Tuesday, May 17, 2005

Every Pundit Last Quarter Said Energy Prices Didn't Matter


I get the New Yorker Magazine. There was a long article about energy not causing inflation. It ended with the classic, "We are in a new paradim! The old ways have fallen!" Whenever one sees these fatal words what is happening is the triumph of propaganda over hard reallity. There is seldom a new paradim.

Same here. Inflation is intimately yoked to energy. To pay for energy the USA always tries to slip the noose by inflating money to make up the difference. This always fails in terrible ways. Same this time. As usual, prices have to go up because of energy costs for nearly all systems use energy and it eats into the bottom line quite directly. So this last quarter, when energy prices went up, prices of all other things rose this quarter, ipso facto.
Wholesale prices rose by a hefty 0.6 percent in April while industrial production dropped, the government said Tuesday in a pair of reports that offered a mixed picture of the country's economic health.

Inflation, on the one hand, is moving ahead, with wholesale prices lifted by more expensive energy, cars and cigarettes. But industrial activity _ production at the nation's factories, mines and utilities _ is faltering.

No shit, Sherlock. Always, when energy goes up in price, production goes down as everyone stops buying stuff and making it becomes more expensive. When the price of world oil dropped a smidgen yesterday, stocks shot up in value. Oil up=stocks down and vice versa. For years, when this blogger explained this simple formula, note the big bull market of the nineties coincided with the cheapest energy prices ever---she gets yelled at as if she is dumb or something.

The real estate Magic Mill continues to grind out wealth even as the Chinese are not increasing the purchase of our debt instruments, the Japanese have still been able to keep the golden conveyer belt running but this can't go much higher.
In other economic news, the Commerce Department reported that housing construction jumped by 11 percent in April, compared with a 17.6 percent drop reported in March. The advance in April increased the total number of housing units builders broke ground on to 2.038 million, on an annualized basis. That exceeded analysts' expectations.

On Wall Street, stocks dipped. The Dow Jones industrials lost 9 points and the Nasdaq was off 4 points in morning trading.

The latest snapshot of inflation also surprised economists. Before the report was released, they were forecasting a 0.4 percent rise in overall wholesale prices and a 0.2 percent increase in "core" inflation.

This blog loves "surprised economists". These clueless entities should be put to work in Chinese coal mines. Then maybe, just maybe they will learn to use their wits instead of mouthing insane propaganda palbum. No one could possibly be surprised by today's news. Impossible.

Readers here know that this blogger will never appear in the regular news examining what is happening economically or politcally.

The housing bubble is rapidly reaching insanity levels. Wealth is pouring into them in the hopes that it will grow in the Magic Mill and crank out again as vast wealth. Presto, chango! What a wonder this is! Frantically building huge mansions, this activity happened before! Readers of this blog know we recommend the book, "Only Yesterday". This book is an invaluable guide to the future. It details how the housing bubble and the stock bubble took turns blowing each other up further.

We are in a future world of hurt.

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