Is The Fed TRYING To Force A Surge In Commodity Prices And Input Costs? Diapason Explains Why Hyperinflation Is Blackhawk Ben's End Goal

Tyler Durden's picture

A Fed paper released in September, which we luckily missed as otherwise it would have led to the collective death through uncontrollable foaming in the mouth of the entire Zero Hedge staff, was "Oil Shocks and the Zero Bound on Nominal Interest Rates", in which author Martin Bodenstein (an econ Ph.D.) argues that oil price shocks (i.e., surges in the price of oil such as the one we are about to experience courtesy of a fresh trillion in liquidity about to be unleashed by the Fed) are... wait for it... beneficial to GDP and stimulative to the interest-rate sensitive parts of the economy. To wit: "In fact, if the increase in oil prices is gradual, the persistent rise in inflation can cause a GDP expansion.". Yes you read that right. The Fed is stealthily floating the idea that a surge in oil prices will be for the greater good. In essence, the Fed is telegraphing that while it acknowledges that oil is about to jump to over $100, it won't be as bad as those with a functioning brain dare to claim. And, as we show below, it will actually be a very good thing! While we would probably get a massive lethal subdural hemorrhage if told to argue a view so blatantly and stupefyingly demented, insane and, simply said, wrong, as that espoused by Bodenstein, we are glad that Sean Corrigan of Diapason has gone the extra mile to not only expose the Fed charlatans for their voodoo gimmickry in this narrow topic, and brings up an even more critical idea, which is that the Fed "actually welcomes the current surge in the prices of many of the staples of everyday life; that it actually exults in the drain being exerted on family budgets; that it revels in the squeeze on profit margins being suffered by already-struggling small businesses, because it imagines this will serve to lower the reckoning of the ethereal construct of a generalized, future real interest rate and that this alone will serve to shower riches upon all who are presently suffering, in comparison for the present woes."

That nobody has reached this conclusion before is explainable - it is something only the brain of an illogical, demented, perverted genocidal madman's brain can come up with. Which is why we are now convinced the Fed is hoping for not only mild inflation, but an outright surge in prices. And since the Fed is confident that it can stop hyperinflation (as did that other idiot Rudy von Havenstein), the only logical outcome is that real, prevailing hyperinflation is what is imminent as this is precisely what the intermediate goal of Fed policy ultimately is!

From Sean Corrigan's Material Evidence October 28 note.

In a self-immolating exercise in reductio ad absurdum, this superficial reasoning has led the Fed right up against the so-called 'zero-bound" in nominal rates (one which a dedicated inflationist could, in any case, make a great deal less constraining if $1 trillion in excess bank reserves did not accrued positive interest). Ergo, the only way the Doves feel they can deliver more "stimulus" via lower real rates is (a) to force down yields at longer and longer maturities - and rational capital allocation and return on invested income, go hang! - or (b) to push up either the rate of price appreciation itself, or, at the least, expectations thereof. Nominal rates down and/or prices up = real rates down -> spending up is the alpha and omega of their plan.

This last has even been taken to the ludicrous extremes that an FRB discussion paper last month, entitled 'Oil shocks and the Zero Bound, purports to argue that while higher oil prices normally lower output by pushing up inflation, once under conditions of ZIRP, the higher oil price raises inflation expectations, reduces the prospective real interest rate, and therefore stimulates the interest-rate sensitive parts of the economy!!!!

Oh, Brave New World! Here we are supposed to concur in the notion that a man whose job is at risk because his employer can no longer afford the dearer diesel he needs to run the factory, and whose commute to that work has suddenly become that much more expensive, too, will be inspired both by this heightened anxiety for his livelihood, as well as by his shrunken disposable cash flow, to take out a loan - which he would otherwise never have countenanced contracting - in order to buy a newly-built house at his lower real yield!!!!

