Today brought the news that Warren Buffet had invested 5 billion dollars in Goldman Sachs. He said that the government was doing the right thing with the bail out.
Then I read that Bill Gross from PIMCO said the government was doing the right thing as well.
So I guess we are now near a market bottom.
Both men are extremely smart and understand these sorts of debacles.
Let's hope that the politicians don't spend too much time trying to figure out how to mess things up. If they do the market will collapse.
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According to the Austrian School of economics, every time you inject money into the economy, it gets bigger, or inflated. This is the definition of inflation.
By making the economy bigger, its individual pieces (dollars), become worth less.
A weaker dollar means higer prices.
Do you disagree with this theory?
I have emailed my Congressman twice to encourage him to vote no on the bailout for this very reason.
By the way Kurt, I'm a friend of Ron's. My friends and I have admired you and your family for years.
Mike Costello
paracelsus8_8008@yahoo.com
Hi Mike
I will tell Ron you said hello and thank you for your nice words.
I basically agree with the definition of inflation. It could be that we see those dollars chasing not enough goods. A weaker dollar does lead to higher prices, especially with energy, and that is one reason the price of oil is high.
With that in mind I am not sure this plan will lead to inflation. It may just let prices come down smoother; otherwise I think it would get very ugly. The dollar may improve from this bailout because people could regain confidence in the U.S. economy.
Also I am not sure that anyone knows how bad the situation is including Bill Gross or Warren Buffet. I saw a quote that Bill Gross was raising cash so I guess he is not convinced the market or the bond market is going to get better.
I don't think this will cause housing prices to go up and I doubt anyone will be buying more furniture. We will see what happens.
Kurt
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