Good news, with bad

Bad economic news today in the form of reports inflation is up the most in 27 years.
(Link here: http://news.yahoo.com/s/nm/20080819/bs_nm/usa_fed_dc).

Thanks again, W, what with yer spendin' an' all.

That's going to be tough on the economy, for sure, and means the Fed will likely have to raise interest rates so we keep inflation in check.

On top of the already-occurring credit crisis, due to the housing loan meltdown, this will likely mean businesses and business could really get beat up.

No one might be able to afford very much.

The good news is that it the dollar will go up because interest rates will likely have to rise and oil may go further down, God willing. It's very likely.

But the overall effect may just be that we have less and less control over what, exactly, the economy is doing due to the string of events of the last 7 years that got us to this point. Hopefully we won't have any serious "stagflation" (stagnant, lackluster economy, mixed with out-of-control inflation).

And that, of course, is where the thanks to our glorious leader, "W", comes in, what with his war and spending and tax cuts for the wealthy and for oil companies and on and on.

Anyway, there's some good and bad, as with most everything in the world, in this news.

As for the banks, there's been some good news in the last 2 weeks, in that none were closed down and taken over by the FDIC on Friday evenings. My suspicion has been held off for a bit. Hopefully held off permanently.

But wait. News today from Reuters shows that the former head of the IMF says a "Large US bank collapse" is possibly (or is that "likely"?) ahead.
(original story here: http://www.reuters.com/article/newsOne/idUSSP21695020080819)

According to former IMF chief economist Kenneth Rogoff, " 'The U.S. is not out of the woods. I think the financial crisis is at the halfway point, perhaps. I would even go further to say 'the worst is to come.'"

More: "'We're not just going to see mid-sized banks go under in the next few months, we're going to see a whopper, we're going to see a big one, one of the big investment banks or big banks,' said Rogoff, who is an economics professor at Harvard University and was the International Monetary Fund's chief economist from 2001 to 2004."

When you put the sharp rise in inflation together with this possibility--that the "worst is yet to come", it doesn't look pretty, does it?

Hopefully, Humpty, we can put all the pieces back together again.