06/01/10 Tampa, Florida – I was as surprised, as many were, to see that the Consumer Price Index (CPI) actually declined in April, dropping to 2.2% inflation from March’s 2.3% inflation.
My family seemed to be endlessly delighted that inflation seems to be going is down, which is because I have been yammering about how inflation in prices going up will always be the result of a money supply that goes up, and I have been saying it for so long that they are sick, sick, sick of hearing that inflation is prices will follow inflation in the money supply, they are sick, sick, sick of hearing my voice telling them that ruinous inflation in prices will always follow ruinous inflations in the money supply, and they are happy, happy, happy that I am wrong!
You can imagine my response to this arrogance. Finally, once again, having had it Up To Here (UTH) with their insults and rude laughter, I explode in their faces “Inflation is still going up, you morons! Prices are still increasing! Watch my lips, morons! Prices are going up! The stupid CPI may show that the rate of inflation decreased by a lousy tenth of a percent lately, which I don’t believe for a second, but prices are still increasing by 2.2%! So what in the hell are you gloating about when the buying power of your money is being destroyed?”
Well, the conversation got pretty heated after I told them that this discussion about inflation was the perfect opportunity to tell them that I was, again, forced to cut expenses so that I could get a little more money to buy a little more gold, silver and oil.
In response to their usual howls of dismay and disquieting screaming about how much they hate me, I patiently explain, for the zillionth freaking time this month, that buying gold, silver and oil was the only intelligent thing to do when the US government allows the Federal Reserve to create so much money, for so long, especially when so much more money pouring, pouring, pouring into the economy has, all the way through history every time somebody tried this Stupid Economic Crap (SEC), made the prices of things rise, like stocks, bonds, real estate, food, energy and the size of government, all soaring, soaring, soaring so that now 1 out of 5 workers in this country gets paid by taxpayers through income taxes, sales taxes, excise taxes and myriad other taxes!
Which is not to mention that inflation in prices is a kind of tax on everything! And now food and energy are going to rise all over the world because central banks all over the world are creating money so that their governments can deficit-spend themselves into the Giant Black Hole Of Debt (GBHOD), all spending with mindless abandon and sporting negative budget balances as percents of GDP, except for three: Saudi Arabia (1.3% surplus), Hong Kong (0.8% surplus), and Norway (9.4% surplus (!)).
Well, the argument got loud and the neighbors started complaining, which is perhaps what caused Gene Epstein, economic beat columnist for Barron’s, to have the headline “Slack Jobs Will Blunt Inflation” which I think implies that prices will still go up, although not as fast, even though nobody has a job, which is a concept I never quite grasped, maybe because I thought it was kind of funny that “blunt” is a term for some kind of marijuana product, and I never associated Mr. Epstein with Cheech and Chong before! “Dave’s not here!” Hahaha!
Apparently, Mr. Epstein appreciated my humor and the trip down memory lane to the ’70s, and he started out his column with a funny of his own!
“Maybe you know the classic telegram,” he says. “Start worrying. Letter to follow.” Hahaha! Good one!
I suddenly thought that this would make a good Twilight Zone episode, where the scene opens up with things burning and people killing each other in the background, while in the foreground a lonely figure reads the telegram, “Start worrying. Letter to follow.”
Here is where I have the camera slowly, slowly zoom in to read the date of the telegram as the voiceover says, “Telegram? I don’t need no stinking telegram to tell me to worry, because I have been worried about this very thing since 1997 when Alan Greenspan, chairman of the Federal Reserve from 1987-2006, really started creating Fed Credit like he had lost his freaking mind and just kept it up, week after week, month after month, year after freaking year, until Ben Bernanke, his jerk successor at the Fed, went even more ballistic at the end of 2008 and doubled Fed Credit in just six months – six months! – and has continued Alan Greenspan’s disastrous rate of increase ever since! Gaaahhh! We’re freaking doomed!”
At just this moment, the camera is close enough to enable the viewer to see the date on the telegram: 1997! Wow!
The rest of the episode is a vast panorama of misery and suffering because of the disastrous inflation in the prices of food and energy, mostly featuring pretty young ladies who have nothing to wear except tiny swimsuits.
Then, cue the Twilight Zone music, and – voila! – instant classic TV!
