Wednesday, April 27, 2011

Everything Is Going Up, Except Your Wages and the US Dollar

On March 28, 2008 - about the time Bears Stearns was blowing up and before just about anyone was predicting a crisis - the Dollar Index bottomed out at 71.585.

Today, after the FOMC re-confirmed (for about the 16th time) that the federal funds rate would remain at "near" zero per cent, that very same index hit a three-year low at 73.26, closing just a touch above that level, at 73.317.

Some not suffering from the all-American malaise of short-term memory loss will recall that 2008 was not a very pretty time to be in stocks. Nor was it particularly good to be working for a Fortune 500 or other large corporation, as, by the end of the year, employees were being shed light so much dead weight off a beached ocean cruiser.

Comparing today to that sorry state of affairs is rather simple. Then, we were just heading into what would turn out to be one of the most devastating recession/depressions of modern times. Today, we are still not recovered from it.

Back in 2008, Ben Bernanke was saying that everything was OK, and soon he would glibly announce that the sub-prime crisis had been contained (insert laugh track here).

Today, the Bernanke delivered the very first of what we hope will be a short-lived experiment - a press conference following the announcement of the FOMC rate policy (no change). Once again, the Bernanke assured us that everything was just peachy, except that the economy was "recovering" a little bit slower than he'd like. We can all join him in that sentiment.

Today, Mr. Bernanke read some prepared remarks, bored us to tears and took questions from the assembled press corps, boring us even more. Today, Mr. Bernanke wants us to believe that core inflation is running at about a 1.6 to 2.2% rate, and while that may be true, core inflation leaves out food and energy, so with those included, real inflation is running at about 6-8%.

The Chairman also assured us that inflation risks were contained, just like he said the sub-prime situation was contained back in 2008. Many of us in the blogosphere didn't believe him then, and we don't believe him now, except this time we have proof.

All one has to do is go shopping, which means getting in a vehicle and driving somewhere and maybe buying some gas, which is more expensive than it was last week, and the week before that and the week before that...

Once one is over the shock of $4.00/gallon gasoline, one can go shopping for some food maybe, and find that prices are higher on fruits, vegetables, canned goods, meats, just about everything.

So, no, Mr. Bernanke, you and your Federal Reserve buddies, whose mandate is to provide price and wage stability and full employment, have failed on all accounts and your pronouncements to the press and the public are falling on deaf ears. Many don't bother to pay any attention to you at all, and even more don't even know who you are (that may come in handy when the pitchforks and torches come out). Another group believes you are lying and that you are ruining the economy and the nation with your mindless inflation-building, dollar-destroying policies.

And don't forget, we have proof. This time, we won't be fooled again.

On this day that the Fed reiterated its Zero Interest Rate Policy (ZIRP), everything went up while the dollar crashed and burned. Stocks were up. Interest rates were up. Gold was up, so too silver, oil, live cattle, cocoa and oil. The few commodities that did go down were already way up, and will likely go up more in the not-too-distant future.

The Fed is killing us, which it why is so refreshing to learn that Ron Paul is running for president. The Texas firebrand, if elected, will run Bernanke and his crew out of town.

Dow 12,690.96, +95.59 (0.76%)
NASDAQ 2,869.88, +22.34 (0.78%)
S&P 500 1,355.66, +8.42 (0.62%)
NYSE Composite 8,609.28, +54.29 (0.63%)

On the major stock indices, advancers pummeled declining issues, 4233-2315. NASDAQ pumped out 148 new highs and 25 new lows. The NYSE produced 290 stocks which hit new highs and 10 which made new lows. Volume was in line with expectations, which is a polite way of saying it was low, again, as usual.

NASDAQ Volume 2,083,155,500
NYSE Volume 4,525,766,000

Crude oil closed up 55 cents, to $112.76. The average price for a gallon of unleaded regular in the USA is now $3.88. Nine states are already averaging over $4/gallon, and West Virginia and Wisconsin are at $3.96 and $3.97, respectively. Soon that number will be 15, then 25 then 45. In time, even those states closest to the Gulf of Mexico - Alabama, Mississippi, South Carolina, Louisiana, Georgia, where prices are among the lowest in the nation, will be hovering near the $4 mark, the point at which the nation surrenders what little is left of its dignity - and money - to the global oil cartel.

Those adding to their stash of gold and/or silver yesterday on the rare pull-back, received instant gratification as both metals popped on the FOMC and Bernanke's policy announcement. It seems the gold bugs and silver liners also appreciate Bernanke's policies, except that theywish he'd take a break now and again to give them time to buy more precious metals before the prices go absolutely hyperbolic.

Gold hit another all-time record, currently trading at $1527.20, up a whopping $20.10 from Tuesday's close. Silver also regained its mojo, picking up $2.16, to $47.76, closing in on the magical Hunt brothers high of $50.25, achieved in 1980. Silver is expected to go right on past that point as long as Bernanke keeps interest rates at zero and the dollar continues to slide into oblivion.

Therefore, if you're feeling a bit squeezed, thank the Bernanke. He's our guy.

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