The fallout from the President’s state of the union address, and more importantly the meeting of the Federal Reserve to determine their policy for the next year happens tomorrow.
I think the Fed’s meeting will be more important because it will weigh heavier on what will happen this year in the economy. The state of the union address will likely be less than dramatic. It will be about coming together and working toward a common goal and not to gridlock the government, blah, blah, blah. It’ll be less forceful than last year’s because the audience will be more red (as in republican) and it’ll be less focused, since he’s already made more promises than he can keep (Iraq, Afghanistan, Guantanamo Bay, etc) and he’s struggling to shore up the ones he’s actually followed through on (Health Care, Economic Stimulus, etc.) Obama is above all things a politician and he knows he’s on treacherous ground right now, but he knows that he’s still got the Senate, so it’s not all that treacherous, but either way his state of the union speech will likely not be anything special.
The Fed’s meeting on the other hand could be much more important. Of note is whether or not they will continue with their current set of operations: namely keeping interest rates super low and sticking with the billion dollar bond purchases. Most likely they’ll stay on course, slowly putting pressure on the Chinese and moving money out of the bond market and into the stock market. It will depend on what they think about inflation.
And that is what had me frightened this morning while listening to the radio. I don’t know if you guys know it, but we’re perched at the ledge of inflation hell. I have no doubt in my mind that something is just waiting in the background to kick start the dive, but once it happens it’ll be like Germany during the Depression. My advice, if you have any spare money: put it into the commodities market like Gold and Silver. Commodities are basically inflation proof, since that is what the money is inflating around. But yeah, that’s where low interest rates, government buying back bonds, and low consumer spending put you: on the edge of inflation hell. And the reason I was scared this morning: McDonald’s announced in it’s quarterly earnings statement that it would be raising prices to deal with inflation.
Call me what you will, but it doesn’t take a genius to know that when Mcdonald’s raises it’s price, so will most other fast food chains, and likely food chains, and likely grocery stores, and pretty much anyone anywhere who deals with food. So look out people, the train is leaving the station, and we aren’t on it or the platform, we’re in the tracks. Here’s hoping the Fed sees the early warning signs and switches the tracks so the train passes us by and slams into China.
