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Debunking Steve Liesman's "What Inflation?" Theory

Tyler Durden's picture




 

Zero Hedge reader Jason submits the following rebuttal to yesterday's most hilarious segment on CNBC, which was Steve Liesman's explanation of how a 100% jump in wheat prices is really nothing to be concerned about.

CNBC, their stooge Liesman, and a whole gallon of "Inflation Doesn't Exist Except in your Nightmares" Kool-Aid.

I viewed CNBC on Monday morning and was amused at the attempt to convince consumers Moms and Dads on a budget who buy groceries) that a 50% increase in wheat will not impact their grocery budget. The logic used (see the story as recorded by CNBC) is beyond ridiculous to the point of incompetence. Anyone who actively listens vs. passively dozing off, and I know that is hard to keep from doing, would have seen right through this. CNBC has disarmed their comments so I am sharing with the ZH. Here is the video of the story -> http://www.cnbc.com/id/41235346

Here is the real story. I used CNBC's data on the costs and increases of a bushel of wheat, a 25 lbs. bag of flour, and a loaf of bread.
 
What a bushel of wheat costs:
 
1 bushel of wheat is up from $5.00 to $7.50($2.50 or 50% increase).
 
One bushel of wheat yields approximately 42 pounds of white flour.

http://www.wheatfoods.org/AboutWheat-wheat-facts/Index.htm

One bushel of wheat yields approximately 60 pounds of whole-wheat flour.

http://www.wheatfoods.org/AboutWheat-wheat-facts/Index.htm
 
((42+60)=102)/2 = 51 lbs. which is about 2 @ 25 lbs. bags of flour.
 
So a $2.50 increase in a bushel of wheat results in a pass through inflation of $1.25 per 25 lbs. bag of flour. This is a great increase in margins for the wheat farmer (assuming fuel and equipment costs did not increase or any other raw materials like seeds or fertilizer).
 
What a 25 lbs. bag of flour costs:
Flour is up from $7.00 to $8.10 (up $1.10 or 13.6%).
 
Not all of the $1.25 inflation in the bushel of wheat got passed through in the price of flour. Of the $1.25 per bag that should have been passed through only $1.10 was passed through. This means the flour producers had to take a $0.15 (15 cents) hit per 25 lbs. bag. This came out of their profits while passing along $1.10/$1.25 or 88% of the cost increase. Not so good for the flour maker. This is what you call margin reduction. It might actually be worse if we factored in fuel costs, labor costs, and fuel price increases. Again the flour producer took that hit as well.
 
What a loaf of bread costs:
 
A bushel of wheat makes 42 loaves of white bread 
A bushel of wheat makes 90 loaves of wheat
http://www.wheatfoods.org/AboutWheat-wheat-facts/Index.htm
 
So let’s average out the production to be (42+90)/2 = 66 loaves of white-wheat bread per 50 lbs. of flour.
 
If a bushel of wheat produces about 2 @ 25 lbs. bags of flour then each 25 lbs. bag would produce about 33 loaves of bread.
 
An increase of $0.10 per loaf results in a total increase of $3.30 of real dollar inflation to the consumer for their next 33 loaves of bread. This means $6.60 for their next 66 loaves. So the original bushel of wheat now costs the consumer (you and me) and additional $6.60. 
 
This means that for the 2 @ 25 lbs. bags of flour the baker had to pay an additional $2.20 for, she actually netted a total of $6.60- $2.20 = $4.40.  Really good for the baker (again assuming all her costs are fixed and did not increase - fuel, labor, power bill, water).
 
The Moral of this story:
 
Just because the cost of wheat increase 50% doesn’t mean that the corresponding increase in bread should also be 50%. The reason is that a  bushel of wheat makes a whole lot of flour which makes even more bread. A much smaller increase in each loaf(66 total) of bread aggregates to a much larger hard dollar increase for consumers. In this case a $2.50 increase in a bushel of wheat actual manifests itself as a $6.60 increase to consumers.  Did they honestly think that bread should have increased by 50% like a bushel of wheat?

Bottom line:  The cost of bread went up proportional to the cost of wheat. Not dollar for dollar but proportionally.
 
