"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput

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Tuesday, March 1, 2011

Inflation on the move in the Eurozone - Bernanke wears Blindfold

News out of Europe early this morning revealed its rate of inflation rose to a 28 month high of 2.4% in February.

Chalk up one more region of the globe where the Kraken is on the move.

If that was not bad enough, there was further confirmation of the problems that China is having containing this beast. Two separate surveys from Chinese manufacturers both revealed upward price pressures.

It is becoming evident that about the only person on the planet who is not concerned about inflation is chairman of the Federal Reserve, Ben Bernanke, who continues sailing his boat down that river in Egypt called De Nial. He had the brazen audacity, in the face of a surge in gold, silver, oil, gasoline, cotton, the CCI, etc. to assert that these rising prices will result in only a "temporary and relatively modest increase in US consumer price inflation".

I do not know about you but looking at the price charts of just about every single commodity one can look it, those charts do not show a 'relatively modest increase'. Does a 100% increase in 7 months in some food costs count as modest?

I can understand the Chairman not wanting to react to ever single tick change in price but for crying out loud, the CCI just made a brand new all time high yesterday and has been rising almost vertically since June of last year. He might want to reconsider that this rise is "temporary' or "modest". Yes, the price of some food items has eased somewhat, notably wheat, but the fact is that the overall index, is still at lofty levels no matter what standard of measurement is employed.

Unless we have a tremendous year this season for the North American crop, we are still going to be dealing with the potential for continued very high grain prices. Yes, there may not be $9.00 for wheat or $7.50 for new crop corn but even $6.00 corn or $7.00 wheat cannot be considered cheap.

Either way, the gold and silver markets are strongly disagreeing with Mr. Bernanke's rather rosy outlook on the inflation front as both markets are surging higher on an inflation trade.

Even the bonds are coming under some pressure, in the face of a falling equity market I might add, due to bond traders believing interest rates on the long end are just too low for the level of inflation that they see coming.

1 comment:

  1. Bernanke may be in denial about inflation but he probably figures he has lots of cover... can always blame Mideast turmoil, Eurozone disparity, China currency "manipulation", hurricanes, earthquakes, rain-soaked regions, drought, solar flares, locusts, pestilence, spiders from Mars and such.

    If (when) those excuses don't work Ben will resort to assigning blame to greedy commodities speculators. Congress and Wall Street will applaud. If that fails, he will blame Congress. That might work simply because they are guilty as well. Big Wall Street banksters will still applaud. They can always find and afford suitable replacement puppets for Washington.

    The history books will not be kind to Bernanke. Perhaps he will find temporary solace by rationalizing that he is one of the chosen, enlightened few, so alone in his brilliance with a perspective high above the common, uninformed masses.


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