A friend wrote to me this weekend in response to my posting on Inflation versus Interest rates. I decided to post some snippets from our exchange as they highlight a very interesting & important perspective (Thanks, D!), that didn’t come out loud and clear in my previous post. D wrote:
I agree with you that the Fed will likely raise interest rates. Inflation is all the buzz these days across the world, and the primary tool we have historically used to deal with inflation is raising rates. That said, I don’t believe that raising rates alone will do much to help inflation, and in fact could further damage our economy.
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I love my coffee. And I love my cigar on balmy summer evenings.
A couple of recent events led me to write this post. First, I received a request on one of my earlier posts on Gold, to give my take on Silver. Why not? After all, Gold and Silver have been the choicest possessions of men and women over centuries. Be it any civilization, any era, the fascination for these pretty, shiny things has captivated and motivated one and all.
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I had a very engaging chat with a colleague earlier this evening. It started when he mentioned that he was planning on buying a new home. To this, I said "Good call on getting it now, as I expect interest rates to go up in the next 6 months". This grabbed his attention and he asked me "Why do you think so?" or something along the same lines.
Lo and behold, this kicked-off a very engaging discussion touching on several things ranging from the economy, inflation, recession, stocks, gold, oil, oil-sands to global warming.
As I drove home from work later, I decided that I’ll cover the core aspect of the chat in tonight’s topic, which is, "Inflation and tools to curb it".
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