Attack of the Weaseldicks: Inflation Running 6%

The Mystery of the Consumer Prices Rise

Somewhere there is a statistical prick (or prickette/prickee) who needs to be called out.

Here we are, less than 10 days after the election and what do we get? A press release like this one saying:

“The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.4 percent

in October on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 1.6 percent before seasonal adjustment.

As in September, increases in the shelter and gasoline indexes were the main causes of the rise in the all items index. The gasoline index rose 7.0 percent in October and accounted for more than half of the increase in the all items index. The shelter index increased 0.4 percent for the second straight month. The energy index increased 3.5 percent, its largest advance since February 2013.

The indexes for fuel oil and gasoline were up 5.9 percent and 7.0 percent, respectively, while the indexes for electricity and natural gas saw relatively smaller increases of 0.4 percent and 0.9 percent. In contrast, the index for food was unchanged for the fourth consecutive month, as the food at home index continued to decline.

The index for all items less food and energy rose 0.1 percent for the second straight month. Along with the shelter index, the indexes for apparel, new vehicles, and motor vehicle insurance all increased in October, as did the indexes for education, household furnishings and operations, alcoholic beverages, and tobacco. The indexes for personal care, communication, used cars and trucks, recreation, and airfare all declined. The medical care index was flat over the month.”

A 4-10th’s of one percent hit doesn’t seem like much, but plug this into an Excel cell: =1*1.04^12. Yeah, 4-10ths per month for 12 months is 6%.  Magic of compounding,

Why? Well, kiddies, it’s because since November of 2014 M1 money stocks are up 24% and eventually wild splashing of printer’s ink shows up as a hole if your wallet. You are a fool to think that kind of print run was really coupled with long-term 1.5% inflation, right?

Believe me, I am not lying when I screamed about the hyperinflation the Fed was shoveling through the election.

Not that the numbers are wrong, but they are wholly whacked when comes to policy.

Going into the December Fed meeting, there will be much discussion about the core inflation rate. This is what economists who don’t think deeply call the Consumer Prices less Food and Energy.

Say what?

I don’t know how they can do it, but with a straight face, economists argue that core inflation (less food and energy) means something.

I have a new plan for such idiotism:

How about we do Fed policy less oxygen instead?

Critique of the MinFed TBTF Plan

Let’s look at the efforts up at the Minneapolis Fed to come up with an alternative way of dealing with critical financial institutions when they get in trouble, also-know-as Too Big To Fail.

The whole plan can be reviewed over here.

I may not have enough “financial engineering” credits in my MBA to fully understand everything about the plan, but this chart was extremely interesting:

clip_image002

If I’m reading this right, there appears to be a Trade-Off involved. If you are willing to accept an 84% chance of a banking crisis under 2007 regulations, there is no overall cost as a percentage of GDP. This makes no sense to me whatsoever.

On the other hand, if you implement the full-up Minneapolis Fed Step 2 of Ending TBTF, then the odds of a banking crisis falls to 9% in the next 100 years, but when it comes around, it will eat 41% of the nation’s GDP.

Here’s where I need to sit down with a clear mind and do some cogitating:

“In sum, the Minneapolis Plan will (a) increase the minimum capital requirements for “covered banks” to 23.5 percent of risk-weighted assets, (b) force covered banks to be no longer systemically important—as judged by the U.S. Treasury Secretary—or face a systemic risk charge (SRC), bringing their total capital up to a maximum of 38 percent over time, (c) impose a tax on the borrowings of shadow banks with assets over $50 billion of 1.2 percent for entities not considered systemically important by the Treasury Secretary and 2.2 percent for shadow banks that are systemically important, and (d) create a much simpler and less burdensome supervisory and regulatory regime for community banks. 2 Covered banks and shadow banks will have five years after enactment of the minimum capital requirement and shadow bank tax to come into compliance. The assessment of systemic risk by the Treasury Secretary will begin at this five-year mark.”

Don’t look now, but the major banks are likely to scream bloody murder about the plan because essentially the higher reserves cost money and right now – with lower reserve requirements – the banks can basically print money.

There is another approach – which I didn’t see discussed in the whole TBTF process: Namely it would be the idea that the Fed could go to a “Graduated Lending” regimen.

Say you have a tiny, effective, community bank and you are serving your community well, and have go way beyond the Community Reinvestment Act and you’re actually making loans to minorities who don’t sit on the bank board, and so forth.

Under the Ure Plan, these banks which do local, community service/oriented banking would get the lowest Fed rate.

Up the food chain a ways, the regionals would pay a little more. Say bargain rates plus a quarter percent, or even a half.

After that, banks that are super huge – and the kind that hide behind the skirts of Too Big To Fail, and want to stick it to the taxpayers if they blow things up, would pay a premium of 0.75 percent or more until they get to the Big Bank Class. These banks would have to pay Fed rate plus 1.5% and so forth.

Think of it as a kind of graduated income (free money from the Fed) tax. The bigger the institution, and the bigger the potential PITA they pose, the higher their lending rates would be.

