The Fed is not the problem, for a change. As this chart shows, the monetary base is not growing, so it must be bank lending.
At some point, the economy will slow, and so will lending, but for now, the Fed cannot lower rates or willl risk reigniting inflation.
GOLD PRICES
Gold prices are finding resistence at $700 an ounce - the highs of July 2007 - and should punch through with these latest money numbers. It's time for caution.
The old highs of $780 an ounce are easily within reach.
If gold surges to new highs, the Fed will be tempted to raise - not lower - short term rates. They will have no choice.
BOND PIRCES
Bond prices bounced these past weeks, but are in a longer term decline, signaling inflation worries.
This is just another indicator of the problems the Fed is facing. Raising short term rates must be in the mind of every inflation fighter on the Board of Governors.
