I was wrong on inflation
For much of the past year I have been a critic of the Fed for keeping rates in easy money territory. One major reason was that they were going to let the inflation genie out of the bottle and that was going to be a problem.
Now, I feel like inflation was only ever a problem in energy and food prices. Now that oil is going down again, that’s manageable. There is no wage-price spiral in Germany (where I thought it most likely to occur because of unions), in the UK, in the U.S. or elsewhere.
Basically, I was wrong on inflation. We’ll get up to maybe 6% in the North America, the Eurozone and the UK before it starts dipping again in Q4 or Q1 2009.
Don’t get me wrong, I still think easy money is bad because it increases appetite for investment risk and leads to bubbles. But, I have to give myself a black mark for getting to riled up about inflation.