GOVERNMENT PROPAGANDA THEN & NOW

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Posted on 6th December 2014 by Administrator in Economy |Politics |Social Issues

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In 1943 inflation was not in the best interests of those running the country. Today, with $18 trillion of debt and $200 trillion of unfunded liabilities, inflation is essential to the survival of the ruling class. It seems paying more taxes is always considered a good thing by the ruling class.

In 1943 saving benefited the ruling class, so it was encouraged. After 9/11 and ever since the government has promoted and encouraged spending and going further into debt to save the country.

Every time a Federal Reserve banker speaks they promote inflation as essential to a well functioning economy.

Only a lone voice in the wilderness has consistently spoken the truth about the Federal Reserve and inflation.

The willfully ignorant masses have been so dumbed down by our government run public educational system, they don’t understand what the Fed has done to them over the last century.

They may not understand charts and calculating the 95% loss in purchasing power of their dollars, but they may understand this:

 

 How is government created inflation working out for you?

Debt, Propaganda And Now Deflation

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Posted on 14th November 2014 by Administrator in Economy |Politics |Social Issues

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Dorothea Lange Negro woman who has never been out of Mississippi July 1936
 

Looks I have to return to the deflation topic. I’m a bit hesitant about it, because the discussion always gets distorted by varying definitions and a whole bunch of semi-religious issues. The Automatic Earth has for many years said that an immense bout of deflation is inevitable because of global debt levels, and it’s all only gotten a lot worse since we first said that. Our governments and central banks have ‘fought’ deflation with more debt, and that was always the stupidest idea in human history. Or at least, most of us were stupid for believing it would work, or was even intended to.

Just so we don’t get into yet more confusion, i probably need to explain that the debt deflation we’re talking about here is not some subdivision like consumer inflation or price inflation or cookie inflation, those are just hollow and meaningless terms. Debt deflation is deflation caused by too much debt, and the deleveraging it must and will lead to. Deflation does not equal falling prices, those are merely an effect of it.

The reason this matters is that when you equate inflation and deflation with rising or falling prices, you’re not going to be able to know when you actually have deflation. Because prices can rise for all sorts of reasons. Inflation/deflation is the money/credit supply in an economy multiplied by the speed at which money is spent in that economy, the velocity of money.

It should be obvious that prices for some items can still rise, certainly initially, when deflation sets in. Producers that see less sales can try to raise prices for their remaining buyers. Basic necessities will always be needed. Governments can raise taxes. Rising/falling prices tell us only part of the story, and with a considerable time delay.

Ergo: rising/falling prices are a lagging factor, and if you look at them only, you will have missed the point where deflation has set in. What follows, obviously, is that you can’t measure deflation by looking at consumer prices (CPI) or production prices (PPI) numbers. You’d be way behind the curve. CPI and PPI tell you something, but they don’t tell what causes falling or rising prices. And that is a valuable thing to know.

I see even John Mauldin in this week’s The Last Argument of Central Banks talk about ‘good deflation’, but that doesn’t exist any more than cookie inflation, sorry, John. Prices for some items may fall due to innovation etc. while an economy booms, but if you call that deflation, you’ll miss what’s really deflation when it arrives.

Deflation is always bad. It either occurs when money/credit is so short that people can not get their hands on it no matter how hard and productive they work, and how much demand there is for their products, or it occurs when people are too poor, too much in debt or too reluctant to part with what they have.

In a deflation, people spend only what they absolutely must, provided even that they can afford to, which leads to large swaths of an economy being liquidated. Falling prices lead to falling wages lead to ever further falling prices lead to factory closings lead to more people who can’t afford to spend which leads to closings which leads to less spending which leads to faling prices etc. This continues until the debt has been deleveraged. Governments will lose tax revenue and raise taxes, but soon enough they will in quick succession disband and be replaced, rinse and repeat until even essential services can no longer be provided.

