I was as surprised, as many were, to see that the Consumer Price Index (CPI) in
the United States actually declined in April, dropping to 2.2% inflation from
March's 2.3% inflation.
My family seemed to be endlessly delighted that inflation seems to be going
down, which is because I have been yammering about how inflation in prices
going up will always be the result of a money supply that goes up, and I have
been saying it for so long that they are sick, sick, sick of hearing that
inflation in prices will follow inflation in the money supply, and they are
sick, sick, sick of hearing my voice telling them that ruinous inflation in
prices will always follow ruinous inflations in the money supply, and they are
happy, happy, happy that I am wrong!
You can imagine my response to this arrogance. Finally, once again, having had
it Up To Here (UTH) with their insults and rude
laughter, I explode in their faces "Inflation is still going up, you morons!
Prices are still increasing! Watch my lips, morons! Prices are going up! The
stupid CPI may show that the rate of inflation decreased by a lousy tenth of a
percent lately, which I don't believe for a second, but prices are still
increasing by 2.2%! So what in the hell are you gloating about when the buying
power of your money is being destroyed?"
Well, the conversation got pretty heated after I told them that this discussion
about inflation was the perfect opportunity to tell them that I was, again,
forced to cut expenses so that I could get a little more money to buy a little
more gold, silver and oil.
In response to their usual howls of dismay and disquieting screaming about how
much they hate me, I patiently explain, for the zillionth freaking time this
month, that buying gold, silver and oil is the only intelligent thing to do
when the US government allows the Federal Reserve to create so much money,
especially when so much more money pouring, pouring, pouring into the economy
has, all the way through history - every time somebody tried this Stupid
Economic Crap (SEC) - made the prices of things rise, like stocks, bonds, real
estate, food, energy and the size of government, all soaring, soaring, soaring
so that now one out of every five workers in this country gets paid by
taxpayers through income taxes, sales taxes, excise taxes and myriad other
taxes!
Which is not to mention that inflation in prices is a kind of tax on
everything! And now food and energy prices are going to rise all over the world
because central banks all over the world are creating money so that their
governments can deficit-spend themselves into the Giant Black Hole Of Debt
(GBHOD), all spending with mindless abandon and sporting negative budget
balances as percents of GDP, except for three: Saudi Arabia (1.3% surplus),
Hong Kong (0.8% surplus), and Norway (9.4% surplus (!)).
Well, the argument got loud and the neighbors started complaining, which is
perhaps what caused Gene Epstein, economic beat columnist for Barron's, to have
the headline "Slack Jobs Will Blunt Inflation" which I think implies that
prices will still go up, although not as fast, even though nobody has a job,
which is a concept I never quite grasped, maybe because I thought it was kind
of funny that "blunt" is a term for some kind of marijuana product, and I never
associated Mr Epstein with Cheech and Chong before! "Dave's not here!" Hahaha!
Apparently, Mr Epstein appreciated my humor and the trip down memory lane to
the 1970s, and he started out his column with a funny of his own!
"Maybe you know the classic telegram," he says. "Start worrying. Letter to
follow." Hahaha! Good one!
I suddenly thought that this would make a good Twilight Zone episode,
where the scene opens up with things burning and people killing each other in
the background, while in the foreground a lonely figure reads the telegram,
"Start worrying. Letter to follow."
Here is where I have the camera slowly, slowly zoom in to read the date of the
telegram as the voiceover says, "Telegram? I don't need no stinking telegram to
tell me to worry, because I have been worried about this very thing since 1997,
when Alan Greenspan, chairman of the Federal Reserve from 1987-2006, really
started creating Fed Credit like he had lost his freaking mind and just kept it
up, week after week, month after month, year after freaking year, until Ben
Bernanke, his jerk successor at the Fed, went even more ballistic at the end of
2008 and doubled Fed Credit in just six months - six months! - and has
continued Alan Greenspan's disastrous rate of increase ever since! Gaaahhh!
We're freaking doomed!"
At just this moment, the camera is close enough to enable the viewer to see the
date on the telegram: 1997! Wow!
The rest of the episode is a vast panorama of misery and suffering because of
the disastrous inflation in the prices of food and energy, mostly featuring
pretty young ladies who have nothing to wear except tiny swimsuits.
Then, cue the Twilight Zone music, and - voila! - instant classic TV!
Mr Epstein was obviously not impressed, and our jocular overture was soon over.
I noticed that ever after I created that dynamite Twilight Zone episode,
he became pretty adamant that inflation in consumer prices will not happen, and
said, "Those who believe that much worse is ahead for prices inflation point
mainly to the huge expansion to the Federal Reserve's monetary base - the
'high-powered' money from which other money is created, and the tinder that
could ignite inflationary flames."
Well, anybody can see he is talking about me because I am one of those people
who believe that the Federal Reserve creating gigantic amounts money will cause
inflation in prices, and I am sure about that because that is one of the few
things that I still believe, now that I have learned the ugly truth about Santa
Claus, the Tooth Fairy and the fiction popularly known as True Everlasting
Love.
Even local children know that I am certainly one of those who believe that the
Fed creating so much money will destroy us with inflation in prices, and local
folklore has it that I said, "Trick or treat? You want trick or treat? Well how
about the fact that we're freaking doomed, you moron kids? The Federal Reserve
is killing our money by massive over-creation, and when your money goes, so do
your parents and your brothers and your sisters and you, too! Trick or treat!"
I assume he accepts my credentials as a Fed-hating kind of guy, and he goes on
to admit that Milton Freidman said, as he quotes, "You can't have price
inflation without monetary expansion", which is what one gathers from the exact
quote, which I remember as, "Inflation is everywhere and always a monetary
phenomenon."
But Mr Epstein contends that because so few people are working, you can print a
lot of money but you won't get inflation in prices unless there is tightness in
the labor markets driving up incomes, which seems odd to me when unemployment
in the US is running (according to John Williams of shadowstats.com) at over
20% (the worst since the Great Depression) and yet prices are still going up by
2.2%, which I don't believe for a second because I am sure that it is higher
than that by a long shot, but which, even so, was an inflation rate that was
heretofore (all the way through history until now) considered, "very worrisome"
and continued being "more worrisome" until inflation in prices climbed high
enough to hit the red-zone of 3% inflation, which has historically proved to be
the limit of economic stability and the beginning of Bad, Bad Times (BBT).
Anyway, I thought that this idea that constantly printing money was completely
ruinous was recently proved by Zimbabwe, which printed so much money that at
the end of the Zimbabwe dollar's existence that inflation was running at an
estimated 360 million percent per year and few people worked.
So, I will say that I think that the real reason that the CPI is merely rising
2.2%, and not soaring as a result of all of this money being created around the
world, is because the cost of housing constitutes a full 40% of the index, but
now that the housing bubble has bust, the glut of housing on the market is
causing the cost of housing to plummet, taking the CPI abnormally down.
So don't worry; ruinous inflation in prices will follow huge increases in the
money supply, and gold, silver and oil will be your salvation from the
destruction of the rest of everything, which makes it so easy that you hear
yourself saying, "Whee! This investing stuff is easy!"
Richard Daughty is general partner and COO for Smith Consultant Group,
serving the financial and medical communities, and the editor of The Mogambo
Guru economic newsletter - an avocational exercise to heap disrespect on those
who desperately deserve it.
Republished with permission from
The Daily Reckoning. Copyright 2010, The Daily Reckoning.
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Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
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