Ben Bernanke Dumbs Down Inflation News as House Sales Collapse

We’re suffering from paradox overload this morning.

We read in the paper that June saw the lowest inflation gains in five months. Ben Bernanke, speaking to the US Congress, dumbed-down his remarks, in a message dumbbells wanted to hear:

“Core net inflation should edge a bit lower,” he said.

But food has been rising this year at three times the rate of a year ago – or 6.2% per year. And gasoline already sells for a price 30% more than it did last year.

Go figure.

Meanwhile, from Las Vegas comes word that house sales are collapsing – they’re down 42% from a year ago. Nationwide, new housing permits are at their lowest in 10 years. And in Southern California, house sales are at their lowest volume in 14 years. But while houses weren’t selling, when they did sell they sold for slightly higher prices.

Go figure again.

Up the mortgage loan food chain, on Wall Street, the big fish at Bear Stearns (NYSE:BSC) say that investors are out of luck. There is trouble galore in the CDO market. But over at the equity trading desks, things have never been better. What trouble, ask the stockjobbers? What housing problem, they want to know? The Dow is near an all-time high. Neither housing slump…nor subprime slump…nor any kind of slump is going to stop this market, say the pros.

Dick Gaylord, who will become the nation’s top REALTOR next year, claims that the market “isn’t down, but just returning to normal”.

“I don’t know that there’s ever been a bad time to buy,” adds Gaylord sagely. “If people will hold on, there’s no bad time to buy in real estate…”

The whole financial world is full of paradox and contradictions.

Bill Bonner
Markets and Money

Bill Bonner

Bill Bonner

Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind Markets and Money.
Bill Bonner

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Core net inflation down, food and gas prices up?
That’s easy. The core net inflation index does not include food or energy price rises.
So is it time for the Fed to target a different measure of inflation?

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