Until recently, a shrinking money/credit supply was very clearly not in the cards. Central banks have gone absolutely nuts in their stimulus plans, and this has artificially kept price levels up somewhat, though far less than they, and scores of ‘experts’ had hoped and expected. Now that game, too, is up. Japan went crazier than ever the other day out of fear that falling oil prices would sink consumer spending even more, but the US Fed has cut QE. That is an admission it has failed to do what it officially was supposed to, not the sign of triumph it’s made out to be, as in ‘the economy is doing so well, it doesn’t need our support anymore’.

Central banks have spent like maniacs, and consumer spending only keeps falling. Just ask Japan. And while you’re at it, ask them how entrenched deflation can become even in an economy that still has the benefit of growing world market to sell its products in. We won’t have any such benefit. The world has stopped growing, and there’s no massaging of numbers left strong enough to hide it. Not that it won’t be tried. As I said earlier this week, we now live in a world built on debt and propaganda.

Since QE and other ‘plans’ never reached the real economy, most nations’ money supplies have also either fallen or at best remained stagnant. We have the perfect set-up for deflation, and we therefore have deflation. It hasn’t reached the US yet, though we should be careful with that because the numbers being reported are notoriously flaky. But it has reached Europe and Asia. Which means the US is only a matter of time. And people, reluctantly, start taking notice. Steve Hochberg and Pete Kendall penned the following for Bob Prechter’s Elliott Wave:

Deflation Rearing its Ugly Head in Subtle and Not-So-Subtle Ways Around the Globe

According to the latest figures, deflation is now perched on China’s doorstep. In September, China’s consumer price index was up 1.6%, but its producer price index fell 1.8%. The CPI increase was its lowest since 2010. [..] in September, demand for electric power, a “bellwether for China economic activity,” fell 8.4% from the prior month, the second straight monthly decline.

“Deflation is the real risk in China,” stated the chief economist at a Hong Kong bank. In Europe, deflation is no longer a possible risk; it’s reality. In September, eleven of fifteen European Union members experienced lower goods prices, and the latest quarter-over-quarter Eurozone growth in real GDP is zero.

With Alice-in-Wonderland naiveté, U.S. financial media place the United States outside the risk of global deflation. Headlines talk of “Mild Inflation” and insist that the U.S. will gain “From Good Deflation.” On October 14, Bloomberg reported that consumer spending is strong enough “to steer the U.S. economy safely through the shoals of deteriorating global growth and the turbulent financial markets.” In early September, we stated that it was only a matter of time before economic weakness and deflation (which will be anything but good) jump the Atlantic and Pacific oceans and arrive in the U.S.

According to the U.S. Labor Department, real wages for full-time employees averaged $790 a week in the third quarter, about $1 less than in the third quarter of 2007. “There’s been no net gain for workers since 1999.” In recent months, spending has been uneven. Retail sales fell 0.3% in September. Most economists are baffled: “one of the great mysteries is why the U.S. has lacked inflation despite all the money being pumped into the economy.” A study by the St. Louis Fed finds that the answer is “a dramatic increase in the private sector’s willingness to hoard money instead of spend it.”

Note: the ‘hoarding meme’ is habitually used by economists, re: Bernanke and his Chinese savings glut, to point out situations which are more often than not characterized by people being too poor to spend, not sitting on anything at all. For economists, if people don’t spend, it must be because they save, never because they’re poor. I kid you not.

 

 

For years now, the Fed along with most economists have anticipated the imminent return of inflation, but it continues stubbornly subdued. This long-term chart above of the CPI shows a succession of lower highs since the early 1980s, as inflation turned into disinflation, which is on the cusp of leading to outright deflation. Some argue that the CPI is rigged to show milder levels of inflation, but the bottom graph shows the same steady move toward the zero line in the Personal Consumption Expenditures Index, an alternate inflation measure favored by the U.S. Fed.

When outright deflation hits, recognition of it will play an important role. Once its presence becomes widely observed, investors and the debt markets will belatedly take defensive action. Eventually, notes Conquer the Crash, “default and fear of default exacerbate the trend as it causes creditors to reduce lending. A downward ‘spiral’ begins feeding on pessimism just as the previous boom fed on optimism.”

