The Insanity Rolls On (Michael Pento)

Thursday, September 16, 2010
By: Michael Pento

Today was a particularly dismal day on the economic news front. Even though this recession began in December of 2007, we still find Initial jobless registering 450,000 in the week ended Sept. 11, which—if anybody is really wondering—is still a lot. According to a phone conversation I had this morning with statisticians at the Labor Department, the average weekly Initial claims number going back to September of 2000 is 392,830. So after losing 8.5 million jobs and after nearly 3 years of recession, we are still shedding more than 56,000 jobs per week above the 10 year average.

Thanks to Bernanke and his love of counterfeiting, we find that the Producer Price Index climbed 0.4% in August over July and was the biggest increase in five months. This follows the report on Import Prices released yesterday, which showed an increase of 0.6% month over month. But how can this be if the Fed Chairman assured us last month in Jackson Hole that; “At this juncture, the risk of either an undesirable rise in inflation or of significant further disinflation seems low.” Exactly what does the Fed chairman consider undesirable inflation to be? Shouldn’t the head of our central bank consider any inflation to be undesirable?

But the worst news came on the trade front. The current-account deficit in the U.S. widened to $123.3 billion in the second quarter, reflecting a surge in imports. This increase in the broadest measure of international trade (which includes income payments and government transfers) surged higher following a revised $109.2 billion shortfall for the first three months of 2010.

Can it really be any wonder why gold has outperformed equities in the past decade? From August 2000 thru August 2010 gold increased about 340%. Over the same time frame, the S and P 500, plunged about 30% in nominal terms. But if measured in terms of gold or the weakening dollar, the performance of US stocks during that time frame would be much worse.

But instead of learning a lesson from the past decade our leaders have sought to intensify the policies that have wrought such a horrific economic scenario.