Ugly Economy Part I

This is the first part of a multi part article in which I will wring my hands, moan, rend my clothing, beat my breast, and utterly dispair over the prospects for the economy. Boy, is this going to be a giggle fest!

I was shocked by Bernanke’s 75 basis point rate cut several weeks ago. Of course, since then, the fed funds rate has been cut by another 50 basis points, and it is a lock that the rate will be cut again at the next meeting of the Fed board of governors.

Bernanke’s panicked reaction to the MLK Day massacre in Asia and Europe (which was fueled, it turned out, by the unwinding of the rogue SocGen trader’s positions) caused me to begin examining the outlook for inflation. It seemed very clear to me that the Fed’s actions were going to cause outlandish inflation.

My first stop on this exploration was to look at the government’s figures on inflation. Now, I am not much of an adherent of conspiracy theories. I have always heard people say that the official data on inflation are bogus, with respect of the fact that they exclude food and energy for the core rate calculation, and with respect of other “adjustments,” particularly through hedonics. I had always heard this, and never paid much attention. I assumed that the figures were an honest effort to quantify fairly a rather hazy concept.

I was pretty stunned when my investigation lead me to conclude that the government’s inflation figures are totally bogus, and that it is pretty obvious that they are purposely rigged to reflect a lower inflation rate than is correct.

If you were a DA trying to convince a jury of the truth of this foregoing allegation, you’d want to prove motive and opportunity. The motive is pretty easy:

  • A lot of government entitlements are linked to the official calculation of the Consumer Price Index. A lower CPI reduces the cost of these entitlements.
  • The government has a legitimate interest in keeping inflation under control. A big factor in inflation is consumer and business expectations. If you can lie about the current level of inflation and get away with it, that’s a very effective way to manage expectations of future inflation downward.
  • The federal government is obviously a huge borrower. A higher rate of inflation raises the cost of the borrowing, as rational lenders would demand a higher interest rate as inflation increases.

The federal government started rigging the official inflation figures during the Nixon administration, when food and energy were excluded from the core rate. Why were food and energy excluded? Straight up: they were exhibiting a massive degree of inflation, and this fact caused awkward problems for the federal government.

The current government figures on inflation show a core rate of about 3% and a “headline” rate of about 4%. I believe that the real pace of inflation is AT LEAST 8% annually, and probably closer to 10 to 14% annually, and that it is certainly going higher over the next two or three years. I have learned something I never really understood before, that inflation is always, always and forever, a function of the expansion of the money supply, and that of course it shows up in prices of good and labor. It is the examination of the growth of the money supply which leads to me state the figures given above.

This is a bit of a hazy process, granted, in part because the Federal Reserve has stopped reporting the broadest measure of money supply, M3. I must also reluctantly indict the Federal Reserve for intentional rigging in this decision. It is pretty clear to me that the Fed could no longer report M3 because it was too embarrassing to report M3 growth running at a double digit pace and yet try to claim that inflation was running at a pace below 5%. It is like inflating a balloon: if the air is not going into consumer prices, where is it going?

An obvious objection Ben Bernanke would offer, if he were here, is that a lot of the growth in the money supply has gone into specific asset classes, particularly housing and equities, a manner which does not necessarily translate immediately into consumer prices and wage levels. OK, fair enough, Obiwan Ben Bernanke. But please, spare me, the disparity is too great and too prolonged to be explained by this factor, and there has just not been enough inflation of housing and equities prices to soak up all the money.

Stay tuned for Part II, in which I will give a valedictory address for the US dollar.

Highly Irate Former Republicans for Obama

Maybe, I hope, I have been wrong in believing that Obama cannot be elected president. I hope, I hope, I hope.

I live in Texas. Fellatio Girl is pure evil. The primary is approaching, on March 4. McCain, who is not really a republican, has already locked up the GOP nomination. As a rational human being, given these premises, i am going to do the rational thing: vote for Obama in the ratsocrat primary, and then ALSO caucus for Obama. The beautifully bizarre and quaint Texas Ratsocrat rules award about 2/3rds of the Texas delegates based on the popular vote in the primary, and the other third based on caucuses. And yes, you can do both! Who knew? When was the last time it mattered?

Obama will probably be a disaster. However, given that McCain is going to be the GOP candidate, I cannot and will not resist the beautiful symbolic quintessentially American story of a black man being elected president of the United States.

I had lunch with some bidness partners on Wednesday, old white dudes like me, long time Republicans. They are all going to vote in the ratsocrat primary for Obama, because they share the view of all right thinking human beings that Fellatio Girl must be ripped to shreds and her burnt remains scattered on the dark side of the moon. Maybe the chicoms will deign to use some of the technology Fellatio Boy traitorously sold them to deposit her charred flesh there for us.

If you’re a Facebook user, and you agree with my absurd rantings on this topic, consider joining this group.

I can’t wait to find out how the ratsocrats at the caucus react to my frequent and loud announcements that my main reason for appearing is to sic the Texas weasels of primary defeat on Fellatio Girl. Perhaps I had best pack a cosh, just in case I have to throw down.