William Poole : "The Fed Wants To Create Inflation"

Isn´t is amazing that just a few days after leaving the Fed Bill Poole is speaking out what the real agenda of the Fed is...... The interview in the FAZ ( one of the most respected German newspapers ) covers lots of others topics like the $, China, commodities, real estate etc but the following quote stands out. The quote is even more true when you agree with my definition of inflation ( see this piece from Mish Inflation: What the heck is it? ) .

Denke hier hat die FAZ in Ihrem Interview einen echten Coup gelandet. Keinen Monat nachdem Poole aus der Fed ausgeschieden ist wird hier endlich mal Klartext über die eigentliche Agenda der Fed ( und leider auch anderen Notenbanken ) gesprochen. Empfehle zudem den restlichen Teil des Interviews zu lesen ( $, China, Rohstoffe, Immobilienmarkt usw. ). Das nachfolgende Zitat fast im Prinzip alles zusammen was man über die Arbeit der Notenbanken und ganz besonders der Fed wissen muß. Das gilt umso mehr wenn man die gleiche Definition von Inflation wie ich habe ( siehe Inflation: What the heck is it? von Mish ).

"Historically inflation is one tool to take pressure away from borrowers. The Fed´s policy is to create inflation to relieve the stress. The Fed was and will be "easy" as long as the economic situation and the health of the financial institutions have stabilized/improved "

"Historisch betrachtet ist Inflation ein Mittel, um den Stress zu erleichtern, den Schuldner fühlen. Die Politik der amerikanischen Zentralbank ist darauf angelegt, Inflation zu kreieren, um diesen Stress zu lindern. Sie war, ist und wird so lange geldpolitisch „locker“ bleiben, bis sich die wirtschaftliche und die der Finanzunternehmen verbessert hat"

> "Easy as long...." LOL! They are trying always to be easy and keep the ponzi game going. I urge you to read How The Bubble Bursts from Mr. Practical via Minyanville for a nice summary how this will end and why Bernanke & Co will fail this time.

> "So lange geldpolitisch locker bleiben wie nötig...." Das ich nicht lache..... Die geldpolitische Ausrichtung wird immer darauf ausgerichtet sein die Inflation zu erhöhen. Für eine wirklich gelungene Zusammenfassung des gängigen Zyklus empfehle ich How The Bubble Bursts von Mr. Practical via Minyanville zu lesen um zu verstehen warum Bernanke & Co diesesmal erhebliche Schwierigkeiten haben werden Ihr Schneeballsystem weiter am laufen zu halten.

On top of this i have found one of the better rants i´ve seen during the past quarter. This comes from Aaron Krowne and fits perfectly to the topic. Debate Over: It's Hyperinflation (and US Economic Collapse) .It´s also gives a different viewpoint on the inflation/deflation debate.

Habe zudem noch eine nette "Tirade" von Aaaron Krowne passend zu dem Postingthema gefunden.Debate Over: It's Hyperinflation (and US Economic Collapse). Gerade weil ich nicht mit allem übereinstimme kann ein Blick nicht schaden. Genau die richtige "Unterhaltung" für ein verregnetes Wochenende.....

GOT GOLD....? ( Within five tonnes of a new record at the GLD gold ETF )

"33 Great Ways To Save Money" .... UK Yellow Press On CPI / Credit Crunch

No Kidding! The piece from the SUN ( yellow press ) in the UK is no satire ! Things must be really ugly ....... I´m not sure if this is qualifying for a contrary indicator / cover story indicator ( like this one ) regarding the inflation debate but when you read the follwoing advice in relation with mayonnaise i assume we are nearer the CPI top than most peolple think.... On the other hand i´m very very confident that the same is not true for the credit crunch in the UK !

Kein Witz! Diese Geschichte in der SUN ( britische Gegenstück zur Bildzeitung ) ist in keiner Weise satirisch oder ironisch gemeint. Scheint momentan nicht nur wegen der verpaßten EM ziemlich ungemütlich zu sein.... :-) Ich bin mir nicht sicher ob diese Berichterstattung bereits ausreicht um als Kontraindikator ( siehe dieses Beispiel herzuhalten. Bei Betrachtung des nachfolgenden Vorschlages könnte man alledrings zu dem Schluß kommen das die Konsumentenpreisinflation demnächst Ihren Höhepunkt gesehen hat...... Für den gerade erst angefangegen Credit Crunch in UK gilt das allerdings auf keinen Fall. Hier hat der Spaß sicher gerade erst begonnen......

21. Mayonnaise is a fine hair conditioner, adding shine.

Give hairdressers the brush off if you want blonde highlights — just brush lemon juice into your barnet and let it dry in the sun.

I think it´s difficult for the BOE & other central banks to claim that are still in control over "inflation expectations" ( see Real Cost of Living Index (RCLI) is rising at 9.5 per cent. via Barry Ritholtz ) ........Disclosure : I´m with Mish´s definition on Inflation ( see Inflation: What the heck is it? )

Der ständige Hinweis das die Notenbänker immer noch Kontrolle über die Inflationserwartungen haben klingt allerding von Tat zu tag lächerlicher ( siehe auch Real Cost of Living Index (RCLI) is rising at 9.5 per cent. via Barry Ritholtz ) ..... Hinweis : Bekanntermaßen sehe ich die Definition von Inflation wie Mish ( siehe Inflation: What the heck is it? )

The SUN THE credit crunch is biting but you can ease the squeeze if you take a few simple steps.

Here Sun cheapskate TIM SPANTON shares his expertise, with 33 great ways to save money now that prices are rising at 3.3 per cent, the highest rate for more than ten years.

But be warned – there are some tips here even miserly Ebenezer Scrooge might be ashamed of taking up.

Remember, if you’re feeling the pinch, laughter is the best medicine – and it’s FREE.

1. Use banana skins to clean your shoes. The inside of the skins contains potassium, a key ingredient in commercial polishes.

Finish off with a soft cloth. Oils in the banana will even enrich the leather in your shoes and help them last longer.

2. Collect old slivers of soap and squeeze them together to make a new bar.

3. Never buy the first round in a pub. If you go drinking once a week and always get to the bar first you will end up buying dozens more rounds more a year than a person who always buys the fourth round.

This is because drinking sessions often end after an odd number of rounds. .....

8. Buy postage stamps in bulk, before the prices go up, which we all know they will. .....

14. Mix milk with equal amounts of water to go on your breakfast cereal. You will soon get used to it. The slight difference in taste is very small and soon won’t be detected at all.

15. Watch telly in bed in the dark. You’ll save on heating and lighting costs and if there’s a sexy show on, you might even get a bonus cuddle from your partner.

18. Get off a stop early if you commute by bus or Tube to save cash. ....

24. Buy Christmas presents in the sales after the holidays and keep for a year.

27. Shower instead of bathing. To save even more, shower with a friend.

>If you don´t believe me that this is not an ironic piece from the SUNn click the link and read the entire link... There are lots of suggestions that do make sense and are less "exotic".

