Monday, March 28, 2011

Some Common Sense in a World of Nonsense

This article presents me with the pressure to bring a response to the fore. I will state first that federal economic policy makers do not understand Inflation as well as they should. Their first failure comes in the ignorance of the impact of Inflation by sector. Where is all the Inflation coming from? The Answer is Food and Fuel. Both generate the highest Inflationary pressure and rate of Inflation. Food and Fuel make up the largest component in the Household budget beyond capital acquisitions like Homes and Vehicles. Capital acquisitions come with some form of mortgage, whose rate has been set in prior period, and relatively immune to Inflation. Households do not see Inflation there–they see it in continuous Daily or Weekly purchases. What are the most continuous of steady purchases?–Food and Fuel. These Costs are Inflation to Consumers, and where real Household notice is paid. Consumers are contracting their purchases by the Inflation they can see, and they see the heaviest Inflation out there. One only need to blow that C-Note on a SUV refill to notice the Inflation. The second flaw in Fed policy lies in the Interest rates–economists always talking about less than 0% as a good thing. Households have watched their Bank Deposits tank, with absolutely no Income coming from them; a sincere burst of confidence foregone, as Households thought they had a slight hedge against Inflation–now gone by Fed decree. I once had a Father who made about $30k per year off his bank deposits; thank God he is not alive today to witness the miserable $600-800 which he would probably draw from like amounts. My Father was never a big Spender, but such Interest rates would have put him in catatonic freeze in buying anything; especially with a magnificent Inflation rate which the Fed refuses to observe. I can positively explain that Consumer Confidence is being adversely affected by the Inflation. Quantitative Easing has been a long-standing Joke, whose sole Goal fulfillment has been Jobs saved, according to the economists who designed the policy. There were better Hiring rates late in the Great Depression, as the Warehouses slowly emptied. The Fed utilizes the collapsed Housing market to exclaim there is no Inflation, while concurrently, banks demand full capital asset coverage before extension of any new mortgages; this means Housing prices will descend still for quite a while due to lack of Buyers. Everyone in the Markets screams Household should invest in Stocks, Bonds, and Securities of various types, but all require constant supervision, else those investments will be even more ineffective than the 0% bank interest rates. Grandpa always told me to never draw Cards in another man’s game; you should know Gramps was a professional Gambler at one time in his career. I fear for federal economic policy makers who turn Households loose to ‘Sink or Swim’ on their own, with even less recourse to Social Services. lgl

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