Government Propaganda Paves the Way for Inkjet Bennie
The CPI index is out today, and I'm more amazed than usual at the way the text is written to try and downplay the reality of inflation. Instead, the dry verbiage opens up by flogging a non-seasonally-adjusted drop in prices, month-to-month.
The Consumer Price Index for All Urban Consumers (CPI-U) decreased 0.1
percent in December before seasonal adjustment, the Bureau of Labor
Statistics of the U.S. Department of Labor reported today.
Why do I suspect that the drones in the trenches are trying to help pave the way for an "inflation is under control, so we're dropping rates" announcement to try and save the current regime's proverbial bacon?
Here's what should be the takeaway: Inflation for consumers is running at about 4.1%, at a time when the economy is softening and slipping toward a slow-to-no-growth period. This is stagflation, yet Inkjet Ben Bernanke and the Fed have been pouring more gas on the fire by dumping cheap money onto the markets in order to try and change something they can't fix.
I've already posted some charts that show that the Fed can't save housing because mortgage rates are unhinged from the fed funds rate, and the primary providers of all that housing liquidity have decided that they're not playing that ponzi scheme any more.
There will be trillions less available for people to blow on overpriced houses, and the fed cannot change that. The cheap money flowing into the markets these days is fueling commodity inflation, and that's coming home to roost in what we pay to live.
The obvious solution is to quit trying to coddle homebuilders and housing bagholders. Admit that you did nothing on the way up, Bennie Inkjet, and let the prices fall. Yes, that will likely mean a pullback in consumer spending to the extent that consumers were extracting fluffy, now-you-see-it-now-it's-gone "equity" from their homes and spending it on $500 jeans and iPods.
But not everyone was that shortsighted or greedy. Let home prices correct, and those who can afford them will buy them. The silent majority, responsible Americans, will keep buying goods and services that they need. Investments will be made with a mind toward reasonable returns for risk.
That is what capitalism is about. Without financial pitfalls for stupid capital allocation, there is no incentive for better investment. Ask the folks in Iran, the former Soviet satellites, Mexico, Venezuela, et al how well economies function when politicians try and determine appropriate rates of investment return by fiat.