FedUpUSA

This looks like a snoozefest… right up until the end:

The information reviewed at the January 2526 meeting indicated that the economic recovery was firming, though the expansion had not yet been sufficient to bring about a significant improvement in labor market conditions. Consumer spending rose strongly late last year, and the ongoing expansion in business outlays for equipment and software appeared to have been sustained in recent months. However, construction activity in both the residential and nonresidential sectors remained weak. Industrial production increased solidly in November and December. Modest gains in employment continued, and the unemployment rate remained elevated. Despite further increases in commodity prices, measures of underlying inflation remained subdued and longer-run inflation expectations were stable.

No employment didn’t – not when you look at the additions to the labor force!

I don’t have to buy any gas, right?  Oh wait…

Source: http://gasbuddy.com

Real business investment in equipment and software appeared to have increased further in the fourth quarter, although likely at a more moderate rate than in the first three quarters of 2010.

Yeah, that’s nice.  Now talk to CISCO and others about margins.  No margin, no profit.  Oops.

Measures of underlying consumer price inflation remained low. In December, the core consumer price index (CPI) edged up, as goods prices were unchanged and prices of non-energy services rose slightly.

How long is that going to last given these trends in the PPI?

In the EMEs, concerns about inflation prompted a number of central banks to tighten policy. Some EMEs reportedly took steps to limit the appreciation of their currencies by intervening in foreign exchange markets, and some acted to discourage capital inflows.

And in others, there were riots.  Including one (mostly-peaceful) revolution. 

So far.

The staff anticipated that brisk increases in energy prices would raise total consumer price inflation above core inflation this year, but that upward pressure from energy prices would wane by next year.

Your frozen body will thaw and be carrion by the time this occurs, of course.

Meeting participants noted that headline inflation had been boosted by higher prices for energy and other commodities, as well as by increases in the prices of imported goods. Some participants indicated that while unit labor costs generally had declined and profit margins were wide, the higher commodity prices were boosting costs of production for many firms. Some business contacts indicated that they were going to try to pass a portion of these higher costs through to their customers but were uncertain about whether that would be possible given current market conditions.

Here’s The Fed admitting that margin collapse is occurring and is likely to continue and get worse.  Save this one folks, for when Bernanke says “but nobody saw it coming.”  Like hell.  He’s six months late from when I started hollering about it, but heh, better late than never.

Regarding risks to the inflation outlook, some participants noted that increases in energy and other commodity prices as well as in the prices of imported goods from EMEs posed upside risks.

Banksters: Causing and financing revolutions and wars for 1,000 years.  Suckas.

Finally, some participants noted that if the very large size of the Federal Reserves balance sheet led the public to doubt the Committees ability to withdraw monetary accommodation when doing so becomes appropriate, the result could be upward pressure on inflation expectations and so on actual inflation. To mitigate such risks, it was noted that the Committee should continue its planning for the eventual exit from the current exceptionally accommodative stance of policy.

Oh do come on.  The entire economy is resting on a 12% of GDP federal deficit!  Pull it – or the accommodation that allows it – and the economy is going to collapse.  And oh by the way, estimates for this year on that deficit are $2 trillion – up from $1.7 trillion.

Best-a-luck jackasses.

But the real stunner is right here.  This chart, which The Fed now has on record, is the defined and absolute proof that they know with absolute certainty that the path the government is on, and the World Economic Forum said we needed to be on (that is to double both government and broad economic debt) cannot possibly work.

Why not?  Well, here:

At the outside in the longer run they believe we will see 2.8% GDP growth.  Over the next nine years this means we will see 28.2% growth in GDP, all-in.

Debt is projected to have to double to produce this on a government and systemic level?  That means debt-carrying costs will have to double against an increase of 28% in output.

Like hell that will happen.  We hit the wall in 2007 as a consequence of inability to cover debt service.

Folks, the FOMC put you on notice with this set of minutes: They know this is going to blow up, they expect it to blow up, and there is no way to avoid it blowing up as carrying costs will double while the output to cover it will grow by less than 30%.

Get ready.

The Market-Ticker

This looks interesting….

The Consumer Price Index for All Urban Consumers (CPI-U) increased  0.4 percent in January on a seasonally adjusted basis, the U.S.  Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.6 percent before seasonal adjustment.

Increases in indexes for energy commodities and for food accounted for over two thirds of the all items increase. The indexes for gasoline and fuel oil both increased in January, continuing their recent strong upward trend. The index for food at home posted its largest increase in over two years with all six major grocery store food group indexes rising.

Naw, nobody needs to buy those things, right?  Ha!

The energy index has increased 7.3 percent over the last 12 months, with the gasoline index up 13.4 percent.

Gee, that’s not a big deal, right?

Now let’s look inside the PDF version and see what sort of surprise is in the table?

Let’s see…. we commonly hear that monetary policy has a lag.  Like, oh, six months or so. 

Well, we’re about there, right?  So let’s see, if we take those last two prints and annualize them (1.004 ^ 12) we get a 4.91% annual “inflation” rate.  Is this “stable” prices Ben?

You folks know my view on this.  Inflation is manifested in prices but it’s not prices.  That is, CPI is a horsecrap measurement, because inflation and deflation is defined by the change in money and credit compared against GDP.  The Austrians will tell you it’s just money supply.  I argue that this is a bad definition because money and credit spend the same, and fungible things must be counted equally.

In any event there are some real stunners in the unadjusted numbers, which I’ll highlight for you:

These are big annualized changes, and they’re in places where the lower-income people in this nation cannot afford them.

Food, particularly healthy food, cooking oils and similar essentials for preparation, heating fuel, water, sewer and trash collection, gasoline, used cars and public transport are all places that hit the lower income American (those at the 50th percentile and below) radically hard.

The brainstems in Washington DC, including Bernanke, will never get their arms around these numbers and recognize that they are absolutely destroying the majority of the population – which, incidentally, have to be able to function and keep their cool in order for all the fatcats to be able to keep their jobs and keep the economy “moving.”

When you look at the actual percentage of income that these people spend in this area – virtually all, when you get down to it – this is the sort of squeeze that, if it continues, has the potential to produce severe political and civil problems.

No, we’re not Egypt. 

Yet.

The Market-Ticker