…except maybe–and that’s a very, very tentative maybe–doing nothing; I’ll get to that later. Tyler Durden:
….what will be far more important to end consumers will be the push higher in food and energy costs. The problem, however, is that for the lowest 20% of Americans, as per the BLS, food and energy purchases represent over 50% of their after-tax income (a number which drops to 10% for the wealthiest twenty percentile). In other words should rampant liquidity end up pushing food and energy prices to double (something that is a distinct possibility currently), Ben Bernanke may have very well sentenced about 60 million Americans to a hungry and very cold winter, let alone having any resources to buy trinkets with the imaginary wealth effect which for over 80% of the US population will never come.
Decades from now, economists–who hopefully aren’t quite the fucking morons they are currently–will look back on this time and wonder why we didn’t create jobs instead. While inflation, as measured by CPI*, is very low, dropping money out of helicopters (ok, quantitative easing) is the worst possible way to create jobs via inflation. Instead of giving money to wealthy bond holders, we could give it to unemployed workers in exchange for working on things we need done–this is typically known as a jobs bill.
This is a complete failure by our elected officials to respond to the most severe economic crisis in seventy years.
Of course, if you don’t really care about the employment deficit, then I guess things aren’t so bad….
*Regarding the Consumer Price Index (CPI), JP Morgan (yes, those motherfuckers) makes this trenchant observation (italics mine):
When the Fed considers the possible consequences of a falling dollar resulting from QE2, it should perhaps focus on food and energy prices as much as on traditionally computed core inflation. First, the food/energy exposures of the lower 2 income quintiles are quite high (see chart). Second, the core CPI has a massive weight to “owner’s equivalent rent”, which suggests that the imputed cost of home occupancy has gone down. Unfortunately, this is not true for families living in homes that are underwater, and cannot move to take advantage of it (unless they choose to default and bear the consequences of doing so). Due to the housing mess, there has perhaps never been a time when traditionally computed core inflation as a way of measuring changes in the cost of things means less than it does right now.
More simply, people gotta eat.