I think yesterday's actions by the Fed to "buy" 1.2 Trillion dollars worth of various kinds of debt may be a turning point for inflation and the value of the dollar.
When the fed "buys" debt, it is another way of saying that it is printing money. This is different from the debt that is issued by the Treasury department (treasuries), in which other countries and investors buy US debt. The latter is not as inflationary as the former, because there is no net increase in money in circulation + reserve. In the short run, we may see a boost to the economy and a reduction in interest rates. Long term, I think we could see dramatic rises in inflation rates, interest rates and decreases in the value of the dollar. Of course, other countries could follow the US in the race to the bottom in devaluing their currencies. In that case, investment in hard commodities and inflation protected bonds (TIPS and Ibonds in the US) will make a lot of sense. --- On Thu, 3/19/09, Mervyn Lobo <[email protected]> wrote: From: Mervyn Lobo <[email protected]> Subject: Re: [Goanet] India's answer to the mighty dollar? To: [email protected], "Goa's premiere mailing list, estb. 1994!" <[email protected]> Date: Thursday, March 19, 2009, 11:06 AM Frederick [FN] Noronha wrote: > India's answer to the mighty dollar? FN, Guess who bears the risk of letting Dollar fall? Yes, you and me and every other person who has savings in currency notes. The US Fed has made Dollar the sacrificial goat and every other country will follow its lead. Rev Rupee will soon be led to the sacrificial alter too. The part I love is that this scenario has been long revealed in the books. The US Fed chief is keeping his covenant, his promise, made six years ago, that he would drop the almighty dollar out of a helicopter if the need arose. Mervyn1650Lobo __________________________________________________________________ Yahoo! Canada Toolbar: Search from anywhere on the web, and bookmark your favourite sites. Download it now at http://ca.toolbar.yahoo.com.
