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If Recovery Were Here, Shouldn’t The Fed Pull Back?

13 September 2009 No Comment

We’re being told at every angle that the economy is recovering and that we’re out of the woods for the most part.  One of the biggest reasons (I have many reasons) that I struggle to fully embrace the green shoots or the recovery mantra is that the Fed is still pretty much fully engaged in their attacks on the recession.  Sure, they’ve announced some programs are ending but these are not the major components of their strategy.  Until the Fed raises rates, they are still terrified of the recession.

My point is that inflation is a serious risk in the near future, and if we have any level of assured recovery, we should be pulling back and starting to consider inflation a real threat.  The problem is that the political leaders would much rather have inflation than a recession.

My belief is that the day is rapidly approaching when the Fed will face an impossible decision on whether or not to raise interest rates.  The decision will have two awful outcomes.  If they raise rates, they will kill any sort of recovery.  If the keep rates where they are, inflation will spiral out of control.

Buy gold and buy some instruments that will outperform with higher rates, then you’ll kill two birds with one stone.

Good luck Ben.

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