Every day I read the news and I think about how that news impacts my reality. Most days, the news is benign, meaning I read it, absorb it, and then move on. Today, however, the news gave me the following information, which made me wonder – who is kidding whom?
Inflation has been running below the Fed’s implicit target of about 2 percent, by some measures dipping beneath 1 percent. That danger zone makes the country too vulnerable to unexpected shocks.
As I have said before, grand conspiracies are not my thing, but I do believe the flow of “natural” forces can unwittingly cause an outcome that seems conspiratorial. About the issue of inflation or deflation, I believe the media is unwittingly conspiring to convince Americans that deflation not inflation is the issue with our economy, and I believe the other willful conspirator is the Federal Reserve.
I admit my evidence for this conjecture is purely circumstantial, meaning my circumstances; however, my circumstances are the same circumstances that surround all the folks who live on the Central Coast of California, and that number is in the millions. Furthermore, I suspect if I could survey America in general, I would find the same conclusion – inflation is happening at a much higher rate than 1-2% annually.
For example, in the last two years here where I live, gasoline prices have climbed 30-plus percent. The price of the bread I buy has climbed some 25%, and the same, more or less, for the sundries, the coffee, the dairy, and the meat. On a scale of brightness, I will fall in the middle, but let me tell you, this sure seems inflationary to me. Add to this, even though the real estate market in this area is not where it was two years, rents are not either, they are higher. In fact, I read that rents are higher across the country.
Okay so we have transportation costs going higher, food costs going higher, and living costs going higher, higher in average than the 1-2 % inflation the government is saying. So, then, what is the value of the U.S government telling us inflation barely exists? Perhaps it needs cover for its anti-recessionary monetary policies, or, more conspiratorially, it simply wants us to believe inflation is low so it can continue feeding the Wall Street fat cats the rich diet of low interest money, which they turn into fast cash for their coffers.
The decision to offer further monetary stimulus at a time overnight borrowing costs are already effectively at zero and the banking system is awash with $2.3 trillion in Fed-created credit has proven controversial both at home and abroad.
Yes, I believe this is the case, but I also believe that it is necessary. The facts are the facts. Unfortunately, Wall Street has sunk its tentacles so deep into our GDP that we cannot afford to see its big members collapse. In fact, we need those members to be extremely flush with cash, so they can turn around and lend that cash out for economic expansion. So, now I wonder, when exactly are those members going to start doing their part?
Trade in the day; invest in your life