Now remember, wheat is used in a lot of products. Not only will you see an increase in bread but a similar analysis could be done on any of the following: pasta, cereal, crackers,  cakes, pastries, all kinds of sauces and spices. The list is too long to list here but this is a good resource 

http://www.allergy-details.com/wheat-allergy/avoid-these-if-you-have-wheat-allergy/
 
So if everything that is made of wheat went up in price as did bread, then a dime here and a dime there adds up to real cost inflation to consumers. We are seeing it in prices at the stores but it seems no one with a media platform wants to discuss the truth. I don't pretend to have done much research on this and it actually took me less than 1 hour to dig all this up using a few select search terms.  Why won’t the press tell the whole truth and stop pretending?
 
Mark Twain said there are "Lies, Damned Lies, and statistics". Statisticians and Economists are not terribly different in their bending of numbers to make their case. I am not sure if CNBC is a willing conspirator in trying to convince the American consumer that "all is well" or if they are simply incompetent. I do know, however that neither is a good thing. This story should be retold on CNBC using the complete facts and the motto from the economists at CNBC should not be "if you can't dazzle them with brilliance, then baffle them with bullshit."  I, for one, have grown weary of being shat upon.

 

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Tue, 01/25/2011 - 13:22 | 903150 Salinger
Salinger's picture

Steve Liesman is an economist, right?   NOT

Tue, 01/25/2011 - 13:24 | 903157 dwdollar
dwdollar's picture

Steve Liesman is a reminder to me that there are secret cabals running the world, and yes they do have a sense of humor.

Tue, 01/25/2011 - 13:29 | 903171 Salinger
Salinger's picture

actually his credentials are quite impressive

 

how about a 3 yr BA in English from NY State college in Buffalo  supplemented with a grueling 10 month certificate in journalism from Columbia

 

The core course, Reporting and Writing I, covers the basics of journalism applicable to all media:

  • how to do research
  • how to write a lead
  • how to structure a story
  • how to cover a neighborhood or a government agency
  • how to cover spot news and investigative stories

http://www.journalism.columbia.edu/page/85-master-of-science-degree/85

Tue, 01/25/2011 - 13:38 | 903214 Don Birnam
Don Birnam's picture

+1

Tue, 01/25/2011 - 13:58 | 903262 Azwethinkweiz
Azwethinkweiz's picture

+1,000,0000

 

These are the credentials of most of the "experts" out there and sadly, those who graduated from more prestigious institutions are just as retarded.

Tue, 01/25/2011 - 14:39 | 903381 Thorny Xi
Thorny Xi's picture

Tell this to the elite of Egypt, where airports are closed so they can get charters out of the country today as the "Day of Wrath" escalates.  Twitter has been shut down, but people are cross posting through Facebook here:  http://www.facebook.com/RNN.NEWS and here: http://twitter.com/rassdwehda

 

 

Tue, 01/25/2011 - 16:06 | 903723 Sarah Conner
Sarah Conner's picture

Anyone see his comrade Erin Burnett say on Meet the Press that the $14T in U.S. debt is not a problem because we have $65T in assets? WTF...

Tue, 01/25/2011 - 16:55 | 903944 Salinger
Salinger's picture

this is a different clip of Burnett with Cramer

http://www.youtube.com/watch?v=bTb7R4LdOv8

Tue, 01/25/2011 - 15:03 | 903478 johngaltfla
johngaltfla's picture

He is very impressive. His Soviet handlers did a good job with him.

Wed, 01/26/2011 - 01:56 | 905396 Moonrajah
Moonrajah's picture

Actually his Soviet handlers are disgusted with his petty little brain that can't delver bullshit propaganda in a plausible manner. So they dropped him like a used condom. And look where the tides have brought him.

Tue, 01/25/2011 - 13:22 | 903153 NOTW777
NOTW777's picture

CNBC also touting the new thing - following the mood of twitter

no shame

Tue, 01/25/2011 - 13:23 | 903154 jus_lite_reading
jus_lite_reading's picture

His name says it all...

Tue, 01/25/2011 - 14:24 | 903351 Turd Ferguson
Turd Ferguson's picture

Yes, LIESman is a complete and total, pathetic, Krugman-sucking moron.

Tue, 01/25/2011 - 14:49 | 903418 JLee2027
JLee2027's picture

Talk about being aptly named.

Tue, 01/25/2011 - 13:23 | 903156 sodbuster
sodbuster's picture

>This is a great increase in margins for the wheat farmer (assuming fuel and equipment costs did not increase or any other raw materials like seeds or fertilizer).<

Let me assure you- they did- big time.

