Taking Liberties with Price Stability
by The Mogambo Guru
the legendary former chairman of the Federal Reserve who heroically
defeated a raging inflation, against powerful political opposition,
which was the result of massive government spending in the 60s
and 70s on wars and increased entitlement spending, and who
is now mysteriously part of the ridiculous Obama team of economic
nitwits occupying in the White House, has finally said something!
After all these
months of sheer economic idiocy flooding from the White House, Congress,
the Federal Reserve and everywhere you turn, Paul Volcker has finally
And, even more
deliciously, he said it to Fed Vice-chairman Donald Kohn, one of
the arrogant, lowlife mental defectives whose egregious monetary
actions got us into the mess we are in, at some dorky question-and-answer
session at a conference in Nashville, Tennessee.
As the Wall
Street Journal reports, the former Fed chairman grilled Mr.
Kohn over the Feds effort to convey that it considers a 2%
inflation rate to be appropriate for the U.S. economy in the long
term and he, questions how the Fed can talk about both
2% inflation and price stability.
actually said, I dont get it, which is a Big Fat
Lie (BFL), because he understands it perfectly, but he is just so
polite and so politic that he finds it hard to say, as I would have
so succinctly put it, How in the hell can you talk about purposely
creating at least 2% inflation in prices and then talk about the
Feds duty to pursue price stability at the same freaking time,
which gives rise to the expression talking out of both sides
of your mouth at the same time, and also gives rise to an
occasion for me to call you a lying halfwit economic ignoramus who
thinks that everybody else is so stupid that you can say such utter
preposterous crap like this to me and think I am going to swallow
I mean, the
idea for the damned Federal Reserve in the First Freaking Place
(FFP) was to make sure that inflation did NOT get above zero! The
Federal Reserve was given extraordinary, probably un-Constitutional
powers over all the money and banks of the United States, to provide
them with a flexible money supply and with the awesome
power of a fiat currency to do it with, on the condition that they
promote price stability, which means zero inflation
in prices! Zero!
I mean, how
freaking simple can it freaking be?
And not only
does price stability mean Zero Freaking Inflation (ZFI)
in prices, it has ALWAYS meant zero inflation in prices, and yet,
now, astonishingly, here is an obviously complete failure, the Federal
Reserve Vice-chairman, presiding as he does over a busted economy
of his own making, telling us that, as Mr. Volcker explains, people
in a generation are going to be losing half their purchasing power
thanks to 2% inflation! Gaaahhh!
a currency that is losing half its purchasing power may not mean
anything absolutely nothing! to an incompetent government
and autonomous agencies staffed with obviously incompetent people
who all can, and will, double their own salaries at their whim.
Prices rise? Give yourself more money!
It means a
bit more, however, to people who have private-sector jobs, as wages
will only slowly increase to match the gradual doubling in prices
as wage increases trail inflation with a lag, which means that workers
will suffer financially the entire time.
And even after
wage and benefit adjustments, and even after some theoretical cessation
of inflation in prices, private-sector workers will never really
catch up, and will therefore almost certainly suffer permanent net-wealth
And a currency
that loses half its purchasing power means a lot to those on fixed
incomes, like retirees living on annuities or fixed retirement benefits,
and who will never, ever see an increase in their incomes from those
sources, but who must still pay the doubled prices, and then higher
and higher prices from there, if they live that long.
But a currency
losing half its purchasing power in a generation means
the most to those people who do not have jobs at all, and those
who cannot have jobs, and therefore they have no income at all,
but who still must pay all the doubled prices!
Mr. Kohn does not use the word sacrifice, or the phrase
The Federal Reserve is going to make it possible for the government
to steal you blind, or admit that The people of the
United States and the world are going to be consumed in the fires
of inflationary hell so that the Federal Reserve can continue to
create misery and failure, while having fun playing around with
their completely idiotic neo-Keynesian econometric stupidities,
an absurdity that has completely captivated the dunderheads in the
major universities of the dumbed-down USA, like Princeton, which
has such low academic standards that Ben Bernanke, the bozo that
is now the chairman of the Federal Reserve, was the head of their
economics department! Hahaha!
So while Mr.
Kohn is careful not to say any of these things, he does say that
acting so insanely as to deliberately try and cause the horror of
(at least) continual 2% inflation in prices gives the Federal Reserve
a little more room
to react to an adverse shock to the
my laughter, but this laughable pipsqueak says that everyone must
suffer a falling standard of living over, at least, the next generation,
so that the Fed can create so much money, flooding the world with
money to loan and literally buying up old loans, that they can pound
interest rates down, down, down lower than the rate of inflation,
which the WSJ notes, is the usual remedy for recession!
And if inflation
in prices is the usual remedy for recession, then it
And while the
inflation in consumer prices is not (yet) raging out of control
and there are not yet food riots in the streets, the JOC-ECRI Industrial
Price Index just shot up to 72.63 from 69.75.
And as for
what to do about it, I can only tell you that there has never been
anything better than gold, which, now that I think about it, says
investing stuff is easy!
Richard Daughty (Mogambo
Guru) is general partner and COO for Smith Consultant Group, serving
the financial and medical communities, and the writer/publisher
of the Mogambo Guru economic newsletter, an avocational exercise
to better heap disrespect on those who desperately deserve it. The
Mogambo Guru is quoted frequently in Barrons, The
Daily Reckoning, and other fine publications.
© 2009 Daily Reckoning