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How Ben Bernanke Sentenced The Poorest 20% Of The Population To A Cold, Hungry Winter
The following chart prepared recently by JPMorgan demonstrates something rather scary, and makes it all too clear how the Chairman's plan to "assist" the US population via some imaginary "wealth effect" due to QE2, is about to backfire. As is now becoming very evident, the prices of energy and food products are about to surge, and in many cases have already done so, but courtesy of some clever gimmicks (Wal Mart selling what was formerly 39 oz of coffee as a 33.9 oz product for example) the end consumers haven't quite felt it yet. They will soon. There is a limit to how much every commodity can open limit up before it appears on the SKU price at one's local grocer. And while a marginally declining "core CPI" is irrelevant for this exercise as it measures only items that are completely outside of the scope of everyday life, what will be far more important to end consumers will be the push higher in food and energy costs. The problem, however, is that for the lowest 20% of Americans, as per the BLS, food and energy purchases represent over 50% of their after-tax income (a number which drops to 10% for the wealthiest twenty percentile). In other words should rampant liquidity end up pushing food and energy prices to double (something that is a distinct possibility currently), Ben Bernanke may have very well sentenced about 60 million Americans to a hungry and very cold winter, let alone having any resources to buy trinkets with the imaginary wealth effect which for over 80% of the US population will never come.
Here is how JPM explains the phenomenon:
When the Fed considers the possible consequences of a falling dollar resulting from QE2, it should perhaps focus on food and energy prices as much as on traditionally computed core inflation. First, the food/energy exposures of the lower 2 income quintiles are quite high (see chart). Second, the core CPI has a massive weight to “owner’s equivalent rent”, which suggests that the imputed cost of home occupancy has gone down. Unfortunately, this is not true for families living in homes that are underwater, and cannot move to take advantage of it (unless they choose to default and bear the consequences of doing so). Due to the housing mess, there has perhaps never been a time when traditionally computed core inflation as a way of measuring changes in the cost of things means less than it does right now.
Since nothing else appears to have jarred America from its prime time TV/iPad hypnosis yet, perhaps this is for the best, and a few hungry months in subzero temperatures is precisely what several tens of millions of Americans need to finally march on Constitution avenue.
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These are the people most likely to vote for the Tea Party. Bye,bye benefits.
Ben buying 600 Billion in US Treasury debt will give the bankers "the vig" of about %3. That leaves about %97 that goes to us, you, me and every American in one form or another.
Bankers are bafoons but "We the People" should deserve %97 of the blame. But just like it's impossible for the government to blame itself for our current troubles, "We the People" can't take any responsibility either. We've got no one to blame but ourselves.
"All are guilty, but some are more guilty than others": damn, can't get this counterfeiting machine to work...OK, let Ben do it.
Dr. El-Erian, who in my view comes across as one of the smarter people on the planet, based on his writings : Appears to be both issuing a warning and establishing an "I told you so" stake in the sand - in his Nov 2010 PIMCO viewpoint. The final three paragraphs are quoted below. The $64T question is : do the unintended consequences show up now, or at QE+N, how severely, to whom (which country) first, and what is the change in dv^2 / dt (the acceleration) of the impact. Remember, it is not the start or stops of life that get you, but the Jerks (2nd derivative of acceleration). Or as Sartre would say, "L'enfer, c'est les autres". (Huis Clos). Hell : it is other people.
This is some current price changes from San Antonio TX area. On Thursday (4 Nov), I filled my car at the Ft Sam Houston Post Excahnge and paid 2.54 per gallon, and on 5 Nov as I drove past the PX gas station the price was 2.56, and today, when I went to work at 0530, the price of a gallon of gasoline was 2.66 per gallon. For E85 from my wife's car, the HEB gas station near our house has had E85 for 2.18/gallon for several weeks, but today, the price was 2.26.
Wal Mart on Bandera Road went from 2.51 thursday to 2.66 Saturday.
I posted a link to this article on my blog:
http://arkadaba.blogspot.com/2010/11/bill-moyers-article-highly-recommended.html
And before anyone gets their panties in a bunch - read it! I know Moyers might be the boogeyman for some people here but he has pulled together an informative and cognizant view of where the US is right now and provided some excellent historical background.
On my own blog, my next post is going to be about where I sit in the political-economic landscape. My progressive friends may have issues with my support for the original tea party goals and the fact that I may have some critical comments on the John Stewart rally. Conservative friends won't like my ideas regarding public health care and education. They will not like what I say about some of the Republicans. It is going to be hard to articulate the nuances.
I remember in grade 10 religious class (yes Canada still supports two education systems - public and Catholic - which I do not support) when the teacher said you can't be a "cafeteria Catholic". It was all in or not. I choose not and switched to a public school at the end of the school year. I sometimes get the impression that some zerohedgers are opting in for all and that doesn't make sense to me. If I ever decided to trade, I would be gathering info from all sources and weighing them against each other.
from arka's link:
Harley to build bikes in India
http://articles.cnn.com/2010-11-04/world/india.bikes_1_india-market-harl...
