"Idaho Hillsmen With Colt 45s and Krugerrands Were Right All Along."


Your hot dogs and beans days have returned.

Say no to the proliferation of adverbs by not clicking on Michael Snyder's DailyMarkets.com column "Is The Fed Completely And Totally Out Of Control?" (also say no to capitalizing articles; even Germans don't capitalize articles), unless you want a fun and clear rant against the bumbling central bankers of these here United States:

Federal Open Market Committee "is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate."  … Do you see what the Fed is saying there?  The Fed is actually saying that it has a mandate to maintain a certain level of inflation.  Not that this is a secret to anyone that has seriously studied the Federal Reserve…  But for Federal Reserve officials to openly state that a certain amount of inflation is part of their mandate is absolutely stunning.

I wouldn't call it "absolutely" stunning. Simply stunning I might agree with. Federal Reserve Bank Chairhumanoid Ben Bernanke has what I believe is an unmingled record of comments to the effect that he does not believe in and has never employed inflation targeting, that he has never met inflation targeting, and he didn't even like inflation targeting when they didn't meet.

These statements are belied by 100 percent of Bernanke's behavior and by thousands of pages of his published work, the gist of which is that recovery from the 1930s depression came, in turn, to each country that went off the gold standard and began seriously devaluing its currency.

So we're still not at Bank of England levels of candor.

Snyder gears up for the coming of Quantitative Easing 2.0, which he expects will be followed by Quantitative Easing n. The Fed's addiction to devaluing the dollar, he notes, has peeled off former supporters:

Ambrose Evans-Pritchard, perhaps the most respected financial columnist in the U.K., recently penned an article entitled "Shut Down the Fed (Part II)" in which he absolutely lambasted Bernanke and other Federal Reserve officials for considering another round of quantitative easing….

I apologise to readers around the world for having defended the emergency stimulus policies of the US Federal Reserve, and for arguing like an imbecile naif that the Fed would not succumb to drug addiction, political abuse, and mad intoxicated debauchery, once it began taking its first shots of quantitative easing.

In fact, Ambrose Evans-Pritchard is now openly accusing the Federal Reserve of being out of control….

So all those hillsmen in Idaho, with their Colt 45s and boxes of krugerrands, who sent furious emails to the Telegraph accusing me of defending a hyperinflating establishment cabal were right all along. The Fed is indeed out of control.

I was a deflationist in 2009, but at some point all those new dollars in circulation will have to boost milk up to $10 a gallon, right? That won't be inflation, of course, because core CPI doesn't count food and energy prices, so it will be like it never happened.

Bureau of Economic Analysis Director Steve Landefeld will smack you around and call you Susan.

But the Fed doesn't use CPI or any of its misleading subdivisions. Rather it uses the BEA's Personal Consumption Expenditures price index—officially because CPE claims to measure substitution (when you give up Chateau Lafitte and your usual table at Spago and go back to Schlitz with hot dogs and beans)—though it's also convenient that PCE lags CPI and thus underestimates the devaluation of the greenback. (Because have I mentioned that Ben Bernanke is absolutely opposed to inflation? Greenspan too!)

Either way, PCE's more attractive spending-power figures make everybody look richer, and rubes love to be told that they're rich.

Here's a study of CPI's substitution bias [pdf] from way back in the pre-Abundance epoch. We wore wooden shoes then.

And even if you're out of Krugerrands, at least Colt 45 works every time: