14 Dec 2007 Fed and Government Firepower is Diminishing

TheUSeconomy will have to gut it out from here without additional help from the Fed or the government. Today’s inflation report shows that the Federal Reserve had little flexibility to lower beyond the quarter of a percent they announced on Wednesday fearing inflation and a falling dollar. As to government actions; early signs are that credit bailout efforts will fall short of easing tight credit. InWashington, political wrestling has already stalled and likely killed relief from the alternative minimum tax. There appears scant hope that a Democratically controlled House and Senate will continue Bush’s tax cuts. So the combined prospects of higher taxes, tighter credit, already high gasoline, falling house prices, slowing consumer demand, and higher prices on everything else if inflation takes hold, almost surely will be enough to stall theUSeconomy.