defensive. He spent most of is talk describing in some detail why the
Federal Reserve and its cheap money policies of ZIRP and QE have not
added to the inflation picture.
IMHO Ben should have stepped up to the plate and said to the world that
in fact his policies have contributed to inflation. He should have
confirmed, what we already know, the objective of current monetary
policy is to stimulate inflation. After all, the idea that zero interest
rates do not contribute to inflation is, well, a dumb idea that has no
basis in fact.
While Ben was doing his best to convince the suckers that believe in his
drivel the NY Fed was publishing a blog that concluded quite the
opposite. (Link)
The title of this chart from the report says it all:
The report looks at what is rising in price. It equates it to what we
actually consume. For example, while the fact that Tenant’s Insurance
has fallen in cost is important to the CPI, it has little to do with
what we actually spend money on. The conclusion from the NY Fed:
84 percent of all expenditures in the CPI basket were on items that experienced above-average increases in inflation in the last seven months.
The bottom line is that Ben can’t fool me. He can’t fool the economists
at the NY Fed. He can’t fool the market. So just who is he trying to
fool? I think he is trying to fool himself.
Effectively, China still has a currency peg. Bernanke kills the dollar, increasing the relative costs of goods in the US and causing the Chinese to print. We get excessive inflation in China and Chinese speculators hoarding commodities leading to artificially constrained supply and even higher prices feeding back to further erosion of GDP in the US. Making the whole picture worse, ZIRP + QE give US speculators a free ticket to join the commodity rally party.
In the past, Bernanke and Geithner have cautiously pinned that currency peg as a primary source of imbalance in the world. The peg isn't Bernanke's fault, it's the Chinese government. While these points are correct, it doesn't change the fact that the Fed *had* to know what would happen, yet they did it anyway.
This is like your neighbors having a dog that is known to bite then expecting sympathy when you jump the fence, stick your hand in the dog's face and get bitten.
Bernanke doesn't deserve to wear all of the blame for commodity inflation. China deserves its share too, but no way in hell can Bernanke wash his hands of this the way he clearly tried to do in his most recent address.
I only have two caveats;
1. are we following the Japanese model, or the UK?
2. Learn from Uncle Milt: Milton Friedman stated that
“Inflation is always and everywhere a
monetary phenomenon.”
I forgot to add:
OFF WITH HIS HEAD!
The Bernanke needs to come out and do an Anthony Weiner press conference. "Yes, I've been lying to you all along. We ARE in a depression." Will this cause all kinds of market unrest? Sure, but it's time we got it over with.
Without wage inflation a real inflation feedback loop is impossible according to Ben and his pals. Too bad that most of his & his associates efforts are indeed premised upon attempting to maintain this illusion of yesteryear.
Good one BK. Cheers
Need to put together a players deck of the guilty ones. Names can always be lied about.
Somebody needs to keep a body count.
"Only at the Fed is there no inflation." -- Marc Faber
But the rest of us live in the real world!
we are all living on borrowed money as long as they lend it to us...an uber-citizen always gets money at less interest than he makes on his speculative investment! So there...if your reputation with bank is good they lend and you rake and then you pay your due...
long
sheep chow..
Bruce, price increases are not the same thing as inflation.
Inflation is the increase of money and credit in relation to goods. Credit is collapsing. Price Increases in some areas will be offset by Price Declines elsewhere. You just can't see the price declines yet because Mark-To-Market has been suspended.
Hi Bruce!
The Fed cannot use the word inflation. If they do they are compelled to raise interest rates. If they raise rates the cardboard and scotch- tape economy will collapse.
Yes, some prices are going up. This is because of peak oil and the relative shortage of fuel which makes all other fuel- related prices go up. This is supply and demand, the same reason why wages do not go up. Businesses faced with higher fuel prices fire their staffs. Compared to the hated staffs, business leaders love their machines.
Real estate prices also fail to go up for a similar reason.
The country went through this rising- price drill beginning in 2004. Fuel prices doubled then doubled again. The FOMC discussed inflation and high fuel prices at just about every meeting. Chairman Greenspan raised the funds rate from 1%, eventually to 5.5%. There was a collapse, beginning in mortgage financing, that required ultra-low short term rates to profit.
Breenspan wuz wrong! The country needed cheap gas and oil, not cheap money. The cheap money has become irrelevant along with the Fed and the Fed Chairman, whoever that happens to be.
Yes, we have high prices but at some point they become unaffordable. When peeps stop buying the prices come down.
The question that needs to be asked is that point here and now?
do you understand that the elite can buy enough food for a whole town for 50 years in just ONE of their BBQ weekends??? and not care about the price!!! the whole price structure is shot. If 80% of the population DIED tomorrow they wouldn't care!!! The poor's spending habits do not mean anything anymore to them... it just stresses out the few sheep that are still toiling around and makes it harder on them... up and up the social ladder more will go on SNAP.. then when they drop the dollar from reserve status the sheep starve!!!
