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Jim Cook



Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

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The Best of Jim Cook Archive

Best of Bill Buckler
March 28, 2011
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Something else happened in the middle of the escalation of the “Japan crisis” - the Federal Open Market Committee (FOMC) met on March 15. Nothing changed, of course. Nobody in his or her right mind was expecting the Fed to do anything about their 0.00-0.25 percent funds rate. There was no change in the mantra that conditions “warrant exceptionally low levels for the federal funds rate for an extended period”. The fact that this extended period is now well into its third year was not mentioned.

What was stressed was the FOMC’s contention that both inflationary expectations remain stable and “core inflation” remains subdued. What was also stressed was that the Fed was firm in its plans to go on monetising US Treasury debt until the end of June this year. As far as the FOMC is concerned, it’s business as usual. As far as the actual US economy is concerned, it is anything but.

Mr Dudley Goes To Queens:

The “Mr Dudley” here mentioned is William C. Dudley, Treasury Secretary Geithner’s successor as the President of the Fed’s Reserve Bank of New York. On March 11, he gave a speech to the Chamber of Commerce in Queens - New York City. Mr Dudley began his speech with a quick overview of the history and functioning of the Federal Reserve which was remarkable only for its blandness and adherence to the “party line”. He continued with his take on the present state of the US economy. And here, he stuck religiously to the party line, specifically the “good” which had been accomplished by “QE2" and the necessity for the Fed’s monetisation to run its appointed course until the end of June.

After his speech, Mr Dudley entertained questions from his audience. And here, things got sticky. The focus rapidly turned to the HUGE discrepancy between the prices Americans were facing in their everyday lives and the “core inflation” numbers favoured by the Fed in their “inflation measurements”.

For one thing, he was politely asked when was the last time he had been to the grocery store.
Mr Dudley chose to rise above such pettifoggery by using the concept of “hedonic inflation” in his explanation. This method, so beloved of government statisticians, “deflates” the final CPI numbers because technical improvements outstrip an increase in price. Mr Dudley used the idea of the ipad. The ipad II is twice as powerful as the ipad I and costs the same, he said. Presto, the “real” price is lower. The response was a mass rolling of eyes followed by a classic: “I can’t eat an ipad!”

Inflation First - Prices Next:

For many decades, the Fed and the rest of the US government has been busy “adjusting” their very selective method of measuring prices. This of course became necessary once they successfully transformed the definition of “inflation” to their preferred target - a measure of rising prices. The original and only sane (let alone valid) definition of inflation is an increase in the total stock of money. But since these increases originate from the Fed and the Treasury, that definition has been “superseded”.

Inflation, properly understood, is a monetary phenomenon and not an market one. Obviously, if more money is either printed or made easier to borrow by lowering interest rates - another favoured Fed tool - then pressure on prices will increase. This is what the Fed “measures” - very selectively indeed.

The problem is that even as measured by these favoured Fed methods, prices are accelerating upward. In February, the US PPI was up 1.6 percent, double its January rise. Much worse, food prices as measured by the government rose 3.9 percent in a month - the biggest such rise since November 1974.






Ó 2009 – The Privateer

(reproduced with permission)


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