Tue, 01/25/2011 - 13:34 | 903197 Sean7k
Sean7k's picture

Sure did. Cargill, Monsanto and ADM make that money. 

Tue, 01/25/2011 - 14:18 | 903293 hambone
hambone's picture

This is all based on US...inflation based on US made goods is pretty tame compared to the the inflation coming and soon to come back at us from overseas. There is little wage increase in the US...the #1 cost of business.  But overseas where stuff is made, they have big wage increases going on.

Imagine the cost of the raw commodity as above (ags, oil, rubber, leather, metals, you name it and if it's priced in $'s, it's going up)  but now couple this with the rising costs of getting the product to the manufacturer, the 10%, 20% even more in some countires of huge y/o/y labor increases (of course to combat rising food, energy inflation - and these were unplanned), rising tariffs / taxes on products.  I know my employer (a global leader) is building in massive 20% y/o/y buffers (10% per half year price increases) into our costing and still not hitting our margins.  But this won't show up to the market til June of '11 and really Jan of '12.  Takes a long time to get through the pipeline.  But boy is it coming...just like '08 but we've no more to cut, no more to downsize, no more to outsource.  And raising prices only lowers our volume hurting our margins via lower volumes to amortize new costs against. 

Liesman is really a fool...or far worse.

Tue, 01/25/2011 - 14:19 | 903334 Sean7k
Sean7k's picture

+100

Tue, 01/25/2011 - 13:24 | 903158 jus_lite_reading
jus_lite_reading's picture

Oh yeah, and "CONsumer CONfidence is at an 8 month high"

 

Steve Lies, Man

Tue, 01/25/2011 - 13:25 | 903167 NOTW777
NOTW777's picture

high on POMO

high on not paying a mortgage

Tue, 01/25/2011 - 14:29 | 903357 Cursive
Cursive's picture

@jlr

Lulz. Guy has possibily the worst anagram for a name.

Tue, 01/25/2011 - 13:24 | 903160 NOTW777
NOTW777's picture

just wait til tonight - obama will proclaim he wants to cut the deficit, balance the budget and create millions of jobs

so tomorrow, in liesmans mind the deficit will be cut, the budget balanced and millions of jobs created

Tue, 01/25/2011 - 13:24 | 903161 israhole
israhole's picture

Yep, Liesman is a stooge, alright.  I finally started making big gains in my trading/investing once I put my boobtube on the curb.

Tue, 01/25/2011 - 13:27 | 903172 topcallingtroll
topcallingtroll's picture

So what percentage of the average budget is exposed to.wheat? Doubling of wheat prices doesnt amount to much for us here in the usa. The commodity cost of goods and services is an extremely small amount of total production costs. This is just a rise in price so far as opposed to an inflation. Total inflation in the usa measuring everything we consume is still fairly benign, but clearly bears watching. The fed is not going to shoot until it sees the whites of inflation's eyes.

Tue, 01/25/2011 - 13:35 | 903200 topcallingtroll
topcallingtroll's picture

Actually mark twain always graciously gave.benjamin disraeli credit for the damn lies quote.

Tue, 01/25/2011 - 13:54 | 903252 erik
erik's picture

The Fed is making a simple (albeit illogical) choice.  Support the US govt at any cost.  Right now that is causing massive food price inflation which is causing instability/revolt among the countries which have the weakest food situations (aka food importers).

Bernanke is driving the US off a cliff and the reason the populace doesn't realize it yet is because food prices are a much smaller percentage of our consumption. 

QE must be stopped.  The money creation is the source of the problem.

Tue, 01/25/2011 - 13:31 | 903188 Cognitive Dissonance
Cognitive Dissonance's picture

When people wish to believe, any plausible lie will do.

Liesman is simply telling the Ponzi and it's puppets what it wants to hear, that all is well and to continue to pump away. The pumps were going full blast when the last of the Titanic slipped beneath the waves of the North Atlantic.

Tue, 01/25/2011 - 13:40 | 903216 Don Birnam
Don Birnam's picture

...and the band played on.

Tue, 01/25/2011 - 14:04 | 903287 youngman
youngman's picture

"I am not sure if CNBC is a willing conspirator in trying to convince the American consumer that "all is well" or if they are simply incompetent"..........it bothers me too....this is simple economics...costs of goods go up....costs of the final product go up....to me he is the Liberal Obama shill...he gets the Democratic memo every morning on what to say that day...

