First off, given the fed’s ridiculous track record of forecasting, I don’t see any reason to think they know what they’re going to face in the future. It might not be so bad if they weren’t totally enthralled with their ideology and beholden to the bankers interests, but they are so that’s that. Also, remember that on top of their horrible forecasting, and bad ideology, the fed is caught up in the need to be cheerleaders for the economy, trying to manage perceptions.
Once you remove all the comments from fed officials, the article starts to make more sense. Unfortunately, there isn’t a whole lot left or much substance after removing the fed officials comments. There’s the often heard concerns of the economy faltering, housing slowing more or even the dreaded threat of deflation.
But here’s a couple of things the article omits that seem pretty relevant. 1) There are tremendous imbalances and misallocations in the economy that are just being ignored. 2) With globalization, we’ve effectively added a huge surplus of workers, but not as big an increase in other resources such as energy and commodities.
While I don’t know that my crystal ball is that much better than the feds, I would venture to guess a couple of things. First, unemployment will stay high which means we definitely will not see wage inflation. (And stagflation without wage inflation seems pretty unlikely) Second, capital will continue to be misallocated from productive investments into speculative gambles. Third, countries like China will continue their policy of beggar they neighbor with their currency manipulation.
Put all this together, and seems to me the most likely scenario is a floundering economy, with a clueless fed holding interest rates low for as far as we can see, (And probably doing more printing of money) while speculative bubbles appear and pop causing more economic instability. Price increases in certain items will be significant, but other items will fall in price, allowing the govt (the fed) to claim inflation is well contained and maybe even to claim that we have positive growth. Ultimately this bubble economy and incompetent fed will be changed, but not any time soon.
Like other posters, I’d have to agree the likelihood of inflation in the near term seems pretty remote. Consequently, I seriously doubt the fed will be tightening any time soon. And if the markets head south, in the near future, look for a return of fed printing money and buying bonds.
