No Runny Eggs

The repository of one hard-boiled egg from the south suburbs of Milwaukee, Wisconsin (and the occassional guest-blogger). The ramblings within may or may not offend, shock and awe you, but they are what I (or my guest-bloggers) think.

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BDS and now FDS?

by @ 7:00 on April 29, 2008. Filed under Business, Miscellaneous.

Bush Derangement Syndrome has been with us nearly as long as President George W. Bush has been in office.   People afflicted by the syndrome believe that all of the world’s and country’s ills, regardless of the facts or the Bush Administrations involvement, are the result of something that President Bush has done or caused to be done.   BDS has led to serious incivility in the public arena.   Worse, it prevents public discourse on solutions to numerous  issues as those afflicted with the syndrome are unable to rationally or logically respond with any answer other than “BUUUUUUUUUUUUUSSSSSHHHHHH!”  

I’m now beginning to see signs of FDS or FED derangement syndrome.   Second guessing the FED has been great sport for years.   There have always been segments of people who pontificate, hypothisize and hand wring over every move the FED might or does do.   That activity is OK, generally it’s harmless.   However, since the FED stepped in on the Bear Stearns deal I’m seeing more and more articles that are trying to link the FED to issues they or their policies come no where near.

One of the most recent and aggregious FDS arguments is in this opinion piece.

The article starts by calling the Bear Stearns move “reckless.” OK, I’m open to differing opinions on this one and at the time, honestly debated whether the move was “brilliant”, “idiotic” or somewhere in between. I’m not willing to say “nothing to see here, move along,” but each day that goes by in which the markets heal a bit brings me closer to saying “brilliant” or maybe “damn lucky”. In any event, using a term like “reckless” at this point seems…well…reckless.

From there the article makes the claim that the fall of the dollar “40%” as stated in the article, was a direct result of the Bear Stearns move. The FED certainly does have part of the responsibility for the slide of the dollar but many other things including the size of our Federal Deficit and the world’s expectations of our future economic health also have significant impacts. Where I see FDS is that the dollar had done nearly all of its slide PRIOR to the Bear Stearns deal and in fact, has rebounded slightly in the time since. If anything, the improvement of the markets which can be traced to the Bear Stearns deal has improved the dollar not impaired it.

The worst example of FDS in the article is the claim that the FED is responsible for food inflation and the food riots that have occurred in Africa. As previously stated, I don’t believe the FED’s Bear Stearns action caused a dollar decline or inflation.   However, let’s assume that they did.   While the Fed’s actions may have contributed to some food inflation it is by no means responsible for the world wide increase based on the following 2 facts:
1. All but one of the countries in Africa that have seen food riots, have their currencies pegged to the Euro. The Euro’s value has been the inverse of the dollar. As the dollar slides, the Euro has increased.
2. Even the US commodity food prices have risen at a rate far in excess of the change in the dollar. This fact means that something more than the dollar is driving the cost of food commodities.

So what’s moving food prices? I know it’s hard for the FDS folks to take in logic but today, even Condoleezza Rice recognized that  the chasing of biofuels has led to increases in food prices. So as not to be accused of having EDS (Ethanol derangement syndrom), I would also offer the rising cost of oil and speculation as other contributors to rising commodity/food prices.

FDS, while not generally fatal, is a horrible disease. If you find that a loved one has contracted FDS, take them immediately to a library and inject them with a good dose of An Inquiry into the Nature and Causes of the Wealth of Nations.

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