Brian of the Frankenstein Government blog brings us today’s Guest Saturday post. He originally published this essay on July 10, 2014.
Calling Mr. Yellen
The fundamentals of project management provide that any project manager worth a shit- is far too intelligent to take over a half completed project that is already vastly over budget. Those things don’t make your project resume’ sparkle. Please think of the Federal Reserve’s QE programs as a project- because I think the analogy is accurate.
Several of the commenters on the Zero Hedge comment boards like to refer to Federal Reserve Chairman Janet Yellen as “Mr. Yellen.”
I’m not sure what the genesis of that was precisely, however, I strongly suspect it has something to do with her not so appealing looks- some folks have even said that when Janet enters any bank- they turn off the surveillance cameras just to be on the safe side.
Mr. Yellen’s husband is George Akerlof. I spent this morning reading some of Akerlof’s papers and thus opinion pieces- trying to get an accurate read on the collective Yellen thought process. Akerlof claims to be on the staff at the University of California Berkeley but that’s not entirely true. Not only is he a liberal economist/banker/keynesian shill but he is a full fledged researcher working for the International Monetary Fund. Oh goody.
I’d like to draw your attention to this chart posted on the Economic Policy Journal which was produced by the BLS. This is a chart comparing various items and their inflated or deflated prices over the last 5 years.
Whenever I see charts such as this, I always wonder why the author selected the items that he/she selected for inclusion on the chart. Missing are things like tax rates, health care costs, and college tuition. Costs that virtually all of us incur- which are far more damaging and reoccurring- than buying a box of Lego blocks for your nephew at Christmas.
So please focus on this chart for a minute. What I’m about to do is make a real world apples to apples comparison. I am acutely aware of my spending habits- mostly because I do the spending and I consider my spending habits to be fairly representative of most folks. To be on the simplistic and fair side, please remember that I am only counting myself- not a wife, kids, or family.
For those of you who hate math and calculations, you may skip down to the bottom line and find this*.
First I shall calculate my savings via the deflated right side of this chart over the last 5 years.
Toys- 0. I have purchased one laptop for 400.00 and a few other components for 200.00 My savings using the above chart have been 216.00 dollars. My girlfriend and I bought a 60″ TV for Christmas that cost 600.00 My older TV cost 800.00 in 2010. So collectively speaking, I have saved about 900.00 bucks on television sets in 5 years.
According to the BLS then, I have saved 1116.00 over the last 5 years on those purchases.
Now let’s try the left side of this bar chart.
I drive 15,000 miles per yr. (conservative est., I also have a motorcycle) The Elantra gets 30 MPG combined. So does the bike. That’s 500 gallons of gas per year multiplied by 5 years. Let’s say the current cost of gasoline is 3.50 a gal. So I spend 1750.00 per yr on gas. Therefore, I have lost about 1300 dollars per yr filling up my tanks since 2009. Total aggregate loss in buying power is 6,500.00.
I eat a lot of ground beef, sirloin. I am going to say 2 lbs. a week. I will use the current price and round it to 4.00 a pound. So I spend 8.00 a week or 416.00 per year on ground beef. Multiplied over 5 years that cost becomes 2100.00 or so. (remember as costs increase- so do sales taxes) Total aggregate loss here is about 750.00.
Auto insurance costs me 1000.00 a year for the car and bike. That is 5000.00 over 5 years. Using their 23% inflation handle means I have lost an additional 1150.00 since 2009.
* So I have saved 1116.00 dollars on deflating items. I have lost 8400.00 on inflating items. Therefore I have a net loss over the last 5 years of 7284.00 on just the items this simple chart depicts.
That loss is HUGE particularly over that short of a time frame.
Now I want you to note that in the middle of this bar chart, the BLS has stated that Consumer Price Inflation or CPI over this period of time (09-14) was 11% or about 2.2% per year. Of course that is complete bullshit as I have proven here. In fact, I have suffered a 5% rate of inflation just on the items they selected. That does not count toilet paper, health insurance, cost of housing, utilities, taxes- all those things that I cannot avoid, items and prices that have been rising in dramatic fashion.
In order to avoid the great deflationary event which should have unfolded in 2009, the unelected masters of the universe- Bernanke and Yellen- have embarked on a 4 trillion dollar stimulus project that has caused the prices of virtually everything to rise, except for a couple of novelty items produced by the Chinese.
This egregious market distortion and it’s ill effects are going to unfold in dramatic fashion as all QE programs are halted OR plan (B) they kick the can some more by installing new QE plans and trying to dump the smoldering ruins onto some other sap.
Either way, I wouldn’t want to be Mr. Yellen or her husband. They were left with an unfinished and wildly over budget project (without precedent!) that is going to cause a serious shit storm in the years to come- because there are only two ways out (deflation or hyperinflation) and both ways suck.
Wouldn’t you love to know how much gold Ben Bernanke personally owns? I’ll bet it can be measured in pounds.