The U.S. government is losing credibility. That is both an obvious and a
useless observation without a sense of the consequences. Maybe, there are none.
Maybe, the accumulating doubt concerning Benghazi, IRS intrusions, and NSA
confiscation of privacy are wearing thin. If the latter proves correct, how
will the people express their disillusion: "Voting with their feet,"
so to speak? A glaring vulnerability is the gap between falling income and
inflation. The government's numbers are propaganda, and seem to have worked.
The Fed, Bureau of Labor Statistics, reporters, and the academics who are paid
to polish Goebbelism into a scholastic veneer, state that annual price
inflation is short of 2%. John Williams, proprietor of Shadow Stats, estimates
that if the Bureau of Labor Statistics used the same methodology for
calculating the CPI as in 1980, the monthly figure released and disseminated to
the public would be 9.4% (as of November, 2012).
There comes a point when a widely held view loses its grip on popular opinion.
The move is often swift, though tendencies had been moving to the revised
standard for a long time. In March 2013, Richard McGregor at the Financial
Times wrote of such an instance: "It is remarkable to remember that
only a year ago, when Barrack Obama came out in favor of gay marriage, it
seemed he had been bounced into the position by unscripted comments from his
deputy, Joe Biden. Now, it is all but inconceivable that the president, or any
Democrat running for national office, could be against same-sex unions."
Parenthetically, this subservience to
fashion defines the hollow men and women who get elected today. Is it possible
that all Democrats running for national office changed their own minds during
the interim? Roman galley slaves acted with more gumption. The American people
know this all too well by now; even if the acknowledgement lies below the body
politics' conscience. The disposal of the has-beens would be greeted, where not
by relief, with indifference.
A dramatic event is not necessary for such a change, although that does happen.
Even then, there may be a period of reevaluation before minds accept that
long-held premises were wrong. Such might be true of Cyprus. "Of"
Cyprus, since the assumptions were as true in North Carolina as Nicosia, but
have only superficially changed investor behavior - so far. The precipitating
event was the discovery that bank depositors did not own their deposits. This
has been true for centuries, but in a similar vein, new books about the years
1913 and 1914 record a wide belief that war was passé. In 1913: In Search of
the World Before the Great War by Charles Emmerson, the author records the
majority view of the people, that view aligning with a long period of the same:
"Thank God for Now! .... [T]hese present times are the greatest and the
best the world has ever seen."
For several years now, there has been a flock of laws and regulations
restricting and redirecting the actions of investors and savers. This has
spread throughout the west, particularly since 2008, a demarcation of sorts,
since which the suicidal mutations decreed by central banks and governments of
western nation-states have demanded more control over the wealth and pocket
change of the people.
There is the perpetually ticking chance that deranged markets - which are no
longer markets in any real sense - will break down. Absent that, what is
described as an ebbing confidence in markets, but might also be expressed
as a growing sense of Us against Them, will find resonance in the real problems
of the 99% who are consumed by price inflation.
Every day, a discreditable twist is adjoined to official malarkey.
"Inflation is the Wild Card for the Fed," in the June 14, 2013, Wall
Street Journal, fits. Early on, the article notes: "The Fed has a 2%
inflation goal and doesn't want consumer prices to veer too much above or too
much below that number over time." There are several misrepresentations,
impossibilities, non sequiturs, and clear violations of the job
entrusted to the Federal Reserve in that one sentence.
"Inflation is the Wild Card" reminds us the Fed - that is, Chairman
Bernanke, since his is the only view that matters - does not care about price
inflation as such. It is consumer price inflation expectations that are
pursued, better for them since mind games are intangible. At present, according
to the article: "Fed officials haven't been too worried since expectations
of future inflation were [sic] stable."
The article does not say why the Fed believes consumers are fat, dumb, and
happy. It is on-the-fly speculation by authors Victoria McGrane and the
ceaseless Hilsenrath. We read how "Fed officials could feel,"
and "if [Fed officials] thought," and the Fed "may
not be too worried."
