Wednesday, February 20, 2008

Another day, another dol-- maybe not.

Oil prices hitting new records; inflation higher than it's been in years; and the economy is slowing down. Can any Dem lose in the fall? Will Bush leave office with approval ratings higher than Nixon's?

Besides the partisan political stuff, this is not looking good. With both inflation and unemployment climbing the Fed ends up boxed, unable to move interest rates much because of inflation, but needing to do something because of unemployment. Of course, with interest rates this low, and old-fashioned fiscal stimulus being political poison (Nanny state bad! Big government bad!), there isn't much room to maneuver, anyway. It looks like the 20-odd year run of circumstantially strong economies is coming to an end -- the benefits of bringing all those Eastern European countries online, with their cheap, well educated labor pools, has about been used up. The free ride is about to end with a bump. Let's hope it's a small one.