> Wer mir nicht glaubt das dieser "Ratgeber" ernst gemeint ist sollte zur Kontrolle den kompletten Link lesen .... Dort finden sich in der Tat etliche Hinweise die hilfreich und weniger "skuril" sind.

Bernanke vs Greenspan

Amazing that everybody wants to believe that Ben "Core" Bernanke has become an inflation hawk over night..... The only reason this guy is talking tough is that the $ is crashing further and the ECB is forcing him to act. But so far the Fed din´t act and i refuse to believe it until i see it confirmed from at least three sources.... :-) Especially in the face of the ongoing recession....... Disclosure : I´m with Mish´s definition on Inflation ( see Inflation: What the heck is it? ) . It seems i´m not the only one who is sceptical... Make sure you read the rant from Tim / The Mess That Greenspan Made Fisher: Silly interest rate talk

Überraschend das irgendeiner zumindest auf dieser Welt die Aussagen von Ben "Core" Bernanke in Sachen Inflationsbekämpfung für bare Münze nimmt..... Der einzige Grund warum praktisch über Nacht der Falke in Ihm erwacht zu sein scheint ist wohl der EZB zu verdanken die die Fed zum Handeln zwingen wird um einen totalen Kollaps des $ zu verhindern. Ich glaube aus Erfahrung keinerlei Rethorik die aus den Mündern von US Notenbänkern kommt und bin gespannt ob den hohlen Phrasen ausnahmsweise auch mal Taten folgen werden. Glaube das erst wenn ich das von mindestens drei unabhängigen Quellen bestätigt bekomme..... :-) Besonders dann nicht wenn die Erhöhungen im Angesicht einer üblen Rezession erfolgen. Hinweis : Bekanntermaßen sehe ich die Definition von Inflation wie Mish ( siehe Inflation: What the heck is it? ) . Sieht ganz so aus als wenn nicht nur ich der einzige ist der eine gewisse Skepsis an den Tag legt..... Empfehle hier den Rundumschlag von Tim / The Mess That Greenspan Made Fisher: Silly interest rate talk

via Calculated Risk Tim Duy: Fed Between a Rock and ...

Bottom Line: The Fed has no one to blame for their predicament but themselves. Bernanke & Co. cut rates too deeply, fighting a battle against deflation that never was. Now they are backed into a corner; either raise rates and risk upsetting a very fragile economy, or stay the path and risk the inflationary consequences.

AMEN!

Pimco´s Bill Gross Must Read Piece On CPI

The following post from Bill Gross is worth reading every single sentence. While i´m with Mish on what Inflation is ( see Inflation: What the heck is it? ) it is very telling how the US is able in depressing the symptoms of inflation. But as long as foreigners are willing to destroy money in buying US treasuries and agency paper one has to congratulate the US for their excellent PR ( no sarcasm! )........ I´m staying with gold......

Ich empfehle dringend das komplette Posting von Bill Gross zu lesen. Bekanntermaßen sehe ich die Definition von Inflation wie Mish ( siehe Inflation: What the heck is it? ). Es ist schon bemerkenswert wie die USA es schaffen die Symptome der Inflation auf äußert vielfältige Weise zu manipulieren. Der Irakfeldzug ist verglichen damit ein Lacher. Solange Sie es trotzdem schaffen genügend ausländische Investoren zu finden die Gelder besonders in Staatsanleihen und Papieren von Fannie & Freddie zu versenken kann man es den USA nicht einmal übel nehmen die kreative Berechnung jenseits von Enron & Co zu heben. Man muß hier ausdrücklich das herausragende PR loben ( das meine ich ehrlich ). Ich für meinen Teil bleibe da lieber beim Gold......

Thanks to Wall Street Follies

Hmmmmm? Gross / Pimco - What this country needs is either a good 5¢ cigar or the reincarnation of an Illinois “rail-splitter” willing to tell the American people “what up” – “what really up.” We have for so long now been willing to be entertained rather than informed, that we more or less accept majority opinion, perpetually shaped by ratings obsessed media, at face value. After 12 months of an endless primary campaign barrage, for instance, most of us believe that a candidate’s preacher – Democrat or Republican – should be a significant factor in how we vote. We care more about who’s going to be eliminated from this week’s American Idol than the deteriorating quality of our healthcare system. Alternative energy discussion takes a bleacher’s seat to the latest foibles of Lindsay Lohan or Britney Spears and then we wonder why gas is four bucks a gallon. We care as much as we always have – we just care about the wrong things: entertainment, as opposed to informed choices; trivia vs. hardcore ideological debate.

It’s Sunday afternoon at the Coliseum folks, and all good fun, but the hordes are crossing the Alps and headed for modern day Rome – better educated, harder working, and willing to sacrifice today for a better tomorrow. Can it be any wonder that an estimated 1% of America’s wealth migrates into foreign hands every year? We, as a people, are overweight, poorly educated, overindulged, and imbued with such a sense of self importance on a geopolitical scale, that our allies are dropping like flies. “Yes we can?” Well, if so, then the “we” is the critical element, not the leader that will be chosen in November. Let’s get off the couch and shape up – physically, intellectually, and institutionally – and begin to make some informed choices about our future. Lincoln didn’t say it, but might have agreed, that the worst part about being fooled is fooling yourself, and as a nation, we’ve been doing a pretty good job of that for a long time now.

I’ll tell you another area where we’ve been foolin’ ourselves and that’s the belief that inflation is under control. I laid out the case three years ago in an Investment Outlook titled, “Haute Con Job.” I wasn’t an inflationary Paul Revere or anything, but I joined others in arguing that our CPI numbers were not reflecting reality at the checkout counter. In the ensuing four years, the debate has been joined by the press and astute authors such as Kevin Phillips whose recent Bad Money is as good a summer read detailing the state of the economy and how we got here as an “informed” American could make.

Let me reacquaint you with the debate about the authenticity of U.S. inflation calculations by presenting two ten-year graphs – one showing the ups and downs of year-over-year price changes for 24 representative foreign countries, and the other, the same time period for the U.S. An observer’s immediate take is that there are glaring differences, first in terms of trend and second in the actual mean or average of the 2 calculations. These representative countries, chosen and graphed by Ed Hyman and ISI, have averaged nearly 7% inflation for the past decade, while the U.S. has measured 2.6%. The most recent 12 months produces that same 7% number for the world but a closer 4% in the U.S.