Mr. Epstein was obviously not impressed, and our jocular overture was soon over. I noticed that ever since I created that dynamite Twilight Zone episode, he became pretty adamant that inflation in consumer prices will not happen, and said, “Those who believe that much worse is ahead for prices inflation point mainly to the huge expansion to the Federal Reserve’s monetary base – the ‘high-powered’ money from which other money is created, and the tinder that could ignite inflationary flames.”
Well, anybody can see he is talking about me, because I am one of those people who believe that the Federal Reserve creating gigantic amounts money will cause inflation in prices, and I am sure about that because that is one of the few things that I still believe, now that I have learned the ugly truth about Santa Claus, the Tooth Fairy and the fiction popularly known True Everlasting Love.
Even total local children know that I am certainly one of those who believe that the Fed creating so much money will destroy us with inflation in prices, and local folklore has it that I said, “Trick or treat? You want trick or treat? Well how about the fact that we’re freaking doomed, you moron kids? The Federal Reserve is killing our money by massive over-creation, and when your money goes, so do your parents and your brothers and your sisters and you, too! Trick or treat!”
I assume he accepts my credentials as a Fed-hating kind of guy, and he goes on to admit that Milton Freidman said, as he quotes, “You can’t have price inflation without monetary expansion” which is what one gathers from the exact quote, which I remember as, “Inflation is everywhere and always a monetary phenomenon.”
But Mr. Epstein contends that because so few people are working, you can print a lot of money but you won’t get inflation in prices unless there is tightness in the labor markets driving up incomes, which seems odd to me when unemployment in the US is running (according to John Williams of shadowstats.com) at over 20% (the worst since the Great Depression) and yet prices are still going up by 2.2%, which I don’t believe for a second because I am sure that it is higher than that by a long shot, but which, even so, was an inflation rate that was heretofore (all the way through history until now) considered, “very worrisome” and continued being “more worrisome” until inflation in prices climbed high enough to hit the red-zone of 3% inflation, which has historically proved to be the limit of economic stability and the beginning of Bad, Bad Times (BBT).
Anyway, I thought that this idea that constantly printing money was completely ruinous was recently proved by Zimbabwe, which printed so much money that at the end of the Zimbabwe dollar’s existence, inflation was running at an estimated 360 million percent per year, and few people worked.
So, I will say that I think that the real reason that the CPI is merely rising 2.2%, and not soaring as a result of all of this money being created around the world, is because the cost of housing constitutes a full 40% of the index, but now that the housing bubble has bust, the glut of housing on the market is causing the cost of housing to plummet, taking the CPI abnormally down.
So don’t worry; ruinous inflation in prices will follow huge increases in the money supply, and gold, silver and oil will be your salvation from the destruction of the rest of everything, which makes it so easy that you hear yourself saying, “Whee! This investing stuff is easy!”
The Mogambo Guru
for The Daily Reckoning
The Mogambo Guru
Richard Daughty (Mogambo Guru) is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the writer/publisher of the Mogambo Guru economic newsletter, an avocational exercise to better heap disrespect on those who desperately deserve it. The Mogambo Guru is quoted frequently in Barron's, The Daily Reckoning , and other fine publications. For podcasts featuring the Mogambo, click here.
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My favorite loaf of German Dark wheat has been reduced from 24 oz. to 16oz., in ONE MOVE!! Oh and the price is still over the $3.00 mark. If that is a 2.2% increase, pls show me your calculations. ps-anyone notice those boxes of crackers, ( still priced the same also), are size-wise starting to resembe those “continental breakfast” size cereal boxes? Why doesn’t somebody call these LIARS OUT for what they are! 2.2%???????
What are you guys getting so bent about? You should be cheering! This is the BEAUTY of the unsustainable. It must, by very definition, come to an end. All the scum-sucking leeches will be left to broil in the bright sunlight of Truth and for them it will be The End. After the end, well, then comes Something Else! Here’s to Something Else, and here’s to hoping it’s a whole lot more fun than what’s going on right now!
C P I =
Constantly
Phony
Index
P.S. This Epstein guy sounds like an economic Sweat Hog
(maybe his credentials were ”Signed Epstein’s Mother”)
You need low employment to create high inflation?
