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:


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 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 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.