Moving from theory to practice, we end up with our old friend Ambrose. Though he confuses inflation and consumer prices, and thinks they’re one and the same thing, he does have useful numbers:

Spreading Deflation Across East Asia Threatens Fresh Debt Crisis

Deflation is becoming lodged in all the economic strongholds of East Asia. It is happening faster and going deeper than almost anybody expected just months ago, and is likely to find its way to Europe through currency warfare in short order. Factory gate prices are falling in China, Korea, Thailand, the Philippines, Taiwan and Singapore. Some 82% of the items in the producer price basket are deflating in China. The figures is 90% in Thailand, and 97% in Singapore.

These include machinery, telecommunications, and electrical equipment, as well as commodities. Chetan Ahya from Morgan Stanley says deflationary forces are “getting entrenched” across much of Asia. This risks a “rapid worsening of the debt dynamic” for a string of countries that allowed their debt ratios to reach record highs during the era of Fed largesse. Debt levels for the region as a whole (ex-Japan) have jumped from 147% to 207% of GDP in six years.

These countries face a Sisyphean Task. They are trying to deleverage, but the slowdown in nominal GDP caused by falling inflation is always one step ahead of them. “Debt to GDP has risen despite these efforts,” he said. If this sounds familiar, it should be. It is exactly what is happening in Italy, France, the Netherlands, and much of the eurozone. Data from Nomura show that the composite PPI index for the whole of emerging Asia – including India – turned negative in September.

China itself is now one shock away from a deflation trap. Chinese PPI has been negative for 32 months as the economy grapples with overcapacity in everything from steel, cement, glass, chemicals, and shipbuilding, to solar panels. It dropped to minus 2.2% in October. The sheer scale of over-investment is epic.

The country funnelled $5 trillion into new plant and fixed capital last year – as much as Europe and the US combined – even after the Communist Party vowed to clear away excess capacity in its Third Plenum reforms. Old habits die hard. Consumer prices are starting to track factory prices with a long delay. Headline inflation dropped to 1.6% in October. This is so far below the 3.5% target of the People’s Bank of China that it looks increasingly like a policy mistake. Core inflation is down to 1.4%.

China has flirted with deflation before: during its banking crisis in the late 1990s, and again during the West’s dotcom recession from 2001-2002. Both episodes proved manageable. This time the level of debt is greater by orders of magnitude, with a large chunk in trusts, wealth products, and other parts of the shadow banking nexus, and a further $1.2 trillion in “carry trade” loans from Hong Kong.

Standard Chartered thinks total debt has reached 250% of GDP. This is roughly $26 trillion, the same size as the US and Japanese commercial banking systems put together, and therefore a headache for us all. Larry Brainard from Trusted Sources says China is sliding towards a European debt-compound trap. “It’s arithmetic.Deflation will kill you if you’re leveraged. It is just a question of how quickly. We don’t know how big the problem is because China is playing a game of three-card Monte and moving the debt to different buckets,” he said.

Asia is not yet in a full-blown currency war, but no country can stand idly by as neighbours dump toxic deflationary waste on their front lawn. Korea has threatened to force down the won, pari passu with the yen. The central bank of Taiwan has been intervening. These skirmishes are happening in a region of festering grievances and territorial disputes, with no Nato-style security structure – or for that matter EU-style soft governance – to damp down fires.

[Chinese] purchases of foreign bonds have dropped to zero, down from $35bn a month at the start of the year. The yuan has appreciated 22% against the yen since June, and 50% since mid-2012. It is up 12% against the euro since the early summer. China is in effect strapped to the rocketing dollar through its quasi-peg, increasingly a torture machine.

George Magnus from UBS says this cannot continue. “What is happening in the property market is the tip of the iceberg for the whole economy. China will have to resort to monetary reflation over the winter, and I think this will include a lower yuan. We are heading into a currency war,” he said.

We have the debt. And we recognize it. Still, the line politics and media feed us is that more debt can be a good thing, that we need more debt in order to attain what they like to call ‘escape velocity’ from the financial crisis caused by that same debt. Oil on fire.

We have the propaganda. We don’t always recognize it for what it is, but the, that’s the idea, isn’t it? It’s to make people think that things are not really what they really are. That we need to spend more public funds on saving banks, not saving people, or else armageddon. There’s hardly a news story left today that is not to an extent phrased by propaganda.

