[img_assist|nid=1601|title=
Fed Funds Rate vs. Inflation|desc=|link=node|align=left|width=400|height=219]
M, to me, it appears that the Fed does a lousy job fighting inflation: the Fed funds rate correlates with CPI, instead of squashing CPI; the Fed only raises short term rates after the cat is out of the bag. Since 1990, only foreign purchases of U.S. Treasuries has saved us from big time inflation.
M, I think the Fed has done a horrible job managing the money supply; the huge growth in M2/M3 is way beyond growth in population plus productivity. In my opinion, the Fed’s mismanagement of the money supply and credit is why we have the housing bubble.
After I saw my plot of Fed funds vs. CPI, I told my wife the battle against inflation is lost, that inflation is inevitable, that we better get into gold big time.
