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Best of the Exchange: Monoline Failures, Fed Model, Inflation Everywhere

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Minyans make sense of the Fed and inflation.

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With the launch of The Exchange, Minyans now have a forum in which to express their viewpoints, comment on articles and meet other like-minded financial souls. Minyanville publishes "A Best of the Exchange" each Friday to highlight the many insightful posts and discussions going on behind the scenes.

Become part of The Exchange and let your voice be heard!

(Editor's Note: Some of the following posts may have been modified slightly from their original form.)


Prof. Shedlock commented on the current state of the economy, and shared with us his thoughts on comments made by Ben Bernanke in his Bank, Monoline Failures Inevitable article. Heated debate followed.

Minyan Paul
: Let's face it, this guy was appointed by George W. Bush, who is an incredibly ignorant man especially when it comes to economics. God help us all.

Minyan Lloyd: He was in fact not appointed by Bush, but he was confirmed by the Democrat majority Senate. There is enough scorn to go all the way around.

Minyan Scott: The comments from these men are about as informative as those from a defense lawyer discussing their client and for the same reason. They have a job to do and it has nothing to do with issues of fact. Of course Bernanke says the worst is over. Would you have him say the 'worst is yet to come' and by doing so create a self fulfilling prophecy?


Prof. Sedacca wrote about the Fed Model, and gave us his interpretation of it in his article Fed Model's Dog Don't Hunt. Much commentary ensued.

Minyan Tim: The Fed Model is a sales tool and that's about it. Financial education is the key and that's why Minyanville is so very important today. You have to do your 'homework' or at least understand the weaknesses of what ever "forward looking" device you are being shown. Realize there are other opinions and options out "there" and do what's prudent for yourself.

Minyan Dean: That may be precisely why we are in a world of hurt. We have tried gimmick after gimmick but the idea of making it possible for us to compete as a manufacturing country, even with our prevailing wages, seemed to be too hard, and it wasn't really tried.
What will happen to (paraphrasing Hillary) hardworking blue-collar types in the future? Not everyone can be an engineer or a programmer or in management or in finance. What does a guy or gal with an IQ of 100 and an AA degree do? Wait tables for the ruling elite? If that's what the average person does, what does IQ of 90 and high school diploma do? The answer is, starve. Roughly 1/6 of the population falls into the IQ < 90 category. These people have NO chance unless there are blue-collar jobs here in the USA. That's a lot of people to be either on welfare or begging in the streets.

Minyan Charles: Not all of this 1/6 will be content to beg or accept meager welfare handouts. Some will take note of how a lot of millionaires were created over the last 8 years, and being weak minded by your IQ measure anyway, they will start looking over the walls at the wealthy and how they are living. Big for security companies, trouble for the wealthy. Try on life in Rio or Mexico City, for a primer about the desperately poor. We are moving toward a paradigm shift in civil society if we do not retool our brand of capitalism with a more compassionate system in mind. I don't accept the Euro models of nanny states, but we are over the edge the other way. There will be a price to pay, and soon.


Prof. Harrison gave us valuable information regarding how to play the stock market in his article Inflation, Inflation, Everywhere! Several Minyans were happy to give feedback.

Minyan David: I get your oil/gold ratio synopsis, but I think you are forgetting something. Oil will not pull back until the dollar rebounds. And, if the dollar rebounds, gold will not perform very well. Try to explain this further for me, but include how the dollar will react in this scenario. Also, you should set up a mobile friendly portion to Minyanville, just functional enough to read the articles...

Minyan Lorne: Professor Todd, every day, I read, your missive, "Inflation in the things we need, deflation in the things we want." Well, I see the first one, no problemo. But then I look around me for the deflation in things I want. Hmmm. Let's say I want to take my better half for a lovely old time on the Champs Elysee. Think airfare, hotels, meals, Metro rides, etc. are less than they were a few years ago? I think not. I don't know where you dine, but not Chez Moi. Even if I opt for a bottle of Bordeaux at the manse, I haven't seen prices go anywhere but up. Now, maybe you'll say, electronics, my good man. Well, OK, after the latest hot product has been on the market awhile, it tends to fall in price. But that's been the case since the Eisenhower administration. So, we come to houses. Are they a need or a want? Well, I suppose both. Now, they are down most places from this time last year, but except for a few extreme cases, they are still above where they were 4 or 5 years ago. Todd, this Minyan would REALLY love if you could explain yourself.

Minyan Mikkel: The NYT put together a chart showing all the components for CPI. It's in a mosaic with each component's size corresponding to the weighting it is given in the CPI and color coded for the change in price over the past year (it's for March). It lends a lot of support to Todd's assertion. Almost without fail, all the things that are necessary (the whole health care/education category, and anything to do with food or fuel) has had massive price increases, but everything else is either flat or having deflation. The most deflation is in clothing, electronics, toys/hobbies and home furnishings. The housing category is the most interesting because it has something in it like heating oil which are in the highest category, other things like rent and utilities that are a little hot (3.5%ish) and then lots of categories of stuff that you put in the house that are all in deflation.

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