This, dear reader, looks a mite suspicious. Sure, inflation was legitimately much higher in selected hot spots such as Brazil and Vietnam in the late 90s and the U.S. productivity “miracle” may have helped reduce ours a touch compared to some of the rest, but the U.S. dollar over the same period has declined by 30% against a currency basket of its major competitors which should have had an opposite effect, everything else being equal. I ask you: does it make sense that we have a 3% – 4% lower rate of inflation than the rest of the world? Can economists really explain this with their contorted Phillips curve, output gap, multifactor productivity theorizing in an increasingly globalized “one price fits all” commodity driven global economy? I suspect not. Somebody’s been foolin’, perhaps foolin’ themselves – I don’t know. This isn’t a conspiracy blog and there are too many statisticians and analysts at the Bureau of Labor Statistics (BLS) and Treasury with rapid turnover to even think of it. I’m just concerned that some of the people are being fooled all of the time and that as an investor, an accurate measure of inflation makes a huge difference.
The U.S. seems to differ from the rest of the world in how it computes its inflation rate in three primary ways: 1) hedonic quality adjustments, 2) calculations of housing costs via owners’ equivalent rent, and 3) geometric weighting/product substitution. The changes in all three areas have favored lower U.S. inflation and have taken place over the past 25 years, the first occurring in 1983 with the BLS decision to modify the cost of housing. It was claimed that a measure based on what an owner might get for renting his house would more accurately reflect the real world – a dubious assumption belied by the experience of the past 10 years during which the average cost of homes has appreciated at 3x the annual pace of the substituted owners’ equivalent rent (OER), and which would have raised the total CPI by approximately 1% annually if the switch had not been made.

In the 1990s the U.S. CPI was subjected to three additional changes that have not been adopted to the same degree (or at all) by other countries, each of which resulted in downward adjustments to our annual inflation rate. Product substitution and geometric weighting both presumed that more expensive goods and services would be used less and substituted with their less costly alternatives: more hamburger/less filet mignon when beef prices were rising, for example. In turn, hedonic quality adjustments accelerated in the late 1990s paving the way for huge price declines in the cost of computers and other durables. As your new model MAC or PC was going up in price by a hundred bucks or so, it was actually going down according to CPI calculations because it was twice as powerful. Hmmmmm? Bet your wallet didn’t really feel as good as the BLS did.

In 2004, I claimed that these revised methodologies were understating CPI by perhaps 1% annually and therefore overstating real GDP growth by close to the same amount. Others have actually tracked the CPI that “would have been” based on the good old fashioned way of calculation. The results are not pretty, but are undisclosed here because I cannot verify them. Still, the differences in my 10-year history of global CPI charts are startling, aren’t they? This in spite of a decade of financed-based, securitized, reflationary policies in the U.S. led by the public and private sector and a declining dollar. Hmmmmm?

In addition, Fed policy has for years focused on “core” as opposed to “headline” inflation, a concept actually initiated during the Nixon Administration to offset the sudden impact of OPEC and $12 a barrel oil prices! For a few decades the logic of inflation’s mean reversion drew a fairly tight fit between the two measures, but now in a chart shared frequently with PIMCO’s Investment Committee by Mohamed El-Erian, the divergence is beginning to raise questions as to whether “headline” will ever drop below “core” for a sufficiently long period of time to rebalance the two. Global commodity depletion and a tightening of excess labor as argued in El-Erian’s recent Secular Outlook summary suggest otherwise.

The correct measure of inflation matters in a number of areas, not the least of which are social security payments and wage bargaining adjustments. There is no doubt that an artificially low number favors government and corporations as opposed to ordinary citizens. But the number is also critical in any estimation of bond yields, stock prices, and commercial real estate cap rates. If core inflation were really 3% instead of 2%, then nominal bond yields might logically be 1% higher than they are today, because bond investors would require more compensation. And although the Gordon model for the valuation of stocks and real estate would stress “real” as opposed to nominal inflation additive yields, today’s acceptance of an artificially low CPI in the calculation of nominal bond yields in effect means that real yields – including TIPS – are 1% lower than believed. If real yields move higher to compensate, with a constant equity risk premium, then U.S. P/E ratios would move lower. A readjustment of investor mentality in the valuation of all three of these investment categories – bonds, stocks, and real estate – would mean a downward adjustment of price of maybe 5% in bonds and perhaps 10% or more in U.S. stocks and commercial real estate.

A skeptic would wonder whether the U.S. asset-based economy can afford an appropriate repricing or the BLS was ever willing to entertain serious argument on the validity of CPI changes that differed from the rest of the world during the heyday of market-based capitalism beginning in the early 1980s. It perhaps was better to be “entertained” with the notion of artificially low inflation than to be seriously “informed.” But just as many in the global economy are refusing to mimic the American-style fixation with superficialities in favor of hard work and legitimate disclosure, investors might suddenly awake to the notion that U.S. inflation should be and in fact is closer to worldwide levels than previously thought. Foreign holders of trillions of dollars of U.S. assets are increasingly becoming price makers not price takers and in this case the price may not be right. Hmmmmm?

What are the investment ramifications? With global headline inflation now at 7% there is a need for new global investment solutions, a role that PIMCO is more than willing (and able) to provide. In this role we would suggest: 1) Treasury bonds are obviously not to be favored because of their negative (unreal) real yields. 2) U.S. TIPS, while affording headline CPI protection, risk the delusion of an artificially low inflation number as well. 3) On the other hand, commodity-based assets as well as foreign equities whose P/Es are better grounded with local CPI and nominal bond yield comparisons should be excellent candidates. 4) These assets should in turn be denominated in currencies that demonstrate authentic real growth and inflation rates, that while high, at least are credible. 5) Developing, BRIC-like economies are obvious choices for investment dollars.

Investment success depends on an ability to anticipate the herd, ride with it for a substantial period of time, and then begin to reorient portfolios for a changing world. Today’s world, including its inflation rate, is changing. Being fooled some of the time is no sin, but being fooled all of the time is intolerable. Join me in lobbying for change in U.S. leadership, the attitude of its citizenry, and (to the point of this Outlook) the market’s assumption of low relative U.S. inflation in comparison to our global competitors.

The Difference Between Communist Capitalism (As In China) And Capitalist Capitalism (As In The US)....The China Price…To Drive

It looks like the China story is becoming more and more fishy....... Keep this in mind when the next blowout nominal GDP number out of China is making waves......

Es sieht immer mehr so aus als wenn es im gelobten Land China immer mehr brodelt...... Ohne diese staatlichen Eingriffe könnte man wohl guten Gewissens von einer galoppierenden CPI sprechen....Behaltet diese Themaktik im Auge wenn demnächst wieder sagenhafte nominale Wachstumszahlen aus China die Schlagzeilen beherrschen....Spreche bewußt von CPI ( Consumer Price Inflation ) und nicht Inflation da ich was die Definition angeht mit Mish übereinstimme Inflation: What the heck is it? .

The China price…to drive FT Alphaville
Here is what we consider to be a graphical representation of the difference between Communist capitalism (as in China) and Capitalist capitalism (as in the US) - divergent costs of motoring.

It comes from John Kemp at Sempra Metals, who notes that in China domestic gasoline and diesel prices are set by the government rather than the market, with the National Development and Reform Commission setting a benchmark price. Filling stations are required to sell fuel at a price within plus or minus 8 per cent of the benchmark.

