The economy and the Fed: When good news is bad!

Though government economic figures strip out the costs of energy and food when calculating inflation it is clear that the real world considers things like eating and getting to and from work necessary living expenses.

This morning's business news reports "American families, which spend 9.9 percent of their disposable income on food, are facing the fastest-rising food prices in 17 years as the global economy relies more on grain to make fuel, food and livestock feed than it harvests." Current government statistics today put the inflation rate at 1.8% annually. That's low by any measure. But is it a true reflection of the real world?

There is nothing illogical about the price of grain, mainly corn, skyrocketing as the frenzy to grow more corn has taken hold like an epidemic in the once barren agricultural states. With government subsidies to the tune of $7.3 billion per year to the ethanol producing industry it makes perfect sense that growing corn is now profitable. The problem is, it takes about 1 gallon of fossil fuels to produce 1 gallon of ethanol. Not only that, but ethanol delivers 30% less fuel efficiency. Studies have shown that even if every single bushel of corn was converted into ethanol (totally unrealistic) it still would produce only 12% of America's fuel demands.

What we're getting into is now just the beginning of the effects of inflation which impacts working Americans when the costs of all dairy products, livestock feed, transportation costs and any commodity that consumes grain products rise at the rate they have been. So, why are these costs stripped out of the inflation?

I've asked this question before but I do have a theory on it. Almost all pay raises and cost of living increases, including Social Security, rely on the Consumer Price Index and the rate of inflation. The lower the official inflation rate, the lower the rise in your paycheck. So, it makes sense for the government to lie about the true inflation since the don't have to pay out as much to retirees and Social Security recipients.

Also, record high oil prices are great for ethanol/corn producers even while oil inventories remain relatively stable. I see this as simply another gimmick by the Wall Street money and commodity manipulators to artificially ratchet up the price of oil to produce panic buying and selling while at the same time relying on government sleight of hand cloaking the true cost of living for ordinary working Americans.

In the meantime, the Feeding Chairman (pun intended), Ben Bernanke, continues to hand out more interest rate cuts to the fat cats who are on a spending binge like drunken sailors as they push derivatives, hedge funds and leveraged buyouts while paying out next to nothing in income taxes, robbing our treasury and driving our country deeper in debt.

It seems to me, the near record high stock market and working Americans' wages and living standards are going in opposite directions.

Speed up R and D electric car technology, America.

The country who develops new battery technology will be the global economic powerhouse

I really hate this good news is bad, and bad news is good. One real problem I see is that people always want to think that raising rates is bad, and lower is good. People need to get it though there thick sculls that our economy is doing so well that we actually need to raise rates!

What is this world coming too.

This pattern of opposite reaction has been going on for awhile. My guess is they are hoping for bad news so the rates will go down again. So when there is bad news the markets go up thinking the federal reserve will be forced to lower rates again. When there is good news the stocks go down because maybe the federal reserve won't lower rates again.