And now we have deflation. Which is not the falling prices, though they are a – delayed – symptom. Still, other symptoms are as valid, as nobody is spending. Mass unemployment in southern Europe is a symptom. West Texas oil at $74 dollars today is one. The Chinese economy, allegedly still growing at $7.5%, but at 250% debt-to-GDP, is another. Throw in 207% debt-to-GDP debt levels across southeast Asia.

With deflation becoming a daily topic in our propagandistic media, despite the fact that governments and central banks are vehemently allergic to it (for good reasons), rest assured that we are entering a next phase of the crisis. Just not one that they would like you to think we are. When debt starts being deleveraged for real, deflation cannot be avoided. And debt must be deleveraged, we can’t sit on it till Kingdom Come and keep adding more while we’re at it. That was never in the cards. And we’ve accumulated too much of it to ever outgrow it. We simply can’t sell or make enough iPhones to accomplish that. Or eat enough burgers, hard as we try.

Our world, our life, has been built on debt and propaganda for many years. They have kept us from noticing how poorly we are doing. But now a third element has entered the foundation of our societies, and it’s set to eat away at everything that has – barely – kept the entire edifice from crumbling apart. Deflation.

It’s time to check where your basic needs will come from when it becomes first harder and them impossible to obtain them from the sources you have been used to. And please, get out of debt. Debt during deflation is a cruel and unforgiving mistress. Think of deflation as a biblical plague.

The Experiment that Will Blow Up the World

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Posted on 1st November 2014 by Administrator in Economy |Politics |Social Issues

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The BoJ Goes Even Crazier

It has been clear for a while now that the lunatics are running the asylum in Japan, so perhaps one shouldn’t be too surprised by what happened overnight. Bloomberg informs us that Kuroda Jolts Markets With Assault on Deflation Mindset.

The policy hasn’t worked so far, in fact, it demonstrably hasn’t worked in Japan in a quarter of a century. Therefore, according to the Keynesian mindset, we need more of it. Mr. Kuroda therefore delivered a surprise spiking of the punchbowl that immediately impoverished Japan’s consumers further by causing a sharp decline in the yen:

 

“Today’s decision to expand Japan’s monetary stimulus may be regarded as shock treatment in the central bank’s effort to affect confidence levels. Bank of Japan Governor Haruhiko Kuroda’s remedy to reflate the world’s third-largest economy through influencing expectations saw the yen sliding and stocks climbing.

Kuroda led a divided board in Tokyo in a surprise decision to expand unprecedented monetary stimulus. Bank officials hadn’t provided any hints in recent weeks that additional easing was on the cards to help reach the BOJ’s inflation goal. Kuroda, 70, repeatedly indicated confidence this month that Japan was on a path to reaching his 2 percent target in the coming fiscal year. Just three of 32 economists surveyed by Bloomberg News predicted extra easing.

“We have to admit that this is sort of a second shock — after we had the first shock in April last year,” said Masaaki Kanno, chief Japan economist at JPMorgan Chase & Co. in Tokyo, referring to the first round of stimulus rolled out by Kuroda in 2013. Kanno, who used to work at the BOJ, said “this is very effective,” especially because it comes the same day as the government pension fund said it will buy more of the nation’s stocks.

 

(emphasis added)

So why is there allegedly a “need to combat the deflation mindset”? Below is a chart of the recent increases in Japan’s CPI.

In actual practice, it matters little how they have come about – the fact that CPI was inter alia boosted by a hike in consumption taxes does not alter the fact that every consumer in Japan is now getting fewer goods and services for his income and savings than before. No consumer is going to a shop and saying to himself “the fact that things are now vastly more expensive than before somehow shows we are still in deflation, because it has happened for transitory reasons”. All he knows is that he is getting less for his hard-earned money. Mr. Kuroda is evidently not moved by such considerations.

  1-japan-inflation-cpiJapan’s CPI is recently growing at a 3.2% annual rate. Obviously, this means one must “combat the deflation mindset” – click to enlarge.

