MikeH

What Do Higher Energy Costs Mean For Inflation?

Economists are a pack of specialists on their knees with magnifying glasses -- one measuring the progress of an ant, the next tracking a stink bug. None of them ever see the herd of elephants coming up behind them.

I have read innumerable stories dissecting the direction of oil prices and consumer spending in this or that 12-week period and not a one of them ever takes into account THE single greatest source of inflation this year, last year, 100 years ago and 100 years from now: out-of-control government spending.

Oil prices and consumer demand accounts are just a working economy seeking equilibrium. So the CPI is 4% this year and the PPI is 3% the next? You call that inflation? I lived through Carter and the private economy hasn't had inflation since he went on his I Hate America world tour. Just natural friction in a machine popping on all cylinders for 20 years (except one lousy quarter). Meanwhile, government spending -- and just the third or so they carry on the books -- has been tripling year in and year out since Ronnie retired to the ranch. I say tripling, but no one really knows because they keep the books like Jeffrey Skilling keeps accounts. If they were smart, they wouldn't have sent him to jail; they'd have made him director of the GAO -- the same regard for GAAP, but better at stealing.

What do they do with the money? Find ways to be a drag on the rest of us who are pulling the wagon. The twin anchors of taxes and regulation don't sufficiently impede the economy and direct resources down wasteful allies. They have to get their root-routing snouts deep into industries that, left to their own devices, would explode with wealth generation for the benefit of the entire world. Look what happens overnight when they just let the heel up a little off the neck of telephony. Where would computing be if it was regulated? Why do I need a federal law protecting me from making more than 1% interest on a demand account? Will the economy collapse if banks have to compete for assets?

And I would love anyone to explain for me exactly what is wrong with a 1% Fed Funds Rate. I didn't notice the world ending in 2003. What I saw was a whole lot of people getting homes of their own that they otherwise couldn't afford -- and a few speculators. If, as the genius secular press predicts, the housing bubble is going to blow us all to hell and gone -- what, the Fed can't take a quarter-point pressur off the ARM indexes? Ooooh no, the annual CPI -- which is running about 2/3 of what it was this time last year -- might ratchet all the way up to 4%.

The current FFR is just the governing class taking care of its cocktail party guests at the expense of the people trying to scramble onto the first rung of the economic ladder. How much extra money has the greatest lobbiests and law writers in history made from rising ARMs? Greenspan was the governing class' bagman for a couple decades and it looks like Bernacke is just his dumber brother.

It's not the extra 25 cents an hour I'll make this year that is inflationary or corn growers making an extra buck a bushel. If you want to know where inflation lives, its inside the latest pork barrel -- any of them -- rolling through Congress this Monday and all those Mondays ahead.

You want inflation? Check the right metric. It's always bon pork roullet in government.