Faster Inflation May Unleash `Financial Tsunami'

Faster Inflation May Unleash `Financial Tsunami'

www.bloomberg.com

Rising consumer prices will leave more U.S. consumers unable to pay their debts and may lead to a "financial tsunami,'' according to Bennet Sedacca, president of money manager Atlantic Advisors LLC in Winter Park, Florida. ``Whether it is anecdotal or statistical evidence, I see inflation everywhere, and this is where the financial tsunami cometh,'' Sedacca wrote in a report published yesterday. ``A battered, over-indebted consumer, if forced to retrench, could create even more problems for the banking system as loan delinquencies would begin to rise even further. All sorts of delinquencies are rising. This is now a systemic issue.''

Sedacca wrote that current financial-market conditions remind him of ``someone standing on a lonely beach, armed with only a small bucket, trying to stop a rare tsunami that hits the shores. It is how I feel about our markets and the tools being utilized by the Federal Reserve, the European Central Bank and other regulatory bodies. They are overmatched for what they are facing and, worse yet, they helped create the mess in the first place by being far too easy with money and debt creation.''

(visit the link for the full news article)

Bloombrg.com, Wall Street's site for breaking financial news and updates on when the 2005 vintage of Bordeaux is ready to drink (it's ready, according to another of today's headlines--so, bottoms up!), throws a monkey wrench into all the buying and consuming today with this headlined report on the forecast of the-depression-that-dare-not-speak-its-name.

The scenario: inflation and economic duress kills off the American consumer--the basis of the real (non-Wall Street) economy.

This is, to be fair, one way to bring inflation under control. Without consumers, prices are sure to moderate--even drop. But with the Fed threatening higher rates, is a real-economy meltdown really the best way to control inflation?

www.bloomberg.com
(visit the link for the full news article)

[edit on 24-6-2008 by gottago]