John Ransom

The Fed told us nothing new in their litany of reasons why the economy seems to be stuck in the mud. But, according to Forbes, Fed Chairman Ben Bernanke “Admits He’s Clueless On Economy’s Soft Patch.”

The cause of both the overheated prices- inflation- and the downturn in economic growth are temporary, they say.

The FOMC also reiterated its belief many factors hindering growth are transitory in nature, such as the "damping effect of higher food and energy prices on consumer purchasing power and spending, as well as supply chain disruptions associated with the tragic events in Japan."

It takes a rare confluence of circumstances to produce low growth and high inflation,  but the Fed did it!

That confluence is not an every day occurrence.  Or even every business cycle occurrence. The Fed has to work really hard to get that kind of mojo going.   

Since the beginning of the expansionist monetary policy of the government, some, including me, have said that at the end of the day you'll be left with anemic growth and high inflation.

That's about where we are right now. 

Says the FOMC:

However, investment in nonresidential structures is still weak, and the housing sector continues to be depressed.  Inflation has picked up in recent months, mainly reflecting higher prices for some commodities and imported goods, as well as the recent supply chain disruptions.  However, longer-term inflation expectations have remained stable.

On the one side the Fed expects us to believe that we have low growth and high inflation not related to any of the policies that they have pursued; that low growth and high inflation is purely coincidental; on the other hand we have critics who predicted that's exactly what would happen given the policies the government has pursued.
I don't believe in coincidence in economics. Economics and monetary policy aren't magic tricks. They're predictive. 

Where you have lots of liquidity, you have rising prices, including the prices in the stock market.  It’s a phenomenon made worse by the unpredictability of the Obama administration’s policies regarding business. While there is plenty of money, there is no confidence, so you see pockets of inflation as that money reaches for safety and security in an uncertain environment.

I don’t blame the Fed for everything that’s wrong with the economy. The Obama administration is mostly responsible.  

But I do side with those who saw this coming.

John Ransom

John Ransom’s writings on politics and finance have appeared in the Los Angeles Business Journal, the Colorado Statesman, Pajamas Media and Registered Rep Magazine amongst others. Until 9/11, Ransom worked primarily in finance as an investment executive for NYSE member firm Raymond James and Associates, JW Charles and as a new business development executive at Mutual Service Corporation. He lives in San Diego. You can follow him on twitter @bamransom.