The government has raised the benchmark repeatedly over the last five years but by nowhere near as much as the increase in crude oil prices. Until the end of 2006, the benchmark gasoline and diesel prices were raised broadly in line with crude. But since then the government has authorised only one price increase in Nov 2007. NDRC officials are reluctant to sanction further increases in case they fuel already high rates of inflation or provoke social unrest. Gasoline and diesel prices are being held down in line with many other basic commodities as part of the government’s broader strategy of relying on price controls to bring down the inflation rate.

China’s refiners now make losses on every barrel of imported crude oil they refine and the government has agreed to provide subsidies to the second-largest refiner, Sinopec, amounting to more than $10bn a year.

There are repercussions here:

The artificially low level of the controlled prices means that China’s manufacturers and households are not receiving a strong signal to conserve fuel. Even as crude oil prices rise, China’s consumers and businesses have no incentive to cut gasoline and diesel use. Rising crude oil prices are helping ration demand in the advanced industrial economies, but have no impact on demand in China, which is where all the marginal demand is coming from for increasingly subsidised gasoline and diesel.

Indeed, price controls are not restricted to gasoline and diesel. China has also banned price increases for electricity and a whole host of other raw materials and foodstuffs - keeping commodity demand artificially high despite surging prices and adding to global inflationary pressure despite the slowdown in the United States.

> The latest numbers are even higher....

> Die letzten Daten sind sogar noch extremer......

Such market-bending policies are evident across the Middle East and Asia, Kemp notes, before concluding:

The Great Depression of the 1930s was made deeper when the United States Smoot-Hawley), the United Kingdom (Imperial Preference) and other countries tried to protect their own economies by resorting to price- and trade-distorting tariffs, causing world trade volumes to collapse. The global downturn of 2007-2009 will be made deeper and longer if emerging economies across Asia and the Middle East refuse to allow domestic commodity prices to rise in order to restrain demand, ensuring that inflation worsens even as the economies of the United States and Western Europe slow.

> And lets not forget some other issues with China..... In the longer term these kind of issues will cause probably more headaches for the central planners.......

> Und ich kann mir einfach den Hinweis nicht verkneifen das China auch abseits der Wirtschaft mit einigen Problemen zu kämpfen hat die längerfristig weitaus schwerer wiegen.....

Thanks to Bob Gorrell

> Now back to the regular program....

> Nun wieder weiter mit dem bekannten wirtschaftlichen Blogschwerpunkt.....

China Gas Price Game Starts To Show Cracks 24/7 Wall Street

The large difference between crude prices and gas is beginning to show up more prominently in the P&Ls of China's largest oil operations. According to the AP "China's second-biggest oil company, Sinopec, says its first quarter profit fell 69 percent due to government controls that bar it from passing on record crude costs to consumers." The firm is offers some subsidies to make up the difference, but they are not enough.

Over the last six months, shares in PetroChina (PTR) and China Petroleum (SNP) ,as Sinopec is known, are well down. SNP has fallen by 30% and PTR by 40%. Shares of Exxon (XOM) are flat over that period.

Public shareholders are being punished for the government policy, but it will not end there. If the economy in China slows, the treasury will find it harder and harder to finance the underwriting of gas prices. China may have to pour more money into the market to support its actions. Or, it may have to let the price of fuel move up.

In a country where inflation already borders on double digits, an oil crisis is brewing. It will be not long until it will moves out into the open.

Workers Get Fewer Hours, Deepening the Downturn

The report from the NYT offers some good hints what is going on beneath the radar. Add to this that the reported jobs numbers are more or less a farce and you know why the recession that already started will be much longer than most people think. Scary that some are still in denial ....

Make sure to read this from Mish about the "Enron" like unemployment data Unemployment Soars, Jobs Collapse. Even i would have thought that this kind of Black Box report is almost impossible to top, but wait...... Martin Hutchinson via Barry Ritholtz Pre-Revision CPI: 9% has made it...... UPDATE: More unbelievable stuff via Barry Disappearing Economic Indicators

Dieser kleine Lagebericht der NYT gibt einen guten Einblick was sich unterhalb der nackten Zahlen so abspielt.Wenn man jetzt noch bedenkt das die monatlich verkündeten Daten zum US Arbeitsmarkt bestenfalls was in der Muppetshow zu suchen haben und Enron in nichts nachstehen kann man sich sehr leicht ausrechnen das die USA für lange lange Zeit in einer bereits begonnenene Rezession stecken werden. Muß jedes mal wieder schmunzeln wenn ich höre das noch über die Möglichkeit einer Rezession gesprochen wird. Immerhin scheint sich bei einigen die Meinung zu verfestigen das diese "mild" sein wird. Sind halt "Permabullen".... :-)

Um zu verstehen wie die US Arbeitsmarktzahlen frisiert werden ist der nachfolgende Link von Mish Unemployment Soars, Jobs Collapse Pflicht! Und immer wenn man denkt man hätte in Scahen US Zahlenakrobatik alles gesehen kommt ein neues "Highlight. Dieses Mal von Martin Hutchinson via Barry Ritholtz Pre-Revision CPI: 9% UPDATE: Mehr selbst für mich kaum fassbares erneut von Barry Disappearing Economic Indicators

Workers Get Fewer Hours, Deepening the Downturn NYT
Not long ago, overtime was a regular feature at the Ludowici Roof Tile factory in eastern Ohio. Not anymore. With orders scarce and crates of unsold tiles piling up across the yard, the company has slowed production and cut working hours, sowing worry and thrift among its workers.

“We don’t just hop in the car and go shopping or get something to eat,” said Kim Baker, whose take-home pay at the plant has recently dropped to $450 a week, from more than $600. “You’ve got to watch everything. If we go to town now, it’s for a reason.”

“We don’t just hop in the car and go shopping or get something to eat,” said Kim Baker, whose take-home pay at the plant has recently dropped to $450 a week, from more than $600. “You’ve got to watch everything. If we go to town now, it’s for a reason.”

The gradual erosion of the paycheck has become a stealth force driving the American economic downturn. Most of the attention has focused on the loss of jobs and the risk of layoffs. But the less-noticeable shrinking of hours and pay for millions of workers around the country appears to be a bigger contributor to the decline, which has already spread from housing and finance to other important areas of the economy.

While official unemployment has risen only modestly, to 5.1 percent, the reduction of wages and working hours for those still employed has become a primary cause of distress, pushing many more Americans into a downward spiral, economists say.

Last month, the hours worked by those on American payrolls dropped, compared with six months earlier, according to an index maintained by the Labor Department. The last time the index moved into negative territory was February 2001, when the economy was on the doorstep of recession. A similar slide emerged in August 1990, one month into what proved an even more severe downturn.

