James Turk, founder and editor of GoldMoney, was quoted in the Asia Times yesterday as saying, “pleas to the Federal Reserve by US investors to lower interest rates are no different than those made to the Reichsbank to create more currency to make up what was being lost to inflation. The dollar is headed the same way as the doomed Reichsmark, and Fed chairman Ben Bernanke is taking actions that are basically little different from those taken by the head of the Reichsbank. The clear conclusion is that the dollar is headed the same way as the Reichsmark. Failing demand is eroding the purchasing power of the currency, and the central bank responds to it by creating more currency units — ‘printing paper’ in the case of Reichsbank and ‘adding liquidity’ in the case of the Fed. They are in fact exactly the same thing.”

Well, that depends on what the banks will do with it, doesn’t it?

“Investors and hedge funds are scrambling to buy risky assets again, renewing bets on the yen ‘carry trade’, piling back into equities and pushing up commodity futures,” Ambrose Evans-Pritchard wrote in the Telegraph yesterday.

So there you have it. Stupid speculation got us here, and the first thing on everyone’s mind when they get more cash, is more stupid speculation.

As a result, inflation is here.

Or is it? The European Central Bank issued a report yesterday claiming that inflation in Euroland is at 2.6%, and that consumers’ perception “might have been magnified at the current juncture by the extensive media coverage of [food] price increases in some countries.”

In fact, consumers’ perception of inflation has been magnified by the reality of food price increases. For example, the Italian Central Statistics Institute has released figures which show that in October alone, bread prices increased 10.3%; pasta, 6.4%; milk, 5%; poultry, 7.3%, fruit, 5.3%. If price increases in August and September are added in, Italian consumer associations calculate an average increase of €400 for the average family food bill at the end of the year, on top of the increased fuel bills, mortgage or rental rates, and utility bills. It’s really not misrepresentation to exclude food and energy prices from the headling inflation rate, is it?

But then again, maybe my perception of the ECB’s lying is just magnified at the current juncture by extensive media coverage …

This entry was posted on Friday, December 14th, 2007 at 11:36 am and is filed under Economy, Finance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.