Using such a policy would also lend itself to scaling down big bank derivative plays as well. 0.5% premium on the consumer loan business but escalating up to a Fed rate plus 3% cost of money for derivatives.
As long as we’re at it, same concept (scaling money costs) could be applied to credit card companies. They should have a financial incentive to be a service rather than a leach and a kind of tax on the poor. 30% interest is usury right now, today. Yet no one in the phony liberal government that has been in power for the past 8 years (and arguably the past 24-years) has been willing to think outside the box.

They simply yammer whatever the deal-cutting lobbyists peddle as “talking points” and in the case of credit card banditry, it’s pap like “We spread the risks among social classes, you see…”

GMAFB. Lies and worse.

Thing is, the lobbyists control the money flow to campaigns and “foundations” so no, no one will do squat.

I asked a buddy who’s a bond guru about this TBTF stuff and he seemed in agreement:

“Yeah – Total joke nothing will ever be done to rein them in- until the economy has been destroyed. Kashkari (head of the Minn Fed – G) beating his own drum – did he ever even mention this when he worked for Paulson? Suggest it? Hint at it? – I’m watching the dollar, Monte Paschi to see what effect the creditor bail in has if any and continuing to watch 3 month Libor. The conversion to a floating rate NAV of the money markets hasn’t backed it off, a credit problem with Deutsch, Credit Suisse? Or just waiting on Fed Funds? The pension plans once again have had their collective asses handed to them on the fixed income side – they have been “Rinsed”. I see Citi will stop accepting cash at some of their Australian branches – complete population control. First India, then……?”

Yeah, don’t get me into the Electronic Money is Coming because it’s already effectively in place in some of the Scandahoovian countries. I would have thought better of ‘em.

But like Pappy used to say, brains are pretty evenly spread around the world, and the inverse of that is so it stupidity.

While Janet the Talking Fed Head is still yammering about rates, no one is suggesting that cheap money should go first to those who serve and premiums should be placed on fat cat bankster hideouts which endanger the world.

If TBTF Banks are too big and create systemic risk, differential rates will drive them toward an AT&T style break-up of their own accord. You notice I trust that in the wake of the (Judge Harold Geneen, wasn’t it?) AT&T break-up there was no collapse of phone service.

Or, was that because AT&T was already under the covers with the NSA? TitainPointe? Whatever…

Bring it (differential rates by market cap) in gradually and change the world…PLEASE!

Differential lending rates from the Fed (at the direction of Congress which according to the Constitution is really in charge of money) and we could actually fix the world.

But more on that this weekend in the Peoplenomics.com opus “Stupidnomics.”

Still, There’s Hope

Great article in Time Magazine this morning which covers the 25-best inventions of 2016.

I think my favorite of the bunch is the Goodyear Eagle 360 a new round (like a ball) tire. Not that I would be the first guy on the block to run out and buy a set (the cars for them aren’t here yet). But I’d love to see the mechanics who can’t seem to balance my four conventional tires just right at all speeds, take up with an all directions tire.

It could turn tire-balancing into a three week consumer ordeal and highly specialized money-sink.

Rent Out the White House?

Sure, I know the Clintons effectively did this – as have both parties, but an article in the NY Post this morning Donald Trump may not be able to work in the Oval Office for a year.

For all his public posturing, outgoing whozzit Obama has been sitting on modernizing the Office.

I bet Trump Enterprises would get the rehab done in 75% of the time – and cost – as anyone else.

But in the meantime, with Trump working from home – a nice big one at that – why not put the WH on AirBbB.com a bid it out?

Why, some of those Middle East and North Korean types would pay big money for such lodgings and that could be used to reduce the National Debt.

Why am I not surprised at Obama on this one?

Mollycoddling Emotional Weaklings

The network some called the “Clinton News Network” just won’t give up on the Clinton lost concept.  Now they are waxing liberally about how “Schools on the front lines heal their wounds post-election…”

Listen to Grandpa George you lazy, weak-willed little light-pressing apes:  Turn off your devices and  GTFU  (grow the ‘eff up).  Real Life ain’t on socialist media.

Shit doesn’t always work out how you like it and the sooner you figure that out and build a little gumption into your character and the will-power to remain undeterred from success by ANY obstacles, the more successful you will be.

Or, you can suck up all this “emotionally damaged by Clinton losing” crap, wallow in the “poor-me” swill and grow up to be a good little GS-13.

Back to the Futures

Flat with 45-min to go to the open.

Comments

Attack of the Weaseldicks: Inflation Running 6% — 21 Comments

  1. I think the chart makes no sense because the label is wrong. It should say “Chance of needing a bailout”. Am I right? that in 2007 there was no way to bail them out, and they had to make or change the law to allow it (Paulson and his 3 page “you must vote on this today or there will be Martial Law tomorrow”). So using the 2007 law, the cost would be $0.00

  2. I have a totally different take on the oval office rehab. I believe and I bet Trump believes that the whole place is bugged to the gills. I wouldn’t work there until every last piece of trim, wire, and all was ripped out and replaced.

    The raising of interest rates is purely a plan to strangle credit and sink Trump. If the neocons don’t invade his administration and do it first.