At the end of last month, more than 4.9 million people were working part time either because they could not find full-time jobs or because their companies had cut hours in the face of slack business, according to a Labor Department survey. That represented an increase of 400,000 since November.

Paychecks are diminishing just as millions of Americans are finding their access to credit constricted as well. Borrowing against the value of real estate — a crucial artery of household finance in recent years — has been pared back as home prices have plummeted and as banks have tightened lending standards in the aftermath of the collapse of the housing bubble.

“At this point, those avenues are blocked,” said Jared Bernstein, senior economist at the labor-oriented Economic Policy Institute in Washington. “Consumption going forward is going to be in large part a good old-fashioned function of paychecks and incomes.”

Even before the rollback in working hours, pay was barely keeping up with the rising costs of gas and food. From February to September of last year, the average hourly earnings for workers in the private sector was still growing at a slightly faster clip than the pace of inflation, according to the Labor Department. But from November through March, as employers began to scale back in a variety of ways, wage growth fell below the pace of inflation, meaning that paychecks were effectively shrinking.

> And this even on the base of the "reported" CPI ...

> Und das auf bereits auf Basis der absolut lächerlichen offiziellen CPI Nummer.....

Now, work opportunities are themselves declining, as the downturn snuffs out business

China Inflation Surges to 11-Year High

Beijing, we have a problem...... It looks like the officials now have to pay the price for all the baby steps during the past years. Thanks to Russ Winter for this interesting chart that could signal some "trouble" for the powerful....

Peking, wir haben ein Problem....... Es sieht immer mehr danach aus als wenn nun der Preis für die laxe Einstellung und den damit verbundenen Babysteps zu zahlen ist. Dank an Russ Winter für den interessanten Chart der noch zu einem ernsten Problem für die "Mächtigen" werden könnte..... Hier die deutsche Version vom Spiegel Lebensmittelpreise in China steigen um über 18 Prozent

Dec. 11 (Bloomberg ) -- China's inflation accelerated at the quickest pace in 11 years and the trade surplus swelled, adding pressure on the central bank to raise interest rates or let the currency appreciate faster to cool the economy.
Consumer prices rose 6.9 percent in November from a year earlier after climbing 6.5 percent in October, the statistics bureau said today. That was more than the 6.5 percent median estimate of 21 economists surveyed by Bloomberg News.

Surging food and fuel costs and a surplus that climbed to a record $238 billion in the first 11 months have prompted the government to name inflation and overheating as its biggest concerns. U.S. Treasury Secretary Henry Paulson, who's in Beijing for economic and trade talks, recommends currency appreciation as a remedy.

The central bank will respond with ``strict control on bank lending, further withdrawal of liquidity, one more rate hike before the end of this year and allow a faster pace of currency appreciation in 2008,'' said Liang Hong, a senior economist at Goldman Sachs Group Inc. in Hong Kong.

The yuan rose by the most in a month against the dollar on speculation rates will rise. The currency gained 0.18 percent to 7.3817 as of 10:55 a.m. in Shanghai from 7.3952 late yesterday. It reached 7.3770, the highest since a link to the U.S. currency ended in July 2005.

The yuan has gained 12 percent versus the dollar since the fixed exchange rate was scrapped. A stronger Chinese currency would lower import costs and slow money inflows by pushing up export prices.

Crackdown on Lending
The trade surplus rose 14.7 percent to $26.3 billion in November from a year earlier, the third-highest monthly total, the customs bureau said today. People's Bank of China Governor Zhou Xiaochuan said that the nation's currency policy will be used to help narrow the gap.

China has cracked down on bank lending and raised interest rates five times this year to curb inflation, asset bubbles and excessive investment leading to industrial overcapacity.

The one-year lending rate is at a nine-year high of 7.29 percent. The People's Bank of China last week ordered lenders to set aside more deposits as reserves for a 10th time this year.
Pork Prices Soar
Pork prices surged 56 percent in November from a year earlier on a pig shortage. Food makes up a third of the consumer price index and rising costs pose a threat to social stability, illustrated by a stampede last month at a cooking-oil sale that killed three people in the central city of Chongqing.

Overall, food climbed 18.2 percent. Non-food prices rose 1.4 percent, accelerating from a 1.1 percent gain in the previous month. Utility prices including water, electricity and gas rose 5.6 percent.

China's economy, the world's fourth largest, expanded 11.5 percent in the third quarter from a year earlier.

Fed & Moral Hazard

For the three people out there that still think the Fed and the majority of other central banks are still fighting inflation i recommend to read Moral Hazards And Fed Actions fom Mish. I coudn´t have said it better. AMEN!

Für die zwei bis drei Leute die immer noch denken das die Fed und fast alle anderen Zentralbanken sich die Inflationsbekämpfung auf die Fahnen geschrieben haben sollten zwingend Moral Hazards And Fed Actions von Mish lesen. Besser kann man es kaum beschreiben. Sehr treffend!

Thanks to John Trevor

China's October Inflation Matches Decade High of 6.5%

After viewing this kind of data it should be clear that China is no longer exporting deflation and is supporting tame CPI numbers around the globe. It looks more and more that China will export meaningful CPI inflation. Jeff Matthews has also some comments on this topic in “An Inflationary Spiral Out Of China” . It will be interesting to see how much longer the Chinese officials are able to keep the poorer people "calm". Maybe the Chinese should adopt some of the US statistics to calculate the CPI number......

Nachdem man sich diese Daten ansieht sollte jedem klar sein das China schon seit einiger Zeit keine Deflation exportiert. Zukünftig wird wohl das Gegenteil der Fall sein. Jeff Matthews hat zu diesem Thema ebenfalls einige Anmerkungen “An Inflationary Spiral Out Of China” . Sollte China das Problem nicht in den Griff bekommen bin ich mal gespannt wie es um den sozielan Frieden besonders unter den Armen bestellt ist. Evtl. sollten die Offiziellen sich ein paar Anregungen bei der Ermittlung der CPI Nummer aus den USA holen. Habe mir sagen lassen das man dort besonders kreativ ist.....


China's October Inflation Matches Decade High of 6.5%
Nov. 13 (Bloomberg) -- China's inflation accelerated in October as food prices jumped, increasing pressure on the central bank to raise interest rates for a sixth time this year.

Consumer prices rose 6.5 percent from a year earlier, matching the decade high in August, the National Bureau of Statistics said today, after gaining 6.2 percent in September. That was more than the 6.3 percent median estimate of 20 economists surveyed by Bloomberg News.

Pork prices climbed 55 percent, adding to the surge in vegetable and cooking-oil costs that's spurred government subsidies for farmers and crackdowns on price-fixing to avoid social unrest. October's record $27 billion trade surplus pumped cash into the economy, stoking inflation that's twice the 3 percent pace the central bank targets.

``Food inflation has expanded into other categories -- energy, labor and asset prices,'' said Chris Leung, senior economist at DBS Bank Ltd. in Hong Kong. ``Everyone in China is feeling inflation, especially the poor.'' He expects another rate increase this year.

