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Special Five Things You Need to Know: Fed Worried the Jig Is Up?


Boot to neck, gotta keep wages behaving.


Kevin Depew's Five Things You Need to Know to stay ahead of the pack on Wall Street:

"The Federal Reserve needs to prevent the public's expectation that inflation will accelerate from spurring demands for higher wages." - William Poole, former St. Louis Fed President

Few fully understand what the need for air will do to a man; I mean the need for air, for the lung-expanding nectar of the space around us, for oxygen. I confess, I didn't, not until I willingly, eagerly snorted the water through flaring nostrils, gasping for liquid volume to fill my empty lungs while Bill Poole stood over me forcing my head into the filthy toilet bowl.

When all you want is air, the shock of filth fades fast. Release. My head pops up reflexively, water expels, the air burns my lungs hot and I hear words being shouted, a mantra of sorts... broken pieces..."prevent the public's... inflation....spurring demands...", and here we go again, water rushing forward, dunked hard, pressure, and the mantra clumps together in a gurgling rumble..."Fdrl serve eeds o rivet e puhblix...." Darkness, then the release, head pops up again, spewing water that mixes in globs with coarse, hot, almost fibrous air, and the mantra opens up again, "accelerate... demands for higher wages." Jesus, how did it come to this? Two lessons, one corollary.

Lesson One: Don't fight the Fed.

Lesson Two: St. Louis is a hard town.

Corollary: Stay away from public bathrooms in government buildings.

"The Federal Reserve needs to prevent the public's expectation that inflation will accelerate from spurring demands for higher wages." - William Poole, former St. Louis Fed President

St. Louis is first and foremost a river city, and like many river cities - Louisville, Richmond, Memphis, Pittsburgh, Cincinnati - the water is both a source of pride and a mark of shame. St. Louis's proximity to the Mississippi river helped shape it as a key inland port, which at one time was second only to New York in terms of commercial traffic. A hundred and fifty years later, however, the river more often than not serves as a reminder of a more prosperous past; tauntingly icy and vacant in the winter, oozing thick columns of humidity that blanket downtown in the summer.

The Federal Reserve Bank of St. Louis sits on Locust Street, a few blocks west of the Jefferson National Expansion Memorial just off the banks of the Mississippi. Like St. Louis itself, you no longer have to visit the place to get what you need. It's available online, and the St. Louis Fed's online economics database has plenty of useful information you can peruse when your head isn't being forced into a metaphoric toilet bowl by a jackbooted monetary thug.

Take a look at the following picture of the year-over-year percentage change in average hourly earnings:

That's the kind of weird economic data you can find at the St. Louis Federal Reserve. You can also find even more bizarre data series, like MZM (money zero maturity), USINTDMRKTJPY (U.S. Intervention: In Market Transactions in the JPY/USD), PPILFE (Producer Price Index: Finished Goods Less Food & Energy) and DSEPLA (Earnings by Place of Work in FRB-St. Louis District States).

God only knows why anyone these days bothers to collect economic data. Even more mysterious is why Federal Reserve central bankers and their econo-lackeys in St. Louis would go so far as to store it all up in a database, especially one so conveniently searchable. This is the kind of stuff ordinary criminals tape to the walls of their closets, a hidden scrapbook cataloging a looter's haul. At the Federal Reserve, it's called "data."

"The Federal Reserve needs to prevent the public's expectation that inflation will accelerate from spurring demands for higher wages." - William Poole, former St. Louis Fed President

Please, ignore the fact that in real terms your wages buy less, and less, and less. If not, as Poole says, the Federal Reserve will "need to prevent" your inflation expectations from demanding higher wages. Another plunge face first into the water and I am beginning to understand what "need to prevent" means. Lesson One: Don't fight the Fed.

"It is my pleasure to be here today to help dedicate this state-of-the-art facility. President Hoenig, I commend you and your staff, as well as the designers and builders, of this impressive structure. It will serve Kansas City and the entire 10th District well." - Federal Reserve Chairman Ben S. Bernanke

The time for honoring yourself will soon be at an end. I heard that line in a gladiator movie, I think. It's a convenient fairy tale for those of us that comprise the "general public." And then another monument gets erected - by those honoring themselves for methodically executing our ongoing impoverishment, and we have to scrounge up another pie-in-the-sky lie to tell ourselves; from dotcom to condos to "less is more."

Meanwhile, the monetary authority still has some muscle.

"You want to keep wages behaving,'' Poole said in an interview on Bloomberg Television. Once the public's anticipation of rising prices begins to stoke demands for higher wages, "the jig is up'' and inflation becomes harder to eradicate."

Boot to neck, gotta keep them behaving, see? Otherwise, the jig is up.

In a bathroom stall in St, Louis, gasping for the air of liquidity, lungs filled with debt, I'm no longer sure I want the jig to end.

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