Additionally, in this Bread from Stones scenario, we are supposed to imagine that an erstwhile despairing entrepreneur gets out of bed one morning and cries, "Hallelujah! The cost of coffee is up, cotton prices are surging, copper wire has just become exorbitant - I better go start a business before it's too late!"

Well, yes, perhaps in those particular industries assuming he has the aptitude, the means, and the ability to persuade someone to finance his eureka moment - but in any other line of business? Really?!?

Here we must force ourselves to pass over the objection that oil-driven inflation and lowered output are not necessarily such unfailingly automatic bed-fellows (see the late Boom) with only the brief observation that this confluence generally originates from either the second-order effects of a prolonged, frictional price disco-ordination, or from CB action to rein in a generalized price rise which only its own, previously over-accommodative policy could ever have allowed to occur in the first place (Hint: with an unchanged supply of money, more spent on one item implies less spent on another).

Instead, we return our focus to this Laputan piece of pseudo-scientific mumbo-jumbo for what it reveals about the muddle-headedness which informs both the ineffable Bernanke Fed and its far too numerous counterparts elsewhere.

In confounding cause with effect, in sacrificing the micro to the macro, in falling victim to any number of category errors and logical non sequiturs; in pursuing, with unthinking mathematical rigour, a set of utterly unreasonable premises to the point of an untenable - indeed, a highly damaging-conclusion, we have a prime example of everything that is wrong in mainstream economics and a glaring illumination of why the state interference which this typically seeks to justify has proven so counter-productive to this-or, indeed, to any other recovery of the past 80 years.

Perniciously, Mssrs Bodenstein, Guerrieri, and Gust even argue that the increasing material scarcity of an oil "shock" can be even more effective at dissolving the 'zero-bound'-and so-err-lessening the general material scarcity being suffered in the slump- if the price rise progresses at such a steady pace that people expect it to continue for some fairly protracted period and if the monetary authority now makes it unequivocally clear that it will not respond to this rise in its habitual manner.

In other words, this strongly insinuates that the Bernanke Fed actually welcomes the current surge in the prices of many of the staples of everyday life; that it actually exults in the drain being exerted on family budgets; that it revels in the squeeze on profit margins being suffered by already-struggling small businesses, because it imagines this will serve to lower the reckoning of the ethereal construct of a generalized, future real real interest rate and that this alone will serve to shower riches upon all who are presently suffering, in comparison for the present woes.

Pushing this line of argument up to the hilt, it also leads to the idea that the Fed-having already stretched credulity by consulting the less than disinterested counsel of the primary dealers regarding the size of its next assault on the free market-should also start buying baskets of commodities! Truly, that way madness lies-the madness of Wallace and Warren and Roosevelt's depression-prolonging circus of restrictionist and inflationist cranks.

Never mind that it is not the general, but the specific estimation that his own, uniquely-determined, residual entrepreneurial income (i.e., the one left to him after deducting the costs of, e.g., his now pricier commodity inputs, Mr Bernanke) will exceed his tangible, pecuniary interest costs (not his airy-fairy, abstract, modelled ones) which incentivises the business leader to act, but even under Blackhawk Ben's own, Neo-Keynesian framework, there is something of a paradox at work here.

This lies in the fact that, however implicit it may be in the obscurantism of the Beelzebub of Bloomsbury's magnum opus, in an economy locked into partial idleness (and a rather more widespread wastefulness) by the vicissitudes of a market-hindering institutional and political setting, the lubricative effect of a monetary debasement only comes about when that inflation is unanticipated.

Put another way, it is only when people who have been withholding previously saleable supplies of goods and labor from a now inconducive marketplace are tricked into releasing them at unchanged nominal-but lower real-prices that a purposeful dose of inflation can hope to offer any palliative effect. Conversely, if they do recognize what is afoot; if they do not succumb to so-called 'money illusion', then they will simply seek to reprice their services to offset the change and so no discernible impact on output or employment will result.

