Friday, March 20, 2009

The Fed announced it would buy $300 billion...

...in Treasury securities on Wednesday and the dollar took a dive as a result. After an initial pop in the stock market, equities have been slowly coming back down to earth. Every pundit on CNBC says that the market is worried about inflation down the road. Makes sense; the Fed is growing its balance sheet by $1.5 trillion. And yet, I wonder if the real reason stocks sold off is that the Fed is signaling how bad things are right now. Never mind inflation in the long run; Bernanke must be really worried about deflation in the near term.

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