The Fed’s own deflategate

So the Dow Jones is down 10.8 percent since the March highs, in full correction territory.

This latest downturn has more to do with the slowing global economy and the deflationary inputs that are coming ashore here in the US.

Whether it’s through cheaper crude oil or price cuts by overseas suppliers struggling to keep market share.

Of course, this is the principle concern of the Fed, since they have no tools to combat deflationary price spirals. Falling prices — helpful to consumers with constrained budgets — is seen as problematic to economists when looking at attempts growing an economy.

The Fed uses the terms, “inflation is growing under trend,” which means they are looking to achieve a 2% inflation rate.

This is almost impossible in the current environment to achieve when countries are fighting a currency war, by debasing their money against other currencies in order to spur growth.

 

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