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Jan 16 2008

Worst Inflation in 17 Years (Updated Below)

According to Business Week, just-released government statistics indicate that consumer inflation in 2007 was the worst it’s been in 17 fucking years, led by energy (gasoline, heating oil, natural gas, electricity) and food. These are the consumables that people must buy, no ifs, ands, or buts.

The article goes on to discuss industrial output, the falling stock market, the “credit crunch”, and other happy horseshit, before getting to the “What the fuck do we do?” section:

Analysts said that with core prices generally remaining well-behaved, it will give the central bank the leeway to cut interest rates further to battle a serious economic slowdown triggered by a steep slump in housing and a spreading credit crisis.

Who the fuck are these “analysts”, who said this? Are they professional economists, maybe working in academia, whose lives will be impacted by the effects their “analysis” might have on decision-makers in high places? Hell, no. They are marketing shills for the Wall Street compulsive gamblers. Whatever they say is crafted solely to advance the interests of the big Wall Street playas.

What’s this “core prices generally remain well-behaved”? Core prices: that sounds like prices for the shit you gotta have, right? Wrong, wrong, wrongity, wrong. Core prices are the prices of the shit other than the shit you really gotta have. You have to buy food and energy, or you starve to death, freeze to death, or lose your income because you can’t drive to work. So the prices for the shit you don’t have an immediate non-negotiable need for “remain well-behaved”–i.e., are not skyrocketing. But the prices for what you need to fucking survive–going through the roof.

Next: “will give the central bank the leeway to cut interest rates further”. I’m no economist; I didn’t even take any basic economics in college (I was more interested in molecular biology and physiology), but I think I have some intuitive grasp of what this entails. See, what happens when the Federal Reserve cuts interest rates further, is that money becomes cheaper to obtain, and thus the money that exists loses some of its value.

That’s fucking inflation! So the shills are saying that it’s ok for the Fed to cut interest rates even though it will increase inflation, because even though the prices of the consumable shit that people need to survive is already inflating at the highest rate since fucking 1990, the prices of the shit that people can survive without isn’t going up quite as fast.

Next: “to battle a serious economic slowdown”. What is the “economic slowdown”? It’s a slowing in the increase in whatever measure you choose to use to assess the overall magnitude of capital embodied in the US economy. The slowdown, at least right now, is a decrease in the profits that holders of capital–mainly the big Wall Street playas who employ the shills–can earn on their capital investments.

So how does lowering interest rates help these holders of capital? It makes money cheaper to get, which means that they can much more easily borrow even more money to gamble with in the capital markets. Since they can’t make quite as much money betting on a given amount of capital, they want even more money so they can increase the size of their bets. I hope you’re starting to get the picture here.

Finally: “triggered by a steep slump in housing and a spreading credit crisis”. Here, the shills are describing the cause for the decrease in how much money their Wall Street playa employers can make on their bets. The two causes they list–”steep slump in housing and a spreading credit crisis”–sound like forces of economic nature occurring without any influence or contribution by human decision-making processes. The shills want it to sound this way, but it just ain’t so.

The housing slump occurred because housing prices were ridiculously inflated in a bubble caused by–wait for it–ridiculously low interest rates (determined by, natch, the Fed at the behest of the Wall Street playas) coupled with a complete abdication of any assessment of the credit-worthiness of people that were being force-fed mortgages so they could buy the hyper-inflated housing stock. And people who had homes that whose price was bubbling up to the stratosphere were also force-fed home equity loans all the way up to those absurdly inflated prices so that they could–wait for it–buy a whole load of unnecessary consumer shit with no intrinsic long-term value.

The “steep slump in housing” is just a return to reality, from the hyper-inflated bubble spurred on by the decision-making of the Wall Street playas and the Fed. And all of the value of that bubbling has already been siphoned away from the people–homebuyers and homeowners–that bought in to the bubble created by the Wall Street playas. These playas now have all that money.

The “spreading credit crisis” was also brought on by decisions made by the Wall Street compulsive gamblers. It wasn’t enough of a big bet that they had made all these shitty loans on hper-inflated housing prices. They decided to bundle large numbers of shitty loans together, slap a pretty dress on, and call them collateralized debt obligations or “CDOs”. Sounds much more impressive than “pile of shitty loans”, right? Based on not much more than the fancy name–and the promised high returns–large numbers of CDOs were purchased from mortgage lenders by all sorts of large financial institutions, and then a lot were resold to–wait for it–retirement and pension funds that are supposed to support the retirements of the same poor suckers who got caught up in the bubble and saddled with unsustainable mortgages. Now that everyone has realized the CDOs are just piles of shit in a pretty dress, they are essentially worthless.

So, now we can finally translate the entire analysis into plain language:

Shills for Wall Street gamblers said that, even though prices for shit that ordinary people need to survive are skyrocketing, prices for shit they can do without are not going up quite as fast, thus justifying actions by the Fed that are going to further increase the rate of skyrocketing price increases for the shit that ordinary people need to survive, while at the same time floating a massive cash infusion to the Wall Street gamblers to bet with so they can try to keep making the same obscene profits they had been, supported by, and ultimately ended by, their own purposeful courses of action that inflated, and then burst, the housing bubble and secondary pile-of-shit-in-a-pretty-dress bubble.

And just to show you that Business Week doesn’t only write for Wall Street compulsive gamblers and their shills, they have helpfully included some useful information for ordinary workers in the final sentence of this article:

Workers’ wages failed to keep up with the higher inflation. Average weekly earnings, after adjusting for inflation, dropped by 0.9 percent in 2007, the biggest setback since a 1.5 percent fall in 2005.

Bottom line: Lowering interest rates now is exactly the same fucking thing as shaking the loose change–what little is left–out of the pockets of ordinary Americans and giving it the already-obscenely-rich. It is morally wrong, and it is also pragmatically wrong, for those who care to see the United States remain a free, democratic, financially upright nation with a vibrant middle class and something other than complete abject misery for the poor. Who knows, maybe these ultra-rich fuckers are all just going to move to Dubai?

UPDATE: I just found another outstanding article by Stirling Newberry at Agonist, entitled “The Economics of Hope”. It provides a very detailed analysis of what we need to do politically and economically to give the US the best possible chance for emerging from the imminent global economic clusterfuck as still the world’s economic superpower. In relation to this post here at PhysioProf, he agrees that continuing to lower interest rates ain’t it. To put it bluntly, Newberry knows what the fuck he’s talking about, so go read him.

1 comment

  1. 1
    Bustednuckles

    They aren’t kidding when they say the surge is working.
    Motherfuckers anyway.

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