The yield on one-year central bank bills issued today rose from the sale a week ago on speculation rates will rise. The notes were sold at a yield of 3.94 percent, a 0.15 percentage point increase.

The CSI 300 Index of stocks fell 1.4 percent as of 2:34 p.m. in Shanghai. The yuan traded at 7.4271 versus the dollar after closing at 7.4123 yesterday. Food prices account for a third of the consumer-price index. For the first 10 months, consumer prices climbed 4.4 percent.

``Food inflation has expanded into other categories -- energy, labor and asset prices,'' said Chris Leung, senior economist at DBS Bank Ltd. in Hong Kong. ``Everyone in China is feeling inflation, especially the poor.'' He expects another rate increase this year.

A stampede at a supermarket sale of cooking oil killed three people on Nov. 10 in the central city of Chongqing, state media reported. Soaring consumer prices helped trigger the Tiananmen Square protests that were crushed by the army in 1989.

In October, vegetable costs jumped almost 30 percent from a year earlier. Prices for edible oil surged 34 percent, while the cost of eggs rose 14 percent.

Price increases for non-food items were 1.1 percent, the same as in September.

There's pressure for inflation to accelerate further.

The government this month raised prices for gasoline, diesel and jet fuel as crude oil surged to records.

Producer prices jumped 3.2 percent in October from a year earlier after climbing 2.7 percent in September, the statistics bureau said yesterday. M2, the broadest measure of money supply, rose 18.5 percent in October from a year earlier.

``Money supply is growing very fast and that is worrying because it may push inflation higher,'' said Paul Cavey, an economist at Macquarie Securities Ltd. in Hong Kong.

Three days ago, the People's Bank of China ordered lenders to set aside 13.5 percent of their deposits from Nov. 26, the highest proportion since at least 1987. The central bank has pushed the benchmark one-year lending rate to a nine-year high of 7.29 percent.

The central bank last week forecast full-year inflation of about 4.5 percent this year, up from 1.5 percent in 2007 because of expectations for prices to rise and pressure from food, energy and labor costs. Inflation of 3 percent is the central bank's annual target.

A sixth increase in interest rates is likely this year, according to a Bloomberg News survey of economists.

Number / Farce Of The Day..... GDP Price Index / GDP Deflator

I think this time they have gone too far .... Reminds me somehow of "Fool´s Day".....

Ich denke diesemal sind Sie wirklich zu weit gegangen.... Das ganze erinnert mich irgendwie an den 1. April.......

U.S. economy grows at 3.9% pace in third quarter

Despite rising worries about commodity prices, the GDP price index, the broadest measure of price changes in the economy, rose just 0.8% annualized, matching a nine-year low. Inflation hasn't been lower since John F. Kennedy's administration."

Here is the nice rant (including a chart) from Barry Ritholtz on this topic I Call "Shenanigans" on GDP! & Hellasious from Sudden Debt is also "upset" in Hooray, Inflation Lowest Since 1963!! . Barry Ritholtz has also found this headline Inflation was low because oil prices surged. In GDP math, sometimes one plus one equals zero explaining how the "math" is working....

Und hier die ebenfalls deftige Meinung inklusive Chart von Barry Ritholtz zu diesem Thema I Call "Shenanigans" on GDP!. Hellasious von Sudden Debt feiert ebenfalls in Hooray, Inflation Lowest Since 1963!! kräftig mit. Diese Schlagzeile Inflation was low because oil prices surged. In GDP math, sometimes one plus one equals zero spricht für sich......

10-Year Treasury Yield Breaks Out / Bernankes "Reverse Conundrum"

Schadenfreude! It looks like Bernanke has his own conundrum. He is now witnessing a conundrum turned upside down. Since the Fed’s 50 basis point rate cut on 18 September – the first in what will presumably be a series of cuts – long-term bond yields have risen rather than fallen. It is for sure no coincidence that at the same time the $ has tanked to historic lows and commodities & gold have soared.....Well done.....

Schadenfreude! Es sieht so aus als wenn Bernanke sein eigenes Rätsel im Hinblick auf dás lange Ende der Zinskurve zu lösen hat. Im Gegensatz zu Greenspan der sicher insgeheim die niedrigen Zinsen am langen Ende bejubelt hat wird Bernanke dieses "Rätsel" wohl verfluchen. Es ist sicher kein Zufall das im gleichen Zeitraum der $ auf historische Tiefs abschmiert und Rohstoffe sowie Gold nur eine Richtung kennen....Gut gemacht.

After months of declines, the yield on the 10-Year Treasury Note broke out today above highs reached in mid-September, sending bond prices lower. After bottoming at 4.32% on September 10th, the yield has risen to its current levels of 4.70%, as equity markets have gained as well. Today's breakout could mean yields are ready to make another leg up.

Thanks to Bespoke

And news like this will add pressure to the bond "conundrum"

Treasury Sales May Rise 50% as Deficit Suddenly Grows

America to press for restrictions on potent sovereign wealth funds

China's $200 Billion Fund to Buy Strategic Stakes

If we are Rome, Wall Street's our Coliseum

Capital flows to U.S. fall by $163 billion in August

Grim Forecast for State Budgets

The US trade deficit is falling, but not as fast as the world’s demand for US debt.

I want to highlight this great piece from iTulip about the long term outlook for yields Captive bidding at the auction: How bond vigilantism was swamped . Looks like a major support will reverse course and will be a significant upward pressure for yields....

Zudem möchte ich gesondert auf Captive bidding at the auction: How bond vigilantism was swamped von iTulup hinweisen. Hier wird gerade auf längerfristige Sicht ein zur Zeit noch unterstützendes Element massiv ins Gegenteil umschlagen und den Aufwärtsdruck deutlich verschärfen....

I´m already waiting for the spin that when the Turkish/Kurdish tension are heating up that this will be good news because this will bring yields down ("Flight to Quality" etc) . If you really hear this argument from a stock market bull it is time to short the market or at least to sell .....

Ich hoffe das uns ein neuer Spinversuch im Zusammenhang mit dem Türken/Kurden Konflikt erspart bleibt. Es ist nicht auszuschließen das wenn die "Flucht in die Staatsanleihen" einsetzt und damit die Renditen weltweit fallen dieses als Argument für weiter steigende Aktienkurse herhalten muß. Solltet Ihr das zu hören bekommen ist es höchste Zeit den Markt zu shorten......

UPDATE 20th Oktober:

One week later the 10 year has broken 4.50 , $ at new lows, oil at 90, etc....

Binnen einer Woche hat sich das Blatt gewendet. Rendite unter 4,50%!, dazu $ auf neuen Tiefen und Öl bei 90$ usw.....

Ron Pauls vs Bernanke

This quote from Scott Reamer/Minyanville sums it up!

