Bernanke says Fed prepared to help U.S. economy

Fed Chairman Ben Bernanke reported to Congress that the Federal Reserve "will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks." I'm just not convinced they can do much.

A correction in the U.S. economy is long overdue, and I can't understand why the Fed is fighting it. A little bit of short-term suffering will strengthen our economy in the long-term, but we're so afraid of the R-word that we'll accept abnormally high inflation rates to keep it away. The greatest risk, as Bernanke himself has made clear is the return of stagflation—an economy that is stagnant or in recession coupled with high inflation rates.

Unfortunately, we seem to already be there. The Fed's solution to stagflation seems to be to deal with the stagnant economy and play the ostrich on the inflation side of things.

Thinking About Profits

The nature of business is to make a profit. The most common way of making a profit is by acquiring a widget for a low price, doing something to add value to the widget, and then selling it for a higher price.

That's why I give you a penny for your thoughs, but when I add my value to them and turn around and unload my thoughts, I give out my two cents' worth.

Consumer Prices Go Up... and People are Surprised?

According to a recent report, January consumer prices spiked up at "an unexpectedly strong 4.3 percent" rate. I'm not sure who wasn't expecting that... I've been saying for months that the continual cuts in the Fed's interest rates was going to cause inflation, and pretty much every economist I read has been saying the same thing.

And, oh yeah, the housing market still sucks.

A Better Economic Stimulus

Business Week's Roben Farzad points out how U.S. corporations can do more to stimulate the economy by using the cash on their balance sheets than the Federal government can by giving rebates.