MEW Delays Bears’ Gratification?

MEW - The Band

“The sharp increases in energy prices over the past few years have not yet (emphasis added) led either to persistent inflation or to a recession, in contrast, for example, to the U.S. experience of the 1970s,” Bernanke said. “Although inflation expectations seem much better anchored today than they were a few decades ago, they appear to remain imperfectly anchored.” – Federal Reserve Chairman Ben S. Bernanke 7/10/07

This money quote jumped out at me. “Yet” is the operative qualifier as far as recession goes. Given the tidal wave of mortgage equity withdrawal (MEW) over the last 3-5 years, we really don’t know what our economy looks like against the backdrop of these rocketing energy prices.

Denying persistent inflation is just plain obnoxious. It’s all around us because of rates jammed down too far too long. The Fed just can’t say so because then it’s Katy Bar the Door. As long as it doesn’t cop to it, the markets can “discount” it in a more orderly fashion.

Time will tell. I think we’re getting close to the reveal. No more MEW, ARM resets beginning. Tide’s going out. Who’s swimming naked??

Oh, the picture. A band called Mew I discovered writing this post.

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