Naked Capitalism Link of the Day

Today's link: Inflation expectations my butt, at MacroBusiness:

But today’s inflation is not in labour or household items. It is in financial assets. Excess liquidity these days doesn’t suddenly appear in product prices and wage claims. It appears in securities markets and, until the irresistible warning of the GFC, housing markets.
In other words, inflation expectations are now operative in capital not labour markets.
I know some will argue that the FOMC watches Treasury markets for inflation expectations in capital. But how reliable is that when the market is dominated by the purchases of foreign governments whose goals are national interest not market related, as well as the FOMC itself? Members of the FOMC have themselves acknowledged the uselessnes of the measure.
The inflation of capital is important because it is one half of the new boom and bust growth cycle that has taken over the global economy (the flip side being the real and perceived shortages in various hard assets, that is, commodities).
If you want to get a gauge of future inflation, you need to be surveying the expectations of capital market traders, not labour market consumers. And if you did your survey after today’s FOMC meeting, expectations would be very high indeed.

In some ways, I think for the Fed that this is a feature, not a bug.  It seems to be the ultimate in trickle-down strategies, feed the stock markets and utilize that wealth effect to grow the economy.  That seemed to be the strategy in the '90's with the tech stock boom and after it popped in the real estate boom in the 'oughts.  Both ended in tears, and I'm afraid all this will too.  I can't decide if the Fed is hoping for inflation to ease the debt problems both in the private and public sectors, or what they want to do to address that.  I don't think causing bubbles to engage the wealth effect works in the long-run, and the potential of peak oil and possible food shortages causing price spikes in an already struggling economy is very disconcerting.  Regardless, we'll have some answers in the not too distant future.