[Aaron]

So... make your own...

[MrBill]

I was looking around for somewhere to post this article by Caroline Baum from Bloomberg. Caroline Baum was one of the only journalists writing about economics that 'got' the fact that higher energy prices were not in fact like a tax. I think it should be framed, but it has no place in Depletion Economics. Feel free to move it if you want, Aaron? Thanks.

$this->bbcode_second_pass_quote('', ' ')
From Pluto, U.S. Inflation Is Near 10%: Caroline Baum

Commentary by Caroline Baum
Every once in a while, I write something that inspires readers. The inspiration is usually to tell me what a knucklehead I am.
Earlier this week, a column on inflation -- what it is (a monetary phenomenon) versus how the Federal Reserve talks about it (seemingly exogenous price increases) -- prompted the ``regulars'' to check in.
This select all-male club (women, no doubt, have better things to do with their time) can best be described by the shared belief system of its members: a fixation with all things gold; an ingrained distrust of any statistic published by the government; and a firm belief that the Federal Reserve's discontinuance of weekly publication of the M3 monetary aggregate last year was just another sign the U.S. is headed down the road of Weimar Germany.
My Feb. 20 column prompted a date offer from a man in San Diego, one marriage proposal, a nomination to fill a vacant Fed Board seat, an endorsement for president, a few compliments for enlightening readers on the inflation process and a serious dressing-down from the rest for my incredible naivety.
Redemption may be in the offing, however. I learned I was
``making progress toward clearheaded thinking with each passing
week,'' according to the blog, ``The Mess That Greenspan Made.''
Alas, my assertion that inflation was running at about 2.5 percent revealed me to be ``as out of touch as the Fed Chairman.''
My feedback tends to fall into some broad general categories:

The Close-But-No-Cigar Department

``Precisely why did the Fed discontinue reporting M3?'' writes one reader, echoing a burning question among conspiracy theorists.
The Fed announced on Nov. 10, 2005, that it was discontinuing publication of M3 as of March 2006. Ben Bernanke hadn't even been confirmed by the Senate as the new Fed chairman, and already in the Land of Black Helicopters he was acting to subvert the U.S. dollar (at least what was left of it after Alan Greenspan's 18-year tenure).
I'm convinced the coincidence of ``money,'' ``Federal Reserve'' and ``inflation'' in the same article triggers a pre- set Google alert. The M3 message is stored and ready to go, relevant to the discussion or not.
The M3 conspiracy theorists (CTs) seem to ignore the monetary base (currency and bank reserves), which is the only instrument the Fed controls. Annual base growth slowed to 2.7 percent in January from 10 percent four years ago.

The Finger-to-the-Wind Department

``Dear Ms. Baum,'' another reader writes. (They start out politely to get my attention.) ``Do you really believe that nonsense about the `core inflation rate?' Inflation is actually running 8-10 percent per annum and getting worse.''
This is the consensus forecast among CTs, who rely for their stats on John Williams's Shadow Government Statistics Web site.
For the record, I don't believe in excluding all the prices that rise in any given month to portray inflation in the best possible light. And I agree that some series in the consumer price index, such as imputed rents, are fundamentally flawed.
But the numbers aren't cooked up in the BLS basement, as the CTs think.
``All the wonks in the federal government spin the numbers for the best possible outcome,'' he writes. ``Of course, they can't give us glowing reports every month, so they have to `spice' them with a little `bad news' now and then. Otherwise they'd lose total credibility.''
Ah, good to know. The numbers are all rigged, but they're rigged in both directions.
``I think my estimate (of 10 percent inflation) is a LOT closer than what the fed wants us all to believe,'' writes a reader whose handle is ``PlutoDave.''
Pluto may no longer be a planet, but it's still far out.

The Tin-Foil-Hats Department

``The truth, Caroyn (sic), again?'' a Plunge Protection Team alumni writes. ``What's gotten into you? Next thing you'll be calling for an investigation into market manipulation by the government. Especially the gold market.''
The PPT is either a) a committee of government officials and
individuals from financial institutions created by President Ronald Reagan after the 1987 stock market crash; or b) a nefarious cabal of the same characters -- Goldman Sachs figures prominently -- that intervenes surreptitiously to support the stock market and manipulate the gold market.
Now that Goldman has its own man at Treasury (again), well,
you write the script.
Where was the PPT during the precipitous plunge in the stock
market from 2000 through 2002? Never mind. I can't prove the markets aren't rigged, and they can't prove they are. Ergo, I'm
the one who's naive.

The Out-of-Nowhere Department

Many of the e-mails I receive have only the slenderest
connection to what I wrote -- and to reality.
``The economy as we know it is collapsing,'' another reader
states. ``There is no rebalancing or inflationary outlet. If there was, it would have happened by now and people would no longer be debating the issue of imbalances. The only person I've seen touch on this issue is Mr Stephen Roach at JP Morgan in his weekly commentary.''
Who's on first? What's on second? I don't know who's at JPMorgan, but Roach is at Morgan Stanley and has a solid following among Armageddon types.

The Kill-'Em-With-Sarcasm Department

``Caroline, if fixing inflation according to you is such a simple exercise then, perhaps, you should get in touch with the Zimbabwe government and give them a quick lecture to pull them
out of the misery.''
Zimbabwe has lots of other problems, but as my late friend Bob Laurent used to say, inflation isn't the toughest one for a central bank. A Chicago-schooled monetarist, Bob meant that the central bank was up to the task of controlling the growth in the money stock.
Yes, there will be short-term pain (back-to-back recessions in the early 1980s in the U.S.), but hyperinflation has only one cause and one cure.

The Pseudo-Philosopher Department

``I'm no theoretical economist,'' writes a reader, ``but I do believe that empirically consistent descriptions of reality are attractive, in that regard monetarism doesn't bode too well as a variable which drives inflation.''
Got it?

I'm not unsympathetic to my readers' concerns about inflation. Each month in its CPI report, the Bureau of Labor Statistics includes the purchasing power of the consumer dollar. A dollar today buys half as much as it did in 1982-1984, according to the BLS. It is worth only 17 cents using 1967 as the base year.
If the Fed were to realize its implicit target of 2 percent a year on average, the price level would rise 48.6 percent in 20 years. In 35 years, it would double.
Now, if inflation is really running at 10 percent, as my readers assert, they'll write in to correct my math.

(Caroline Baum, author of ``Just What I Said,'' is a
columnist for Bloomberg News. The opinions expressed are her
own.)

[nemo]

That looks fun... Can I play?

Edit: Firefox likes waffleimages, IE not so much? WTF?

[Aaron]

$this->bbcode_second_pass_quote('nemo', 'T')hat looks fun... Can I play?