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<p>[QUOTE=&quot;DW-coins, post: 1323948, member: 33380&quot;]Ha ha, it sounds alot like a good buddy of mine who runs a hedge fund. His main focus is on the EU and on deflation and he firmly believes any inflationary pressures will come only after a serious round of deflation. You know, I think they all read the same news letters and all pay attention to the same issues which is why most of them are behind the ball when change occurs. Like Peter Lynch used to say - common people are at ground level and see what those on the 110 floor in Manhattan completely miss. Nevertheless, I see their point about deflationary pressures and the fear that all boats sink into the mud when the tide goes out. But I also know from both experience and from my readings that the Fed cannot control inflation for beans once it gets started. A quick review of the 1970&#039;s and Gerald Ford&#039;s &quot;WIN&quot; buttons (god, I wish I would have kept mine) which stands for &quot;Whip Inflation Now&quot;, and in my opinion sums up the extent the Fed can manipulate the economy. Your friend is right to say the Fed has tools to use but to-date they&#039;ve never been shown to be effective and are more typically a trailing indicator of out of control inflation. Yes, they can reign in the M2 money supply but what on earth will they do with all that paper? And at this point there is so much paper out there even a 50% cut in M2 will still be multiples of its historical averages. </p><p>The way I see the whole picture is this - The world economy is like a giant iceberg and the Fed is like a guy standing on the iceberg with an oar. Yes, he can use his oar in an attempt to alter the direction or momentum of the iceberg but his efforts are nominal at best. However, it does calm some people to see him paddling away since there is a clear political side to the Fed but it&#039;s all for show, the economy is far too large and far too complex for any one entity to control or manipulate. </p><p>So I would take your friends predictions with a grain of salt. Inflation or deflation or stagnation, they&#039;re all trailing indicators of a weak economy and until all this fear and dread in the markets is assuaged, any or all of these scenarios could come to pass. What is certain is that we&#039;re all in for a roller coaster ride of a lifetime![/QUOTE]</p><p><br /></p>

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