Yet here we have Bernanke and his breathless battalions of banknote bundlers about to embark upon the perilously disruptive process of engaging in a gross manipulation of asset values, interest rate settings, and currency parities by telling people explicitly that prices will both rise and rise more rapidly and for longer, and all with the Fed's unreserved blessing and encouragement!

In other less poetic words, hyperinflation is coming, and Bernanke is welcoming it with open arms.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
russki standart's picture

End the FED, Bitchez!

UGrev's picture

whoever junked you needs an asskickin' and a brain exam. 

End the Fed ∞+1

UGrev's picture

Whomever junked me needs a freaking history lesson on how many central banks were abolished already and why. We don't need a central bank. Never have. 

Careless Whisper's picture

i think mister rothschild and mister j p morgan would disagree with you. a central bank is needed to further the big banks control of world-wide finance. most people have no idea how much power the big banks have --- just take a look at a case where goldman is referred to as the "victim" and the hot tub time machine federal prosecutors think it's 1980s east germany, and want a secret trial to protect the "victim's" trade secrets --- an admitted high frequency trading program that can "manipulate markets in unfair ways".


UGrev's picture

Of course THEY would disagree but THEY can collectively kiss my ass. I don't give a rats nuts what they think. ;)

rocker's picture

You are right. End the FED as we know it.  If they are not fully transparent they are prone and will betray the nation, in order to benefit the elite and Central Bankers of choice. The FED and Treasury manipulate the bankers, the media, congress, the senate and yes even the president. Regardless of party.  The Fed is the enemy of the people. And only a very few understand that. If we only knew how much and many they really give to those bankers of choice. Just look at what they did for Goldman Sachs and JP Morgan. It is so obvious that the FED is nothing more than a ponzi scam .  If you save money in a bank at what ever interest rate, you should not loose purchasing power. That alone is proof that the FED is the Enemy of the American People. They steal your savings right in front of your eyes using the term, our dual mandate is.............

macholatte's picture


IMHO Grayson is a Progressive Party lapdog and that makes him dangerous. However, if Ron Paul or Bill Black had a firm grip on Grayson's leash, then you might have a seriously nasty junk yard dog biting at the Fed's crotch and that could be a good thing for everyone.


In a closed society where everybody's guilty, the only crime is getting caught. In a world of thieves, the only final sin is stupidity.
Hunter S. Thompson

doolittlegeorge's picture

I miss that guy.  Never had words ever make me laugh harder or louder.  People really wondered and even blurted out "what are you reading"?  Imagine that...someone who wonders "what you're reading"??!!!!!!

Diggintunnels's picture

The absolute unchecked power of the FED should scare every American.  Think about the market over the last year, a little bit of inside knowledge from the souce could make untolds amounts of money with no risk.  This kind of power via information is toxic and no one person should have this kind of power.

financeguru500's picture

I don't know who junked you but i disagree with junking. I will say this though,

If we end the Fed, who will be there to take their place? As the collective people are ignorant about most things and unable to make good decisions(just look at how the tea party got bastardized by Palin and the Republicans, it was never a republican movement), the people with the loudest voices (most money) will take place of the Fed with their institutions.

If I were a betting man, I would place my money on the Fed being ended purposely by TBTB (the bankers that be, aka Rothschilds and IMF) only to be replaced by another form of banking. I'm guessing the IMF is being established to be the world monetary creator to take the place of all currencies. With the IMF's move to sell gold lately, i would be careful to buy too much gold as that is an indication of things to come (maybe owning gold becomes illegal, maybe the new form of world currency causes gold to be extremely devaulated while other things keep their value).

Charley's picture

Giving bankers control of a nation's money and making it responsible for management of the economy is like handing a pedophile a bottle of Viagra, a fifth of scotch, and a classroom full of preschoolers.

On the other hand, if you take it from the Fed, control of the nation's money reverts to congress, who already proved they were incapable of acting responsibly when they delegated that power to the Fed.

financeguru500's picture

Exactly! And as you have recently seen, all these mainstream people who were responsible for the problems are coming out and pointing fingers, who are they pointing at and why?

