In an attempt to calm nervous investors, Fed Chairman Alan Greenspan announced that he didn't see inflation as a "significant problem." We disagree. Oil prices have tripled since December 1998. Iraq's decision to halt oil exports and the continuation of Middle East conflict signal that prices will not fall in the coming months. Plus, natural gas is double its January 2000 price level. California's energy problems are spreading to other states, and demand is only going to grow as the hot, summer months wear on.
Alan Greenspan's announcement is just another last-ditch effort to prop up the stumbling stock market. Mr. Greenspan is starting to lose his followers, too. The market barely budged even though he all but promised a rate reduction. That's because these inflationary pressures are not going away. Investors are already worried -- evidenced by increasing gold demand -- and we bet that Mr. Greenspan is worried, too.