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Tuesday, September 21, 2010

Inflation Will Save The Day

Since I am having connection problems and nothing much changed in the market, I will have a limited number of charts today, plus a bonus Youtube video (which I don't have to upload) to go over what happened today. The SPX, which was down a bit just before the FOMC announcement, finished down a bit. In the intervening time between the announcement and the close, there was a quick 10 point rally, followed by an almost equally quick 10 point drop, putting us right back to where we started, about the only thing getting accomplished being that the computers were able to sub-penny scalp on the way up and on the way down.

If it is the FOMC's intention to trash the dollar, mission accomplished. It took a big drop on the announcemnet, and is just above the critical 80 level. If you are owed large sums of dollars (like a certain Asian country we won't name) this is bad news, but if you are in debt up to you're eyeballs (like a certain North American government we won't name), this is great news. And if you are one of those suckers who have been saving for a rainy day, you are screwed.

"Inflation expectations remain subdued". While I'm not a gold bug, the gold market is sure calling "B.S." on Bernanke. The target here is ust over 1300, and with treasury yields continuing to drop, should have no trouble hitting it.

I have often wondered why economists keep equating inflation with growth, as it is obvious to a layman like me that, if asset prices rise by the same amout the dollar drops, your net gain is nothing. Yet, they just don't see it that way. Well, I may have stumbled on to the answer: a 1933 propaganda video on how Roosevelt saved the world by inducing inflation:

You know, I can almost forgive those in 1933 for their ignorance, since they never experienced the 1970's, when we learned what happens when wages don't go up faster than inflation. But anyone who lived through that (cough"Bernanke"cough), or saw what happened the last 20 years in Japan, really ought to know better.

I will have the new highs update shortly.

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