    • The place may have to be gutted and redone simply because Donald and Melania have good taste. Regarding bugs, I’d think that simply ripping the magnetron from a high powered microwave oven and feeding a proper antenna to blast every part of the walls, ceiling and floor should fry any electronics there. Of course, the FCC may get a little annoyed.

  3. Everyone lies. Most people don’t have time to care about their own small circle of lies much less the lies of their government. The Don will have the same evolving technology as previous presidents. Will he use it to make the world a better place? Time will tell

  4. RE: “A 4-10th’s of one percent hit doesn’t seem like much, but plug this into an Excel cell: =1*1.04^12. Yeah, 4-10ths per month for 12 months is 6%. Magic of compounding,”

    George,

    0.4% does not compound that fast.
    you got typo in your formula
    1.004^12 = 1.049070208 … or 4.9%

  5. “…since November of 2014 M1 money stocks are up 24%” !!!!!!!!!!!!!!!!!!!!!!!!!!!!!

    That should’ve filled our screen, but gets rather quickly forgotten with additional chit, chat. No offense to anyone, but continuing so will destroy everything we presently hold dear.

  6. Referencing the CPI Press Release: I have not seen a 7.0% gasoline index price increase in middle Tennessee, there were a few spikes when the Colonial Pipeline had problems back in the summer and most recently with the fire in Alabama, but gas has stayed below $2 for the last 6 months. Housing has increased in our area as demand from folks that continue to move in from all of the liberal left areas like Southern CA and Chicago where taxes and cost of living have driven them out.
    The one item that I am surprised at is the cost of food -“In contrast, the index for food was unchanged for the fourth consecutive month, as the food at home index continued to decline.” Are they kidding, do they not go shopping? Food prices continue to increase on an almost weekly basis. Take $50 to the store and see what you leave with, for a family of 4, maybe 2 to 3 days of meals. I guess the “food at home index declined”, because people can not afford to keep much food at home…
    Not sure there is any basis in reality with these gubermint folks sometimes.

  7. I spent a couple of weeks in Sweden this summer and I want to put to rest the idea that Sweden is a cashless society. They tried it, but it didn’t last long. First off, the older people wouldn’t stand for it and when the banks wouldn’t take the coins that the children had saved in their piggy banks that was the last straw.

    The government there is very responsive to the people, and the people don’t put with any kind of scandal or questionable behavior from their elected officials. Just a hint of impropriety and they are gone within days.

    When I was there I used my credit card which was out of the norm since people there almost exclusively use debt cards when using plastic, they are not big into credit. I never bothered with getting any Swedish cash but my friend used cash about half the time, so it is used and widely accepted form of payment.

    • Just goes to show how crooked the MSM is trying to peddle “cashless works” in the former land of the Free, don’t it?

    • What about the Immigrants raping the white Swedish women and men? What is the report on that?

  8. Obama okays the rehab of the oval office.
    republican response, ‘How could Obama do that knowing that a new POTUS would be coming in. That’s something he should have left to the new POTUS. How dare Obama spend more money on rehabbing the office than all of the prior presidents combined.’

    Obama doesn’t okay the rehab of the oval office.
    republican response, ‘Obama is kicking it down the road. Obama is preventing the new POTUS from occupying the oval office. How could Obama not allow the oval office to be properly upgraded for the new POTUS?’

    See George that’s why I think republicans are bipolar. I write that as an outside, but honest, observer who never voted for Obama. To me it seems that republicans are deranged. No matter what Obama does republicans whine. If Obama came up with a cure for cancer republicans would whine that Obama support Big Pharma.

    • While I agree to a certain extend, I think that part of the hand-off should be an Oval Office that is totally up to date with features.
      I don’t know how anyone can work in government because I have four – yep, count ’em 4) monitors as my work surface and I still can’t get enough space. I did the math this morning and my display sit is as big as a 55″ TV…so I am thinking over a 4K 65″…
      Point is that while its true that “It’s a poor workman who blames his tools”, it is also equally true that when you see a good craftsman, they have really finely honed tools than make their excellence at the job possible.
      Since Obama has never – near as I can figure it – held a REAL job where there are project milestones and deadlines and critical paths and such in the for-profit world that he regulates, he has been bound to a non-profit way of thinking.
      Trump, on the other hand, is the kind of guy who could walk into a room and have multiple 65″ screens and keep them all updating and working – thereby increasing productivity.
      Back to point then: Sure, I get the rebs and the dmons tossing barbs and all that. But would it make sense for a human in the modern age not to have a “combat ready” office with the sharpest tools out there?
      Seems to me that both Obama and the Rs have some explaining to do. Yeah, old is fine. But no, when the Commodore people introduced the Vic-20 it would not have been a proper business tool. But if you have a spreadsheet literate number-banger, I figure give ’em a room of tech and let ’em rip.

      • My thought on this is why would I want the crew that can’t keep their email out of the papers managing MY security upgrade?
        I would say Oh, OK, Thanks we’ll handle it, and take it from there. I am sure they will all think Ha, Ha look what we did to them. Let them think it.