As If The Fed Planned To Do It All Wrong
(International Forecaster) -- by Bob Chapman --
As of Wednesday we have seen the euro rise 7 straight days, which caused the USDX to fall to 78.14, this in spite of having 10-year rates in Spain, Portugal and Ireland rising 3 bps.
Both food and energy prices have risen at double-digit rates. This is an inflation reflection of 1979-80, 1996 and 2008. In the 1979 and 1980 and in the 2008 period our inflation gauge measured real inflation of 14-1/4%. Both occurred in recessions similar to today’s inflationary depression.
Today’s energy prices will reflect a loss in buying power of more than $60 billion in the US alone. Higher grain and meat prices will add $40 billion to total, a loss in buying power of $100 billion. By the looks of it costs and inflation will rise further causing further cuts in GDP consumption. These costs will affect 70% of the stimulus and QE2. That means very little consumption gains and stagnant unemployment.
The Consumer Sentiment Index fell from 74.5 in December to 72.7 in January, which does not instill confidence in the economy. Current conditions fell from 85.3 to 79.8, a 3-month low. Large household goods purchases fell to 129 from 140. The auto purchase outlook was fair to poor as well.
Real wages based on a phony 1.2% CPI, fell 0.4% when in reality the loss in buying power was much higher. Every indicator is in the minus column. This is reflected in income expectations for the year that fell from 125 to 116. Real expectations dropped from 64 to 55, the lowest level in almost 60 years. There is no recovery and there will be no recovery. The numbers are staring you right in your face. 2011 will be lucky to see 2% to 2-1/4% growth, as government spends $862 billion on pork and the Fed buys $1.6 trillion in Treasuries, Agencies and toxic waste.
We have two economic and financial Americas, one of poverty and advancing poverty and one of sumptuous wealth. The top 20% own 93% of financial assets, which could be the seeds of upheaval. The average family is one or two weeks away from starvation and debt collapse. How do you make up the difference working 34.3 hours a week as gasoline rises from $2.50 to $3.50 a gallon and the price of food advances 50%?...MORE...LINK