Running with the bull, a measure often
cited is the University of Michigan survey of consumers' inflation
expectations. At the starting gate, real people do not think about percentage
price changes across the panoply of hair-dos to dishwashers. Leaving that
aside, we can be sure that, should the University of Michigan Survey interfere
with Fed jumbo, it will crush the dissonance.
We know this because that is what it did in 2011: "According to the Thomson
Reuters/University of Michigan survey of consumers, households currently expect
inflation to average about 4½% over the next year, up noticeably from 3% at the
end of 2010." This is from the May 2011 Federal Reserve Bank of San
Francisco Economic Letter. Bharat Trehan, a research advisor in the
Economic Research Department at the San Francisco Fed, shoved consumers, and
their expectations, into some glutton-free receptacle. Trehan explained:
"Since commodity price shocks have occurred relatively often in recent
years, this excessive sensitivity has meant that household inflation
expectations have performed quite badly as forecasts of future inflation....
However, the increase in expected inflation likely reflects the excess
sensitivity of consumers to food and energy prices." Let them eat cake, or
not eat cake, in the instance of Trehan's hit-and-run job.
Junk research, such as Trehan's may be losing credibility. Part of the problem
is a lack of competition. These Ph.D's, taught by Bernanke and other lifers,
have been free to write for themselves, with no questions asked.
"Inflation is the Wild Card for the Fed" is not a promising
comeuppance, but guest speakers from government satraps have looked foolish at
recent Congressional inquisitions. Most recently, Eric Holder has no
credibility. That guy from the NSA may be the worst travel poster for the
federal government since Las Vegas attracted tourists to watch nuclear
detonations from hotel rooftops.
The trend in dubious federal testimony was discussed here in " Crony
Bureaucrat" and "Eating
the Fed for Lunch." Shortly after Chairman Bernanke's
discredited excuses, a U.S. Treasury official was shish-kabobbed by a Senate
committee. He sounded like an arrogant idiot, which he probably is not, but
many years of telling the politicians anything, with inept cross-examination,
has attracted and imbedded a sloppiness that neglects, at the very least, an appearance
of diligence and care at the Federal Reserve, the Treasury department, Eric
Holder (head of the Sometimes Department of Justice), and that iHead from the
NSA.
Peggy Noonan wrote in the June 15, 2013, Wall
Street Journal: ""[T]he surveillance state will in time encourage
an air of subtle oppression, and encourage too a sense of paranoia that may in
time-not next week, but in time, as the years unfold-loosen and disrupt the
ties the people of America feel to our country. "They spy on you here and
will abuse the information they get from spying on you here. I don't like
'here.'""
Food prices rising at a 10% annual rate
with work weeks cut from 35 to 32 hours may telescope Noonan's anticipated lag.
TO RESURRECT A MORE ELEVATING STORY, the widely read Ambrose
Evans-Pritchard devoted his June 16, 2013, Daily Telegraph column to the
latest warnings by Charlene Chu ("Fitch
Says China Credit Bubble Unprecedented in Modern World History").
Chu told the Telegraph that China's "credit-driven growth model is
clearly falling apart. This could feed into a massive over-capacity problem,
and potentially into a Japanese-style deflation.... There is no transparency in
the shadow banking system, and systemic risk is rising. We have no idea who the
borrowers are, who the lenders are, and what the quality of assets is, and this
undermines signaling..."
Chu's straight talk was the topic of
" 'A' for
Conduct. 'F' for Guts." Albert Edwards, the widely followed,
no-nonsense, Global Strategist at Societe General, titled his June 4, 2013, Global
Strategy Weekly "If UK Chancellor George Osborne is a Moron, Fitch's
Charlene Chu is a Heroine." Edwards writes: "[A] seething anger has
been bubbling within me since UK Chancellor George Osborne's March budget....
By contrast Fitch's Charlene Chu deserves a medal of honor for her stark
warnings about the Chinese credit bubble."
Later: "Credit rating agencies came
in for a lot of criticism in the aftermath of the financial crisis but Chu
stands out from the conspiracy of complacency on China warning loud and clear
that China is nearing an abyss. The well known China commentator Michael Pettis
calls Chu 'the only analyst who understands what is happening in the Chinese
banking system.'"
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