Sunday, May 13, 2007

Three-Month Annualized Inflation at 4.7%

Tuesday we get an update of the inflation outlook.

[Click on graph for a larger version. Thanks to the Bureau of Labor Statistics for the image. (Source.)]

And yeah, I know, "core" inflation is only just above 2%. Who cares? Enough of this "core" stuff. Inflation is inflation, damn it. I pay for gas every day. I pay for food every day.

I don't understand where the collective conscience of our professional economists has gone. Our thought processes are completely incapacitated by mainstream rhetoric. Every day, we read or hear that the Western World has conquered inflation. Well, I say the professionals are either lying or their naive.

Does anybody realize that official annualized 3-month CPI inflation is now officially at 4.7%? Rounded up, that's 5%. (Source.) When was the last time we had annual 5% inflation? Around 1990. What did the Fed have to do? They retracted money supply. And we had a "hangover," i.e. a recession -- only normal when you've been inflating the money to hell over the past years. The same thing is happening again, and the Fed will have to retract AGAIN -- either that, or watch the dollar disappear into thin air.

At the same time, we have a slow-down in economic production. Anyone ever heard the term "STAGFLATION" before? Know when we last had a major episode? The 1970's. My memories of those days are as vivid as the memories of 1929-35 were for my father. (See here for some quotes about the 1970's.) For those of you who don't remember or who weren't around, the financial loss was greater than the 1929-30's.

Now, either I'm way off the mark and the next ten years will be more of the same, or I'm right and we're headed for some interesting times. I cannot believe we will not see a serious global correction within the next few years. What form it will take, I have no idea.

What has happened to the economists' conscience? Do our academicians all have blinders on?

And don't ask me to break out the stats. As far as the data are concerned, I guess I'll have to come out of the closet and say I'm an Austrian. (For those who don't know what I'm talking about, I'm referring to a school of economics that keeps statistics in its proper cage, i.e. that does not try to theorize through the use of computer models, mathematical constructs, and graphs of figures, each of which can mean what the utilizer wants them to mean. It is the school of Friedrich Von Hayek and Ludwig Von Mises, a school which has come in and out of fashion about three times since they lived and died. Presently, they're out, and this is a great tragedy.)

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