Tue, 01/25/2011 - 15:40 | 903503 Cognitive Dissonance
Cognitive Dissonance's picture

And before that he was the Conservative Republican shill......because he's been doing the same since becoming the CNBC economics reporter/myth maker.

It's not about left-right, it's about power and control. He's a corporate shill that will dance to whatever political persuasion his corporate handlers determines pays the best at that time.

Tue, 01/25/2011 - 16:17 | 903783 bingaling
bingaling's picture

Why don't more people get that?

Tue, 01/25/2011 - 17:29 | 904051 ColonelCooper
ColonelCooper's picture

Because TPTB need us to stay at each others throats.  How can the ponzi continue when you realize that regardless of my stance on abortion I make a pretty damn good pair of boots?  And I realize that despite the fact that you believe in global warming you have big fat ass chickens and want to give me a dozen of them for a pair of my boots.  And then we realize that we really wouldn't have to work as hard at our day jobs if I could just trade another pair of those boots to have your pothead brother in law come over to my house with a couple of rolls of that hemp cloth he makes.

But then because you and I don't make any money, Capital One won't give us credit cards to buy Ipods with.  Then the Apple people and everyone in their supply chain will lose their jobs and won't pay taxes.  Then all of the non producers won't get food stamps and continue to breed like the rabbits you got from my Bible thumping cousin.  Then nobody will have jetskis and cable, and you and I both know that somewhere in the Constitution it says that every American is entitled to a jetski.

So see, without us hating each other for our labels, the beast dies.  Now get back over here so I can choke your treehugging, faggot ass.

Tue, 01/25/2011 - 19:01 | 904307 Panafrican Funk...
Panafrican Funktron Robot's picture

Excellent, accurate post alert.

Tue, 01/25/2011 - 13:32 | 903193 suteibu
suteibu's picture

I liked the part in the video about how competition actually increases the pass-through of the higher commodity price.  A little pitch for central planning, perhaps?

Tue, 01/25/2011 - 13:41 | 903212 hambone
hambone's picture

Oh GOOD LORD -

Big O plans to propose FREEZING the Federal budget...noooooo. 

Freezing the budget at $4.1T when you are taking in $2.1T. Imagine freezing a budget when you are overspending by 100%.  And imagine the backlash that will come from this horrific "cutback".  Oh, and yes he can...he now proposes to rid us of those $20B in earmarks.  Whewww, crisis averted. 

Political fucktard.

Tue, 01/25/2011 - 13:47 | 903232 Hedgetard55
Hedgetard55's picture

+55

 

And he still can't produce a certified birth certificate.

Tue, 01/25/2011 - 14:20 | 903261 hedgeless_horseman
hedgeless_horseman's picture

moved

Tue, 01/25/2011 - 14:26 | 903354 irishgurl4
irishgurl4's picture

"Investing" is the new spin on the word "spending."  They realized spending was seen very negatively so they switched it up.  Investing sounds so good and positive.

Tue, 01/25/2011 - 13:43 | 903222 rich_maverick
rich_maverick's picture

http://www.thekidsvillage.com/content/coming-crisis-middle-class

These idiots are all wrong.  If you want to real truth, check out the video in the above content (from Elizabeth Warren of all people).  The summary is the following.  As "must buy" items go up in price (due to real inflation seen since the 1970s), the available money for discretionary spending goes down.  Governments weigh discretionary spending significantly in their figures, showing deflation.  But, when looked upon from a fixed salary perspective (which has been the case in the past 25 years), people are having to spend more on food & energy & health & transportation, while they have less to spend on discretionary (computers, TVs, electronics).  So, as demand goes down in discretionary (as there is less money chasing them), they suffer deflationary consequences.  In the end however, households have less money at the end of the month.  The video demonstrates the lie BLS is performing.  It's a lie of omission.  What is worse, is as food prices and other must haves go up in price, BLS deflation will get worse.

Tue, 01/25/2011 - 13:57 | 903258 suteibu
suteibu's picture

Thanks for the link.  Very interesting and well constructed.

Tue, 01/25/2011 - 13:44 | 903228 Overpowered By Funk
Overpowered By Funk's picture

Steve Liesman has the entire collection of Fed action figure dolls along with the matching pajamas.

Tue, 01/25/2011 - 13:49 | 903239 Caviar Emptor
Caviar Emptor's picture

Don't you guys recognized State-Backed Propaganda when you see it? 