Diese Aussage von Scott Reamer/Minyanville trifft den Nagel auf den Kopf!

Bravo to Ron Paul for giving voice to the hundreds of millions or pensioners, savers, working stiffs, poor, fixed income beneficiaries, laborers, gasoline-, bread-, milk-, and egg-buyers who weren’t able to ask Mr. Bernanke why he – like every Fed chairman before him since 1913 – screwed them for the benefit of the top 5% of the population of this country.

Click here to start the audio file

Klickt bitte hier um Ron Paul zu hören.

Here comes the take from Minyanville

“I want to follow up on the discussion about moral hazard. I think we have a very narrow understanding about what moral hazard really is. Because I think moral hazard begins at the very moment that we create artificially low interest rates which we constantly do. And this is the reason people make mistakes. It isn’t because human nature causes us to make all these mistakes, but there is a normal reaction when interest rates are low that there will be overinvestment and malinvestment, excessive debt, and then there are consequences from this. My question is going to be around the subject of how can it ever be morally justifiable to deliberately depreciate the value of our currency?”

His statements continued (about how much oil, gold, wheat, corn, etc. has gone up since the rate decrease) but the heart of his question was the following moral question: ...consciously depreciating the value of the USD has winners and losers (Wall Street/banks/the rich and everyone else), Mr. Bernanke. How do you constantly choose Wall Street over the rest of America?

You will not be surprised to know that B-52 Ben didn’t answer the question. He couldn’t answer the question (at least truthfully). .....

But his non-answer is not germane. The element that Ron Paul introduced is: the morality of the Federal Reserve’s constant injection of credit into the system at the slightest hint of macroeconomic distress. And I mean slightest: we haven’t even seen a GDP print below 0. We were only down 4.2% from the ALL TIME high in the Dow (the Fed’s own research suggests that the stock market is the best leading indicator of the economy).

On top of this Jeff Matthews & Mish has some must read post Fed Chairman Flunks Final Jeopardy! & Price Stability & Top Secret Missions

Zudem hat Jeff Matthews und Mish entwaffnende Posts Fed Chairman Flunks Final Jeopardy! & Price Stability & Top Secret Missions veröffentlicht das ich jedem ans Herz legen möchte.

I hope nobody is asking any longer why gold is soaring......

Damit dürfte wohl auch geklärt sein warum Gold sich zu neuen Höhen aufschwingt.....

Peter Schiff vs Diane Swonk On Inflation

Looks like everybody call themselves "experts". . Peter is discussing with Diane Swonk about the quality of the inflation numbers from the government.. The woman is pure comedy. Click on the headline to start the video. In the meantime Swonk should talk to the CEO of Nestle about this topic....


Was CNBC sich teilweise für "Experten" einlädt ist schon erstaunlich. In diesem Fall eine gewisse Diane Swonk die doch allem ernstes behauptet das die Inflationszahlen der USA ein stimmiges Bild abgeben. Teil der Begründung ist das Sie die verantwortlichen Leute persönlich kennt und die soetwas niemals machen würden.....Klickt auf die Überschrift um das Video zu starten. Swonk sollte am besten mal mit dem CEO of Nestle sprechen....

The Biggest Dollar Diversifiers Are American / S. Jen

While i not agree that the US $ is sound Stephen Jen puts up some excellent points why the Greenback is facing some "hidden" headwinds. The obvious problems like a slumping US economy, the diversification from Foreign Central Banks away from the $, deficits etc are well known ... He points out several others reason why the $ is losing faith..... He blames the Fed and its "bailout" mentality under Greenspan and probably under Bernanke.... On top of this it isn´t helping the $ when the Fed is the only Central Bank that is targeting the useless "core rate" when others are fighting the headline CPI. Both are not very successful...... But the key point is that the big guys are fleeing or as Wall Street and others would say "diversifying" out of the dollar holdings at a accelerating pace........Make sure you read also this piece from Brad Setzer

Obwohl ich nicht mit der These übereinstimme das die Fundamentaldaten für den $ immer npch gut sein sollen macht Stephen Jen hier einen sehr guten Job und weist auf einige nicht so offensichtliche Punkte hin die einen Teil der aktuellen Dollarschwäche erklären. Die offensichtlichen Probleme des $ wie eine abschmierende Volkswirtschaft, Diversifikation der Notenbanken aus dem $, Defiizite usw. sind inzwischen selbst auf CNBC angekommen. Jen aber arbeitet andere nicht so offensichtliche Punkte heraus, wie z.B. das die Fed dank Greenspan zurecht eine Mentalität unterstellt das im Falle einer Krise immer die Geldschleusen großzugig geöffnet werden. Dazu kommt dann noch das die Fed die einzige Notenbank ist die lediglich die alberne "Core" Inflation "bekämpft". Der wichtigste Punkt aber ist das die Amis selbst aus dem $raum flüchten oder vornehmer ausgedrückt "diversifizieren"..... Kann Euch in diesem Zusammenhang noch empfehlen das von Brad Setzer zu lesen.

The dollar is very weak relative to most currencies. While cyclical factors have played an important role, I don’t believe that cable is trading at 2.05 and EUR/USD at 1.38 due only to these rather innocuous cyclical factors. Other structural factors may be at play. One possible structural reason for the dollar to have had a gradual downward trajectory since 2002 is, I suspect, portfolio diversification by US real money managers.

Cyclical explanations for the weak dollar
There are ample cyclical reasons for the dollar to have underperformed recently. First, the US economy is weaker than almost every other economy in the world. Though we may have seen the trough in the US business cycle in 1Q, the recovery trajectory is likely to be modest, after a surge in 2Q. The rest of the world, however, continues to surprise to the upside, showing no sign of lagged effects of the softness in the US economy from 2Q06 to 1Q07. No longer do investors doubt the ‘de-coupling’ thesis. Monetary policy between the Fed and other central banks is in direct correspondence to this expected divergence in economic growth. As a result, the dollar may sag as long as other central banks remain in motion.
Second, in addition to these central case expectations of the US and the rest of the world, due to the problems with the sub-prime market and the housing sector, the risk to the US outlook is biased to the downside, with limited spillovers expected for the rest of the world. Investors have the collective memory that the Federal Reserve eased interest rates by 75bp in 1998 in response to the failure of LTCM, despite the fact that the general macro conditions were positive and inflation was drifting higher. With this track record, investors believe that the Fed may have difficulties raising interest rates if the sub-prime problem persists.
Third, higher oil prices are positive for EUR/USD. Not only do oil exporters have a marginal propensity to consume European goods that is twice as high as that for US-made goods, but the fact that the ECB targets headline inflation while the Fed targets core inflation may also have encouraged investors to expect EUR/USD to rise with oil prices. ....

