Grand Theft USA – Prices Go Parabolic

ilene's picture

Grand Theft USA – Prices Go Parabolic

By Phil of Phil's Stock World 

Two percent!  

That’s how much the price of EVERYTHING has gone up IN AMERICA since Christmas Day, just 6 weeks ago.  This is according to the very reliable Billion Prices Project at MIT, which collects pricing data every day from online retailers using a software that scans the underlying code in public webpages and stores the relevant price information in the database.  The daily online index is an average of individual price changes across multiple categories and retailers that provides real-time information on major inflation trends.    

In other words, this is not Bernanke’s BS – THIS IS REALITY FOLKS – and reality is NOT GOOD!  We’re talking parabolic short-term moves that you know and I know and the data shows is absolutely happening. Yet the Chairman of the Federal Reserve Bank of the United States of America tells us over and over and over again that it is not happening.  

He tells us that inflation was down in 2010 from 2.4% in 2009 to 1.2% last year and that he sees no inflation. In fact, he is basing his mathematical models on it and directing our nation’s policies on this basis and he is conducting the most dangerous monetary experiment in the history of the Universe – ALL BASED ON HIS PREMISE THAT INFLATION DOES NOT EXIST!  

But, what if it does?  What if every other nation on Earth, including now even Japan, who see 3, 4, 6, 8, 12% and 20% inflation are not wrong and it is, in fact, Ben Bernanke who is wrong.  I would not be as worried if The Bernank got on TV and said:  Inflation is heading up to double digits, which is our plan but that’s not at all what he’s saying.  This means either the Chairman of the Federal Reserver is either lying right to our Congresspeople’s faces, under oath, or that he is a clueless policymaker with his finger on the button of a weapon that can wipe out the wealth of nations – that can kill tens of millions of people through starvation and can just as easily wipe out everything the American people have worked to save their entire lives.  Crazy or lying – take your choice

"Wait," you might say – "If Ben Bernanke is that wrong about inflation, wouldn’t there be some other hard evidence?" How about racking up $76Bn worth of losses in the 3 month-old POMO program already? Yes, that’s right,  in just 90 days the Fed has racked up $76Bn in losses on existing and new Treasury, Agency and MBS purchases, according to Zero Hedge.  "Gosh that sounds like a lot of money," you might be inclined to say. Don’t worry about it, it’s not going to be the Fed’s problem – it will be yours.  As Dr. Bernanke testified last week: "At the appropriate time, the Federal Reserve will normalize its balance sheet by selling these assets back into the market." 

As noted by ZH: "The Treasury is borrowing from the Fed, which, when it loses money on those loans, will then borrow from the Treasury, which will probably still be borrowing from the Fed" so this can go on for quite some time and "all" it does is add to the National Debt that you, your children and your grandchildren will be saddled with for the rest of their lives.  

Inflation is certainly creeping into our budget deficit, which is coming in at a whopping $1.65Tn for 2011, and amount that will equal (assuming GDP growth is 3.6%) 10.9% of our Nation’s Gross Domestic Product. Overall, the Government which collected less than $300Bn in Corporate Taxes against that $15,000Bn GDP (less than 1.5%) in 2009.

The actual amount of taxes paid by US Corporations in 1999 was $191Bn out of $15,000 Bn of goods and services sold in the United States that year.  Those must have been some horribly unprofitable sales, right? Poor General Electric – who produces the News that tells you how unfair corporate taxes are in America had such a rough time with their $156Bn in 2009 revenues that they had to ask for a $1Bn Tax REBATE from Uncle Sam last year.  It’s amazing how fast a gross profit of $77.8Bn (49%) can disappear as it becomes an Operating Income (bonuses must be paid) of $29Bn (18.5%) and then, for tax purposes, just $10Bn which, somehow, causes GE to get a refund of $1Bn (10% of reported Income).  Did they have a loss in 2008 that offset it?  No, they declared $19Bn in taxable income and paid $1Bn in taxes (5%).  How about 2007?  No, they declared $26.5Bn of taxable income and paid $4Bn in taxes (15%).  

