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The Federal Reserve and Easy Money

You see it all over the news.  What is the dollar's future in the world marketplace?  How far will the dollar's value drop?  

The current U.S. monetary policy is precarious.  Government spending is at historic highs and will likely rise even higher.  The Fed's loose monetary policy is pumping historic levels of funds into the marketplace to finance the spending.  In order to pay for new government mandated programs, higher taxes will most likely be required, especially with two big name programs: Health Care Reform and Cap & Trade.  

In many ways the dollar is taking self-inflicted wounds from our own policies.  The Fed continues to pump cash into the system to provide more liquidity for the markets in an effort to combat the financial crisis and U.S. economic slowdown.  Now what? The problem is the Federal Reserve will be limited in its ability to maintain this position long-term because inflation erodes profits.  As a result, the Fed will be forced to shift its monetary policy by tightening up the money supply if it ever hopes to beat back inflation.  

Borrowing and excessive spending continues to run rampant in Washington.  There are no indications this trend will end or even slow anytime in the near future.  What does this mean for businesses and individuals?  The U.S. economy continues to fail to add jobs and deflationary pressures persist - fueled primarily by decreasing wages for the American workforce.  Once these forces shift and unemployment eases, inflation will begin to return.  But, how fast?  How long is the Fed's current monetary policy sustainable?  Sound off in today's quick poll....

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