Posted on 06/22/2013 1:25:44 AM PDT by blam
The Inflation Predictions Were Just Wrong, And Now They're Hurting People
Cullen Roche, Pragmatic Capitalism
June 21, 2013, 4:21 AM
Remember back when QE started and we saw charts of high powered money going vertical all over the place and everyone who didn’t understand modern banking said that the reserves would flood out into the economy causing high inflation or even hyperinflation? And do you also remember how most of those same people also said that the only way you’d be able to protect yourself from this hyperinflation was by owning hard assets like gold or silver? Well, the inflation never came. The most recent reading of 1.7% pretty much proves that we’re much more Japan than we are Weimar (and yes, even independent gauges confirm the low inflation story). And now the portfolio recommendations are falling apart as well….
It’s one thing to be wrong about the way banking works and the way inflation might spread. But most of these people were explicitly recommending a substantial overweight in gold and silver as well. And they’ve been annihilated in recent years. Gold is down 33% from its 2011 highs. And silver is down a staggering 60% since the time I started referring to it as a bubble. These are massive moves and if you’ve been substantially overweight these metals in your portfolio then you’ve experienced substantial pain based on sheer misunderstandings by people who are posing as experts.
The thing that really drives me crazy about this is that so much of this has come from the ideologically driven groups who were really selling nothing more than fear and hatred of the Fed and the government. Look, I know the government hasn’t done everything right and I am certainly no Federal Reserve apologist, but that doesn’t ever justify bad analysis and specific portfolio recommendations that are simply irresponsible. And that’s all we’ve seen here. People selling an ideology based more on politics than knowledge….
I couldn’t agree more.
I actually think the FED has done a great job given what they have to work with.
The FED doesn’t control trade policy so their efforts at helping unemployment in the face of tax/tariff policies that favor foreign producers has been like a band-aid on a cancer.
And the FED doesn’t control government spending. An irresponsible Congress would still borrow on a gold standard and promise that your kids would repay it in gold.
For the last four years Bernanke has made that point, on the record, every time he addresses Congress.
...”I go to the grocery store frequently and I’ve noticed a significant increase in the price of a can of mixed nuts. I’m pretty sure someone forgot to heavily short mixed nuts during light trading in the asian markets”...
Anyone who buys groceries and gas knows that we have inflation. Why are the “must have” items not included in the assessment?
Exactly.
Anyone who shops knows prices are increasing much more than 1.7%. I know I’m paying about 50% more for groceries since 2008.
If the economy does recover for real, then we'll see.
Okay, the mythical 1.7% figure doesn’t include food or fuel, you know, the stuff that keeps us warm, fed and well lit. Add in food and fuel and tell me again about inflation. Bread is $4 a loaf, medium quality beef is $8/lb and gas is twice what it was when W left office.
........with portable gallows running a close second.........
Because there are mandatory increases built into programs like Social InSecurity and such when inflation increases so naturally the Gub'ment tries to hide any increase so they can instead spend money on pork (buying votes)...
Exactly.
We are in an unusual time where there are strong inflationary pressures and strong deflationary pressures and they are holding each other in check. I’m no economist, but even one of the best, John Mauldin, says economics IS NOT A SCIENCE, and is at best an educated guess - that is often wrong.
Read: This Time it is Different. Because in many ways, it is not.
There is no real basis for the level of the equities market other than a false belief in recovery that is non-existent and built on false hope from infinite QEasing - proven by the fact when the slightest hint of that QE easing coming to an end causes the market to gasp.
False hope.
And the deflationary pressures are so strong (metals, commodities, natural gas) that inflation may never show up and the highly feared D may occur when it is realized that the economy is indeed still bust.
Watch the markets collapse then.
Is it the FED's job to destroy the value of our currency? Shouldn't our currency become more, not less, valuable over time?
Yes, prices have increased, and portion sizes have decreased.
The worst depressions in this country have occurred after the formation of the Fed; which is basically a banking cartel. In an actual capitalist society, such as we had 100 years ago, there is no need for a centralized bureaucracy attempting to control the economy.
You’re dreaming, the Fed has done damage to multi-generations of Americans with policies that have destroyed the savers and capital formation not to mention the value of the currency. Wholesale destruction will commence as the Fed loses control and hyper-inflation will raise it’s deadly head.
In a 21st century global market.... there is a need to protect our economy against foreign “invaders”. In the same way the government is suppose to protect our homeland from invasion, I believe the government should provide protection from foreign attack on our economy. I believe the fed serves that purpose... in part.
Agreed.
LLS
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