Intercepted Fed Communications

Ferengi Traders have recently intercepted a communication to the Federal Reserve. The author of the letter has yet to be ascertained but the content is very relevant.

Dear the Fed,
You suck. You don't have a backbone and as a result you are slowly and
very surely making our country and our currency irrelevant. Usually the
masses rebel and bring down great empires but luckily for us democracy
fixed that problem. Unfortunately, democracy can't fix how lame and
fickle you are and so you will be our ruin.
A few things to tell you:
1) Inflation isn't 2% like your pathetic CPI ex-Food & Energy says it
is.
First of all, as far as I can tell food and energy are the only two
items you should NEVER exclude from an inflation index. Tell your wife
and kids they can have everything in the consumer basket except food and
energy and you will quickly see that they are actually the two MOST
important and indispensable factors in the CPI. You can find substitutes
for, or go without, everything in the basket EXCEPT those two.
Secondly, stop using "Seasonally Adjusted Intervention Analysis" it's as
sketchy as the Seldom-Accepted-Accounting-Principles (SAAP) we use to
cook the books here at LoS. I mean writing a computer program to
automatically remove any items in the basket which deviate meaningfully
from the previous year? Isn't the point of the data to SHOW the change
versus the previous year not hide it? Oh, I found the list of items that
you've adjusted for and it's embarrassing.
The majority of adjustments remove price increases with much less
frequent adjustments for price declines. You've basically left dairy
products out of the index for the last 5 years citing outrageous
one-offs like "a generally tight cheese market" as justification for
this. And as if reporting a separate ex-energy index wasn't enough
you've statistically intervened to remove the effect of higher energy
prices even in the index that's supposed to INCLUDE energy. In one
outrageous case you removed the effect of fuel oil for three months in
March 03 and the reason you cited for the "abnormal"
move was the "end of winter," yeah I was surprised as sh-t when winter
ended in Spring 03, it was wild! For a real measure go back to the old
method, you'll see inflation is at least double what you're reporting.
2) Grow a spine you slimy invertebrate
The market has a memory. Over the past 15 years you trained us to
believe that no matter how much risk we take, and how much we lever that
risk, if anything really scary comes down the pike then you will bail us
out. Now we all run around like reckless, spoiled 16 year olds bidding
up the price of anything we can get our hands on and not worrying about
consequences because daddy (Greenspan) and mommy (Bernanke - that's
right you're spineless AND a girl) will get us out of any trouble we get in.
Well you're only making the problem worse and we aren't learning anything so
we'll continue taking stupid leveraged bets creating bubble after bubble so
you can tip-toe around trying not to pop any of them.
3) You're lying to yourself if you think we still have real GDP growth
in this country.
I challenge you to find one measure of wealth OTHER THAN THE DOLLAR
which shows the US economy as worth more now than in 2001. If I wanted
to buy our country it would cost me 30% fewer euros today than it did in
2001, it would cost me less bars of gold, less barrels of oil, less ounces of copper,
less btu's of natural gas, less cubic feet of lumber, less of almost anything that has
intrinsic value. Yet you keep reporting GDP growth, why? Because your quick fix
is to effectively print more money so that in dollar units everything is getting more
"valuable". But guess what, to the 95% of the world that doesn't use dollars the true
value of the US economy has been shrinking, rapidly.
It's like a company doing a 5 for 4 reverse stock split every year and
claiming to have 20% eps growth, you haven't changed the earnings just
the units those earnings are measured in. The rest of the world is
telling you our country is worth less by massively selling our currency
and you still naively think we're growing value - I feel like I'm at a
gathering of the flat earth society or in Zimbabwenomics 101.
This will come back to bite you but not nearly as much as it bites us.
The cheaper the dollar gets the more expensive all our imports get,
inflation will rise faster than you can statistically manipulate it and
when that happens expected inflation goes through the roof (which as you
yourself have pointed out many times is by far the most serious threat
to economic existence). Then the only way out will be interest rate
increases as swift and severe as all the cuts have been. All the bubbles
will pop at once and then we're really in for it. Maybe it's 10 years
away but there's a toll collector at the end of every free ride.
When will you learn that recession is ok? It's actually healthy, it's
the cycle, it's how things have worked for a 1,000 years. Trying to
prevent every small recession is going to end in one huge recession (ie.
depression) and no one will trust you anymore which is a much bigger
problem. No economy in history has ever been able to successfully
inflate its way to health, this won't be any different.
Benny, I know you had to trade in your hypothalamus and spine to be fed
chairman and now you biologically over-react to everything and are
incapable of standing up straight when confronted by bully-morons like
Kramer. But I'm hoping you at least still have your brain. Before you
had this job all your published research showed that central banks
should strictly target inflation and should be ignorant of asset prices.
You had good reasons for this conclusion, don't forget them.

Subprimely,

Long or Short Capital Management