This isn’t about GE, of course.  When the sum total of all Corporate Taxes collected against $15Tn of goods and services sold in the US is just $200Bn – we should consider ourselves lucky that GE "only" took $1Bn from us.  Just ask DIS, NWS or CBS ($13Bn in sales, $182M in taxes paid) and they will tell you (through the media they control) that, if anything, US tax policy is strangling their ability to prosper.  It’s true!  It must be, because I saw it on TV AND I read it in the Wall Street Journal!  

We are playing a game and the game is called "Grand Theft USA" and our country is being stolen from us by Corporations, who use the skills of our people (government education), the health of our people (pay your own health care), the infrastructure of our nation (best in the World and falling apart) and the life savings of our people (top-level borrowing rates kept artificially low through massive Federal devaluing of our currency) while placing the PEOPLE (not the Corporations) of America ever deeper in debt.  

Our Multinational Corporations use and use and use and use and pay nothing back.  Despite the fact that many may have had their origins here, they are now nothing more than Global Carpetbaggers. In post Civil War in America, Carpetbagger was the pejorative term for Northern Capitalists (mainly Wall Streeters) who came in post-disaster and politically manipulated and controlled former Confederate states for varying periods for their own financial and power gains. In sum, carpetbaggers were seen as insidious Northern outsiders with questionable objectives meddling in local politics, buying up plantations at fire-sale prices and taking advantage of Southerners.  Gosh, wrap a flag around that and it’s exactly what the multi-nationals are doing to our country now!  

By the way, notice how the Mainstream Media has changed the definition of carpetbagger over the years to mean a politician who runs from another district.  In fact, I challenge you to come up with 3 negative phrases that describe Corporate activity.  Come on, you’ve lived long enough – you’ve watched thousands of newscasts, read thousands of pages of newspapers – what are the phrases they use to describe negative corporate behavior?  I know poor people are fat, lazy, illegal, unwashed, unmotivated, uneducated, lying, cheating, scamming, octo-baby producing big losers who suck on the government teat every chance they get but, what are Multi-National Corporations?

The purpose of Newspeak was not only to provide a medium of expression for the world-view and mental habits proper to the devotees of Ingsoc, but to make all other modes of thought impossible. It was intended that when Newspeak had been adopted once and for all and Oldspeak forgotten, a heretical thought—that is, a thought diverging from the principles of Ingsoc—should be literally unthinkable, at least so far as thought is dependent on words. Its vocabulary was so constructed as to give exact and often very subtle expression to every meaning that a Party member could properly wish to express, while excluding all other meanings and also the possibility of arriving at them by indirect methods. This was done partly by the invention of new words, but chiefly by eliminating undesirable words… The vocabulary consisted of words which had been deliberately constructed for political purposes: words, that is to say, which not only had in every case a political implication, but were intended to impose a desirable mental attitude upon the person using them.  - George Orwell, 1984

Now, before you start checking to see if you are accidentally reading the Daily Worker, let’s see what kind of investing thesis we can draw from all this.  We were discussing the wisdom of playing long-term shorts on momentum stocks like PCLN, NFLX, OPEN and CMG in Member Chat this weekend (see very extensive strategy discussions under our Breakout Defense Trades as well as our still-bearish $25,000 Portfolio) and my comment regarding whether NFLX should be used as a "focus short" (the kind we stick with and roll along) was:  

NFLX is NOT a stock you want to press short into inflation. Neither is PCLN, who collect a fee and outsource their labor so costs are relatively fixed. The models can be gamed by inflation. CMG, on the other hand, has a wider distribution and suffers margin pressure from time to time and rising local labor costs can be very painful – that’s the kind of business that we can expect an eventual sell-off in. But, in a real inflationary environment, it’s hard to bet against anything other than utilities and insurance – who have regulated charges and often can’t get increases fast enough to keep up.