The segment was aimed at the 'lowest common denominator' complete with stupid props (Liesman holding a sack of flower, a loaf of bread and wheat :-) ! Gimme a break!).

The conclusion through their numbers was that even if input costs quintuple you the little guy will only need to pony up a dime more . lol. 

What they didn't mention is what guys like me remember and which we haven't seen for a while in the US: the psychology of pre-emptive price increases, of talking people through 'sticker shock', of collusion and price fixing in hundreds of little sub-sectors and on and on 

Tue, 01/25/2011 - 13:50 | 903241 gwar5
gwar5's picture

Liesman is an idiot. A journalist, not an economist

I worked with his brother and he makes ears bleed too

Tue, 01/25/2011 - 13:53 | 903249 Cognitive Dissonance
Cognitive Dissonance's picture

It serves the masters well to have idiot Liesman as a front man. When it all goes south, Liesman will be a convenient idiot punching bag to pummel.

Tue, 01/25/2011 - 13:50 | 903242 Instant Karma
Instant Karma's picture

Let me make one thing unmistakably clear: the price over everything is going up except houses and flat screen TVs. Everything. Every item in the grocery store. Gasoline. Heating costs. Water costs. Satellite TV. Restaurant bills. Airline fares. Car prices. Clothing not so much. Toys.

Tue, 01/25/2011 - 14:12 | 903311 Temporalist
Temporalist's picture

Clothing not so much?  Cotton is at record highs:

Cotton Soars to Record as Chinese Demand Surges, Global Production Wanes

http://www.bloomberg.com/news/2011-01-24/cotton-soars-to-record-as-chine...

Tue, 01/25/2011 - 15:13 | 903514 Instant Karma
Instant Karma's picture

I'm not sure that's been passed through yet. How much of the price of a nice shirt or pants or underwear is actually cotton? Probably not much.

Tue, 01/25/2011 - 13:50 | 903243 bunkermeatheadp...
bunkermeatheadprogeny's picture

He was on this morning with an inflation map. Had the U.S. in the 0-3% category.

Tue, 01/25/2011 - 13:52 | 903247 Samuel Morales Jr.
Samuel Morales Jr.'s picture

There is inflation. Ask any hardcore middle class shopper that prices have no risen despite a higher unemployment. USA is mostly a service economy that imports a lot of stuff. Inflation in the dollar creates noticeable inflation, but the foreign economies which have weaker currencies that are dollar-pegged in some manner feel the brunt of the inflation much more. Americans just lucky for now. Actual goods have increased, not just food, but steel. Even a weaved basket. Those things are more sensitive to inflationary pressures than service jobs like how much a haircut costs, what a peticure costs, etc. Real raw materials are at the forefront of inflation, and producers eat some of the cost, but nevertheless, the consumer who pays attention to prices obviously sees that inflation is going on.

Tue, 01/25/2011 - 13:53 | 903248 spekulatn
spekulatn's picture

Well done Jason.

Tue, 01/25/2011 - 13:54 | 903251 CrashisOptimistic
CrashisOptimistic's picture

Don't watch CNBC.  Neither should you.

Where are the analyses of rent?

Tue, 01/25/2011 - 13:55 | 903253 DarkMath
DarkMath's picture

You lost me when you jumped from the 10 cent increase in one loaf of bread to aggregating to 66 loaves of bread. That's a bit disingenuous don't you think.

CNBC is evil but they are speaking the truth in this case. Bread prices aren't going to increase all that much for now.

The real killer will be higher fuel costs because everyone takes a hit there. Where higher wheat prices don't increase production costs for everyone in the supply chain, higher fuel costs do. Higher fuel cost can make prices rise exponentially.

Tue, 01/25/2011 - 14:11 | 903285 hedgeless_horseman
hedgeless_horseman's picture

The real killer will be higher fuel costs...

But...but...but...the Saudis are talking about raising production.  How they are going to do this when global and KSA oil production peaked several years ago is unimportant.  At least they are talking about it, which when combined with a little release from the Strategic Oil Reserves, and voila!  WTIC down below $87.  See, central planning is easy when you measure your performance on a time scale equivalent to the average American's attention span.

http://news.yahoo.com/s/afp/20110124/bs_afp/commoditiesenergyoilprice

Tue, 01/25/2011 - 14:18 | 903333 GoinFawr
GoinFawr's picture

"...WTIC down below $87" But not the good stuff. Exactly.

