"We're All Keynesians Now"

Richard Nixon declared the above headline, and I suppose he was right. Consider these facts:

• Economic stimulus of $160 billion to be sent to Main Street around May 1. Has anyone ever even talked about how this is to be paid for? No. The answer is that we'll borrow it.
• Fed economic rescues for Wall Street -- $800 billion, of which $400 billion has already been spent. Never mind that most of the Wall Street firms being assisted aren't even members of the Federal Reserve Bank system, nor have they paid FDIC deposit insurance. It doesn't matter any more, now that the Fed can create money "electronically" (Ben Bernanke's word). Even more remarkable considering that many of these Wall Street executives were paid more than $250 million each last year while their investors lost money!
  

I guess those two figures tell us a lot about where our government's priorities lie. Nearly $1 trillion of new debt and new money created since August 2007, which doesn't even include the deficits already anticipated prior to that date. More than 80% of it will go into Wall Street's pockets. This $1 trillion figure is just the new debt intended to spend America out of an economic slump; it doesn't include the deficit spending that was already budgeted for this fiscal year. That's a lot of profit for Wall Street that the don't even have to work for!

Fed Fund futures are pricing in a 100 basis point interest rate cut this afternoon when the FOMC meets.

Question: How many times in the 95 year history of the Fed has the FOMC cut by 100 basis points?

Answer: Zero. We'll see if the Fed makes economic history this afternoon. It would be the first time. But former Fed Governor Laurence Meyers this morning said that the Fed mustn't "disappoint" Wall Street today. The former Fed hawk said that the Fed must ignore inflation so as not to disappoint Wall Street and the stock market.

"It is a wise rule and should be fundamental in a government disposed to cherish its credit, and at the same time to restrain the use of it within the limits of its faculties" -- Thomas Jefferson (letter to John Wayles Eppes, 24 June 1813) Reference: Jefferson Writings, Peterson, ed., 1280)

PPI and Inflation

The PPI year-over-year inflation rate released this morning was 6.4%, more than triple the Fed's target rate. Even the core rate was much higher than expected, by more than double! I couldn't help but notice that the CNBC crew hardly discussed it, quickly glossing over it and moving on. They preferred to keep a steady drum beat of their group think cousins demanding further Fed rate cuts. I also couldn't help but notice that their guests were also "all keynesians" now! Couldn't they find a divergent voice? There are plenty of them out there! The Dollar be damned! Inflation ignored! Full speed ahead. Never mind that we're headed "full speed ahead" for the edge of an cliff!

This soybean chart seems to say it all. It is symbolic of the expectations for the future of commodity prices. The financial markets are pricing in higher inflation to come. After reaching lock limit down 6 times in the past 11 days, including last night, soybean prices are shooting skyward like fireworks this morning.

Wall Street is happy this morning, with the Dow up by more than 250 points. Wouldn't you be happy with the Fed injecting $800 billion into your pocket that you didn't have to earn?