Wednesday, July 16, 2008

Inflation Explodes, Trouble Ahead for Stock Market

According to the New York Times, "The Consumer Price Index, which measures prices of a batch of common household products, rose 1.1 percent in June, the Labor Department said. That increases caps a year where inflation has surged to proportions seen by some as threatening the stability of the American economy. In the last 12 months, the price index has risen 5 percent, the biggest annual jump since May 1991."

If you multiply the 1.1% rate in June, it comes out to 13.2%, a rate big enough to remind me of the post-Vietnam years of the late 1970s. This augurs ill for the stock market because the inflationary monetary expansion in which the Republicans have engaged since '82 is coming home to roost. These cycles take 25 years and perhaps more, to complete, hence generalizations about good or bad economic results over a 1-24 year period are impossible to make.

If the Fed takes action to slow inflation by reducing interest rates it will take several years, there will be unemployment, New York City is going to hell in hand basket (if you recall the near-bankruptcy in the mid 1970s during a similar correction you know what I'm talking about), and the stock market is in for a rough ride that makes this year's look like a ride on Mary Poppins's umbrella.

The country's planning elite, the Wall Street crew and the captains of industry, Jim Cramer, Alan Greenspan and the Fed have brought the coming recession to you courtesy of their inability to run the monetary system.

Gold is down today probably related to the correction in the oil market and to the realization that the Fed is going to correct. Hence the dollar is stronger. Our economy has had so much loose cash that has been created by the Fed and diverted into immoral and incompetent hands that there are all kinds of crazy things going on, and the public will pay while the hedge fund managers who have extracted billions from the 25 years of inflation will sit back on their verandas and enjoy the show.

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