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October 15, 2017 | Yellen’s Huge Mistake

Rick Ackerman

Rick Ackerman is the editor of Rick’s Picks, an online service geared to traders of stocks, options, index futures and commodities. His detailed trading strategies have appeared since the early 1990s in Black Box Forecasts, a newsletter he founded that originally was geared to professional option traders. Barron’s once labeled him an “intrepid trader” in a headline that alluded to his key role in solving a notorious pill-tampering case. He received a $200,000 reward when a conviction resulted, and the story was retold on TV’s FBI: The Untold Story. His professional background includes 12 years as a market maker in the pits of the Pacific Coast Exchange, three as an investigator with renowned San Francisco private eye Hal Lipset, seven as a reporter and newspaper editor, three as a columnist for the Sunday San Francisco Examiner, and two decades as a contributor to publications ranging from Barron’s to The Antiquarian Bookman to Fleet Street Letter and Utne Reader.

In a speech Sunday morning in Washington, Federal Reserve munchkin-in-chief Janet Yellen wondered why inflation has remained so subdued. Only an egghead with a PhD in economics could be puzzled by this, given that it takes practically unlimited quantities of fresh borrowing merely to sustain a convincing illusion of inflation, never mind create real economic growth.  The past is instructive here, for there was a time just after World War II when every dollar of borrowing could be correlated to $1 or more of economic growth. Nowadays, though, it takes perhaps $20-$30 of new borrowing, most of it at low interest rates but with a growing claim nonetheless on our economic future, to generate that same dollar’s worth of growth. Talk about a losing battle! Under the circumstances, Yellen should be happy that untold trillions of Fed funny money have produced any inflation at all, albeit of financial assets and real estate, not wages.

The size of workers’ paychecks will never be more than a minor concern to the Fed in any event. For the last decade or so, the banksters have had their hands full trying to prevent the financial economy, represented chiefly by a quadrillion dollar gas-bag loosely known as the “derivatives market” — from deflating.  What is mystifying is not that inflation has not returned, but that Yellen and her economically ignorant cronies would risk imploding a deflationary black hole by tightening rates in the absence of inflation.  Subjecting the derivatives house-of-cards to yet one more turn of the interest-rate screw could cause it to collapse literally overnight. Meanwhile, whatever statistical inflation is said to occur in the $80 trillion global goods-and-services economy, it is insignificant in comparison to even the tiniest shifts in inflation/deflation in the quadrillion-dollar financial economy.

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October 15th, 2017

Posted In: Rick's Picks

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