They will be a part of the new system that gets created and which will be led by the IMF.

Bugman82's picture


Look at where the blame is going.  Freaking rediculous.

Boba Fiat's picture

LOL, I don't even see "The Fed" as an option. 


Why aren't Paulson and Bernanke and Geithner and Obama getting a send off like Mussolini?  What kind of a people have we become?

goldfish1's picture

Why aren't Paulson and Bernanke and Geithner and Obama getting a send off like Mussolini?  What kind of a people have we become?

What she said.

TaggartGalt's picture

What kind of a people have we become?

Well, here is a clip from a movie that explains it so well.  So funny, and true, makes me want to cry!

Turd Ferguson's picture

"Why aren't Paulson and Bernanke and Geithner and Obama getting a send off like Mussolini?  What kind of a people have we become?"

Mussolini's errors/crimes were plain and obvious to all Italians.

Our rulers have, so far, avoided the same fate because so few Americans understand how and why they are responsible. The addle-minded, prozac-gulping masses will continue to allow this travesty until the damage is complete and the republic is destroyed.

hedgeless_horseman's picture

I understand how and why they are responsible, but I have not taken any offensive action, only defensive. I am not a prozac user, however, addle-mindedness is a side effect of good whiskey, which I do gulp on occasion.  I am sure I have a share of the responsibility for this travesty.  I pray that in some way practicing disintermediation helps me to atone for my fiscal and political sins.  Amen, and slainte!

FEDbuster's picture

Everyone with a mortgage, credit cards, car loan, etc... should stop paying on them now!

Starve the beast.

A Man without Qualities's picture

The main reason why US society is doomed is that the majority is just too fucking stupid and ignorant.  Too few have the ability to comprehend the complex issues or even use available information to form an opinion - they have their views and then seek the information that supports it. I imagine those men who created the Declaration of Independence must be looking down on the nation they gave birth to and weeping.


"Already long ago, from when we sold our vote to no man, the People have abdicated our duties; for the People who once upon a time handed out military command, high civil office, legions — everything, now restrains itself and anxiously hopes for just two things: bread and circuses"

unununium's picture

The issues are not complex.  The lies are.

Give the people a little more credit.  It's our only hope, anyway.

High Plains Drifter's picture

Yes sweet thang, (Denniger) was bumping his know-it-all gums on MSNBC this afternoon. Ha ha ha, this guy is too much.  Pika has been on there a long time on his knees and kissing Denniger's ring. Its those wascally democrats.........You try and tell them anything and you piss off el gran douchebag himself (Karl) and pretty soon you are out on the door step looking in.

trav7777's picture

lol...too true.

If they keep Douchinger coming back it'll be because he is the bitch and gives them what they want.  Some kinda political blame bullshit.

mynhair's picture

So control reverts to CONgress, what is the problem?

Elect idiots and the $ dives.  Elect some with brains above the level of a cat, and the $ soars.

Lesson would be: don't vote for idiots.

ZakuKommander's picture

I do not believe that anyone with brains above the level of a cat is running.

Oh regional Indian's picture

I believe  electronic voting machines make the entire vote-scam meaningless.

Careful manipulation of public perception make all races close (or close enough). From there, a little software manipulation is all it takes. In fact, early voters are seeing problems already.

2000, 2004, 2008.... enough time for the perps to wipe away their paw prints from the crime scene.

Remember Michael Connelly?


fiftybagger's picture

Ever think that maybe the framers thought your thoughts 200 years before you ever lived, and for that reason enshrined bimetallism?

hungrydweller's picture

Ladies and Gentlemen - we have a winner!

Temporalist's picture

Congress didn't really delegate the power to the Fed a handful of bankers and their lapdogs did in a secret coup to "save" the global financial system but a war actually kept that system going.

