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The Anals of Stock ProctologyPublished weeknights by
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Introductory Trial- to The Anals of Stock Proctology $16.99 The Flatio Report 2/20/04 In its last policy statement the Fed admitted that, well, yeah, there might be a little inflation but not to worry, and not yet. The Big Lie goes on. Everyone can see inflation but the Fed and the Gummit Ministry of Economic Information. Actually, they see it, but they just keep right on lying about it. The most important qualification for being a Fed governor, or an Information Ministry shill, is an advanced degree from the Goebbels School of Information Management. The Fed is out there bullhorning what a great job they've done controlling inflation. This isn't information, it's disinformation. Raw commodity prices are up 38% in two years. Housing inflation has been raging at 10% per year, but the BLS (or BS for short) says that it's up 2.1%? Yes ladies and gentlemen, because of the fact that Disinformation Ministry excludes home sale prices in their housing cost index, the raging housing inflation that we have seen over the past three years is NOT included in the CPI.
During the period of Q1 1999 through Q2 of 2003, the Federal Office of Housing Enterprise Oversight reported that housing prices increased by 33%. That works out to a compound rate of 6.6% annually. Over the same period the CPI data shows a 13% increase, or 3.82% annually. The National Association or Realtors reported that the average sale price of existing homes rose by 9.7% in 2003. The CPI data shows just over 2%. This is fraud, plain and simple. We are in the grips of runaway inflation and the government is flat out lying about it. The gummit excluded food prices from the "core" inflation rate ostensibly because food prices are "volatile." Volatile my eye. For the last five years food prices have gone in only one direction. That's not volatility, it's consistency. Food is excluded from the "core" rate because it is something that we have to buy every day and it normally increases at twice the rate of the items arbitrarily included in the "core." The fact is that 4-6% food inflation is normal, and and closer to the real truth about inflation in the things we all need to buy every day.
Energy prices are, admittedly, volatile, but there can be no arguing the trend. Up 65% in five years a compound rate of 10.5%.
Here are a couple other necessities that show there is "no inflation."
The chart of the CRB is a barometer of inflation at the raw commodity level. The long term chart suggests that commodity inflation should rage on but at a slower pace next year. The target for this year appears to be around 270-275, based on a 1 year cycle cmap. Given that it has already been hit, a range may develop, but the trend should reaccelerate in 2005. A 3 year cycle cmap of 265 has been hit, but a 4 year cycle cmap of 295 is still outstanding.
So there you have it, raw commodity prices going up at 15% per year, food prices rising 6.2% annually, energy rising 10% annually, housing rising 10% annually, but the "core" rate of inflation is only 2.5%. Therefore, we have no inflation, and the Fed has a rationale to continue suppressing interest rates indefinitely at levels that rape and plunder conservative savers, mostly older retirees, and force people to make ridiculous, wasteful, risk-laden decisions about how to manage their money. The result is stupendous malinvestment, overcapacity, over consumption, over everything. A liquidity bubble, a speculation-in-whatever-moves-and-doesn't bubble, a consumption bubble, an everything bubble. The greatest bubble of all time. We do know how it will end. We just don't know when. That's why we watch markets. They will tell us first, and for those who are paying attention, soon enough. 30
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