Fuzzy Math

By Lloyd the Idiot

This from a Dick Black Facebook post:

 ”If you put $10,000 in the bank last November, it’s worth just $9,000 today. Isn’t Ben Bernanke the greatest? It’s called Zimbabwe-nomics. Just print all the cash you need. Liberals are so smart.”

 Huh?  The inflation rate is nominal (but, of course, so are the interest rates), so I just don’t get what the heck he’s trying to say, especially since the term “Zimbabwe-nomics” is not used, well, anywhere.  Guess I’m not as smart as the liberals he references.

 

UPDATE:  Now that I’ve had some time to do some additional research on Mr. Black’s claim,  it appears that it’s not just fuzzy math – it’s a complete fabrication.  The 20% inflation rate simply doesn’t exist, obviously, and, furthermore, there’s no reference to numbers like that  anywhere.

Brings to mind a recent post by Quotable Joe on The Danger of Uncritical Thinking.


Comments

  • LloydTheIdiot says:

    Just to be fair, I do strongly agree that inflation is coming, but I think Bernanke has done a pretty good job with the hand he’s been dealt. And there’s no way there’s been a 10% devaluation of the dollar over the past year.

    Bizarre.

  • Loudoun Conservative says:

    Look at your food prices. Look at your gas prices. Look at the “Quantitative Easing” put forward by Bernanke, which is just another name for “print more money,” and you cannot ignore that fact that the dollar has been seriously devalued, and your purchasing power has been eroded.

    In fact, the 10% number may be low. Here is a link to an article that says that China has devalued the dollar by 30%.

    http://www.businessinsider.com/china-devalues-us-buying-power-by-30-protects-us-treasury-holdings-2011-1

    And here is a great link that will explain quantitative easing for you.

    http://www.youtube.com/watch?v=PTUY16CkS-k

  • SPQR says:

    Maybe he had to make a $1,000 withdrawal to pay his property taxes? Or alternatively, maybe he had to make a withdrawal to pay his property taxes…in Zimbabwe?!?

  • G.Stone says:

    The hand he been dealth is on the printing press cranking out money.

  • Heck, it wasn’t even a year. It was only from November – 6 months

  • Loudoun Insider says:

    Yet another example of why this guy should be swept into the dustbin of Loudoun political history.

  • DC Beltway Bandit says:

    I want to give Black the benefit of doubt, but how does his fuzzy math square with his idealogical “fiscal conservatism” or does that notion only apply to a liberal administration?

    At Loyd – I agree Bernanke has done “ok” but far better than Hank “the Citibank” Paulson could have ever done given the complexity of our National Economy. Geithner on the other hand, I am not a fan of. He has made numerous irresponsible decision, Too Big to Fail etc.

  • Eric the 1/2 troll says:

    Its not rocket science. There has not been anything like a 10% inflation rate and THAT is the only way $10000 becomes $9000 in a bank. Buying power (i.e., the price of gas, etc) is built into the inflation rate figure. This guy has just shown what an idiot he is simply by opening his mouth.

  • Loudoun Conservative says:

    The Loudoun Conservative above is an imposter. I’m the real Loudoun Conservative. Anyway, the Chinese Yuan is significantly undervalued by most accounts. Most believe at least 30% but some think it could be as high as 75%. Think about the DOW swings when there is a major economic event….well that can happen in currency fluctuation as well. Check back to WWII when the hyperinflation of the German Deutch Mark where it’s value changed in the several hundred percentile range overnight. This can happen again folks. It is not due to Bernanke, but the culmination of policy over the last 50 years. Spending money, printing money, deficit spending, debt, demographics, international currency and fiscal policies all contribute to it. Bush Jr. intentionally was trying to devalue the dollar so that our imports would go up. Obama has continued that same policy. It makes for a recipe for disaster if we stay on the same road. The only real solution is free trade and eliminating the inefficiencies in the market place. OH, and Loudoun Conservative, stop stealing my handle!

  • Ref says:

    Perhaps it was “not intended to be a factual statement”? As in, he needed some numbers to make a point, and his own rear-end was the closest reputable source?

  • BlackOut says:

    Folks it’s started (or should I say continued); minor gaffe but it’s a trend in a very long time line. This man makes stuff up for his own use. He’s made a political career of it. See previous twists and exploitations of the Ashburn Library, his service on the library board, his support and admiration amongst the legislature, his false claims of fatherhood of Rt 28 overpasses, etc, etc.

    The entertainment will get better I guarantee it. This is going to be a train wreck.

  • Eric the 1/2 Troll says:

    “…the term “Zimbabwe-nomics” is not used, well, anywhere…”

    No, it is used (mostly in rightwing libertarian blog circles) to describe fiscal policies that create hyperinflation (like in Zimbabwe under President Robert Mugabe). In short applying the term “Zimbabwenomics” to the US is nothing short of hyperinflation hyperbole. The real LC has it right, any inflationary presures we might be faced with going forward are the culmination of policies over at least the last 50 years.

    Here is a primer on Zimbabwenomics:

    http://longorshortcapital.com/zimbambwenomics-and-mugabe-efficiency-theory.htm

  • Let's Be Free says:

    I can’t believe how many people are late to the game in terms of understanding the inflation that is overtaking us.

    Last month White House spokesman Jay Carney dismissed Wal-Mart CEO Bill Simon’s warning that he is “seeing cost increases starting to come through at a pretty rapid rate.” Carney said, “In terms of one person’s prediction about inflation, I don’t have a response to that,” he told reporters assembled for the March 31 daily press briefing. Mr. Carney continued, “I have not, in the meetings I’ve been in with [the President] involving economic discussions, have not heard any reference to those particular forecasts.”

    Well, the March CPI was released April 15th. The inflation rate for food at home this year is running at an 11.2 percent annual rate (23.3 percent for all those fruit and veggies that Michelle Obama wants everyone to eat). But not to worry, the inflation rate for personal computers is a NEGATIVE -14.3 percent.

    All that loose monetary policy and deficit spending does wonders for ordinary people and households trying to hold it together — NOT.

    The White House is clueless, as are many blog posters.

    Let ‘em eat IPads — now there’s a motto for the 2012 campaign and those who want to continue on with the big government, print money and print it again economic interventions.

  • Let's Be Free says:

    And as for whether a 10 percent inflation estimate is in the ballpark, check this out.

    http://www.cnbc.com/id/42551209

    The modern magic of hedonic price indexes, which means almost nothing for low and moderate income people, is tamping down the reported rate of inflation. Had the BLS been calculating CPI this way during the time of Jimmy Carter we would likely have been blessed with a second peanut farmer presidential term.

  • edmundburkenator says:

    LBF, most of this inflation is associated with the fuel prices (it takes a lot of petroleum-based fertilizer to grow your veggies). Fuel prices are driven by speculators, not supply/demand. Unfortunately.

    I do welcome your concern for low/moderate income people. You should also include whatever we want to call the “middle class”.

    Before you start using the CEO of Walmart to shape your economic policy, you might want to check their annual reports and look at their profit margins.

  • Let's Be Free says:

    Actually EB I’ve made some nice change this last year investing in Potash (POT) and Mosaic (MOS). Those companies mine fertilizer — whatever role energy played in the production of their ore was long before money or financial systems were invented.

    And when I bought into the DIG (Ultra Gas and Oil) ETF last August, I was looking at the US deficits, US monetary policy and US foreign policy, Obama’s regulatory and environmental policies, and how those would interact with supply and demand and contribute to political unrest in the Mideast and developing countries. I didn’t think once about those guys wearing black hats, who commit the cardinal sin of buying future contracts — you know future contracts that reflect risk, continued political interventions and expected supply and demand conditions.

    I know these concepts are too complex for the President, his spokesman and the Attorney General to understand but hope to run into some more enlightened folks on the blogs. No problem for me though, because I took advantage of your president and his policies to earn a 100 percent return on DIG in 8 months.

    And too bad that you reject out of hand by a knowledgable business person. That’s par for the course in Obama’s management of the economy — it’s no wonder the recovery is so weak.

  • DC Beltway Bandit says:

    Not trying to defend Black, is it possible this was a simple mistake? After all we are human and tend to make mistakes.

  • BlackOut says:

    DC, Black is way beyond the benefit of doubt.

  • Eric the 1/2 Troll says:

    “I know these concepts are too complex for the President, his spokesman and the Attorney General to understand but hope to run into some more enlightened folks on the blogs.”

    Well, that pretty much says it all, doesn’t it…

  • edmundburkenator says:

    Business people are trying to make a profit — as they should. I didn’t reject his comments, I just am noting their context.

    If there is nitrogen in your fertilizer, it was refined out of petroleum. Potash is often a component of what goes down on the ground.

    Dick Black is not a rational fellow, so why are folks searching for reason in his statements? Stop. It’s a waste of time.

    He’s part of the repeat-it-til-they-believe-it crowd. It works work some folks.

  • edmundburkenator says:

    Eric, I suspect LBF is really not looking for enlightenment, he’s looking for confirmation.

    Wrong blog for that.

  • Let's Be Free says:

    I’ve always been a low to no nitrogen fertilizer fan myself — it’s good for the environment, and top-notch for Chesapeake Bay.

    I don’t know of or care about Dick Black — maybe he’s a blind squirrel who found an acorn or got sufficiently close to it to be able to sniff it out. If you all don’t like the fellow, for whatever reason, there has to be much more fertile ground to plow than an emerging issue he is fundamentally correct on.