Tue, 01/25/2011 - 13:55 | 903254 Hedgetard55
Hedgetard55's picture

The cost of the wheat is a small part of the total cost of producing a loaf of bread, the major drivers being labor, energy, and overhead, so an increase in wheat prices will never drive the bread price up in the same percentage.

Tue, 01/25/2011 - 13:57 | 903259 patience...
patience...'s picture

The point he is trying to make is -

On a loaf of white bread there is about a 6 cent increase and for wheat it is less than 3 cents.

It does appear that other ingredients, manufacture and distribution add the most cost.

 

Tue, 01/25/2011 - 13:58 | 903263 tmftdoyle
tmftdoyle's picture

"I am not sure if CNBC is a willing conspirator in trying to convince the American consumer that "all is well" or if they are simply incompetent."

 

They are both. Their incompetence manifested itself in the simple/quick refutation that you provided.

Tue, 01/25/2011 - 13:59 | 903264 Caviar Emptor
Caviar Emptor's picture

The point conveniently ignored by Liesman which is part of my biflation theory is that it takes less of a dose of inflation to kill consumers, businesses and the economy when you simultaneously have deflating incomes, employment (and opportunities for advancement) and real estate. It's pretty simple: there's less margin for absorbing or passing on input costs or cost of living increases when net worth and personal assets are on the decline. 

It's a symptom of a post-bubble world and also of an economy on the decline. The cost structure of a middle class existence (for consumers) is too high and can no longer be supported by he aggregate earnings and net worth.

Today was a good example of the dynamic: 

Case Schiller confirms what we've said here on ZH (myself included) that the housing double dip is accelerating. BUT inflation is beginning to blossom as consumer price increases were announced by Kraft, Kellogg and General Mills

Tue, 01/25/2011 - 14:00 | 903273 That Peak Oil Guy
That Peak Oil Guy's picture

It would be interesting to see how much oil goes into a loaf of bread.  I'm just sayin'...  ;-)

Monetary inflation + more expensive inputs (due to harder to obtain supply) = Big Trouble

(Especially in the land of population overshoot.)

Meanwhile TPTB do everything they can to juggle the money/debt monster while also trying to hold down the price of gold to keep the price of oil as low as they can.

These jugglers have too many bowling balls in the air and something will have to fall.

TPOG

Tue, 01/25/2011 - 14:00 | 903274 lunaticfringe
lunaticfringe's picture

I have never liked Liesman, although I have a friend who is an avid headhunter and trophy seeker. He says there are things to like about Steve...

Tue, 01/25/2011 - 22:01 | 904719 LooseLee
LooseLee's picture

Ass-Kissers and etablishment conformist-shills are what TPTB seek to keep the sheeple passified; Liesman fits the bill to a tee...

Tue, 01/25/2011 - 14:02 | 903275 dryam
dryam's picture
1pussy

noun \?pu?-s?\ plural puss·ies
Definition of PUSSY


1: Steve Liesman
2: cat
3: a catkin of the pussy willow
Origin of PUSSY


1puss
First Known Use: 1726
Tue, 01/25/2011 - 15:15 | 903524 Midas Mulligan
Midas Mulligan's picture

Those definitions don't look all that familiar.

A consultation with the Urban Dictionary is in order:

pussy

The prime motivating factor in any (straight) males life. Like oxygen, it's only important if you're not getting any. Lack thereof causing depression, anxiety, willingness to do any stupid stunt to get some, and a train of thought that focuses on little but the question of why you're the only one on the planet not getting any.

Tue, 01/25/2011 - 14:34 | 903374 innsbrooklad
innsbrooklad's picture

Steve Liesman is proof positive that the Indian had congress with the buffalo.

 

He is the ugliest thing I see every day on national television and he is the

dumbest economist I have ever seen. Thank God for the mute button.

Tue, 01/25/2011 - 15:11 | 903505 msgtb
msgtb's picture

I don't watch CNBC I don't think I could take it.

I record it and play it back at 4x and if I see Rick 

or Sharon I hit play and listen.

 

It works great as those two are the only people

I care to listen to.

 

Good luck and good trading

 

Dave B.

