Get Ready for Force "Fed" Inflation

Posted: Aug 31, 2011 12:01 AM

Chicago Fed President Charles Evans made an appearance on CNBC yesterday, and what he said was very interesting. Essentially, Evans told us that he’s nervous about economic recovery, about the lack of job creation and about sluggish housing. Without saying that the Fed is going to continue to force-feed us inflation, he said they’re going to continue to force-feed us inflation.

"Strong accommodation needs to be in place for a substantial period of time," he said. "If we could sort of make everybody understand that this is going to be in place for a longer period of time, we could knock out some of that restraint that comes about when people talk about premature tightening."

For anyone still talking about “premature tightening”—and I know you’re out there because I’ve spoken to some of you—I have just one question: What are you drinking? Look at what the Fed has already done. They’re not just going to walk away from the plan at this point. Let’s wait and see what happens with their meeting later today, but I’m fairly certain that the minutes will further substantiate that they have no intention of trying to guide the inflation genie back toward the bottle.

Remember what happened the last time we were force-fed inflation as a means to lift the economy out of a deep recession. In 1932, soybeans were 44 cents/bushel. By 1952, they were $4.50. Looking at the front-month contract on soybeans today, they’re over $14/bushel. We used to laugh at beans in the teens, and now it’s the norm. Mark my words: after a couple more years of currency-debasing-as-policy, we’ll not only be talking about $20+ soybeans, we’ll be talking about higher prices on everything across the board.


On the show this morning I talked quite a bit about how the SEC began as a regulatory agency with good intentions but has turned into a bloated, billion-dollar leviathan that’s run by lawyers who have no clue how to regulate Wall Street. William D. Cohan, a Bloomberg columnist, made another compelling argument about why it may be time to do away with the last remaining New Deal agency. I encourage you all to read it.
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