If 80% of the people died tomorrow, I can assure you that the rich would not be doing well as result. Somebody has to take out the trash and do the dishes.
Ben Shalom Berflunky: (follow that Soros)
with his idiots: C. Roehmer; a flunkie
Jared Bernstein: lost in space
Faustian Foolsby: let me resign quick. I can lie too!!!
The other Chicago gang and banksters who destroyed the economy made it
another Greece.
Keep printing that counterfeit.
We cannot expect those in the clouds to understand the meaning of rain and mud, nor of drought, and should consider ourselves lucky if by some miracle the meaning of wind should drift into the cloud dwellers consciousness.
I have seen people like The Bernank before. They are troubleand they will take you a long way down the wrong alley before you must fire them.
They have that wide eyed look of a cow and they have just as much common sense, but real problem is that they are stubborn.
I have seen people like The Bernank before. They are troubleand they will take you a long way down the wrong alley before you must fire them.
They have that wide eyed look of a cow and they have just as much common sense, but real problem is that they are stubborn.
The Bernank says no inflation because housing price decline balances other increases.
Thanks for that takedown of the arrogant Princeton/Ivory Tower hack's propaganda lies.
That The Bernak doesn't DAILY have to answer for his FRAUDULENT "no inflation" statistics, just shows how ABJECTLY CORRUPT the NY Times, Wash Post, cnn/Time/warner, murdoch's Fox 'news' empire, and other "major media" "leaders" are.
The Fed's serial incompetence, corruption, and (especially) in-your-face arrogance, are FORCING me to re-examine the GREAT DEPRESSON: did the Fed ENGINEER the credit bubble BOOM > credit bubble BUST > stock market crash > credit CONTRACTION/massive unemployment that was the GREAT DEPRESSION?
the answer is almost certainly, "yes." The neo-Feudal wealthy elites ENJOY having the majority of the U.S. population live in misery, financial terror, and serf-like dependency. After all, absolute power (dictatorship) has been THE model of govt. for most of human history, we humans have only had a taste of democratic govt. for past 200 years or so... and that, for a tiny minority of humanity. The more things change, the more the Neo-Feudal elites try to make them the same!
Dollar trading with oil today...weird.
Everything is transitory except the defense Keynesian economics.
Bernanke is the classic academia versus real world story.
While it is true that in an aggregate sense there is no inflation, this is not a good way to view the real world.
Policy is about people as a whole and their everyday lives.
Thus what must focused on are the everyday budgets and living expenses.
The FED largely ignores this segment as a most important part of the economy.
It may not be the most important in a true dollar sense, but the issue is a lot like having a motor that works or it does not.
A 25 cents part could decide whether the motor works or not, thus is not just the aggregate view that is the most important view.
Bruce,
I really enjoy your writings. This is off topic but you did some nice analysis on the muni bond market. It seems to be making a resurgence. Are you planning a follow up piece on that topic?
Thanks!
If a tree falls in the forest, and I say it didn't fall, does it make a sound? Does it matter if anyone is listening?
I just bought a Tomato for $3.41--it seems inflation is making a 'sound'; Bernake is clueless...
Yeah, those tomatoes can't be beat...like we used to get for $.50 a pound in the old days. Now it's tasteless plastic. At the supermarket I used to work at in the summer the produce dept bought some local "homegrown" tomatoes. Sold 'em for $1.99 per pound. Went like hotcakes with people asking when would we have more.
I bet you got a nice big tomato. Was it grown without sprays?
Pardon me but either that is one giant tomato or you're not a very good shopper.
Seriously? You actually paid that?
That's what it costs for a REAL tomato, heirloom, ripened on the vine. Not those hard orange balls that sell for $1.29.
Roma tomatoes have a very nice tomato flavour, are also ripened on the vine and are generally on sale for ~ $1.87/pound. They slice great and you can stuff them easily. Use a muffin tin, stand them up and vous y voila!
Substitution. For $3.47, I could have two pounds of tomatoes. That's a lot of tomatoes.
but that tomato may be rich in e coli, the "new" anti-oxidant
:D
housing is in another deflationary swoon, and i can buy a refurbed PC for under $100. the local grocery clerks union is on strike, or is it lockout? management is complaining that Walmart can hire workers for a lot less. they are reluctant to negotiate with labor. there will probably be no NFL this year. same story as above. GM is stuffing the channel. Wait to see what kind of incentives they offer this fall. Rents remain high, but that reflects the cost of service; repair, security, water and grounds maintenance.
and more talk about mortgage modification. it never happened in the first place.(see Harm?) if Bernanke isn't talking about inflation he must fear the other thing, inflation is the word he seldom uses, deflation is the word he never uses.
and what we have is deflation in personal income, faster than prices can drop to readjust. we just pumped how many billions into main street to keep this ratio in perspective. the next wave down will hurt, as real income falls, and prices struggle to keep up. somebody said its deflation when you are selling? amen.