Diversification by US real money accounts
While the cyclical factors I mentioned above may help explain why the dollar has depreciated recently, they don’t give a satisfactory explanation as to why the current level of the dollar is so extremely low. In retrospect, since 2002, the dollar has had its ups and downs, but the underlying trend has been downward. I have long argued that the dollar is structurally sound, and provided reasons (such as the ‘de facto dollar zone’, valuation, geopolitical hegemony, dominance in the global financial markets, etc.) justifying why the dollar’s hegemony will be preserved. I am still convinced by many of my arguments. However, I am now taking more seriously the thesis that US real money investors have been steadily diversifying away from USD assets since 2003. ...The dollar may thus still be structurally sound, but not as sound as I had thought.

US real money accounts consist of four key categories of funds: mutual funds, private pension funds, state and local pension funds and life insurers. The Fed’s Flow of Funds data track the sizes of these funds. As of 1Q07, the total assets under management by these four categories reached US$20.7 trillion, up from US$12.6 trillion in 1Q03. At more than US$20 trillion, real money under management in the US is close to four times the size of the world’s official foreign reserves. Any signs of diversification by these real money accounts would have great implications for the dollar. While I don’t have a breakdown of the asset allocation of all four categories, the Boston Fed’s Monthly Mutual Fund Report shows that mutual funds’ allocation to international equities has risen from around 15% in 2003 to 22.5% now. This trend diversification is gradual but determined.

If we apply this outward investment allocation ratio to the total stock of mutual funds, the cumulative outflows of mutual fund investment since 2003 are around US$400 billion. But if we apply this outward investment allocation ratio to the entire stock of real money accounts, the cumulative outflows since 2003 total US$1.16 trillion: US$190 billion in 2003, US$295 billion in 2004, US$324 billion in 2005 and US$352 billion in 2006. These outflows are indeed massive.

Bottom line
Contrary to popular presumption, US real money mangers are the biggest dollar diversifiers, not the Asian central banks. Controlling assets that are four times the size of the total global official foreign reserves, US real money managers have been steadily diversifying out of the US since 2003. My calculations show that cumulative outflows may have totaled US$1.16 trillion in the past four years. This may help explain the downward drift in the dollar in recent years, and why the dollar is so weak now.

Bernanke Vs The CEO Of Nestle On Food Inflation

Who do you believe? I´ll go with the expert from the world largest food company and not with the spin masters from the FED who eats at the CPI cafe.

Wem würdet Ihr glauben? Ich halte mich da doch eher an den Experten des größten Nahrungsmittelkonzernes der Welt und nicht and den in einer parallelwelt lebenden FED Chef der im CPI Cafe essen geht....

Thanks to Wall Street Follies

This is taken from Herb Greenberg.

The head of Nestle doesn't see food inflation as a short-term issue, but part of "structural" changes in his world. So much for this "core inflation is in check" mumbo jumbo. Check, please.

At the same time Bernanke is living in his own "core world" and wonders why the inflation expectation are imperfectly anchored.....

Zur gleichen Zeit fabuliert Bernanke weiter über seine eigene "core" Welt und wundert sich das die Inflationserwartungen nur suboptimal verankert sind....

"Delivering a speech to the National Bureau of Economic Research, the Fed chief said "changes in energy [and food] prices should have relatively little influence on 'core' inflation, that is, inflation excluding the prices of food and energy."

Make sure you read Barry Ritholtz nice rant Un-frickin-believable

PIMCO-Gross "How We Learned to Stop Worrying (so much) and Love “Da Bomb”

good and long ( this is already a summary) piece from pimco. please keep in mind that when you read this "bullish" (except for us asssts....) piece from gross that he is a bond guy. we will see how the outlook will be when we will see "events" like (hedge funds, derivatives, failed lbo´s , popping bubbles in almost every credit market etc) .... we havn´t seen a real stresstest yet.....

guter und langer beitrag von gross. bedenkt bitte bei der lektüre das er die sicht eines anleihemanagers hat. zudem könnte einige der annahmen einem ernsten test unterzogen werden wenn wir wohl nicht zu verhindernde "ereignisse" im kreditmarkt (hedge fonds, derivate, unternehmenspleiten etc) gegenüber stehen. ..den wirklichen stresstest haben wir bisher noch nicht gesehen.....

...For the purpose of this Outlook, “da bomb” is globalization and all of its wondrous benefits – high growth, low inflation, accelerating profits, and benign interest rates. For that matter, you can compile a short list of critical factors that have aided and abetted globalization’s surge during the past decade or so: the information technology revolution, favorable government policies including inflation targeting and lower taxes, a shift to freer low cost markets in China and India, as well as moves towards deregulation and lower trade barriers worldwide. ......


These have been PIMCO secular themes for years now, but somehow after correctly analyzing the evolution of “da bomb” we never stopped worrying about it and how it might end; like Slim Pickens headed for his mushroom cloud destination 20,000 feet below, we were giddy, but subconsciously pretty darn worried. We foresaw rising global growth, but said it would be “moderate” due to a lack of aggregate demand. We spoke to a “stable disequilibrium” which referred to good times now, but maybe bad times on the horizon, and emphasized not the stability but the potential downside arising from trade deficit imbalances, U.S. debt buildup, and resultant financial flows. Those worries were enough to tilt portfolio constructions towards a more U.S. centric housing led slowdown which we hit right on the money, but they steered us away from a more global orientation where the rest of the world continued to experience 5%+ growth rates and to dominate financial market trends. ........

Secular Review
Globalization. Technology. Freer markets/financial innovation. Favorable public policy. These are “da bomb’s” critical components and we could spend paragraphs expounding on the influence of each. ....... accelerating global growth; disinflation; increasing returns on equity capital; and low real interest rates

......Interestingly, each of these trends has a common thread, as do the components of “da bomb”: The ascendance and dominance of capital vs. labor. Add a billion or so potential workers to the global labor force, blend in a technology S curve acceleration, combine these with deregulation, lower taxes, and free trade, and you have a recipe for accelerating returns to capital and diminishing returns to labor. Higher stock prices, lower inflation, declining interest rates and importantly a rather low volatility environment for both economic growth and asset prices have resulted. It’s known as the “great moderation” in economic circles, assisted not insignificantly by what has been called Bretton Woods II, a recirculation of surplus reserves into consuming nations that has promoted growth and lower interest rates – no mean feat in historical context.


What’s New?
Does this virtuous circle favoring capital at the expense of labor continue? We see nothing to stop it absent a global financial bubble popping of sorts, an accelerated decline of U.S. housing in the short run, or a U.S.-led trade policy reversal that could precipitate counter-attacks from Asian exporters. These three are not “black swans” as they say. Asset bubbles are a near inevitable result of attractively financed leverage in search of a limited array of financial assets – and the exuberance that inevitably accompanies them. In turn, if U.S. housing declines soon morph into the consumer sector, the belief in a U.S.-centric global economy will reemerge, and a cyclical argument for slower global growth will accompany it. Anti-trade legislation may or may not become a reality.....


A bigger threat to asset markets however, c