FOOLS KNAVES AND STARS

There is a term starting to pop up again in the economic jargon not popular since the 1980s, stagflation.

If you lived it you know it. If you didn't you soon might.

In short, it's about higher prices and slow growth. When the two meet at the crossroads like they did then it spells trouble. With the global central bank craze for zero to negative interest rates in the persistent absence of growth, some feel the economic furniture is being arranged for just such a party.

After all there's a lot on money on the loose as cash stores pile up. Take a look at Japan. Just today in the WSJ you have a picture of Dallas Federal Reserve Bank President, Robert Kaplan, quoted: "We want to try to normalize [interest rates] as fast as we can." If there is a more abstract term in the English language than normalize, we haven't heard it.

When bureaucrats start talking normalization hopefully you have one of those construction hard hats nearby. What the gist of Kaplan's point is the Fed's moving toward a consensus about the need to hike rates. Forget the Ides of March. There's hardly anything more dangerous than the Ides of a Bureaucratic Consensus.

Now Kaplan like many of his brethren has the requisite credentials that ought to scare you, Harvard and Goldman Sachs connections, not to mention author of several how to manage books. He supposedly, according to the Journal, looks as if he's about to roll over on interest rates. Kaplan replaced Richard Fisher, a known "hawk" who criticized the Yellen crowd's easy-money schemes, calling them financial heroin. One of the attractions of Trump is he bypassed Harvard or they bypassed him. Either way it's a blessing in disguise.

The Journal reports, and here's another scary part,"Ms Yellen has adopted and built on the consensus-oriented style of her predecessor, Ben Bernanke. Despite signs of division in recent months, the institution is largely in agreement on the likely path of rates."

Kaplan spent 23 years at Goldman Sachs before leaving in 2006. The path between Goldman Sachs and global central banks is a long and inglorious one. The Journal notes that Kaplan agrees with Yellen that inflation is not on an upward trend. You have to keep in mind that economists in general and central bankers in particular are not known for their predictive prowess.

Meanwhile, on the stagflation issue, beware of commentators who say such and such an indicator is not jiving with past stagflation indicators. They also cite the two best performing sectors now, utilities and telecoms, both of which are really surrogate bonds. During the good old stagflation days of the 1980s many utilities were yielding 13-14%. So were bank CDs and 30-year Treasuries. Thirty years mortgage rates averaged around 15%.

The idea that Treasury Inflation Protection bonds today are yielding such anemic returns doesn't jive with the recent run-up in gold prices is another point: Gold, as gold haters love to cite, doesn't yield anything and that's true. But the cost of carrying that insurance given the anemic TIP yields is negligible.

So what's the point since we're nowhere near that now. Just this: Only fools, knaves and dolts believe the stars have to align exactly the same for a repeat performance.