Higher Oil Prices Do Not Mean Inflation?!?!?
March 15, 2011 7 Comments
BECKLEY — Today the Federal Reserve stated, ”Long-term inflation expectations have remained stable, and measures of underlying inflation have been subdued.” I define inflation as a general and progressive increase in prices. I’m not sure what the Fed’s definition of inflation is but let me share a couple of charts:
Corn
Sugar
Live Cattle
Cotton
Oil
Notice a familiar trend with those charts? I would call that a general and progressive increase in prices. Our overlords at the Federal Reserve call that “stable and subdued”. Of course I could have gone on with all the commodities I actually track and invest in like corn, wheat, soybean, live cattle, lean hogs, coffee, cocoa, sugar, cotton, orange juice, platinum, gold, silver, copper, natural gas, oil, and heating oil. Guess what they all have similar charts – take gold and silver for example – through the roof. Silver is up over 70%+ this year alone! This is stable and subdued, it’ll be interesting when it gets out of hand. I can see it now, “Silver up over 700% in the year alone!” I guess then the Fed might consider cutting quantitative easing. I was reading how our interest payments on our government debt were up over 12% in the first quarter of this year to over $100 billion. I wonder what our interest payments will look like then?
About The Freedom Thinker
Brooklyn Daniel
Stephen VanNuys
TennesseePaul
The Freedom Thinker
Every time that oil prices increase there is a corresponding rise in the cost of food and other commodities that are shipped by truck and of course production costs also increase. Perhaps the Ruling Class has decided that a rise in the cost of living is no longer an indication of inflation. Who can believe anything anymore that is connected with the government in any way?
I know the Fed has to be very careful with what they say. If they come out saying, “The ship is sinking!” Then the ship will surely sink. I understand they have to be careful with their words, but it is the actions I have issue with why continue to do QE and why continue to force interest rates low.
What worries me is that their actions match their words. Normally one would expect them to say “Stable and Subdued.” Then take action on the exploding prices by doing something to resolve it.
Inflation is a result of weaker more abundant currency. The more we print and circulate, the less it is worth. The only thing that has saved us from double digit inflation to date is the fact that the banks are not lending any funds to the public. They are simply borrowing it from the government and lending it to each other for a profit.
God help us when the dam breaks….
By extracting food and fuel the analysis can ascertain a different view of the increase cost of goods and services. There are many examples of doing similar views. The one that gets reported and discussed the most may not be the one you are seeking for your purposes, but it does not preclude the initial reading as irrelevant. It would be beneficial to view all indicators, not simply one. I’m fairly certain the Fed has their eyes one more than just one set of data points.
There’s no inflation as long as you exclude from your index those assets the prices of which have gone up.
There is also the fact that we’re living in an age of technological innovation that continues to reduce the real price of technology. That is used as cover for the currency devaluation.
So where is everybody? This used to be a pretty interesting place.
I think everyone would agree that we are in an inflationary economy that is consistent with a consumption based system. A free market oriented economy is much more consistent with a savings/investment system. When John M. Keyens and Harry Dexter White (a communist spy who ended up committing suicide after he stole U.S. printing plants for the Russian economy) promoted the Bretton Woods system. Basically they put the U.S. on a psuedo gold standard. Eventually the dollar was completely severed from gold in 1971. There is no gold backing nor any backing of any substance of the U.S. dollar at all. There has not been any backing since 1971. The U.S. has set the world record in history as the nation that has gone the longest with a currency without any gold backing. Long term inflation – that is to say inflation beyond 5 to 10 years – is not possible without long term debt. This is another reason why the U.S. has run up the largest debts in the history of the world as well. Hence, our currency is issued in debt. An example of the required debt for the existing inflation is that people generally have to borrow 30 year notes for moderate size houses they can’t afford – even in the post 2008 real estate crash. Strangely, but not surprisingly, there are more $100 dollar bills circulating just in the city of Moscow than in the entire U.S. American troops used thousands of pallet loads of shrink wrapped $100 dollar bills to by the allegiance of various local villages in Iraq. Our monetary system is so out of control that our central bank (the Fed) would be insolvent today if their books were marked to market just as mutual, hedge and pension funds are required to be by law. Once a country sails into the zone of insolvency, there is no comming back. It’s like trying to put toothpaste back in the tube. When economist in the 1940′s asked J.M. Keynes “what happens in the long run” about his system – they asked with the understanding that it would lead to bankruptcy. His answer was “we are all dead”. What a brilliant existentialist thinker. I say that tongue and cheek because the long run is here now. The bill is due today on the debt as well as unfunded liabilites that reach close to 100 trillion (with a T) dollars. The questions now are, what happens now? What do we do now? Where do we go from here? Oil and gold move in tandem. There is a correlation between the two just as there is a correlation with the inflation rate and the rate of abortion. So when we discuss inflation, we are addressing issues that are beyond just price. Inflation is very deceptive. Some economists will say that if inflation is at only 3% then everything is “under control”. This was the lie that mainstream economists sold the public in the early 80′s. That is to say, they said that we have finally figured out how to run a monetary system that has no gold backing. These “low” annual inflation number of 2% to 4% sound warm and fuzzy but inflation at 3% means that your currency has lost 45% of it’s buying power in about 20 years. At 4% the currency has lost 75%. So if you are 50 years old, going into your old age, or your child is ready for college, the buying power of your paycheck has been cut in half. But what about COLA or cost of living adjustment? In just a few sectors it is a wash but only for a few years at best. Right now the middle east is completely debauched in petrodollars. Apparently, they added jet fuel to the tobasco sauce in whatever it is they are eating or drinking over there. We are guilty of the same here in the U.S. When we remove that “preservative” out of our monetary thinking, we will witness a mad dash to gold, oil and farmland – real assets, in just a year or so. It will be a mad dash to see who can be first out the door or a flight from the dollar en masse. Buy gold now.