“The few who understand the system, will either be so interested from it’s profits or so dependent on it’s favors, that there will be no opposition from that class.”
-Rothschild Brothers of London, 1863

"The financial system has been turned over to the Federal Reserve Board. That Board administers the finance system by authority of a purely profiteering group. The system is Private, conducted for the sole purpose of obtaining the greatest possible profits from the use of other people's money"
-Charles A. Lindbergh Sr., 1923

"A great industrial nation is controlled by it's system of credit. Our system of credit is concentrated in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the world--no longer a government of free opinion, no longer a government by conviction and vote of the majority, but a government by the opinion and duress of small groups of dominant men."
-President Woodrow Wilson

"History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and it's issuance."
-James Madison

"I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a monied aristocracy that has set the government at defiance. The issuing power (of money) should be taken away from the banks and restored to the people to whom it properly belongs."
-Thomas Jefferson

“The money powers prey upon the nation in times of peace and conspire against it in times of adversity. It is more despotic than a monarchy, more insolent than autocracy, and more selfish than bureaucracy. It denounces as public enemies all who question its methods or throw light upon its crimes. I have two great enemies, the Southern Army in front of me and the bankers in the rear. Of the two, the one at my rear is my greatest foe.”
-Abraham Lincoln

Vorpal1's picture

So even powerful individuals cannot stop the evolution of institutions to ever larger ones. Just like the cosmos, complete with a black hole at the center.

nuinut's picture

What makes you think the IMF gold was anything more than countries buying back pledges made to the IMF?

No physical gold changed hands, which is why they wouldn't sell to Sprott.

Multiple entry book keeping. IMF never necessarily had any gold. Just another tool to quiet the golden canary.

Hyperinflation brings the gold revaluation.

Think about it. Who currently holds the bulk of the world's gold? TPTB.

financeguru500's picture

Hmm, good point. I do feel like gold is the only true thing that holds value compared to fiat currencies. I just have a nagging feeling that in the creation of a new world currency, something will be done to negate all value of gold. If gold were allowed to continue to rise it would destroy everyones trust of fiat currency, though that may be needed to end the current fiat currencies for the rise of the new currency. Too many questions of possibilities.

fiftybagger's picture

"something will be done to negate all value of gold"


There's only one thing that can do that, and it can't happen while I'm still here......


15 And he had power to give life unto the image of the beast, that the image of the beast should both speak, and cause that as many as would not worship the image of the beast should be killed. 16 And he causeth all, both small and great, rich and poor, free and bond, to receive a mark in their right hand, or in their foreheads: 17 And that no man might buy or sell, save he that had the mark, or the name of the beast, or the number of his name. 18 Here is wisdom. Let him that hath understanding count the number of the beast: for it is the number of a man; and his number is Six hundred threescore and six.


Revelation 13
King James Version
Boba Fiat's picture

Ronald Wilson Reagan?!!  6 letters in each name!!  (That's what I was told in 1980).


Actually, many scholars think that six hundred sixty-six was a numerical code referring to Nero.  The text was written to Christians living under Roman rule.  Roman soldiers would screen John's letters sent from Patmos, so he had to include certain puzzles that only Hebrew-Christians would recognize. 


Besides, rather than watch something slowly coming toward you, why not run out and destroy it if you know it's coming?  Who says we have to sit back and lazily watch a one-world currency evolve under a single dictator?  Hell, I'll buy your property for gold and ammo, right now.  I'll give you food and heirloom seeds for silver.  Who's game?  Sic semper tyrannis.

fiftybagger's picture

"why not run out and destroy it if you know it's coming?"


Because it is ordained with a higher purpose.  You couldn't destroy it if you wanted to.   And even after it is destroyed, IT COMES BACK:


3 And I saw one of his heads as it were wounded to death; and his deadly wound was healed: and all the world wondered after the beast. 4 And they worshipped the dragon which gave power unto the beast: and they worshipped the beast, saying, Who is like unto the beast? who is able to make war with him? 5 And there was given unto him a mouth speaking great things and blasphemies; and power was given unto him to continue forty and two months. 6 And he opened his mouth in blasphemy against God, to blaspheme his name, and his tabernacle, and them that dwell in heaven.