Tue, 01/25/2011 - 15:27 | 903568 luk427
Tue, 01/25/2011 - 15:11 | 903507 Whalers
Whalers's picture

Kind of surprised by the comments I'm reading.  You cant have POMO without some short-term rise in commodities (year or two).  If POMO raises stock prices than POMO raises commodity prices as well.  Therefore, if POMO is an artificial prop up of the stock market than it is artificially pumping up commodity prices as well.  This Fed induced inflation is not true market inflation.  That means the natural direction of the market will take over soon enough and DEFLATION will be back on the front burner. 

Inflation?  What's worse, paying $10,000.00 more per year on your everyday purchases or the fact that your house has lost about $150,000.00 in the past three years?  The housing market is about 50 trillion is size.  If we see another 10% drop in housing (conservative) that's another 5 trillion out of our economy.  Helicopter Ben cant keep up with that.  States and municipalities are looking into their ability to default on their debt or even restructure their debt to pay cents on the dollar and your worried about bread prices?

Deflation is the worry. You don't hear about it much because there is nothing to "sell" a person during deflation. Stocks, gold, silver and housing all go down together during deflation.   Liesman is a stooge of the Obama admin but is correct that inflation is not THE problem.

Tue, 01/25/2011 - 15:22 | 903560 ejmoosa
ejmoosa's picture

What's worse?

I can wait out the drop in price in my home.  I paid less for it than it is worth now. 

 

I get to utilize my house regardless of the fluctuations in it's value.

 

Food and gas, on the other hand, I cannot wait for.  I need them when I need them.  And more importantly, it affects the psychology of how things are each time I drive past the gas station and prices are rising, even if I am not buying gas. 

Rational? Probably not.  Reality. Yes.  And that reality will shape future behaviors.

 

Tue, 01/25/2011 - 15:39 | 903624 Sean7k
Sean7k's picture

Yes, when you pump money into a system exceeding the value of products and services, you get dollar inflation. Deflation is currently only appearing in the shadow banking system- thank goodness GAAP protects the banks from that! Snark.

However, deflation would be a godsend. Price discovery would be re-established, marking a floor to build upon-and it would destroy the big banks that caused the problem in the first place. 

Bring on the deflation!

Tue, 01/25/2011 - 17:45 | 904117 ColonelCooper
ColonelCooper's picture

Saying that deflation is the problem at hand because the inflation is caused by printing, is like saying that your dog didn't die because I killed it.  So you're saying that POMO and QE and Stimulus will end soon?

I'm sure that when QEII is over, it will prove to have been the kick start the economy needed and deflation will no longer be a worry. 

Tue, 01/25/2011 - 15:13 | 903515 More_sellers_th...
More_sellers_than_buyers's picture

The rent is to damn high bitchezz!

Tue, 01/25/2011 - 15:16 | 903528 ejmoosa
ejmoosa's picture

Inflation is here, and like a ball of dough, it's just starting to rise. 

 

Orange juice in 59 ounce containers.  Ice cream sold in 1.5 quart containers. 

 

All the packaging that can shrink is shrinking.  Maybe they have confused the deflating of the packaging with the inflation of the prices.

 

 

Tue, 01/25/2011 - 15:41 | 903631 Sean7k
Sean7k's picture

Of course, the way America eats- is that really a bad thing?

Tue, 01/25/2011 - 15:31 | 903597 SRV - ES339
SRV - ES339's picture

He was on this morning with an inflation map. Had the U.S. in the 0-3% category.

Yes, Stevie explained it all... the emerging economy world is awash in inflation... apparently, the developed countries do a much better job of bullshitting the numbers, so they all have inflation "under control!"

 

Tue, 01/25/2011 - 15:47 | 903647 bob_dabolina
bob_dabolina's picture

Rising prices are a function of high demand and a strong global recovery. I very much doubt monetary policy has any effect on prices. Oh, and on a side note, we will not monetize the Federal debt, and home prices have never gone down at a national level so we are not concerned.

-Ben (Times Man Of The Year) Bernanke

BTW, after I saw that he made person of the year, I made a blood vow to never buy another Time magazine again.

Tue, 01/25/2011 - 15:59 | 903703 rich_maverick
rich_maverick's picture

You are mistaken about how Time magazine awards that honor.

Hitler, Stalin were both "Person of the Year".  They are given to the person who is viewed as most newsworthy for the year.  MMr. Helicopter Ben Bernak truly is worthy of that honor.  He deserves to join the likes of Hitler and Stalin, and other "A-holes" responsible for the death of millions.