The rising tide of inflation can certainly lift all market ships.  Of course we’re ignoring the relative value of stocks to real inflation but that’s a deep kind of discussion we have with Members over months, not in 2 paragraphs of a morning post. As a quick example, check out the S&P 500 priced in gold since the crash. If we assume gold is a real hedge against inflation and the real value of a dollar, then US equities are STILL down 41% off the highs with a DECLINING 200-day moving average. In other words, we are losing ground to inflation and currency devaluation with our market plays:

Does this mean we don’t buy stocks? No, stocks need to catch up to inflation and they, like prices, are likely to go parabolic if inflation continues at the pace being measured by the Billion Prices Project. Also, we are blessed to be able to leverage our stock market gains and that should keep us well ahead of inflation but not so much for the tired, huddled masses we will be leaving behind as we hunker down in our luxury bunkers to ride out the revolution, which may come sooner than you think if speculators are right in projecting an additional 50% jump in the price of rice.   

As Mubarak has shown us – you can rob and oppress people for three decades without a peep as long as you feed them but, once they begin to starve – it is amazing how fast they take to the streets. Les Miserables is the World’s most popular musical – you would think some lessons would have been learned by the bourgeois audiences that walk out of the theater humming the tunes, but no…

 Happy Valentine’s Day!

- Phil

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Loan Gunman's picture


Back in 2008, Phil was singing the praises of then presidential candidate Barrack Obama.  I don't thing Phil is dumb enough to fall for the hope and change so I think he was talking his book.  You've got to took him a couple of months to get rolling but BO has been berry berry good to Wall Street.

boeing747's picture

WTF, 'no inflation from printing money' from a prof. from Princeton? Costco 10 lbs oakmeal costed $4.99 few years ago now $7.29. Even the price of Costco bathroom tissue goes up a couple of dollar with worse quality, the tissue so rough now (compared to old soft facial tissue feeling), it hurts my ass. I'm sure later they will change to 1 ply, then it will hurt my finger. Ben, in a normal recession, $100 cash can buy goods costed $120 before, but now because of your printing, $100 can only buy goods costed $90 before, that's 30% inflation upfront even CPI at 0. You can not fool an Indian or Chinese on this matter, I suggest you join a kindergarden in Japan and relearn what's honest, what's intergrity and what's you can do for your country. I known you are struggling internally but you need to be the right side of history.

ebworthen's picture


I never leave leftovers.

Tonight I had some leftover ground beef from making chili - and some old gumbo soup I had made. 

Cooked up the ground beef in the skillet, added the gumbo soup, mmmmm...

...damn the price of bacon though...


Hot Shakedown's picture

Given the firepower and ingenuity available to the US citizenry, I would argue that it is only a matter of time when some organized effort is made to simply 'take out' helicopter ben, tiny tim, and that anti-christian , pro islamic charlatan. It will happen at this rate and it will be swift.

Antipodeus's picture

I didn't know Eric Holder was anti-Christian.

GottaBKiddn's picture

The govt. creates debt through deficit spending.

The Fed creates inflation by increasing the money supply.

Congress allows them to do this, and tax us, because they represent the corporations, not the people. It also allows them to put us in jail if we complain to loudly.


AssFire's picture

Inflation??  Heck just buy physical like the past winners did. Let the Gov try to come and dig it out of your teeth. Airline hi-jackers don't have a prayer the next time they try that BS. Those who gave up their gold were the same ones who sat and did nothing when the hijackers supposedly took over the planes... Just buy physical never yield to the demand or threats of its return to the treasury (even if it must be held beyond your lifetime- this is a long term thing for your kids- right?) and remember what that guy said..."fool me once shame on you,  ahh we don't get fooled again".

Come on Ilene, it is not that hard to solve...


dcb's picture

I wish the national media would start picking up more what a liar the bernanke is , besides the fact that he is a sack of shi....

We need our egyptian moment, to riot and get rid of the fed and the bernank.

ebworthen's picture


You must understand that they are part of the machine that does not want the populace to know.

Cumcast wants you to buy beer, nachos, and watch the bread and circuses (sports and drama).

The Egyptian moment will not come until the 20 some-thing's don't have jobs.  Right now they are the people being hired to take the jobs of the over 30's with kids, health-care, retirement, and a mortgage.

The 20 some-thing's are now being inculcated into the consumption cult - give them just enough to take out a loan on a car or a house or buy a bunch of shit; if they can't pay it the old folks will or the banks take it back after the government owned car maker and mortgage backed by Fannie/Freddie have repossessed their "assets" that have been moved off of the balance sheets.