"we just pumped how many billions into main street "
Ah, this is incorrect. In fact, what "we" (via taxpayer rape) have done is pump more capital into unproductive "investments" that do not bring any real value to anyone remotely connected with main street. This is real capital destruction (deflationary) with main street now being held responsible to pay the bill. None of the TARP/TALF funds have made it to main street and none of the bondholders (investors in GM or any other companies that were bailed out) will ever recover their losses. The moral hazard has been unleashed for at least 30+ years and until people responsible go to jail and the fraud (at all levels) is prosecuted, nothing changes. Look around, possession of real assets is rapidly becoming the law. Very common when societies lose confidence in the system. Possession was already nine tenths of the law. in short, there is a very real cost for creating capital, All this has been played out before, hedge accordingly.
Can you describe what forms of assests you are referring to?
Anything that contributes to the survival of you, your family, and your community.
42 million on food stamps. a rather large number of forceclosed mortgage holders living rent free. the GM bailout kept a few people working anyway. it all adds up. not sure what your main street looks like but there is a lot of work on mine, (pardon me for being literal) there are no corporate profits without consumers.
as for taxpayer rape, getting two dollars of service for every dollar the taxpayer contributes? who is raping who? if inflation is too much money chasing too few goods what is deflation? while BB is technically correct that the spec in commodities will revert to the mean (china is ready to let go) then what have you, too many commodities sent to market, and too little money (as you point out capital is disappearing, and money velocity is stuck in a nose dive: the water coming out of the tap slows way down just before it stops)
wages falling faster than prices creates an inverse sort of inflation, which hits you just as hard as the other kind. don't be distracted from which way the tide is heading, and thats out.
The problem is that the person paying the $1 in taxes isn't getting the $2 dollars in services. The $2 in services are going to someone other than the taxpayer. They go to the entitled classes (Banksters, Public Sector Employees, etc.)
Again, the "flation" debate remains pointless as you point out yourself by the reference to food stamps. More and more people only concerned with one thing, survival. As more and more people fall into this category, well you get the picture. Yeah, there is a lot of work to do (but how much is really necessary for survival) and who is footing the bill. Economists had a chance to prosecute the fraud and establish a system connected to reality and it hasn't happened. Don't be distracted by academic mumbo-jumbo. People will do whatever it takes to survive and I already see businesses and individuals trading goods and services out of the eye of the tax man. Crash the fucking system already so that compensation can return to people who are actual worth a shit.
The moral hazard has been unleashed for at least 30+ years and until people responsible go to jail and the fraud (at all levels) is prosecuted, nothing changes.
Jail may be the safest place to be when the SHTF. Just like in Monopoly.
Great! You can have me cell in the FEMA camp!
Tuco
Well, at least until the food stops being delivered.
I thought it was traditional to allow the sheep to grow a little fleece in between shearings.
I thought this piece was referring to the woman on the left margin with the bodaciously inflated ta-tas.
My mistake.
Taken in its entirety, theBernank is defining inflation as the old economists did: Without wages rising to chase higher prices, there is no inflation.
I agree with him. The cost of living however, is an entirely different matter. Did anyone ever ask him if the Cost of living is more now than it was last year? And the year before that?
He could hardly deny it and remain unthought of as an incompetent liar.
Why do people insist on thinking that any Fed chairman is supposed to tell the truth. Wasn't Alan Blinder who said the chairman's first priority is to lie to the markets?
Bernanke can go to hell. I deal in commodities like food ingredients, commodities, plastics, fine chemicals, and various additives and I can tell you our prices are up at least 10% this year.
Our electric company asked for a 21% rate hike this year, so we're supposed to feel lucky they were only allowed 14%. I buy 110 octane for my '65 Chev 396, it runs me $7.50/gal. My goddam coffee just jumped 20%.
If they say there's little to no inflation, it makes you wonder how often they lie about everything else.
....feel for our elderly who are living with Z.I.R.P. ! that should be criminal. the older generation in this country, typically the salt-of-the-earth, patriot & honest people are being slaughtered . the children & elderly of the U.S. are being neglected & abused & no one is standing up for them .
I just heard that sales of "spam" are at all time records. I did not check dog food prices.
Tuco
If you're traveling to Korea or Viet Nam, bring spam and American cigarettes. It will get you very far.
how about condoms?
Maybe not enough room in your bag, falak. Best to buy them on site.
8)
With all due respect theyve lived the good life. Im talking those on the cusp of being born at end of WW2. And if they havent , they had as good a chance as any generation through history to get on board. They had the opportunity by pulling forward future demand and living beyond their means - im generalizing , but thats facts. I dont feel bad for that generation. They also sat by whilst the constitution and building blocks of the US were trampled on for the last 40 years.
Its the dumb-dumb social network idiots i feel sorry for - theyve got no chance and have their whole lives to deal with it.