"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


Wednesday, November 16, 2011

Rising Prices just a Figment of Our Imaginations

JACOB MARLEY:  Why do you doubt your senses?

SCROOGE:  Because, a little thing affects them. slight disorder of the stomach makes them cheats. You may be an undigested bit of beef, a blot of mustard, a crumb of cheese, a fragment of an underdone potato. There's more of gravy than of grave about you, whatever you are!

So goes the conversation between the two former business partners in a scene from Charles Dickens', "A Christmas Carol". Of course Marley is a disembodied spirit who comes to warn Ebenezer Scrooge to change his ways while there is still time. Scrooge thinks he is imagining the entire encounter.

Reading today's CPI numbers from the official bureau of propaganda I could not help but to think of this scene. Yes, according to the feds, those rising prices we are all experiencing in the grocery story are nothing more than "undigested bits of beef" ( I could not resist the pun).

Funny that on a day when we have to sit and read commentators telling us gold is under pressure because "inflation is benign", we watch WTI Crude Oil surge through the $100 barrel level as news hits the market that the flow of crude oil in the major pipeline that runs from the Gulf Coast to Cushing, Oklahoma will be reversed allowing oil to flow OUT of Cushing thereby reducing what has been a supply glut pressuring the benchmark for oil.

If WTI Crude continues to show strength, it is going to be a difficult trick for the gold bears to keep up any chatter on ebbing inflationary pressures.

On a different note, take a look at the composite price of wholesale beef. It scored an EIGHT YEAR HIGH yesterday! Don't worry however, this is just a figment of your imagination. The government tells you so.

Meanwhile, Commodity Prices are indeed not continuing to soar into the stratosphere, but neither are they breaking down sharply either. This index would have to fall below 560 to suggest a bear market in commodities overall is underway. Prices have retreated from their all time peak, but seem to be moving in a generally sideways pattern over the last couple of months having bounced off of the above level and moved higher. The index would need to clear 620 to suggest a period of rising commodity prices is underway once again.

That is what is particularly galling about the government's numbers. They give the impression that inflation is benign but the truth is that while the CCI has fallen from its peak, it remains at an extremely lofty level nearly 90% above the bottom made back in 2008. It is a bit of an exaggeration to say it this way but it conveys the point more forcefully - commodity prices have nearly doubled since the fall of 2008.

When you put it that way, the "benign inflation" picture does not seem quite so benign now, does it?


  1. Dan,

    All those charts and graphs and stuff. Look, the Market Watch people just ran an article that told me that just cause Crude goes up, it does not mean gasoline prices will rise. So, really Dan, these guys know best.

    Do you believe this sh.......? Crude rises will not be felt at the pump. Who in their right f...... mind writes this stuff and who at marketwatch actually prints it. Amazing world.

  2. I think the croud just got the picture right at closing time, with Fitch shouting it. Germans are deftly afraid of the large Heidleberg Web Presses. Their grandparents know exactly what that brings. And for what, to foot the bill for a couple hundred million Old Southern gents retirements that start at the old age of 53 and save the Banking Cartel? I think they pass outright. The secondary market holds the key for the ECB to monetize if they have to. If not, Ben loves German technology. Have to hold on to the buy button and wait awhile. When the 10's are rising in all of Euro land, the powers that be are getting awfully antsy. I wonder if the recent mining stock basing will be the lucky first ones in; or the more patient among us who might see some lower prices in a hurry and we can swan dive in.


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