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Politics : President Barack Obama -- Ignore unavailable to you. Want to Upgrade?

To: Sr K who wrote (123926)	10/15/2012 11:50:55 PM
From: tejek	Respond to of 149317

“It’s conceivable that it can be done but it hasn’t yet been done,” Soros said. “Until then the possibility that eventually you could have a much greater inflation at some point is a very real one.” In the meantime, China announced on Sunday that inflation is at the lowest level in two years: brecorder.com

To: Sr K who wrote (123926)

10/16/2012 9:09:20 AM

From: RetiredNow

Read Replies (1) | Respond to of 149317

Hi Sr K,
yes, Soros describes it well. Here's the thing. The Fed has almost always missed the turning points, which means they've increased business cycle volatility, not decreased it. They've blown bubbles and then were surprised when the bubbles popped. Bernanke himself was fond of saying that there were no problems dead ahead, until everything collapsed in 2008.

Now even if none of that were true and we had a decently prescient Fed Chairman, I'd still doubt it could be done. You see, the problem is that we're driving a Mac truck at 100 mph straight at a wall. The Fed is telling us they can wait until 10 ft before the wall, slam on the breaks, and we'll stop before we hit. That's just not credible. Almost always, by the time the Fed understands price increases as a result of inflation is becoming a problem, much higher price increases are already baked into the cake. Even at that moment in time, if the Fed takes action, the actions they could take would be on a delay and the prices increases would have to play out, to great harm to the common man.

Think of it this way, you hold a coiled spring in your hand. The potential force is released and becomes kinetic. You see the movement 1 millisecond after it begins. Will you have the speed to squash both hands together to stop the spring from being sprung before it's done uncoiling? I doubt it. You just aren't fast enough. The main reason why is that you are relying on lagging indicators of the spring having already sprung, instead of leading indicators that tell you BEFORE the spring is sprung. Same with the Fed. They are relying on PCE, which is a lagging indicator. And I won't even go into all the massaging that makes those numbers look far too benign. So by the time that indicator says "caution, prices are rising", the inflation goose has been cooked and price rises are already baked in.

If you want to see how inflation is resulting in price increases, one of the better sources is ECRI's Monthly Future Inflation Gauge (USFIGM). Right now, the trend is showing upward price pressure due to the Feds monetary inflation. This is intended to be a leading indicator, which means that what it's showing is that we already have decent prices rises baked into the cake.

Date / Level / Growth

Sep 01 '12	103.4	5.2
Aug 01 '12	101.0	1.0
Sep 01 '11	100.0	-1.7