Deflation + speculative commodities = ?

Just to clarify, the Fed is not worried about the price level(CPI). It is targetting asset prices first and foremost. Falling asset prices are hurting bank capital rations(solvency issues), and the ability of banks to lend.

What all this means is rising prices coupled with margin pressures as not all price increases may be succesffull passed on. Higher commodity prices may also serve as a drag on the economy(e.g. higher oil prices)

Nothing is more entertaining than an economic analysis by Riversider.

Except one by LICC.

Here's some help for you jhx

http://www.walmart.com/ip/3281699?wmlspartner=GPA&sourceid=44444444445527161150

Ha!

http://www.creditwritedowns.com/2010/10/the-fed-wants-asset-price-inflation-not-consumer-price-inflation.html

The Fed’s intent is not to create consumer inflation, but rather asset inflation — primarily in the equity market. By pulling longer-term bond yields lower, the Fed hopes that this will alter how investors value equities relative to the fixed-income market. Moreover, the Fed will be actively pushing up the value of bonds that exist in investor portfolios, and as such the intent is to induce these investors to rebalance their asset mix towards equities in order to maintain their current allocation. The Fed is also trying to incentivize fund flows into the equity market. This in turn would theoretically boost household wealth and as such make consumers, who now feel richer, to go out and spend more. So the theory goes — we shall see how it works in practice.

The Fed’s intent is also to lower both the debt and equity cost of capital so that companies will, at the margin, compare that to expected returns on newly invested capital and begin to spend more on new plant and equipment. The hope here is that the investment spending multiplier will kick in and that stepped-up job creation would occur in tandem with the renewed capex growth.

-David Rosenberg, Gluskin Sheff’s Morning Note, 18 Oct 2010