Wednesday, February 2, 2011

Inflation? Yea That Was the Goal, What's Your Point?

Since 2007, Ben Bernanke has been consistently transparent. The FED hates deflation. Deflation you see is a very normal consequence of free markets. Deflation penalizes debt holders. It makes people with little debt and savings far richer. It rewards prudence. The Bernank is well aware of this.

Who would have gotten screwed by deflation? Banks and debt holders. So for three years, anyone who has passed an Econ 101 class has had to watch the Bernank try to print his crony bankers out of bankruptcy. They have pulled out every stop. Secret loans, taxpayer bailed out banks who don't have to absorb losses, mythical accounting standards, manipulated BLS numbers, and lies. Lots of lies and distractions. But Ben has a gawd awful problem now. He can't stop the inflation train. To raise rates now means the debt we owe and must refinance goes parabolic. Banks can't unload all those toxic loans and foreclosed houses. In short, the Bernank is screwed. He has painted himself in the corner. And he seems willing to take everyone with him. He is out of options. Runaway inflation is how this all ends- time and time again history has proven this. Weimar, Zimbabwe.

Can you imagine how insane this would get if suddenly 10 million or so people found jobs and added to demand and pricing pressure? Shit.

What is the answer? The most painful one. Jack interest rates up and fast. Kill the economy now. Live to fight another day. Savagely attack all government spending. Pay down debt. Will he do this? Not a chance in hell. That would be a reversion to the mean. It would cost him his job and it will cost the President his. The same outcome that they have been trying to avoid since 2007.

Last night, I saw ground sirloin at FIVE bucks a pound. Everything I consume, coffee, butter, vegetables all up at least 20%. Container quantities down. By this spring, the SHTF. Producer prices, consumer prices, taxes, gasoline and fuel, all are poised to go parabolic and kill the economy. This is what happens when you try to fool Mother Nature. 

Here's a chart I snitched from ZeroHedge. Pick out the stuff you use and watch the howls and denials that will occur in the BLS and CPI figs due out mid Feb. If you are considering gold and silver as hedges, I'd be a buyer. Soon.


Anonymous said...

And it will all be blamed on th free market system. It can't ever be their fault. Imagine what it will be like here in Venezuela where we import 85% of everything we consume except gasoline, which is essentially free. Last year our inflation was 35%. Food inflation was 47%. It's agood thing that I like bananas.

arerix said...

In Norway we pay 50% more for ground sirloin. Actually, we pay 50% more for a product containing at least (=exactly) 28% ground sirloin. Food can still become a whole lot more expensive is what I say.

Brian said...

Thanks for checking in Are. Many of us know that the US is responsible for exporting inflation and apparently nobody is going to try and stop the FED and the greedy bankers who sold the world all of those shitty investments and kicked this mess off.

My hero is Iceland. They told the EU and the bankers to screw off. And guess what? They are coming out of this just fine and they actually are enforcing the rule of law. Proof positive that bailing out banks was not the solution. I am watching Ireland. I would love to see the Emerald Isle tell the EU to fuck off. We'll see.

By the way Are, what the hell do they use as filler for the other 72% of your sirloin?

rawmuse said...

I read ZH also, but I scan past a lot of the comments. Some of those characters are bat shit crazy. About 10% are decent comments, from which some wisdom may be gleaned.