LAT: Risks Close In on the Fed: Inflation, growth move in wrong direction

[DeepModem Mom]

Risks Close In on the Fed
Setting rates becomes a delicate task as inflation and growth move in the wrong directions.
By Joel Havemann, Times Staff Writer
May 29, 2006

WASHINGTON — Ben S. Bernanke's honeymoon as the new Federal Reserve chairman is drawing to an end....

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The Fed has reached a crunch point in its stewardship of the U.S. economy, and any misstep on Bernanke's part could have dramatic consequences.

Inflation is picking up just as economic growth and job creation appear to be slowing. The housing boom is ending, and rising mortgage rates threaten to depress home prices and throttle consumer spending. Gasoline prices are rising and the dollar is falling, portending increases in what Americans pay for foreign goods: energy and electronics, coffee and clothing....

***

If Bernanke's Fed continues to raise interest rates, it risks choking economic activity, particularly the rate-sensitive housing sector, a prime engine of growth since the 2001 recession. But if it doesn't, Bernanke could get a rap as being soft on inflation — and prices could rise even more.

It's a predicament that would challenge the legendary Alan Greenspan, whom Bernanke replaced Feb. 1....

http://www.latimes.com/business/la-fi-fed29may29,0,298772.story?coll=la-home-business

[existentialist]

1. Looks like the natural and expected long term result

of deficit spending and huge debt is coming home to roost.


OK neocons, what do you propose to do about this?


Plan on cutting taxes for the rich again?

[mcctatas]

2. I think they have a two prong attack...

cut more taxes, and privatize everything until we have to pay for the air (extremely polluted I might add) we breathe or they'll cut off our supply until we choke up the cash...or die. :grr:

[Born Free]

6. Thank Greenspan ..he knew what was going to happen

Greenspan knew, and yet he kept selling out America's finacial future to make the bush team look better...I could not believe when he was recommending ARMs at a time when interest rates were at the lowest point, knowing people would be screwed as soon as interest rates retruned to normal. They did all of this to give a false sense of security to American citizens to make the bush economy look good by getting everyone to suck out all their home equity and spend it. Now that the election is over, Greenspan could retire and let the mess for the next guy. Poor people that trusted them are screwed and a lot more are coming do, many signed up for 5 year plans, and those are coming do as well - Imagine when they see their mortgage payments jump 25% and the house value drop $25% ...they are screed fast, if anything happens they go under. The biggest mistake these people made was trusting anyone durn the bush teams reign. Those that distrusted the bush team and everyone that worked with them will be OK, providing they can keep their jobs.

[gratuitous]

3. More tax cuts! Dick Cheney needs another 25 large!

And re-double our efforts in Iraq and Afghanistan! We can fight two elective wars, cut taxes, and hold the line on inflation! Anyone who says otherwise is just helping the terrorists! Clap harder, dammit, or Tinker Bell's a goner!

[AndyTiedye]

4. He'll Crank Up The Helicopter Until The Election, Then CRUNCH!

[Roy]

5. Not to worry, This WH will do what they always do......

to make the economy better.
They will announce that 10 million jobs were created last month and crow about more minorities are buying new homes, and that everything is just fine in this robust economy.

Chris Matthews and Wolf Blitzer will have a republican guest debate the issue with a conservative guest who will repeat the 'good news'.
And everything will be just fine again.

[David__77]

7. They'll err on the side of higher inflation.

They simply cannot afford to collapse the housing bubble. Inflation will help shrink the massive public debt, in real terms, as well.

[Supersedeas]

8. Monetary policy - smonetary policy: CNN has Holloway, gators/shark attacks