“Some countries, including Mexico and Brazil, are complaining that the Fed is exporting inflation with its near-zero interest rate and massive purchases of long-term government debt, which is rapidly growing due to U.S. fiscal deficits. And when global inflation picks up, as it has started to do in many emerging markets, it feeds back into more inflation in the U.S. through higher prices of globally traded commodities. With unemployment already high, the result would be stagflation—slow growth, high inflation, steady unemployment—as we saw in the 1970s. For the good of the world and for its own good, America needs to show some leadership and better adhere to sound monetary and fiscal policy.”
Meanwhile,
Meanwhile,
Caroline Baum (Bloomberg) considers the dangerous consequences of US government policies:
“There are still plenty of reasons to own a home, but the deductibility of mortgage interest isn’t one of them. For the last two decades, the nation’s housing policy was designed to convert as many Americans as possible into homeowners. It was aided and abetted by Fannie Mae and Freddie Mac, which lowered the standards on mortgages they guaranteed; lax lenders; fraudulent loans, with borrowers and lenders often in cahoots; bankers that securitized and sold the mortgages; credit-rating companies that thought enough collateralized junk was worthy of a AAA; and, yes, a public eager for a free lunch.”