Tue, 01/25/2011 - 16:19 | 903782 sbenard
sbenard's picture

Good analysis, but with a small, but important update: Wheat was $5/bushel at the end of Jun. It closed today at $8.38/bushel, nearly $1 higher than the author's example. It was up again today for 9 of the past 10 days!

In other words, the phenom is much more powerful than even this article argues. Inflation is here, and its is going to get much WORSE because there is a lag time between futures prices and grocery store prices -- about 6-9 months. We should begin seeing significant inflation in the stores by spring or summer. Batten down the hatches, because its coming!

Tue, 01/25/2011 - 16:27 | 903819 sbenard
sbenard's picture

I would LOVE to see deflation because it rewards savers and people who are smart with their money. But politicians and central bankers hate it because it punishes the chronically-indebted (read U.S. government) and those who make bad bets (bankers, investors in MBS', etc.). It is time to bring back some accountability by bringing on some deflation!

Tue, 01/25/2011 - 16:50 | 903922 sbenard
sbenard's picture

And this article doesn't include the indirect impacts of rising commodity prices, either. If those poor flour producers lose money, eventually they experience a phenom called BANKRUPTCY, which means they will probably shutter their doors and lay off all their employees. And their competitors gain pricing power that eventually brings -- oh my goodness -- higher INFLATION! And if they DO stay in business, they will feel pressure from employees that want higher wages to combat the effect of inflation on their lives, squeezing them even more. Why didn't Lies-man mention these indirect inflationary pressures? Hmm!

By the way -- corn has increased in price even more than wheat. At the end of June, it was priced at $3.53/bushel. Last Friday, it closed at $6.57/bushel. Corn is in our fuel (ethanol), many foods and sweeteners, and even BABY DIAPERS (corn starch)! And last Friday, the EPA mandated a 50% INCREASE in the volume of ethanol in our gasoline. Gee, I wonder  what will be the impact on the price of corn from that move?

Tue, 01/25/2011 - 19:56 | 904411 pacu44
pacu44's picture

Where does the EPA have the authority to do that? I have the Constitution right here, what Article?Section?

Tue, 01/25/2011 - 20:29 | 904492 ColonelCooper
ColonelCooper's picture

Executive orders bitches!!  You may now commence wiping your ass with your copy of the Constitution.

Tue, 01/25/2011 - 17:40 | 904093 lunaticfringe
lunaticfringe's picture

Bring that deflation pain bitchez!

Tue, 01/25/2011 - 21:55 | 904705 alfred b.
alfred b.'s picture

 

 

   Stooge Stevie is a Wall St groupie along with the rest of the cast of squawk box...and most of the cnbc crowd....he is truly in awe and fan of heli Ben & tax-cheat Geithner !! 

Tue, 01/25/2011 - 22:07 | 904709 michigan independant
michigan independant's picture

The issue has been obfuscated by the endeavors of governments [p. 67] and powerful pressure groups to disparage economics and to defame the economists. Despots and democratic majorities are drunk with power. They must reluctantly admit that they are subject to the laws of nature. But they reject the very notion of economic law. Are they not the supreme legislators? Don't they have the power to crush every opponent? No war lord is prone to acknowledge any limits other than those imposed on him by a superior armed force. Servile scribblers are always ready to foster such complacency by expounding the appropriate doctrines. They call their garbled presumptions "historical economics." In fact, economic history is a long record of government policies that failed because they were designed with a bold disregard for the laws of economics.

http://mises.org/humanaction/chap2sec10.asp

We have watched for decades.

It is impossible to understand the history of economic thought if one does not pay attention to the fact that economics as such is a challenge to the conceit of those in power. An economist can never be a favorite of autocrats and demagogues. With them he is always the mischief-maker, and the more they are inwardly convinced that his objections are well founded, the more they hate him.

Be not deceived; God is not mocked: for whatever a man sows, that shall he also reap.

So it is in regard to our works.

Be not deceived (μη? πλανα?σθε)

Tue, 01/25/2011 - 21:56 | 904711 alfred b.
alfred b.'s picture

 

 

   Stooge Stevie is a Wall St groupie along with the rest of the cast of squawk box...and most of the cnbc crowd....he is truly in awe and fan of heli Ben & tax-cheat Geithner !! 

Wed, 01/26/2011 - 01:15 | 905341 Dexter Morgan
Dexter Morgan's picture

Everyone on this page is absolutely right.  Kick ass!

Do NOT follow this link or you will be banned from the site!