Got Inflation?

If REAL inflation is running at 7% to 11%, doesn't that mean that the US economy growing at only 0.6% really signals a pretty massive recession? And that "flat" US average incomes are actually plummeting? And doesn't that mean that the 12.7% reported fall in home prices is more like 20%?

One more time - if you believe the government's inflation number, you are a fool. But it's really not a question of whether you believe it or not, just go to the grocery store and gas station. The real inflation report can be found there.

Bernanke's plan: Stopping massive deflation with massive inflation and hope it all comes out in the wash

Grocery prices are soaring. Gas prices are soaring. Hell, most prices are soaring. Thank you Helicopter Ben.

But about the only thing that ISN'T soaring is the price of homes. In the middle of this rampant (consumables) inflation and dollar destruction, you have historic (asset price) deflation. Just as most HP'ers have predicted.

Eventually though, home prices will stop falling. Probably quite some time from now, when the historic housing P/E ratio is restored, confidence is somewhat restored, pre-bubble prices are back, and it's cheaper to 'own' than rent.

And when that happens, and home prices stop falling or god forbid start going up, the NAR and the few realtors who are left will start saying "home prices stable!". But when you factor in the wild inflation underway (the real inflation, not the government-reported inflation), real home prices will still be in freefall, and the crash will have been much worse than people think, and the combination of flat incomes, job losses and rising consumable and service prices will be devastating.

Here's a new editorial on the inflation solution, which is well underway I believe. Meanwhile, got gold? Got food?

The Inflation Solution to the Housing Mess

The policy alternatives in the post-housing-bubble world are painfully unpleasant. In my view, the least bad option is for the Federal Reserve to print money to help stabilize housing prices and financial markets.

Yes, use reflation to soften the pain for Main Street and Wall Street. If instead we let housing prices fall another 25%-30% – as predicted by the Case-Shiller Home Price Index – it's almost certain that Washington will end up nationalizing the mortgage business.

While there is a substantial risk that inflation may rise for a time – this would be the policy goal – monetization is more easily reversible than nationalization of the mortgage market.

IMF: "Food-Price Inflation May Trigger Starvation"

Thank you Casey Serin.

Thank you mortgage brokers.

Thank you realtors.

Thank you investment bankers.

Thank you Alan Greenspan and Ben Bernanke.

Thank you ethanol farmers.

Thank you George Bush.

Thank you General Motors.

Thank you Chinese communist party leaders.

And thank you American consumers and Wal-Mart shoppers.

You are now about to starve millions to death.

Hope it was worth it.

Donate to the World Hunger and Relief fund here. And stop using ethanol, stop buying Chinese crap at Wal-Mart and start connecting the dots.

April 12 (Bloomberg) -- Further gains in food prices would be ``terrible'' for the world's poor and throw hundreds of thousands of them into starvation, International Monetary Fund Managing Director Dominique Strauss-Kahn said.

Governments throughout Asia, Africa and the Middle East are seeking to combat food inflation and avoid social unrest by curbing exports or lifting import duties on basic food staples such as rice. Global food prices surged 57 percent last month from a year earlier, according to the United Nations, and the World Bank warns civil disturbances may be triggered in 33 countries.

If food inflation keeps accelerating at its current rate ``the consequences will be terrible,'' Strauss-Kahn told reporters at the IMF's semi-annual meeting in Washington today. ``Hundreds of thousands of people will be starving, leading to a disruption in the economic environment.''

The Death of the US Dollar, the Fall of Rome, and the Confusion and Ignorance of the Masses

Dow sets "record". Boss gives you a raise. Home price soars.

Sheeple think: "We're rich! We're rich! We're rich!"

Reality says: "No, you aren't."

I know the trolls won't bother reading this, since they obviously don't read, but for those interested in inflation, and the head-fake that a depreciating currency gives to its unsuspecting and ignorant holders, this is required reading.

And if anyone can argue why unjustified and unsustainable asset prices are good for society, make your case. And by the way, how's that M3 doing? Oops, you mean it's not reported by the government anymore? Gee, imagine that.

Enjoy HP'ers.

An important concept to understand as it relates to money unlike other commodities is that an artificial increase in its supply confers no social benefit.

The price of money—like any other commodity—is by eternal laws of supply and demand. Like any other commodity an increase in its supply lowers it price. Conversely an increase in demand raises its price. As Rothbard reminds us, ”What makes us rich is an abundance of goods, and what limits that abundance is a scarcity of resources: namely land, labor, and capital.

Multiplying coin will not whisk these resources into being. We may feel rich for the moment, but clearly all we are doing is diluting the money supply… Thus we see that while an increase in the money supply, like an increase in the supply of any good, lowers its price, the change does not—unlike other goods—confer a social benefit.

Whereas new consumer or capital goods add to standards of living, new money only raises prices—i.e. dilutes its own purchasing power. The reason for this puzzle is that money is only useful for its exchange value…its utility lies in its exchange value, or “purchasing power.”

What is even more important is that when money is depreciated, it leads to the moral and economic decay of a country.

In the final days of the Roman Empire, its currency was depreciated repeatedly by successive emperors.