A BAD DAY

Ever have a problem with the sciatic nerve? It's like watching the teatimony of the Inspector General of the Federal Reserve testify before Congress. It's truly painful...ok, not that painful. It's not like knowing where the hell 5 trillion dollars managed to get to painful. But it hurts and has been this way for a couple of days now. It's not painful like The Leader telling Gaddafi he must leave now and having Gaddafi tell The Leader, "I don't think so." But it hurts. It's not painful like oil at $103 a barrel--thats WTL...nobody knows where Brent is...but it hurts. Anyway, that's my tale of woe. It's a bad day; I hurt.

In the mean time unemployment dropped below 9% this morning which is a good thing but this recovery is really a shallow thing. A lot can stop it dead in its tracks...like inflation fears. Which brings me to another period of confusion in which I often find myself as you loyal reader know. This week, M. Trichet gave the clearest sign that any central banker is likely to give the interest rates in Europe are heading up next month. His fear of inflation is the reason. I'm quite sure thatIreland, Spain, Greece and Portugal aren't too happy about M. Trichet's fears but the Germans are turning handsprings...except that the dollar is in the crapper against every currency in the world which aint good for exports from Berlin. While this positioning of M. Trichet just proves once again that setting monetary policy for Euroland is not an easy thing what I don't get is how can M.Trichet spot inflation a-comin' and Mr. Bernanke can't see anything out there but blue skies on the same front. Somebody needs a check-up from the neck-up. Then again, perhaps there is more to this than folks realize or are willing to admit.

I have written for well over a year that the grand scheme in play is that the way out of this mess that we find ourselves in is to debase the currency and inflate the hell out of the economy. I'm not at all sure whether this started out as a conscious act on the part of the Administration and the Fed but in my view it certainly has become that today. There is simply no other explaination for the absolute ignoring of the fiscal situation by The Leader and his mob and the complete damn the torpedoes approach the Fed is taking as to monetary policy. There appears to be only one goal in sight; the re-election of The Leader in 2012. And it just might work although this oil thing has become probably the single biggest bump in the road on the way to the fulfillment of that objective. It's clear that upheavel in the Middle East caught the administration on its back foot (and most other people for that matter) but I think they might have taken their eye off the ball a bit. Moderately high energy costs have never been a real concern because that enviornment supports The Leader's fixation with developing a green society. What has been lost, however, is the real world understanding that for now and for the forseeable future our world is dependent of fossil fuels. At 75 bucks oil isn't a problem; at 100 bucks the pucker factor greatly increases; at 150 bucks we are in big trouble. If the Middle East muddles through this we might get lucky; if Saudi Arabia gets involved I'll see you in the bomb shelter. We as a nation are not in a structurally sound position. The risk on the downside is today greater than any upside bias we may have developed over the past couple of months. Let's be real careful out there as we move towards March Madness.