Insider

In the recent article on the party in stocks, this was one of my concluding paragraphs:

The bottom line is that by the time the Fed becomes institutionally aware that inflation is raging across the globe – and I often wonder when they’ll finally awake to the threat – it will be too late. Inflation will have the momentum, and it will take a vast overreaction on the part of the Fed to restrain it. They’ll have to drain enormous amounts of liquidity and tolerate vastly higher interest rates to be able to do that, and I doubt they have the courage for such bold action. I think they will hesitate, equivocate, and ultimately be late.

Perhaps sensitive to the growing awareness of inflation across the world and the Fed’s role in fostering it, Bernanke took the opportunity today, while at the National Press Club, to minimize any such concerns. This is really quite a disturbing mindset on display:

The headlines are screaming at the top of every financial media outlet tonight: The Dow Closes Above 12,000 For The First Time In Two Years!

Inflation Is So Much Worse Than We’re Told

Tuesday, January 25, 2011

Executive Summary

• Why inflation is several percent higher than claimed
• The criticality of correctly weighting the CPI & how the current methodology is flawed
  • Case study using healthcare, one of the largest victims of underweighting in today’s CPI
• Why the Fed (erroneously) sees deflation and is making dangerously-flawed policy decisions as a result
• The 8-steps that will signal our progression into an inflation-induced financial crisis in the US
• Recommendations for preserving the purchasing power of your assets 

Full Report (for enrolled members only)

In a different time we could happily go about our lives, ignoring economists as largely irrelevant to our daily lives. That is no longer the case.

In helping to shape central bank policies, economists are performing one of the largest social and monetary experiments in all of history, and its outcome, good or bad, will shape all of our lives enormously over the coming years. In fact, this experiment is already well underway and yielding results. Perhaps not the desired results, but results nonetheless.

The biggest problem with most, but not all, economists is that their theories are founded on incorrect assumptions.

This biggest of them all is assuming that the economy has some sort of an ‘equilibrium point,’ a magic place where just the right number of monetary actions and policies will create high jobs, price stability, and economic growth.

Unfortunately, this is just completely the wrong way to look at things.

Niall Ferguson recently pointed this out and made a critically important point: