New developments

Well, big new developments this morning, concerning the economy and neither is good.

First, wholesale prices are up a whopping 1.1 percent in March, nearly triple the expected increase. Added to it is that this is "the largest increase since a 2.6 percent rise last November, which had been the biggest one-month jump in 33 years."

Yeah, that's 33 years. Zounds.

In itself, it's just not good news, of course. With everything else that's going on--all the bad news like the deficit spending we're doing, the war in the Middle East, the ridiculously, embarassingly low dollar on the world market, etc.--this is what the Federal Reserve and most economists absolutely didn't want and wanted desperately to avoid. With the falling dollar and a slowing economy, virtually all conversations about that same economy virtually always ended with "Well, at least we don't have any inflation."

And here's why:

With a slow economy or recession and inflation, you get the dreaded "stagflation" of a stagnant economy and inflation.

Now, economists know very well what to do for one or the other, but when you put the two together, it makes for a heck of a mess, a very difficult situation because they just don't know what to do. For inflation, you increase interest rates, to slow the economy. For a recession, you cut interest rates. Either is simple. Together, it's a stinker. You really have to walk a tight rope.

And frankly, if you were a student of history, you would know that this is almost inevitable, given that this President and his administration took us into their arbitrary war, with all it's spending. In the 60's, it was President Johnson's war in Vietnam, with all it's spending--and no tax increases--that brought us to the inflation, later, in the 70's. Different presidents and administrations paid dearly for that--right Mr. Carter?

But that's what is so great about this President. He was never a student of history. Don't know anything about how economies work? Don't know how those same economies work with high spending, low interest rates, low tax rates and more tax cuts for big business and the wealthy? Don't know anything about creating power vacuums in a despotic country, especially in the Middle East? No problem. Don't worry your pretty little head. Your friends will take care of you and your friends, for sure.

Okay, so here we are with a "bad moon rising." We need some good news and here it is: The good news, if there is any, is that the Fed will now be much less likely to cut interest rates further. MUCH less likely. You can bet on that. The one thing that REALLY concerns that group is inflation. So now, the dollar will be much less likely to drop a whole lot farther, even though today it did, what with the psychology of the markets and all. It's not great news, but it's something.

The second big development today---yeah, just second--is that oil hit $114.00 a barrel today. Yup. Read it again: $114.00 a barrel for oil. It did back off but hey, it hit it. And the lower the dollar goes, the higher oil will go, certainly.

The thing is, I'm sure the Current Occupant of the White House--as Garrison Keillor and I like to call him (he created it, of course)--has no idea what to do about the economy. Heck, the Fed will hardly know what to do so how would he?

So, folks, all I'm sayin' is, it ain't good, it's not getting better and they won't know quite what to do. Terrific, huh?

Kevin Phillips says we're sliding into our "post-abundance" period. My description of his theory, not his.

My point is that we should all start paying attention now.