November 21, 2006 (Bloomberg)

Federal Reserve Governor Kevin Warsh said inflation is too high and there are “clear” risks it won’t slow as investors expect, suggesting he sees price gains as a greater risk than economic growth.

“Inflation, though down somewhat from its level earlier this year, remains uncomfortably elevated,” Warsh said in a speech at the New York Stock Exchange. “Financial market prices imply that inflation will continue its gradual but persistent downward track during the forecast period. There remain, I believe, clear upside risks to that inflation outlook.”

Warsh’s views on the economic outlook are consistent with those of his Fed colleagues, based on minutes of the central bank’s Oct. 24-25 meeting, at which it left the benchmark U.S. interest rate at 5.25 percent for a third session. Warsh said today he expects the economy to be “remarkably resilient,” though a “sharp pullback” in housing will hold down growt

Traditional “sin taxes” – duty on alcohol and tobacco – formed a headline-grabbing part of the announcement: the alcohol tax is to increase by 6% more than inflation, with an inflation+2% increase in each of the next four years. This will result in a near-immediate increase of 4p per pint of beer, 3p on cider, 14p on wine, and 55p on a bottle of spirits. A packet of 20 cigarettes will cost 11p more. An additional £950 duty will be charged on the most polluting new cars when they are first bought.

No, Mr. Munchkins, you’re the illiterate. Inflation “rises” by definition. When it declines we call it deflation, bubba.

Furthermore, “a loss in purchasing power” is clear and comprehensible whereas you often are not with your failed economic mumbo jumbo. It’s time you economists and pundits face up to the shit in your shoe and SHUT THE F*CK UP!

Governement bond market is biggest bubble going. Sester had a great post on the yeld curve conundrum. Anyway you cut it, the US is at the complete mercy of those buying our debt. That and fear I guess.

The Fed is being slowley relegated to the dustbin as they play whack a mole. At some point they should just let themselves out the side door and let the markets get on with the necessary burnout

In November 2002, when Bernanke was merely a Fed governor, he gave a speech about “Deflation: Making Sure `It’ Doesn’t Happen Here.” More than five years on, the text provides a step- by-step guide to the Fed’s reaction to the current credit crisis, and hints at the tricks left up the central bank’s sleeve.

…

“It’s worth noting that there have been times when exchange-rate policy has been an effective weapon against deflation,” Bernanke said, citing the 40 percent devaluation of the dollar against gold enacted in 1933 to 1934. “The devaluation and the rapid increase in money supply it permitted ended the U.S. deflation remarkably quickly. Monetary actions can have powerful effects on the economy.”

So, brace yourself for a Fed funds rate close to zero, interest-rate-free loans in exchange for a much wider range of debt collateral, and further dollar weakness.

This is the problem with the USA government fudging the statistics. Nothing much of consequence to fix problems can get done until we are up to our ears in alligators, as they say. We need to have honest and accurate reporting and take the medicine early on.

I know that inflation is much higher than the government reports because I see it in most things that I buy regularly. Also, Costco has been raising prices lately and when that happens, you know there is a problem. For instance, Jarlsberg cheese just increased from $3.99/lb (where it has been for years) to $4.25/lb.