No Income, No Problem...Just Go Shopping (Michael Pento)

Not to worry. QEII will fix everything

Monday, November 1, 2010
By: Michael Pento

Personal Income fell in September as spending increased nevertheless. Purchases increased .2%, while incomes fell 0.1%, the first drop since July 2009. Real Disposable income—which removes inflation and includes changes in taxes—dropped .3%. And of course, forget about all that talk about consumers finally learning how to save. The savings rate decreased to 5.3 percent from 5.6 percent.

The most egregious data point released from the BEA today was on inflation. Somehow, they managed to claim that The Federal Reserve’s preferred price measure, which excludes food and fuel, was unchanged from the prior month and was up just 1.2% from a year earlier, the smallest gain since September 2001. That should come as a shock to anyone who has witnessed soaring prices from nearly every commodity produced on the planet.

But the Fed and Administration will not worry as much about falling incomes as they will about less spending and low inflation. Their answer to every problem is print more money.

We also had the release of the October ISM-Manufacturing Survey today. The index came in at 56.9 up from 54.4 in September. The most interesting part of the survey came from what respondents are saying:

• "The dollar is weakening again, which is resulting in higher costs for our materials we purchase overseas. It is hurting our profit margins." (Transportation Equipment)
• "Business slowing down but still double digit over last year." (Chemical Products)
• "Currency continues to wreak havoc with commodity pricing." (Food, Beverage & Tobacco Products)
• "Customers remain cautious, placing orders at the last minute, making supply planning a challenge." (Machinery)

Not to worry. QEII will fix everything.

Michael Pento, Senior Economist at Euro Pacific Capital is a well-established specialist in the “Austrian School” of economics. He is a regular guest on CNBC, Bloomberg, Fox Business, and other national media outlets and his market analysis can be read in most major financial publications, including the Wall Street Journal. Prior to joining Euro Pacific, Michael worked for a boutique investment advisory firm to create ETFs and UITs that were sold throughout Wall Street. Earlier in his career, he worked on the floor of the NYSE.