Hide Your Kids, Hide Your Wife, Hide Your 401K

By Rathan Haran, April 13, 2011 7:43 am

My buddy Justin posted an interesting chart recently about the correlation between quantitative easing (what the blue shirt crew calls QE, QE2, and possibly QE3) and commodity prices (notice the gas pump recently?). It reminded me of a posting I drafted to write in January, right smack in the middle of the Fed’s 2nd massive infusion of dollar dollar bills ya’ll into the ‘economy’. Now that QE3 appears to be on the horizon, I guess I should get this out and desperately hope that this will be my last opportunity to write on this subject. Here’s the chart:

What this chart is showing is that the huge rally in commodity prices (basically the things you buy to physically keep your body alive such as grains, veggies, meats, etc. and some things that make life easier like oil) have coincided with the Fed’s purchase of treasuries.  This is also one of the main reasons behind the rally we’ve seen in the stock market, and if you don’t believe me, try plotting your stock portfolio in nearly any other currency besides dollar bills.  It won’t be so pretty.

So what does this really mean to you?  Well for one, it means for anyone who was not heavily invested in the stock market (at least 40% – 50% of your assets), you’ve likely seen a huge DECREASE in your spending power.  Basically you can’t buy as much stuff as you used to be able to, primarily because the prices of those items have risen dramatically.  So while you are earning the same wage, it actually costs you a lot more to live now then it did before the Fed spending (see below).

Now what’s even worse is that since this Fed action is on the currency value, it doesn’t just effect what we earn today.  It effects EVERYTHING we’ve ever earned in our lifetime!  That includes your savings accounts, your 401Ks, grandma’s $5 birthday checks … anything that’s denominated in American greenbacks is worth 25 – 30% less due to quantitative easing.  So again I wonder why so many Americans were vehemently opposed to a 3% tax increase on FUTURE income for the uber-wealthy (whose lifestyles will not be affected) yet aren’t so worried about these rounds of QE’ezing that have effectively removed 25% of their ENTIRE net worth (not to mention future earnings as well).

Sadly, while a lot of us could use the extra dough to stay relatively comfortable a bit longer and wait out this economy, it’s really the poorest people in this country and the rest of the world that are facing a real struggle for survival.  A developer I work with noted that for the first time in India’s history, a luxury (a beer), a convenience (a liter of gas), and a necessity (an onion) had all cost the same.  Again, the people that have to bear the burden are often the ones that are least fit to do so.  And last I checked, it wasn’t them who leveraged bad mortgage loans, committed massive financial fraud, borrowed trillions in TARP money, exploited corporate tax loopholes, and paid themselves millions in bonuses.  Just saying.

Revised Lyrics:
Bernake’s climbin’ in your pockets
He’s snatchin’ your accounts up
Tryna rape em so ya’ll need to
Hide your cash, hide your bills
Hide your cash, hide your bills
Hide your cash, hide your bills
And hide your 401K
Cuz they’re rapin errbody out here

Enhanced by Zemanta

One Response to “Hide Your Kids, Hide Your Wife, Hide Your 401K”

  1. Jonathan says:

    How do you get the 25-20% figure? Commodity prices are only a small contributor to the prices of most of the foods we buy (e.g. the cost of corn, even at elevated prices, is a very minor contributor to the price of a box of cereal – the bulk is processing etc.), and I believe core inflation now is inly 2-3% or so, not outside historical norms.

Leave a Reply

Panorama theme by Themocracy