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Ante omnia armari
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Saturday, June 28, 2008
Entry for June 28, 2008
The government-calculated Core Inflation does not include food or fuel. Cynics believe this is to give the government a lower inflation number to tout. Cynicism aside, the core inflation rate now is higher than the yield on many short-term certificates of deposit. The old Consumer Price Index does include the items that are killing our pocketbooks. Using the CPI as a basis, it is clear to see that there is currently no conservative way for us to protect our savings against inflation. If we cannot afford to save, the next best thing is to avoid debt. If we cannot avoid debt, the best we can do is to try to keep the interest rates that we pay manageable. If we cannot manage the interest rates that we pay, we fail.
Citing their fear of inflation, The Fed has signaled that they have stopped making rate cuts, so now the pundits will wait to see if the economy is stimulated enough. The Fed will never admit to the fact that they never have had a true clue what to do, and that so far they have not fixed anything.
Apples, oranges, corn, horses, sheep, and cattle, if you collect any group of farmers to serve as experts on farming they all will agree what is in the barnyard and what is growing in the fields and orchards. Financial experts never can agree on anything, so I am unsure on what exactly qualifies them as “experts.” Some financial experts are now crowing that we have avoided a recession; that the true measure of two consecutive quarters of negative growth was not met. Bah! The few basis points that we stayed about negative growth amounts to a village idiot defense against the obvious; the economy is wedged deep in the toilet trap and The Fed can’t find the plunger. We are in a recession; quit trying to spin it any other way. It may grow to be the mother of all recessions.
It is best to learn about money from those with the biggest bank accounts. Warren Buffett is the King Kong of moneymakers, with $62 Billion in credentials. When The Oracle of Omaha says we are in a recession that will be deep and long, you best not bet against the house. Anyone wanting to argue against Mr. Buffett’s views, please first show us your bank balance.
Mr. Buffett has been rather vocal lately. This is free advice, coming from the very best. I suggest The Board of Governors of the Federal Reserve System may do well to tune in to The Oracle’s frequency.
James A. Zachary Jr.