The Commerce Department recently revealed that wholesale inventories increased by 0.5 percent in August. Additionally, sales at wholesalers rose by 0.9 percent during the same month, marking the first uptick since April. However, the true implications of these figures remain ambiguous, even among experts.
Yelena Shulyatyeva, an economist at BNP Paribas in New York, interprets this trend as companies exercising caution ahead of the Presidential election. Contrastingly, Peter Newland from Barclays views the report as a positive indicator that demand is beginning to recover.
In essence, there’s a notable lack of clarity regarding what these statistics actually mean. Even if we could decipher their significance, one might wonder how they genuinely impact the broader context.
It’s challenging for us to ascertain the real value of these metrics. The reliability of economic data has fallen to a point where it’s comparable to the dubiousness of a John Edwards paternity claim. The data exists, but it begs the question: can we truly trust it?
From our vantage point, the economy and financial systems have become so distorted that all standard reference points have vanished. Everything seems to be drifting out of alignment. Economic data now resembles abstract inscriptions in a cave dweller’s sanctuary. Here’s why that is…
Extracting Wealth from Dollar Savers Globally
Consider an industrious individual working 200 hours a month with a take-home pay of $5,000. When he purchases a new pair of shoes, the store owner records this transaction in their inventory and places an order with a wholesaler.
Meanwhile, Federal Reserve Chairman Ben Bernanke introduces $40 billion into circulation through his new QE3 initiative. But where does this money originate, and where does it ultimately go?
Official claims assert that this cash is used to acquire mortgages, thereby lowering mortgage rates and buoying the housing market. We hear that underwater borrowers will get relief, allowing banks holding bad loans to transfer these to the Federal Reserve’s balance sheet.
However, what about the other side of that equation? Can these failing mortgages truly become assets for the Fed? The reality is they cannot.
These bad debts remain on the books and must eventually be accounted for. A default must still occur. Someone has to bear the consequences.
In Bernanke’s realm, neither the lender nor the borrower seems accountable. Instead, he opts to obscure systemic failures, protecting banks and inflating currency, which, in turn, impacts dollar savers worldwide.
Bernanke’s policies have left an unmistakable mark on wholesale statistics…
Funny money impacts wholesale inventories in unexpected ways. Perhaps reduced borrowing costs stimulate credit-based purchasing, thus depleting wholesale stockpiles. To some economists at Princeton, this phenomenon appears to indicate economic growth.
Yet, the truth is that this supposed growth is merely an increase in debt. Essentially, current economic benefits are borrowed from future generations, leaving the responsibility to today’s children. Moreover, GDP growth often reflects rises in debt rather than true economic progress.
Other, more troubling consequences arise from this influx of currency. Here’s one stark example…
Escalating Food Prices Are a Serious Concern
The summer drought has triggered a significant rise in food prices. While government mandates, such as those directing the use of corn syrup in fuel, undoubtedly contribute to this trend, they are just one piece of the puzzle.
The Federal Reserve’s expansive money printing practices further compound the situation, creating a heightened risk of soaring food prices. While we cannot predict the future with certainty, history provides valuable insights.
For instance, we know that an endless supply of digital currency, when released into the economy, often leads to increased prices, particularly against a backdrop of finite resource availability. This phenomenon likely underpins the Food and Agriculture Organization’s food price index, which has surged 140 percent over the past decade.
Regrettably, this trend is only the tip of the iceberg. With the impending effects of QE3 set to exacerbate supply shortages from the recent drought, food prices are poised for a dramatic increase. Drawing from past experiences, we can anticipate tomorrow’s headlines, and they won’t be amusing…
“Hungarian citizens take to the streets as global food prices skyrocket by 50 percent in less than a year.”
Count on newspapers across the world to cover this story. Remember where you first encountered this insight.
Sincerely,
MN Gordon
for Economic Prism
Return from Rising Food Prices are No Laughing Matter to Economic Prism