There's No Inflation (If You Ignore Facts)

Sunday, September 30, 2007 | 08:14 AM

First Bloomberg, now Newsweek:

One of our favorite topics -- inflation ex-inflation -- has been slowly creeping into the mainstream. We have been hammering away on this for years; the surprise half point cut by the Fed is the most likely reason as to why the MSM seems to have discovered this meme.

Here's the latest from Dan Gross' Contrary Indicator column in Newsweek:

"Readings on core inflation have improved modestly this year," the Federal Open Market Committee said in justifying its 50-basis-point interest-rate cut last month, while conceding that "some inflation risks remain."

Catch that bit about "core inflation"? That's Fedspeak for: inflation is under control, unless you look at the costs of things that are going up. The core rate excludes the prices of food and energy, which can be volatile from month to month. Factor them in, and inflation is about as moderate as Newt Gingrich. In the first eight months of 2007, the consumer price index—the main gauge of inflation—rose at a 3.7 percent annual rate. That's more than 50 percent higher than the mild 2.3 percent core rate. The prices of energy and food are soaring, at 12.7 percent and 5.6 percent annual rates, respectively, and have been doing so for years. As a result, the CPI—including food and energy—has risen 12.6 percent since July 2003, for a compound rate of about 3 percent.

Signs of inflation are evident throughout the economy. When investors fear a rising inflationary tide, they latch onto the driftwood of gold. The day Bernanke cut rates, the price of the precious metal soared to heights not seen since 1980, when inflation ran at nearly 12 percent! I read about this in The Wall Street Journal (whose newsstand price rose 50 percent in July), which I picked up in the lobby of a New York hotel (where the average nightly rate soared 12.5 percent in the first seven months of 2007 from 2006, according to PKF Consulting) while sipping on a Starbucks Frappuccino (whose price has risen twice since last October)."

The whole article is wroth your time to read . . .


There's No Inflation (If You Ignore Facts)
Dan Gross
Newsweek, Oct. 8, 2007

Sunday, September 30, 2007 | 08:14 AM | Permalink | Comments (31) | TrackBack (1) add to | digg digg this! | technorati add to technorati | email email this post



TrackBack URL for this entry:

Listed below are links to weblogs that reference There's No Inflation (If You Ignore Facts):

» There Is NoInflation from tekel
No evidence of inflation in the American economy, unless you look at the cost of the commodities which people must actually buy.  Or the continuing decline of the dollar against world currencies.  Or the predictable spike in the (dollar-denominated) ... [Read More]

Tracked on Sep 30, 2007 1:46:07 PM


Under the guise of wanting to avoid a US recession which would wreak havoc on the average Joe, they cut rates with the buck already on its ear and in the face of a run in commodities, no less. It does not get any more brazen than that. But hang on a sec, that’s not the point at the moment. The point is the galling aspect of their feigning concern for the public. When you know that their every move is dedicated to keeping Wall St. happy.

Amaranth blew up in September of 2006. Prior to their demise, a 30-yr. old punk, using 8:1 leverage had manipulated the Natural Gas market higher in the wake of Katrina. By the ’05/’06 winter, Natural Gas had peaked at $14.73, a staggering level. Those eating with NG found themselves with eye-popping bills. (And others using alternative fuels were also zinged as a raging NG price can surely float all energy boats.) I am sure there were folks who went cold that winter, lacking the funds to keep the heat turned on.

The NG genius, Brian Hunter, was named the 29 spot on the Traders Monthly list of top traders in March of 2006. It was reported that Amaranth profited by about $800 mil on those NG trades with Hunter himself taking compensation of anywhere from $75 to $100 mil.

While the hoi polloi went into hock or went without, owing to the oppressively spiking retail cost of heat.

San Diego Employees Retirement Fund is one large pension that was invested in Amaranth. Apparently, that number was $175 mil in ’05. Since the fund dropped 50% in the first 9 months of 06, you gotta’ know that this pension fund took a big, bad hit. How’d you like to be 62 and ridin’ the back of the DPW truck for 30 years and then hear that, eh? How’d you like to get a $1,200 January gas bill? When you take home about $3k a month? Well, plenty of folks, did.

Did the regulators step into the Natural Gas market and put a stop to the manipulation that was causing an absolute hardship on John Q. Public?

Not on your life. But surely the FED was aware of the very real strain that US households were feeling! So why would the FED care now about poor John Q. and his re-sets when they didn’t care then that John Q. was cold? Because any intercession on John Q.’s behalf would have upset the grand slam that the energy traders were settin’
up. It’s that simple.

As a matter of fact, it wasn’t until July 25, 2007, that the CFTC charged Amaranth and head energy trader Brian Hunter with Attempted Manipulation of the Price of Natural Gas Futures including making false statements to the New York Mercantile Exchange. Ya’ think? I wonder if there’ll be any restitution to the old ladies out there who did without heat that year, eh?

When Gasoline first hit $3 bucks a gallon, did the regulators step in there, throw the specs out, RESTRICT OUR PRECIOUS COMMODITIES MARKETS TO “COMMERCIALS ONLY”? Not on your life. They know darn well what’s goin’ on, that a good $20 or $30 per bbl is courtesy of hot money, but do they step in and give John Q. some relief? Not on your life. Because, again, this would interrupt a very dynamic flow of funds from speculators. How many mutual funds jumped into this fray too, eh? You wanna’ spoil another trading party? We can’t have that, can we?

But surely the FED knew what $3.00 Gasoline would do to the least well-heeled among us, right? Do you think they have mulled what $4.00 Gasoline is gonna’ do? Perhaps. But that still would not have stopped them, no sir.

On the contrary, the FED knows that the shrewdest of the credit card issuers will be right there to save the day, to extend more credit to John Q. That he is going down the rathole, burdened with debt, is not an issue. Just think of the late fees and penalties that the lenders will extract from his hide!

As for the subprime debacle, did the regulators step in and derail the abusive/criminal activity? Did they make any moves to nip it in the bud? Not on your life. It was the Bear, Stearns misfire that pulled the rug out from under the crooks. Do the powers-that-be now feign ignorance? We don’t have to go there, do we? The bile it evokes is just too potent.

Posted by: Joanie | Sep 30, 2007 9:20:25 AM

The comments to this entry are closed.

Recent Posts

December 2008
Sun Mon Tue Wed Thu Fri Sat
  1 2 3 4 5 6
7 8 9 10 11 12 13
14 15 16 17 18 19 20
21 22 23 24 25 26 27
28 29 30 31      


Complete Archives List



Category Cloud

On the Nightstand

On the Nightstand

 Subscribe in a reader

Get The Big Picture!
Enter your email address:

Read our privacy policy

Essays & Effluvia

The Apprenticed Investor

Apprenticed Investor

About Me

About Me
email me

Favorite Posts

Tools and Feeds

AddThis Social Bookmark Button

Add to Google Reader or Homepage

Subscribe to The Big Picture

Powered by FeedBurner

Add to Technorati Favorites


My Wishlist

Worth Perusing

Worth Perusing

mp3s Spinning

MP3s Spinning

My Photo



Odds & Ends

Site by Moxie Design Studios™