inflation

Bye Bye Chained CPI and Other Budget Surprises

The Obama administration is finally abandoning their endorsement of chained CPI for next years budget.  The reason is probably not good economics, but political.  Election season is near and this is just one of many policies the Obama administration endorsed which raised the ire of the retired.  A refresher, chained CPI is another method to adjust for cost of living increases at a reduced rate than what is currently used, CPI-W.

Yo, Yellen Round Up

This moment is historic.  For the first time in history a woman is nominated to chair the Federal Reserve.  Assuming Dr. Janet Yellen does a good job, this alone will help millions of women in finance and economics, which to this day is fraught with gender bias and glass ceilings.  She is already inspiring the phrase, Yellenomics and referred to as Bernanke Redux for most perceive the Fed and their policies will not change much in the transition.

Corn Ripples!

Every once in a while we see a piece of data which makes the hair on our heads stand on end. Such is the Census Foreign Trade graph of the month. Below are corn exports and their percent change a year from June 2012.

corn exports 6/12

The more orange a state is, the more their exports declined. Texas corn exports declined a whopping -272.6%, Kansas dropped -160.9%. Arkansas is a real disaster, with a -445.2% drop in corn exports as of June 2012. What's worse is the June data only gives a 10% national drop in corn exports from a year ago. July gave much worse figures.

By July 2012, the United States corn export decline was the lowest in 19 years and had dropped 40% from a year ago according to the latest USDA statistics. The U.S. is the largest exporter of corn and corn is the largest export of course-grains. The below charts are from the USDA grain report.

Attack of the Central Banks Points to Impending Recession

attack puppet peopleThe Central Banks went on the move. Within 45 minutes of each other, the ECB lowered interest rates, the Chinese central bank did too and the U.K. just enacted more glorified quantitative easing. BoE increased their asset purchases by £50 billion to a grand total of £350 billion.

While it appears we have a global, coordinated plan of attack by Central banks, one might also notice we have a global coordinated plan to counter an economic slowdown. In other words, by all acting in concert, this gives more confirmation that we have a global economic mini-implosion going on.

We already know a U.S. recession is projected for 2013. The IMF not only scolded the United States but also is warning on a global economic growth downgrade, coming to a press release near you on July 16th.

No Quantitative Easing For You

money gamblingSorry speculative traders in commodities, the Fed actually did a just say no on more quantitative easing. The FOMC meeting minutes for January 24-25th were released last week and some speculative commodities traders still seem to be in denial land.

The FOMC money quote:

The Committee also stated that it is prepared to adjust the size and composition of its securities holdings as appropriate to promote a stronger economic recovery in a context of price stability. A few members observed that, in their judgment, current and prospective economic conditions--including elevated unemployment and inflation at or below the Committee's objective--could warrant the initiation of additional securities purchases before long. Other members indicated that such policy action could become necessary if the economy lost momentum or if inflation seemed likely to remain below its mandate-consistent rate of 2 percent over the medium run. In contrast, one member judged that maintaining the current degree of policy accommodation beyond the near term would likely be inappropriate; that member anticipated that a preemptive tightening of monetary policy would be necessary before the end of 2014 to keep inflation close to 2 percent.

Ben! Say It Ain't So! America Could Be Like Greece?

us greeceToday Federal Reserve Chair Ben Bernanke testified before the House Budget Committee. The quote which implies America could become Greece is this:

Even the prospect of unsustainable deficits has costs, including an increased possibility of a sudden fiscal crisis. As we have seen in a number of countries recently, interest rates can soar quickly if investors lose confidence in the ability of a government to manage its fiscal policy. Although historical experience and economic theory do not indicate the exact threshold at which the perceived risks associated with the U.S. public debt would increase markedly, we can be sure that, without corrective action, our fiscal trajectory will move the nation ever closer to that point.

Greece?   Really?   Business Insider calls this plain annoying. The comparison is the wrong country. America really looks like Japan. The dire warning the United States could become like Greece is really about health care costs. Federal outlays for health care are already 5% of GDP and we have apocolyptic projections for meteoric health care costs increases. Here's Bernanke on those:

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