Revelation 13
King James Version


"Live by the sword, die by the sword"  Ever heard that?  Here's where it comes from:

52 Then said Jesus unto him, Put up again thy sword into his place: for all they that take the sword shall perish with the sword. 53 Thinkest thou that I cannot now pray to my Father, and he shall presently give me more than twelve legions of angels? 54 But how then shall the scriptures be fulfilled, that thus it must be?


Matthew 26
King James Version


9 And the third angel followed them, saying with a loud voice, If any man worship the beast and his image, and receive his mark in his forehead, or in his hand, 10 The same shall drink of the wine of the wrath of God, which is poured out without mixture into the cup of his indignation; and he shall be tormented with fire and brimstone in the presence of the holy angels, and in the presence of the Lamb: 11 And the smoke of their torment ascendeth up for ever and ever: and they have no rest day nor night, who worship the beast and his image, and whosoever receiveth the mark of his name. 12 Here is the patience of the saints: here are they that keep the commandments of God, and the faith of Jesus.

13 And I heard a voice from heaven saying unto me, Write, Blessed are the dead which die in the Lord from henceforth: Yea, saith the Spirit, that they may rest from their labours; and their works do follow them.


Revelation 14
King James Version


ZakuKommander's picture


3 An I sawz teh munster hurtz in teh hed: An laterz teh monstar hed he getz bettar: An evry pepls goes layk: OMFG! in wunder.4 An evry1 goes wrship teh munster an Evry1 goes wrship teh dragn bcuz he r haveing teh powurz. Any1 stolez hiz cheezburgerz? No wai!

5 An teh monstar sai bad of Ceiling Cat and he also sed teh monstar wuz clevar. He can has powurz 4 yeerz an yeerz.6 An teh monstar openez mout: An then he sed he h8z Ceiling Cat! OMG.


Revelation 13

Lolcat Bible version


52 Happy Cat sez, Bad kitteh. If u use claws u die by claws.53 Funny irony. If I could ask, Ceiling Cat sez I can has army. LoL54 But can’t cuz no spose 2?


Matthew 26

Lolcat Bible version


9 A thurd angell! Sez "Peepz whoo worshipz teh Monstar, getz hiz mark in 4hed or on handz, u big trubble now."10 "Ceiling cat pores sulfurz on u an makez tormentz, haha."11 Ur tormentz, they smellz funny, and is no chzbrgurs wit ur tormentz, and no u can't has napz 4evr eithur.12 Ceiling Cat's peeepz needz paytienz 2 put ups wit teh stink from ur tormentz n be tru 2 Son of Ceiling Cat.

13 A voice sez "Writez this: Iz good bein ded, the ded can haz rests an chzburgur."


Revelation 14

Lolcat Bible version



Bananamerican's picture

I M praynz for yer dam nad sol


Oh regional Indian's picture

Zaku, is that original work?

Absolutely brilliant. 


Temporalist's picture

"Iz good bein ded, the ded can haz rests an chzburgur."

And that is all anyone that follows those ancient magically written books really wants is to foreverafter have chzburgr.

Great mashup.

slobbermut's picture

Excellent again.  His Word will not return void...keep up the warning, some few will heed and you have discharged your duty.'s picture

simply said "unless you are in the eye of the do not realize that you need a raincoat"...and then again once you are already in the eye...and "if" this is your firstr major will not realize that there is a "back side" of the storm.

a large part of the population is not in your game and is busy raising a family or paying bills....they do not or may not see  because the have put their trust in "man" and that is their failure or mistake.

God Bless the "little" people.

janchup's picture

Trust in man or in the soothing stories told? 

Blah Blah Blah's picture

Couldn't agree more!  The consolidation of power into one man's hands, supported by the apostate church and led by the evil one himself.  Can not happen until I am out of here also!