Quarky Gluon's picture

I'm not so sure about the 20 some-things getting plenty of jobs.  It seems that college grads have had some significant difficulty in that task recently as documented in this PBS Newshour piece:

dcb's picture

I wish the national media would start picking up more what a liar the bernanke is , besides the fact that he is a sack of shi....

We need our egyptian moment, to riot and get rid of the fed and the bernank.

Dead-eye Odom's picture

Fat people don't riot. But, inflation will put us on a diet.

Diogenes's picture

Is this the real life?

Is it just fantasy?

Caught in a landslide

No escape from reality

Open your eyes

Look up to the skies and see

sellstop's picture

Lets kill inflation. Lets kill it now.

How? Everyone. Every damned one of us will stay at home for one week. We won't go anywhere, we won't buy anything. No gasoline. No food. No theater. Turn off the TV. Don't buy anything. Don't spend any money. One week. We'll have them eating out of our hands.

That is how inflation is reduced. Reduce consumption.

Inflation is created by government debt. Raise taxes and reduce govt debt and the dollar will strengthen, inflation will subside. You don't even have to reduce the size of govt. Just reduce govt DEBT. Raise taxes and the dollar will strengthen. Look at the Euro. Austerity. Taxes up, euro up.....Look at us. Lowering taxes for thirty years. Dollar down for thirty years.....



johnQpublic's picture

taxes for the lowest bracket have gone up 2000% since the inception of the income tax

what more do you want?

SamuelMaverick's picture

Hey Phil of Phils stock world, your article was okay while it was dealing with the real rates of inflation, but your article became a stinking pile of dung once you started railing about those evil corporations not paying enuf taxes. That nonsense will work with the average drooling idiot sheeple who are clueless about economics. It wont work here on zero Hedge. The secondary and indirect tax revenue a profitable business generates for society is phenomenal. Go peddle your mental lilliputian bullshit elsewhere.  Yours,  Maverick

sellstop's picture

I don't understand why you think that only "sheeple" want corporations to pay their share of taxes. If corporations not paying taxes is what creates jobs and prosperity, where are all the jobs and prosperity?

Go to Robert Reich's site, and look at the speech that Herbert Hoover made in 1953. Nothing has changed. How was Hoovers record on the economy?



SamuelMaverick's picture

Didn't say that corps not paying taxes is what creates prosperity , can you read ???  That line of incoherent thought is painful to read.  What creates jobs and prosperity are healthy businesses, whether corps or sole proprietors etc...  Robert Reich is a colossal socialist idiot and a mental lilliputian. 

Quarky Gluon's picture

Yes, jobs overseas and prosperity for the super rich elite living the high-life on one of their many sprawling estates while their fellow proletariat countrymen fall further into poverty and homelessness.  As for your comments about Mr Reich, I would rather contend that it is lilliputian minds that fling ad hominem insults instead of taking the bother to engage in the sorts of rational discourse that you'll hear from Robert Reich.

RockyRacoon's picture

Ah, so you work for GE.   Got it.

ReeferMac's picture

Gawd, it's crazy, but I honestly JUST finished reading 1984 (haven't read anything like that since High School!), AND IT IS UN-FREAKING-CANNY how Orwell nailed it so perfectly 50-years ago. Everyone should get a copy at their local library (mine kept it in Young Adult Fiction).

Thanks again Phil, love reading your pieces.

Antipodeus's picture


"A Brave New World" Aldous Huxley;

"Fahrenheit 451" Ray Bradbury;

"Animal Farm" George Orwell;

"The Prince" Niccolo Machiavelli.


StychoKiller's picture

We've ALWAYS been at war with Eurasia!