+1 on Bill M, anyone dismissing him purely on ideological grounds is doing themselves a disservice.
Well, I've made it to the end of the article, plus comments (mostly Stormfront driven anti-Jewish drivel and responses to that...and don't protest that you're not from Stormfront because #1 I don't really care, and #2, refer to point #1, you racist twits).
Wading through all that crap deserves some kind of response, non?
First, excellent article. Bernanke's QE is going to end up hurting a lot of people, and the sad thing is that it is by design. You have to sacrifice the many to help prop up the banksters. Once you make a deal with the devil, you have to go all the way and see it through into completion. TARP wasn't enough. This won't be enough.
We've been going into the "boiled frog" scenario for a while now, but the time frame has been moving along faster than even Bernanke had expected, I'm thinking. I believe he had thought that he could kick the can longer. He has run out of options, and is quickly running out of time.
The Stormfront people are an annoyance and a pain in the ass. I didn't think until recently I had any skin in this game, but I have been researching my family tree, and looking into family artifacts, and in my research I found a small cup with the star of david all around it with the inscription "David 1869".
I never knew anyone in my family was Jewish. Having that around during Nazi times could have probably have gotten me and my children killed.
So, on behalf of "David 1869", and a large part, on behalf of myself, for having to read through three pages of your bullshit and drama in the comments section of a financial blog, you can each individually or as a group go screw off.
Thanks.
It is just part of the commenters. Better they say it up front and be identified so we can roll our eyes at it than let it fester and gain some kind of legitimacy, don't you think?
Plus a little mocking here and there can be useful. Certainly suppression is counterproductive.
Stormfront - just looked it up. http://www.stormfront.org/forum/
Travis, if you are looking for "clan," which is understandable under current circumstances, is this what you identify with? Serious question.
It's teh innerwebz. Antisemitism is most of the reason this silly thing was invented, dontcha know.
(Learn to ignore it or take off the rings and get down and dirty with those assholes.)
The reason I come to this site is that they post up-to-date market stuff and some longer term macro articles - and they are always on top of what is happening in the market.
Some of the comments bother me - especially the racist and sexist ones - but I am a firm believer in letting others (including myself) say whatever. And I'm all over the place:
http://www.youtube.com/watch?v=0Uc3ZrmhDN4
Ich
If you get a 5 micron red blood filter, you can remove most of that "Jewish" gene. Sometimes it takes 2 or 3 filterings to complete the job.
And have a nice day.
Kayman
Scrooge alive and well and living in the Fed.When it reaches -20 degrees in January the eviction season begins.Beware the memories will live for ever.
Bernanke in Denial 2005-2007
http://www.youtube.com/watch?v=INmqvibv4UU
http://www.youtube.com/watch?v=PdiCJUysIT0&feature=related
Neil Young Bitchez
don't take the chip, bitchez.
Last year London Residents in the UK was burning Large Books from little shops for heat at very cheap coins compared to the going rate of Coal at the time. Someone ran an article on it.
I hope that these book shops have been repenlished so that the Londoners can do it again by staying warm burning large books instead of expensive coal.
the best economist do their own grocery shopping - food manufacturers have been gearing up for inflation for months now.
This isn't a direct response to any particular post, but I want to make my position clear regarding a certain exercise I have chosen to involve myself in over the past year.
There are people who come to this site for financial guidance and understanding of global events. There are many solid individuals offering insight, and many who speculate (also invaluable). There are also people on this site who come to vent their frustrations at the reality of this country's plight. ZH is a place for many people to take comfort from the truth - when it can't be found anywhere else.
There are also elements on this site that are toxic - extreme hate. This element also takes comfort here. These people are like parasites - they are foreign to the host, but feed on the energy of the host. And potentially weaken the host (ZH).
Bottom line: I use my Jewish heritage to draw out the parasites. I use my heritage to draw out the ignorance. It's not always easy to see the difference between people on this site who have a legitimate beef with elements of the Israeli government, US bankers, et al, and those who are here because they think this place is an online CLAN rally. Engage in some very basic conversational strategy, however, and the haters are exposed. And then there is nothing more to talk about. Zero credibility.
Everyone is entitled to an opinion, agreed, but say it like it is. Don't bullshit me, or any other person coming to this site for truth. You speak the truth, as you see it, and you take your chances.
Please don’t confuse this as a rant, it's not. Also, I take zero offense to the slurs, and any attacks are a joke. It’s a fricking blog. And it’s my game, so don’t feel like you have to play. Cheers.
My long term indicators continue to warn of USD strength and EURO weakness.
http://stockmarket618.wordpress.com