 

 

Bloomberg’s article continues along precisely these lines:

 

“A decline in demand following April’s sales-tax increase and the tumble in oil prices are putting downward pressure on prices in Japan. Today’s decision came hours after a government report showed that core inflation eased to the slowest pace in six months in September.

The 3 percent gain in core consumer prices — the BOJ’s main gauge — was just 1 percent with the effects of April’s sales-levy hike stripped out.

The BOJ today reduced its estimate for the core consumer price index, which excludes fresh food and increases to sales tax, to 1.7 percent for the fiscal year through March 2016, from 1.9 percent previously. The bank kept its forecast at 2.1 percent for the following year.

The central bank won’t hesitate to act again if needed, Kuroda said, pointing out there’s still room for additional measures. The BOJ acted as skeptical views mount over the effect of quantitative easing, according to Citigroup Inc. economists Kiichi Murashima and Naoki Iizuka. “If the impact of today’s action on the economy and prices proves limited, the impact on financial markets may also prove short-lived,” they wrote in an e-mailed note.

Do Hot Flashes Have You Feeling Irritable?

Prescreen for a Menopause Research Study

 

The above is a corollary to the recently heavily propagated idea that falling oil prices are somehow “bad” for oil consuming countries because they might lead to lower prices! You can read this nonsense in every statist rag, from the Financial Times to the Economist. If this doesn’t prove how utterly absurd the basis of today’s central bank policies is, nothing ever will. These people have taken complete leave of what was left of their senses.

Although it shouldn’t be necessary to say this, here is a reminder: rising stock prices are not “proof” that things are fine. If that were the yardstick by which to measure the “success” of central bank money printing, the best performing economies in the world would be those of Venezuela, Argentina and Iran.

Learn More On How to Build Credit.

BetterMoneyHabits.com

  2-BoJ assetsBoJ credit, as represented by the asset side of its balance sheet. Still not enough! – click to enlarge.

 

Kuroda’s Policy Will End in A Catastrophe

In order to explain why the pursuit of Kuroda’s policy is edging ever closer to a catastrophic outcome, we have to delve a bit into the details of Japan’s monetary data. In spite of the BoJ’s “QE” reaching record highs, it mainly creates bank reserves and furthers carry trades. The economy sees no private credit growth so far.

Commercial banks in Japan continue to shrink the stock of fiduciary media – this is to say, they are reducing outstanding credit, which makes more and more unbacked deposit money disappear. Hence, Japan’s money supply growth has recently decline to a mere 4.3% year-on-year, as the rate of contraction in outstanding fiduciary media (i.e., uncovered money substitutes) has accelerated to 9.4 annualized in spite of the BoJ’s pumping.

The reason is a technical one: contrary to the Fed, the BoJ buys most of the securities it acquires in terms of its “QE” operations directly from banks – this creates new bank reserves at the BoJ, but no new deposit money. By contrast, the Fed buys only from primary dealers, which are legally non-banks (even though most of them belong to banks). This creates both bank reserves and deposit money concurrently. The BoJ’s actions can only directly inflate the money supply to the extent it buys securities from non-banks, e.g. when it buys stocks in REITs to prop up the Nikkei.

Below is a chart showing the annual growth rate of Japan’s narrow money supply M1, which is essentially equivalent to money TMS (it comprises demand deposits and currency).

 

3-Japan-M1-y-yJapan’s 12-month money supply growth has declined to 4.3%, in spite of the BoJ’s pumping  – click to enlarge.

 

In short, the effectiveness of the BoJ’s pumping depends on the extent to which commercial banks are prepared to employ additional bank reserves to pyramid new credit atop them and thereby create additional fiduciary media. Japan’s banks are doing the exact opposite, mainly because there simply isn’t sufficient demand for credit. Why would anyone borrow more money, given Japan’s demographic situation?

However, one result of this is that an ever larger portion of Japan’s money supply actually consists of covered money substitutes – deposit money that is “backed” by standard money. Covered money substitutes have grown by more than 77% over the past year.

