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    Repiglican Roast

    A spirited discussion of public policy and current issues

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    I'm furious about my squandered nation.

    Saturday, June 28, 2008

    Barclays warns of a financial storm as Federal Reserve's credibility crumbles

    Barclays Capital has advised clients to batten down the hatches for a worldwide financial storm, Federal Reserve chairman Ben Bernanke has made a huge policy mistake, according to Barclayswarning that the US Federal Reserve has allowed the inflation genie out of the bottle and let its credibility fall "below zero".

    "We're in a nasty environment," said Tim Bond, the bank's chief equity strategist. "There is an inflation shock underway. This is going to be very negative for financial assets. We are going into tortoise mood and are retreating into our shell. Investors will do well if they can preserve their wealth."

    Barclays Capital said in its closely-watched Global Outlook that US headline inflation would hit 5.5pc by August and the Fed will have to raise interest rates six times by the end of next year to prevent a wage-spiral. If it hesitates, the bond markets will take matters into their own hands. "This is the first test for central banks in 30 years and they have fluffed it. They have zero credibility, and the Fed is negative if that's possible. It has lost all credibility," said Mr Bond.
    [...]

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