THE BIG HOAX

Generals are not the only ones famous for fighting the last war. Central bankers the globe over know a thing or three about the subject, too.

Forget if you can for the moment energy and food, and that's precisely what they'd like you to do, here's a brief list of rising prices of things despite all the deflation talk and concerns about low inflation among central bankers, airline and movie tickets, tuition and shelter costs, repair services fees and medical costs. 

A front page article of today's WSJ headline reads: "Insurers Push To Rein In Spending on Cancer Care" The first paragraph tells it all. "Insurers are changing how they pay for cancer care, aiming to blunt the soaring costs and push oncologists to adhere to standardized treatment guideline."

Check out your municipal services over the last year or so, things like trash and water or those unwanted but quite costly traffic fines and penalties that for some mysterious reason keep accelerating.

Our guess is the Fed is behind the curve, the economy is closer to so-called full employment than most believe. Much of the hand wringing about slack is just that, misplaced hand wringing. That should get folks thinking about the W word and the next dropped shoe, wages.
 
 Real wages are and have been flat. Many COLAs have been either cut or eliminated. If you're a COLA owner you might prefer the description decimated.

The 10-year Treasury recently hit a low of  2.44% in spite of the fact that many believe the Fed will soon siphon more juice from the punch bowl. That's a big assumption not the least of which is the Fed will get things just right or won't be too slow to recognize their mistake.

The quiver is empty. Standing by to do what ever it takes won't get it this time around. These are bureaucrats. About the only really safe assumption one can make about them is they hardly ever know what they're doing and get it correct. These are the the crowned knights of unintended consequences.

Too many investors are anticipating the horse to stay in front of the cart. But that's why surprises surprise. Look around. Yield-starved investors are desperately chasing anything and everything to sniff out higher returns on their money.

Interest rates are lower than a duck's belly. If the bond market isn't a bubble just waiting to burst, then it don't snow in Minneapolis in the winter time and former Fed Chair Ben Bernanke speaks pro bono to hedge fund mangers on request.

 The late mystery writer Raymond Chandler wrote a classic called The Big Sleep. With all the braying among central bankers about deflation, we suspect these boys and girls are working on another one that should be titled, The Big Hoax.