Troublehoff's picture

it's especially disturbing since prices post christmas for many consumer goods are reduced in the sales etc.... and yet still prices are up

i guess when commodity prices are leaping up by 50%, 100%+ in the space of 1 year it's not too surprising really.

good old ZIRP

The Alarmist's picture

I'll say it again ... Bernankestein is like the economic version of Enrico Fermi pushing fuel rods into his atomic pile at the U of Chicago in the early 1940's.  Fermi did not design the pile to have shielding or cooling, as his theoretical calculations suggested there was little danger of runaway or explosion ... so a theoretical scientist put one of the largest cities in the US at risk in an academic pursuit.  As for Ben, well, so what if the lives of several billion are put at risk ... he has a point to prove.

whatz that smell's picture

who the flipping taco cabana is ilene?

ReeferMac's picture

Actually, this article was written by Phil Davis. I think "Ilene" helps out the folks @ ZeroHedge and brings in some of the content. Phil posts his daily missives at his website:, as well as other financial information sites around the net.

ilene's picture

ReeferMac and All - I'm the editor at Phil's Stock World and post many of Phil's articles here. We have permission from other authors to post their work at the Favorites on Phil's Stock World, and some also on ZH - which I do with articles I think people at this site might also enjoy (or enjoying arguing with).  We are big fans of ZH at PSW. - Ilene 

goldstandard's picture

2% my ass. I just don't believe government figures any longer but what's even worse is that the consumer is getting squeezed from all manufacturers. I do the food shopping for the family every week and usually buy the same items each week. I damn near dropped dead this past weekend. It was like someone removed all existing canned goods and replaced them with cans that were 1/3rd the size. Bad enough if you buy a bag of chips, 50% of the bag is nothing but air. But to reduce the actual size of canned goods and charge the same price just down right sucks. I'm just wondering how long it will take for the American consumer to wake up and pull an Egypt.

The Alarmist's picture

Do ya think Big O would go if half a million showed up and camped out on the mall? Nah, that stuff only applies to the little nations.

robobbob's picture

several hundred K showed up for O-care. Big Brother just shrugged, and the MSM played it as a couple of old ladies at a sewing bee.

the revolution is only televised when it has TPTB sponsors

StychoKiller's picture

Or, when Pb is sent on its merry way via high-speed delivery devices!

OptionsHedge's picture

Hey man, you passion shows. Bravo!

Dr. Acula's picture

Who would be so foolish as to hold dollar-denominated assets?

If you had $10,000 since Christmas, you've effectively thrown $200 in the garbage. It's costing you $4 rent / day just for the privilege of storing green confetti.

Also, note that this means the US gov has stealthily defaulted on $1 T of its $50T debt since Christmas.

Once the expulsion of monetary assets from hoards begins, the dollar's fate is sealed.


GottaBKiddn's picture

While bonds theoretically make you dollars, during inflation those dollars are losing value.

So, you're losing your gains, after inflation. And the govt. taxes you on the supposed capital gains, and ignores the inflation loss. So, you lose twice. Same with equities.

Find PMs off the record, and/or food, water, fuel, and anything else you can think of that starving, struggling people need. These things will soar during inflation, with no loss or taxes.

MolotovCockhead's picture

From the experience of Zimbabwe, looks like everyone of us have to get back into the stock market of protect ourselves against inflation!! Imagine the dollar comes in billion denomination.

proLiberty's picture

 What if every other nation on Earth, including now even Japan, who see 3, 4, 6, 8, 12% and 20% inflation are not wrong and it is, in fact, Ben Bernanke who is wrong.


Inflation is everywhere and always a monetary phenomena, and when all central banks are monetizing their own debts, and through swaps the debts of others, we will see pervasive co-inflation, where the level of prices for real things (gold, oil, food) melts up quickly while the prices for the rest of the components of the economy trend upwards in response.

bjennings's picture

Can I get an honest answer from some smart person here?  What will this do to bond funds?  My elementary view of this has been that those who have been short bonds have been getting screwed by FED manipulation of interest rates.  Is this correct?  Is this about to change?  I know people advising other highly risk averse people to invest in lower risk bond funds which in every other environment is probably the right thing to do but my rudimentary understanding of bonds and the current environment tells me that eventually those who have been shorting bonds will be proven correct.  Thx in advance.

proLiberty's picture

Bonds?  Don't confuse money with wealth, meaning that the longer it is to maturity, the more the holder will suffer 'wealth risk'.   The question will be far more how much wealth will he be repaid with more than if he will get repaid at least in part in nominal terms.



bjennings's picture

Thanks so much for your response.  So what you are saying and assuming is that if you hold your bonds to maturity you will earn a return that is outstripped by inflation.  What if you have to sell before maturity?  Even still, what if you invest in bond funds?  Do fund managers hold bonds to maturity; invest for bond appreciation, etc...  So much of this may be out of the realm of a short response but any input is much appreciated.

njdoo7's picture

I know I am not going to address your original question.  This is because it doesn't look like you understand the main point of the reply from the questions you are asking.

