Leaving aside the insane ramp in the stock market, today’s PCE report confirms that Bernanke’s bogus buck bonus bonanza is having almost no effect on the real economy. As a result, I’m beginning to think that I’m on the wrong side  of the inflation versus deflation debate. I started out as a deflation kind of guy, then early this year switched to inflation as a result of the printing press action. But it seems so impotent, I’m rapidly going back to the Japan model – which, of course, said that it would be impotent. The position of the dollar is another question, so I’m not dumping my WIPs or my Canadian dollar positions, but I’m adding some bonds.

I must say that I found this paper from Hoisington Management very informative.

Yesterday, Dell Computer’s financial results “slipped out” three minutes before the close. Really? The Market Ticker discusses the question.

This is about as blatant as it gets – a huge ramp, on huge volume.

“Someone” (or a bunch of someones) had that report 17 minutes before the bell, and if you were one of the “chosen few” you had a “high frequency” 14 minute window to loot the joint – again.

This sort of scam is so “in your face” that it leaves open not only the question of whether there are any cops (answer: No) but also whether one should have any confidence in our markets as a fair place for people to invest (again: No.)

In a nation honoring the rule of law this sort of trading pattern would result in an immediate investigation and a literal blizzard of subpoenas within minutes.

But we don’t live in that sort of nation, do we?

No. The government and the crooks are in cahoots to pump up stocks, bonds and real estate by any means. Any means at all. The SEC looks the other way, although the SEC is just a bunch of paper-pushing lawyers with little or no understanding of markets so they probably wouldn’t see this kind of crime even if they were looking.

In case you were worried that this is a bull market rally, Mark Hulbert shows that it is speculative excess which almost certainly identifies it as a bear market rally.

Consider the blistering performance since early March of those stocks with the lowest financial quality, according to Ford Equity Research, an independent equity research firm. Through Aug. 26, the stocks with the lowest quality rating from the firm (rated C or C-) have produced an average return of 141.8%.

In contrast, the stocks rated A- or higher for quality gained “just” 44.3% — or less than one-third as much.

Although the retail-driven rally in garbage such as AIG and FNM previously mentioned should give you all the evidence that you need.

One of the most glaring fundamental problems of the U.S. economy is the lack of a skilled and educated workforce. This story from the New Yorker shows how the teacher’s unions are protecting their economic interests at the expense of our children and ultimately the whole economy.

Tenure guarantees teachers with more than three years’ seniority a job for life, unless, like those in the Rubber Room, they are charged with an offense and lose in the arduous arbitration hearing.

In Klein’s view, tenure is “ridiculous.” “You cannot run a school system that way,” he says. “The three principles that govern our system are lockstep compensation, seniority, and tenure. All three are not right for our children.”

A senior regulator in the UK, Lord Turner, has dared to say that the financial services industry appears to be taking too much from the economy.

The head of the City of London watchdog says Britain’s “swollen” financial services industry has become too big for the good of the economy and needs to be cut down to size…..

He says parts of the financial services sector – including derivatives, hedging, and aspects of the asset management industry and equity trading – have grown “beyond a socially reasonable size”. He also argues that the debate about bankers’ bonuses has become a “populist diversion”, suggesting that global taxes on capital flows could be a more effective way of taming the over-mighty financial sector….

And of course it is here in the US, in spades. Somehow the industry has used its political clout to eliminate transparency and gain such an advantage in the markets that it takes a huge share of national income, totally disproportionate to any value that it might add to the economy by increasing the availability of capital. These multi-million-dollar bonus babies are simply the most visible beneficiaries of  a giant confidence scheme in which most of us willingly participate. We accept the premise that we can place confidence in industry “professionals” who, it is asserted, are able to obtain for us a more secure financial future than we, the poor ignorant masses, would be able to secure. Unfortunately the confidence game ends up with most of the money in the hands of the “professionals” while the rest of us are left with shattered dreams.

There is a fundamental structural problem here, the result of an industry that is allowed to operate with a built-in conflict of interest where, in most cases, it bears no fiduciary responsibility for the financial health of its clients but is free to act, legally, in its own best interest even at the expense of the interests of its clients. Doctors, or even lawyers, who are actual “professionals,” do bear responsibility for any adverse impact of their actions on their patients or clients. And can be sued for their actions, where even egregious abuses in the financial services industry are disposed of by biased arbitrators and regulators. Yet the industry’s public relations campaigns and political lobbying always position the industry as a benign parent which is looking after the public’s future.

A ludicrous extreme of this is exhibited by the Fed, which has been fighting tooth and nail against disclosing which banks have received what aid from the government. So we are supposed to invest in banks, and lend them money, without proper disclosure as to their financial condition?  That, Mr Bernanke, is, at best, encouragement of fraud. The same Fed has been resisting any kind of public disclosure of its operations, even as Ron Paul’s bill requiring an audit of the Fed makes its way through Congress. Excuse me, a multi-trillion dollar bank operated by the government is currently not audited? Hellooo? What is going on here? The presumption is that if we knew what is going on behind the curtain we would panic, bringing all kinds of adverse consequences down on our own heads. And that would be bad. So, for our own good, says Mr Bernanke, we are to be kept in the dark, like children whose parents are trying to keep them from knowing that the ship they are on is sinking. But the kids can see the lights flickering, and hear the creaking of the ship.

The government is not even flirting with any serious regulatory form, and it appears to keeping the money flowing into the hands of the “professionals,” who are basically stealing from all of us. But, at least, we are entitled to timely, open, honest and complete accounting from the government in respect of its actions. That would be a start.