Anyone try to buy some milk or gas in the past week? There is some bad news, and there is some worse news.

The bad news: you probably already know: its expensive as hell.

The worse news: its going to get more expensive.

The Fed is expected to announce another rate cut today to try to stop the housing and stock markets from sliding any more than they already have…there is one major problem: trying to deflate this bubble is inflating huge bubbles in precious metals (gold at 1000/ounce, really?) and commodities (I may as well be pouring filet minion on my cereal, except that now the filet is more expensive too). The long short of it is that the rise in energy and agricultural costs have led to a large increase in prices, the biggest gain in one year since 1980.

So what is going on with the rate cutting?
What happens is that as the Fed expands the money supply, money is worth less, and so it costs more to buy stuff. The good old “I” word, inflation.

I thought fed rate cuts were saving the mortgage market?
Thats the idea. The problem is that not only are the rate cuts not perculating down, but now we have hyper inflation.

Now I am by no means a hard liner on either side. Ron Paul is probably wringing his hands like a madman right now, and on the other side people are praying for the rate to go to zero. I definitely think that cutting rates needed to happen – probably sooner than they were but I am much more worried about inflation long term than anything else. Like it or not Fed, some people are going to foreclose and banks are going to have to write off a bunch of stuff…but lets not damage the dollar long term with getting crazy on this rate cutting. Don’t get me wrong, the fed has a hard job, but we have to pay the reaper sometime, so lets get it over with now.

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