    And context? The context is the Walmart CEO was confirmed by published data. Hard to get better than that. Sounds like some folks are blinded on the inflation issue by a statement from a fellow they don’t like.

  • edmundburkenator says:

    LBF, you don’t think the CEO has rising prices to defend?

    “Everyone, just put down that stupid P&L statement and listen to me… it’s not my fault the crap you want to buy is more expensive.”

    He’s got a problem with food costs (and lower margins) to be sure, but he’ll make it up in other ways.

    Net profits were UP in Q1.

    I don’t know him, so I don’t know if I would like him or not.

  • LloydTheIdiot says:

    Black is not entitled to the benefit of the doubt on this one – because there is no doubt. It’s not even a 10% inflation rate he suggests – he used November as the benchmark, so that would put the annual inflation rate at more like 20% and obviously that has not happened. No one on this thread has been able to point to anything that even remotelsy supports the crazy statements he’s made. And it couldn’t be a mistake either.

    That said, iInflation is going to occur as a result of the reckless spending – not Bernanke’s policies per se — but, unlike Black’s statements, we haven’t seen it over the last six months.

  • Cato the Elder says:

    Inflation will indeed occur as a direct result of Ben’s policies. Furthermore, it’s exactly what the policies are designed to do, just ask him.

    Bernanke injects free money into the system, and all the money has to go somewhere. To give you some idea of how absurdly easy it is to get leverage, even a little fish like myself can lever up 5:1 at a rate of 1.3%. What this means is I have a million in cash I can borrow 5 million at an insanely low rate to go and speculate an whatever my heart desires.

    Now, imagine the big guys at GS doing the same thing, only with many, many times more leverage. It then becomes easy to understand why corn, wheat, coffee, sugar, cotton, crude, copper, etc. are up in excess of 10% since the announcement of QE2.

    We’re in the early stages of commodity push inflation, where input costs are rising and the effects are just beginning to be felt by the consumer. Businesses with pricing power are passing the costs along, like oil companies. Businesses without pricing power like Dell are having to eat the higher inputs, thus compressing their margins.

    The sad part about QE2 is that it does exactly what the progressives claim to abhor, which is transfer wealth from the bottom 95% to the top 5% who don’t have to spend 70% of their discretionary income on food, fuel and clothing and can afford to speculate.

  • edmundburkenator says:

    Miss you around here Cato.

  • edmundburkenator says:

    So what happens when the commodity bubble bursts?

  • Cato the Elder says:

    That would be a net positive for our economy. Personally I hate wealth that gets generated during BS commodity rallies (note that I didn’t say I wouldn’t participate, just that it makes me feel mildly dirty for doing so). I was half joking when I said the other day that one sure fire thing that could be done to reduce energy prices immediately would be to refuse to raise the debt ceiling.

    Mind you, that would create enormous dislocations in the market, but it sure would be entertaining to watch the GS/JPM/MS/insert TBTF institution here get screwed.

  • AFF says:

    Thanks Cato. When this post went up I wondered what your take was.

    What happens if the free money (1.5%) gets cut off tomorrow?

  • Cato the Elder says:

    Nobody really knows the answer to that, but I’d say that you’d see a 10% or better correction in the financial markets as everyone freaks out then stabilization as the news gets digested and people realize that just because new money isn’t coming into the system doesn’t mean there’s not plenty of rollover cash working. Remember, QE2 was new money, but over half the purchases are made with rollover funds. The fed will be in there buying notes for a long, long time – I don’t see them shrinking their balance sheet anytime in the foreseeable future. In reality, they need to get the deficit under control before they start to tighten because if they have to drain liquidity with the deficit this wide we’d see rates climb pretty quick and that would put the kibosh on any recovery activity.

  • Loudoun Farmer says:

    Only tangentially related to the discussion, but if you are taking a crop off a field, you need to add Nitrogen from somewhere, be it from petroleum based fertilizer or manure. A field is like a bank of nutrients (both major N/P/K and minor Magnesium, Calcium, etc)…you can only make withdrawls for so long before the soil has nothing left to supply the plant. As a rule of thumb, a field thats being cropped for hay, in order to stay balanced with two cuttings being removed each year needs about 60/lbs per acre of N per year average. If its a pasture based situation with animals putting manure on the field with a good amount of legumes (clover) you can get away with less or no additional nitrogen, but in any crop field, hay land, or vegetable production…nitrogen isn’t an option its a necessity, so yes, a lot of the run up in food prices is from higher fertilizer costs. In addition there is a great deal of speculation in commodities which just like fuel, is distorting the usual supply/demand side of things.

  • edmundburkenator says:

    I have to make one of those someday…

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