Dow 14,000 Recovery or Stagflation!

Recently the Dow has crossed and hovered around the 14,000 mark, a level not seen since 2007. The Main Stream Media have been singing the praises of this event, declaring that peoples 401K’s have finally rebounded back to where they were in 2007. Of course they attribute this to that brilliant economic genius President Barack Obama.

If the Main Stream Media were doing more reporting and less edifying of President Obama they may uncover a less rosy outlook than they are portraying.

Wikipedia defines Stagflation as : “Stagflation, a portmanteau of stagnation and inflation, is a term used in economics to describe a situation where an inflation rate is high, the economic growth rate slows down, and unemployment remains steadily high. It raises a dilemma for economic policy since actions designed to lower inflation may exacerbate unemployment, and vice versa.”

Wikipedia defines the causes as : “Economists offer two principal explanations for why stagflation occurs. First, stagflation can result when the productive capacity of an economy is reduced by an unfavorable supply shock, such as an increase in the price of oil for an oil importing country. Such an unfavorable supply shock tends to raise prices at the same time that it slows the economy by making production more costly and less profitable.[5][6][7] Milton Friedman famously described this situation as "too much money chasing too few goods".

“Second, both stagflation and inflation can result from inappropriate macroeconomic policies. For example, central banks can cause inflation by permitting excessive growth of the money supply,[8] and the government can cause stagnation by excessive regulation of goods markets and labour markets.[9] Either of these factors can cause stagflation. Excessive growth of the money supply taken to such an extreme that it must be reversed abruptly can clearly be a cause. Both types of explanations are offered in analyses of the global stagflation of the 1970s: it began with a huge rise in oil prices, but then continued as central banks used excessively stimulative monetary policy to counteract the resulting recession, causing a runaway price/wage spiral.[10]

The government will try to tell us that inflation is only around .02 percent per month but the key to understanding that figure is it is always qualified with the phrase “excluding food and energy”! What a bunch of hogwash! Inflation is the increase in prices we pay out of our pocket and food and energy are two of the primary drivers of most people’s budgets!

With the Federal Reserve pouring $85 billion new money into the economy every month with their Quantitative Easing program the result is a deflating dollar and increasing prices.

Our Government through the various agencies such as NLRB, EPA, FDA FCC, etc as well as the presidents Executive Orders have placed excessive regulations on everything. The New Affordable Care Act (AKA Obamacare) has over 13,000 pages of regulations. The EPA is on a course to eliminate Coal as a viable and reliable source of energy. The NLRB has been activist in blocking companies like Boeing from locating plants in States that have Right to Work laws.

Your 401K may have recovered to it’s 2007 levels but the amount that can be purchased with the money has been cut in half. Gasoline was around $1.80 per gallon when Obama took office it is over $3.60 per gallon today. Food marketers have shrunken the package sizes while raising the prices.

Conclusion we are deeply embedded in Stagflation as a result of the second definition of causes above. The recovery is only a sound bite for the no longer trustworthy Main Stream Media.

Work Hard Have Fun

Bob DeMaura