Monday, October 31, 2005 U.S. U.S.

September and October represent the first back to back spending declines by American consumers since the recession of 1990! The news should give the FOMC a lot to think about.

It will not bother me if the FOMC tightens a bit too much at first and has to back-track later. "Nipping inflation in the bud" is extremely important. A wage-price spiral is the last thing our country needs.

The reality is that inflation is not very bad but there are a lot of folks who are focused on short-term problems. The perception of inflation can lead to more inflation so raising short rates a little too much can serve "the greater purpose".

David Altig Director of research at the Federal Reserve Bank of Cleveland,and David Taylor/ a hedgefund manager support my theories.

I have spoken with confidence that the price of oil is going to come down. However, I have never been sure that there will not be at least one more solid surge to test the nerves of the market. Another quarter or half point by the FOMC may be more than enough to level out supply and demand for oil until new supplies are available.