Deflation Risks Subsiding...Goldilocks Has Been Achieved

Ben Bernanke was right – if you put your mind to it, and print enough money, you CAN prevent deflation.

New CPI numbers show that the core CPI (excluding food and energy, which nobody really uses anymore) actually jumped 0.3% last month, their largest increase since June 2008. About 40% of that increase came from tobacco taxes though, so you can bet our economic leaders are congratulating themselves on a “Goldilocks” inflation/deflation scenario.

Now they just have to figure out a way to put all that newly printed money away – shove all that toothpaste right back in the tube - and we’re all set.

Recommended reading: Andy Kessler on why Bernanke should spell out plans to combat hyperinflation.

Why the economoy is worse than we know

In his recent article in Harper's Magazine, Kevin Phillips takes a good hard look at government economic numbers (a la John Williams) and concludes that - surprise, surprise - the numbers are skewed to serve political goals.

This is not news to many readers, but this piece is still worth a review, as Kevin paints a clear story about the history of gov't tinkering in our favorite economic stats.

Bottom line is that keeping an eye on the "real" picture, rather than the picture our gov't paints for us, gives us a huge advantage in our trading. I believe that sadly, your average investor believes, in large part, what the gov't tells them. And that's why your average investor doesn't make any money.