In this week's Off the Cuff podcast, Chris and Mish discuss:
- Fuzzy Fed Math
- Housing-cost methodology understates true inflation
- China's Gold Hunger
- Vacuuming up 50% of total world production
- Market Madness
- Any news – good, bad, or worse – drives stock prices higher
Hooray! The Dow (over 15,000) and the S&P (well over 1,600) are at record highs.
As the Fed cheers its success in creating a triple-whammy in asset bubbles (stocks, bonds & housing), it's also patting itself on the back for doing so while keeping inflation securely squelched. The latest CPI stats from the BLS peg the inflation rate at a paltry 1.47%
Not so fast, cautions Mish, who did a little corrective math to the dubious way the BLS calculates housing price inflation, which is the largest single driver of the CPI. Using his methodology, a more rational accounting of housing prices pushes CPI up to 3.33% – well over the Fed's own targeted threshold of 2.5%, at which it has said it will stop quantitative easing (otherwise known as QE, or money-printing).
It's clear to Chris and Mish – as well as anyone with two eyes – that the Fed has no Plan B for exiting its popular QE program. The markets are high on liquidity, and will go into instant withdrawal convulsions the millisecond the QE spigot starts lessening.
by stevejermy