His main point is the difference between wealth and money.  What is a piece of paper: wealth or money?  How many pounds of beef will your treasury / stock buy now as opposed to a few years from now?  With inflation like we are currently seeing, it appears that it is going to be much less.  This is not to say you cannot gain wealth in paper markets, but there are a lot of unknown factors affecting your position (fed policies, wars, environmental, etc..).  Why put wealth at risk in a piece of paper, instead of securing hard assets that you need for survival or gain value during inflation?  

Read GottaBKiddn's comments on this post, he's explaining the point well.

minus dog's picture

Well, the obvious lesson of this story for the moment is not to store wealth in green paper rectangles.  Convert it into things you need, and can live off of.

proLiberty's picture

My wife participates in a crowd-source shopper survey.  She reports that prices are broadly up everywhere.

jailnotbail's picture

 As Dr. Bernanke testified last week: "At the appropriate time, the Federal Reserve will normalize its balance sheet by selling these assets back into the market."

Well, that is if the Fed doesn't decide to exercise the option it wrote into it's rule recently to just sell the crap to the Treasury.  I'm betting Ben's waiting for the "appropriate time" to do that, i.e. as soon as the  next minor explosion enroute to the big bang which will rearrange the whole universe occurs, and creates a temporary distraction.

Confucious 222's picture

Chairman Ben does not need to follow any rules or laws or suggestions; so just get it out of your head.

Chairman Ben can do whatever he damn well pleases. He is above any rules or law, or the very rule of law itself. He has all the suggestions he needs already; so just keep them to yourself.

Chairman Ben is the smartest man in the world; just ask TTTimmmay!

ALL must pay alms and homage to the Great Chairman!

Bow lower, you cur






hamurobby's picture

Meh, Ben will probably just swap the treasuries for what gold is left in the vaults. Very few mericans will bat an eye, I mean really, its just a barbaric relic, who cares right? And after all, WE have the dollah!  <sarc> 

GottaBKiddn's picture

Inflation is a the tax that is not called a tax. It is game that is played against those who don't know the game. Classic "haves vs. have nots". If you know the game, then you know that you have to unload your currency and pick up 1)assets that increase in value during inflation, and 2) low-interest debt. The assets appreciate during the inflation, while the debts decrease. Little wonder that the wealthy are not investing in new business activities in which raw materials are turned into retail goods by a labor force. This is not rocket science, and throwing rocks in the street doesn't help. Just ask the Tunisians and Egyptians. In this game the weakest will starve, and the militaries will make war.


NOPOMO's picture

Ben will tell you he sees no inflation....can stop it in its tracks in 15 minutes.  Oh, and that tax extentsion....well that was for the wealthy.  Middleclass disposable income is shrinking because anything gained has been lost in inflation.  The only ones who gained are the wealthy.  That's what your Congress, President and Helicopter Ben think of you.... this is what the are really saying go f*ck yourself because we are gonna steal it all.

Mercury's picture

The details on the methodology page are pretty thin:

Does anyone know for instance how different sectors are weighted?

CD's picture

"The BPP's inflation measure is markedly different from the government's. The economists average all the prices culled online, meaning the basket of goods is whatever you can buy on the Web. (Some items, like books, are most often bought online. Others, like cats, are not.) Plus, the researchers do not weight certain items' prices, even if they tend to make up a larger proportion of household spending."


What I found amusing was a line from the MIT Newsletter:

"Globally, the Billion Prices Project could even affect countries suspected, unlike the U.S., of releasing dubious inflation information."