Fed Warning on Inflation? David Stockman on Both Parties Advocating Default, and Paul Craig Roberts on Democracy in China

Rather than get some substantial reading done on Man, Economy, and State, I have spent that past hour or so commenting on the HuffPost.  There is seriously no arguing with people on there.
So anyway, not too much news today.  Mark Perry mentioned my article in a blog post on Carpe Diem today.  Kudos to Dr. Perry for the much-needed publicity.

Ironic news today as both the Elizabeth Duke of the Federal Reserve Bank in Boston and St. Louis Fed Prez James Bullard are both warning of inflation today.

Here is Duke in a speech today at what I believe was the Boston University School of Management:

"the recent increase in gasoline prices has affected consumer choices in housing and other purchases, big and small. Family incomes have not kept pace with rising costs and many families, particularly those with low-to-moderate incomes, are actually facing the decision between buying gas to drive long distances to work and paying their mortgage.

Profound insight indeed yet she fails to realize that it is the Fed's policies that are pushing up gas prices and it was the Fed's funding of the housing bubble that caused many people to take out mortgages.

Here is Bullard actually suggesting in a speech sponsored by the Mineral Area College Foundation that perhaps the core inflation number should be dropped:

Bullard said ignoring energy prices in measures of inflation may understate the true inflation rate if rising energy prices represent a relative price shift for energy.  In addition, he discussed headline and core inflation and stressed that the key policy goal with respect to prices is headline inflation rather than core.  He also said that the Federal Open Market Committee (FOMC) “should de-emphasize core inflation in order to reconnect with households and businesses that experience important price changes every day.”

So inflation should be calculated by including food and energy prices?  What a revelation!  Housing prices should be included, though of course it would understate inflation today as prices are still dropping.  If housing prices were calculated in the CPI, perhaps people would have recognized the housing bubble earlier though.

Here is a pretty good video of David Stockman being interview by Bloomberg:

Excerpt:

"The problem is not the debt ceiling. When push comes to shove, at the 11th-hour, they will do it for a couple of weeks or months and we will have a little more borrowing headroom and will be back to the same impasse where we are now."

"The real problem is the de facto policy of both parties is default. When the Republicans say no tax increases, they're saying we want the U.S. government to default. Because there isn't enough political will in this country to solve the problem even halfway on spending cuts.
When the Democrats say you can't touch Social Security, when you have Obama sponsoring a war budget for defense that is even bigger than Bush, then I say the policy of the White House is default as well."

Obviously raising taxes is the wrong solution, but yes, both parties are advocating default.  Drastic cuts need to be made, but they won't be.
Here is a better interview of Paul Craig Roberts with Max Keiser:

Excerpt:

"The west prides itself that it is the standard for the world, that it is a democracy. But nowehere do you see democratic outcomes: not in Greece, not in Ireland, not in the UK, not here, the outcomes are always to punish the innocent and reward the guilty. And that's what the Greeks are in the streets, protesting. We see this all over the west. There is no democracy, there are oligarchies, some of these smaller European countries are not even run by their own governments, they are run by Wall Street... There is probably more democracy in China than there is in the west. Revolution is the only answer... We are confronted with a curious situation. Throughout the west we think we have democracy, we hold ourselves up high, we demonize China, we talk about the mafia state of Russia, we talk about the Arabs and so on, but where is the democracy here?"

Couldn't have said it better myself, except for the slightly protectionist bent he goes on in the second video.  Everyone on the HuffPost should watch this.
I will end with a great graph on the Euro Crisis from the Economist