Since Bernanke took office in February 2006, inflation as measured by the personal-consumption-expenditures price index has averaged 1.9 percent. Criticism from Republicans, including House Speaker John Boehner of Ohio, that the Fed’s stimulus would spark a rapid acceleration in prices is unfounded, bond yields show. Traders anticipate prices will rise at a 2.17 percent rate in the next decade, near the Fed’s 2 percent goal.
“There’s a pretty pervasive expectation that inflation rates remain reasonably stable,” said Keith Hembre, chief economist at Nuveen Asset Management in Minneapolis, which manages about $120 billion. “Certainly, there are a number of critics, but if you just look at the performance of the market and the measure of financial conditions, at least here over the near-term you’d conclude the policies have been successful.”
They have been?
I would argue that artificially propping up an economic system that is grossly overvalued and incapable of growth is not “success”, and that the “inflation” view reflected the idea that credit growth would rapidly accelerate as would velocity.
I held this view until I was forced to change it in 2008 because the facts did not comport with the thesis.
In fact if you go back and look at my writing of the time you’ll find that I was very concerned about a dollar value collapse. I haven’t been for years, but it’s not due to Bernanke’s policies — quite the contrary.
Bernanke has simply been replacing private credit with public, effectively financing the public deficit.
Note that Ben has repeatedly claimed under oath that he will not monetize the debt in testimony before Congress. He was lying, but nobody cares because lying before Congressis no longer punished — Clapper recently did so and got away with it, as have countless others. Unless you’re a steroid-using baseball player there’s no reason to fear lying before Congress; it’s now a widely-accepted and practiced act.
Lonski said he sees inflation as “well-contained, indefinitely” because wages aren’t growing by more than 2 percent annually.
That’s because turning the economy into a permanently pulled-forward credit-driven monster no longer can drive even faux growth as there is no more capacity to grow credit at ever-larger exponential rates.
But don’t mistake this for “no inflation.” Price bacon lately? Where have all the $4/lb sales gone? They’ve disappeared; now it’s $6. What’s that rate of inflation? Ribeye steak? Find it under $9 and you’re doing good — a few years ago it wasn’t that hard to find it at $5-6 for choice grade if you were patient. And then there’s Obamacare.
But leaving this aside the “program” to “restart growth” hasn’t worked. All we’ve gotten is a continual financialization of everything and the destruction of middle-class purchasing power.
That is the problem, in short — to generate so-called “continuing growth” you must engage in exponential expansion of credit. But that requires both someone willing to lend and someone willing to borrow and exactly as we saw in 2007 and the beginning of 2008 the marginal borrow is being pushed further and further out; the largest increase is now coming in student loans, which is both self-defeating in that it destroys future purchases of things like houses and leads directly to destitution and default.
What’s even worse is that because this particular binge is taking place within yet another “sacred class” of production (education), just as has happened with “health care”, nobody will stand up and speak to the truth — that there is no legitimate argument for the rate of increase in price other than rank gouging and that the behaviors that have enabled that gouging are supposed to be unlawful.
Bernanke will go down in history all right — as a denier of the fiscal Holocaust and a builder of the current and next generation’s gas chambers.
Count on it.