Mogambo nailed it on the head when he mentioned Zimbabwe, but the conditions also exist in South Africa (look up South African Broadcasting Corporation (SABC) and unemployment and/or inflation to research this further)
In case you are keeping track at home, the mass transit system in Philadelphia PA called SEPTA, is seeking a rate hike, in spite of the fact it costs two dollars to ride the bus.
Yes, you read that right, two whole bucks to ride the bus NOW, one of the highest rates in the nation, and they Still need to raise the base fare to cover their costs.
Tell me again there is no inflation Government, I just love to hear you lie through your teeth. Ugh.
Miami JMR-
The problem, brother, is when was the last time something else was an improvement? By my reckoning it was in 1776 A.D.
Cheers-
JMR JRod
Same here in Australia Ron. Bread, breakfast spreads, corn chips, all sorts of packages at the supermarket have been getting smaller for the same price.
Conversely, politicians’ salaries have been rising, while the benefit to the public from said charlatans has continued to plummet!
How perplexing!
Dear Mighty MG
I remember you declaring it several times before that CPI does not take into account prices of housign, energy and food.
Now you are declaring something exectly opposite to your previous sermons. Which one is true ?
SMR san
“I will say that I think that the real reason that the CPI is merely rising 2.2%, and not soaring as a result of all
of this money being created around the world, is because the cost of housing constitutes a full 40% of the index,”
Which will be the next thing that you will stop believing, now that you have learned “the ugly truth about Santa Claus, the Tooth Fairy and the fiction popularly known as True Everlasting Love”?
And, by the way, if “the rest of the episode is a vast panorama of misery and suffering because of the disastrous inflation in the prices of food and energy, mostly featuring pretty young ladies who have nothing to wear except tiny swimsuits” then you should not be wondering when there are probably quite some people out there supporting inflation…
re: ‘Inflation is still a problem…’
I still have Zim dollars from my trip in June, 2001, to see the total solar eclipse from a field in Zambia (I also keep my Kwachas). We exchanged the US dollar for 100 Zim$. The Zim people at the time suffered from inflation, to be sure, but then the governing incumbents sucked the lifeblood out of the country. This is what governing incumbents do, I notice in history books. They suck away our future for their presents, and inflation roars in and everybody is unhappy who is alive.
Through the years after my trip, I tracked the exchange rate while the Zim government printed more and more and the people worked less and less, especially the ones who were beaten for complaining*.
Zeros were added and 100 Zimbucks became 10,000 and then 100 again and then 10,000,000 and then they added zeroes by the handful and their money couldn’t buy any foreign things, not even German ink to make their money look legitimate and after that their money was just paper. After the exchange rate got about 25 or 30 zeroes to the US dollar, the numbers were meaningless to me.
9 zeroes to the trillion
12 to the quadrillion
Americans have trouble with big numbers, don’t they? Now that’s scary.
quintillion, sextillion. Sex! That number will be popular. Maybe sooner than anyone thinks.
* from Zimbabwe a few years ago: “The stores are so empty, you think they sold shelves.”
JMR Jrod,
Something Else is in ALL OUR HANDS. If you’ve got Gold, Guns, and Guts, that is . . . .
IMHO, people should not be spending their time on trying to bail out the Titanic with soup cans. . . the ship is going down, forgettaboutit! What we should be doing is thinking about and planning for Something Else, when it inevitably occurs. Don’t let the Something Else steer you, YOU steer the Something Else to be something better than we have today. It’s in YOUR hands.
Peace and Future Prosperity
JMR in Miami
I think the European siblings of the Austrian Economists are correct (despite unseemly sibling rivalry), inflation is not just a function of money supply, it is the product of money supply _and_ the velocity of money. So ironically, we have deflation in large parts of the economy, with minimal goods price rises, so net deflation, because people are reducing their spending and saving more. Eventually confidence in the currency will decline so much that people no longer want to keep it long, thus the velocity of money will ramp up, causing inflation, and possibly hyper inflation!
As has been pointed out, inflation can happen with Gold backed currencies too, when you take account of the velocity of money!
People are still in the saving phase, so we have net deflation, but this won’t last forever, so anyone with any sense should be hoarding useful stuff, while it is still relatively cheap, including a rotated food cache.