Globalization can't be relied on to control inflation, IMF says

[red42]

Globalization can't be relied on to control inflation, IMF says

Updated at 13:34 on April 13, 2006, EST.


WASHINGTON (AP) - Central bankers trying to control inflation may have to work harder in the future as oil prices remain high and corporations begin spending cash reserves, the International Monetary Fund said Thursday.

The international lending organization said that while globalization has provided some brake on inflation in recent years, it cannot be relied upon to do so in the future.


"Despite having been helpful in the past, globalization may not be a crutch for central banks to lean on going forward," said Raghuram Rajan, the IMF's chief economist, presenting three chapters in the organization's World Economic Outlook.


http://www3.cjad.com/content/cp_article.asp?id=/global_feeds/CanadianPress/BusinessNews/b041339A.htm

[investindinar]

The article also says, "The large current-account deficit in the United States increases the risk of a downward adjustment of the U.S. dollar, which would push interest rates up sharply and possibly lead to a recession". That's is precisely what we've chatted about on and off for about three months now, the dollar is going down... downtown... all the way to Chinatown... Interest rates are going up, all the way up so that things may start looking like the early 80's all over again. High short term rates will force longer term rates to creep higher and higher until the current real estate bubble goes 'pop' in a big way. When the real estate market pulls back, there'll be a marked decrease in consumer spending and more layoffs. Especially in the real estate industry.

Inflation is starting to creep up again. Not only are energy prices going up long term, but commodities prices, especially industrial metals, are on a long term bull market thanks to China and India. That means that when the CPI starts to creep above 4.0% this year, Mr. Bernanke will have his hands full trying to guess which way to take the economy. If the Fed keeps hiking short term interest rates, say to 5.5% or higher, everyone of us we'll start hearing the 'R' word by the end of the year. I guess he'll have to decide it's either going to be a recession, or we're going to have to reign in inflation. My bet is he's going to stop hiking rates soon, say around 5.0%, and let the economy keep rolling along with inflation over 4%, and core inflation above 2.2%. We'll see later on this year.

Oh well. I guess I'm glad I'm in this Iraqi dinar venture over the long term. Either way, the dinar is going to go up no matter what, and the dollar down. I wish I knew when Al Shabibi and company are going to decide on managing the dinar against the SDR, and not just the dollar.

The dinar is going to look real good three to five years down the road. By that time the dollar should have bottomed out. At that time I'll think about exchanging my dinars for dollars and ride the higher fixed income security yields on US Treasuries all the way down.

Now if I can only find a way to roll over all of may IRA and 401k money into Iraqi dinars.... mmmmmm. I'm thinking.

Happy investing everyone.

Sincerely,

investindinar