The Market Ticker

Up 1.1 on finished goods (which was double expectations), 2.3% on intermediate goods and up 8% (!) on crude goods.

The really, really bad news is that the finished goods index has now risen at more than ten percent (10.2 and 11.5, respectively) in the last two quarters.

What's worse is that ex-food and energy the rate went from a "pretty-decoupled" 2.2% rate in 4Q 2007 to a "oh oh" 5.0% in the first quarter of 2008.

But the truly ugly number inside the release was the crude goods index, which was up sixty seven percent in the last quarter of 2007 and actually ROSE to 73.4% in the first quarter of 2008!

Read that again folks - a 73% annualized increase in crude inputs?!

This is beyond ridiculous and yet it is exactly what happens when you blow bubbles and then instead of letting them pop you insist on trying to prop up the stock market by blowing another one!

But all the bubbles you can blow now - all the ones that are left - are bad for consumers and bad for America - and they're bad "right now", not just when they (ultimately) pop.

Gas at $4 anyone? Flour prices quadrupling in less than a year (go ask your local pizza joint.) Milk going up in price at a 50% rate annualized. Eggs from under a buck to a buck-eighty around here since last spring - a clean double. Beef skyrocketing, bratworst (heh, I like the stuff) shooting the moon like a priapic symbol, cereals flying north.

The ugly here is that this "prop job" attempt for Wall Street is now hammering the hell out of middle-class America, and absent some real leadership in Washington DC - specifically, the removal of Bernanke and a shutdown of the "gravy train" handout system from DC to anyone who whines loudly - it is going to continue as we rotate from bubble to bubble to bubble.

While this can be at least compensated for by traders who are able to rotate into the newest "hot money" place and make out ok as the bubble is blown, then abandoning it when the cashflow starts to dribble off, the unfortunate reality is that middle America has no defense against this sort of thing.

The '90s Tech Stock bubble at least was confined to speculators - few "middle Americans" got hurt badly when it was blown or when it blew up.

But the rotation into housing screwed virtually everyone, and the goading on by Greenspan urging Americans to take out HELOCs and spend spend spend put up to 30 million American Families permanently underwater by goading them into taking on debt based on a chimera - the claim that their home was going up radically in value when, in truth, it had not moved in real value at all - that profit was all "speculative premium."

Now that premium is disappearing as the bubble deflates, and the "hot money" has moved into commodities - oil, wheat, soy, milk, copper, gold.

So now the American Consumer gets hammered in the holes on both ends of their bodies at once. On the one hand we have their house price collapsing back to intrinsic value (which must happen) and at the same time we have the "bubble kids" shifting their bets into the commodity market fueling insane PPI and CPI increases, which means you're paying more for everything you need to survive, from food and fuel to copper pipe for that house you'd like to build.

And since fuel is in literally everything, there is no escape. Oil is a primary component in plastics, for example. Go walk around your house and tell me how much of what you have in that home would not be there were it not for some form of plastic! Your refrigerator, dishwasher, coffeemaker, toaster, blender, the insert in your kitchen drawer that holds your silverware. Your television, computer, keyboard and mouse. Your washer and dryer. Your car, of which half the interior is plastic. Anything electrical (the insulation on the wiring.)

In addition oil is food. The obvious part, of course, is the transportation of the food to your local store, but it doesn't stop there. Natural gas is the primary component in fertilizer (ammonia) and of course tractors need diesel fuel to operate.

There are some who claim that this is a matter of "inflation."

If you define "inflation" as "price change", yes. But that's not the true definition of inflation - inflation is first and always a monetary phenomena.

Unfortunately the bad news is that because this is not being caused by monetary inflation there is no monetary solution. Instead, what we're consigned to in the United States is the fact that our lawmakers are rubber-stamping a "bubble economy" where we shift from one bubble to another, and the last two - and probably the last two we can manage to blow - are both really bad for consumers.

So now we, the people, get it both ways as Congress and Wall Street both do their level best to screw the rest of America, and unfortunately, nobody in "Middle Class America" will get off their tush and demand change.

What's change?

Go back and look at the last ticker - the prescription is right there.

Short form, once again and slightly expanded:

• Bernanke must go and be replaced by someone who will publicly state (and be held to) that he or she will not tolerate regulation-dodging in production of asset bubbles of any sort.
• Ditto for Congress (good luck - Ethanol anyone?)
• All who either participated in or willfully looked the other way at the fraud of the last eight years must be prosecuted, without exception - both for former transgressions and any going forward. Yes, this includes Mr. Bernanke, who has admitted in the press that he willfully tolerated dishonesty on Wall Street (his "slightly more honest" comment.)
• No off-balance sheet games of any kind.
• No non-exchange-traded derivatives held or written by any regulated or federally-backstopped entity - period.
• Leverage strictly controlled at no more than 8:1 for regulated, backstopped entities (corresponding to a 10% reserve ratio), with no cheating allowed (e.g. "sweep" accounts)
• Bank secrecy abolished - all examination reports are made public within 30 days of completion.
• Mark-to-market and margin supervision enforced nightly for everyone (including speculators in the commodity markets - yes, including hedge funds)
• A shutdown of "burn our food" - that is, repudiation of ethanol in fuel tanks. That should be banned, not mandated.

The odds of such reforms happening?

Zero, until and unless Middle America wakes up and gets on the phone instead of swilling its collective beer.