Bank reserves can be transformed into currency when customers withdraw cash from their deposits, hence to the extent that deposit money is “backed” by bank reserves, it ceases to be a form of circulation credit. The narrow money supply in total now amounts to roughly 595 trillion yen; of this, roughly 139 trillion yen consist covered money substitutes and 83.4 trillion yen consist of currency (outstanding banknotes in circulation). Thus the stock of fiduciary media has shrunk to 372.6 trillion yen.

 

4-Japan-M1Japan: currency plus demand deposits = M1 = true money supply – click to enlarge.

 

And yet, in spite of Japan’s money supply growing much slower than money supply in both the US and the euro area, the yen continues to implode:

 

5-YenThe yen’s plunge is accelerating   – click to enlarge.

 

The yen’s ongoing collapse suggests that Kuroda will eventually get his inflation wish, as import prices continue to rise. In fact, Japan recently regularly reports trade deficits, which is inter alia a result of the plunge in the yen’s external value. Currently, this is offset to some extent by the decline in commodity prices, but given that commodities are by now extremely cheap relative to financial assets such as stocks and bonds, it becomes ever more likely that this offset will eventually reverse.

 6-japan-balance-of-tradeAn era of trade deficits has begun in Japan, concurrently with the decline in the yen   – click to enlarge.

 

The question is though, why is the yen falling so much if Japan’s money supply isn’t expanding at a very strong rate? We believe the answer to this question is to be found in the following statistics:

 7-Japan Debt To GDP Vs. The WorldGross government debt to GDP – Japan is the undisputed public debt king of the developed world – click to enlarge.

 

It is well known that Japan has a very high public-debt-to GDP ratio. Even with the recent economic upswing, its budget deficit for the current year is projected to clock in at more than 7% of GDP – the latest in a string of huge annual deficits. What is less well known is the ratio of public debt to tax revenues, which is actually the more relevant datum:

 

8-Debt to fiscal revenueGovernment debt relative to tax revenues   – click to enlarge.

 

We conclude from this that the markets are pouncing on the yen because they are forward-looking: the BoJ is monetizing ever more government debt and this is expected to continue, because the public debtberg has become too large to be funded by any other means.

In spite of the relatively low money supply growth this debt monetization has produced so far, it also creates the perverse situation that an ever greater portion of the government’s outstanding stock of debt consists actually of debt the government literally “owes to itself”.

On the surface, this monetarist wizardry suggests that one can indeed “get something for nothing” – but that just isn’t true. Deep down, market participants know that it isn’t true – so even though they are celebrating the promise of more liquidity by sending Japanese stocks soaring, they are also creating a fault line – and that fault line is the external value of the yen.

Among the industrialized welfare states, Japan is the one that is closest to government bankruptcy. Even with interest rates at record lows, the proportion of debt growth that is caused by mounting debt servicing costs alone has begun to rise in recent years due to the sheer size of the public debt outstanding. In other words, the government is by now in a so-called “debt trap”.

It has only been able to avoid more grave repercussions so far because Japan has run a current account surplus for a long time, and and only very few foreign investors therefore own JGBs. Japan’s own state-owned financial institutions such as the Post Bank and the state-owned pension fund have invested a large part of the population’s savings predominantly in JGBs.

And yet, the seeming calm rests on what appears to be increasingly misplaced confidence. All that is needed to blow the entire scheme to smithereens is an event that leads to a cracking of this confidence. Once a critical mass of economic actors becomes convinced that the plan is indeed to “make the public debt disappear” by monetization, and given what markets have done so far, it seems increasingly likely that it is the yen that will crack first. However, the sign that the ship is actually capsizing will be when JGB values begin to plummet in spite of the BoJ’s buying of government debt.

The growing amount of bank reserves piling up as a corollary to the BoJ’s exploding holdings of JGBs are like tinder waiting for a spark to set it off. Since Japan’s financial institutions hold large amounts of JGBs as ‘risk free’ assets augmenting their capital, their solvency will come into doubt should JGBs begin to decline in value. This is likely to happen should the fall in the yen’s external value get out of control. In that event, large portion of the covered money substitutes sitting in accounts may actually be converted into currency by panicked depositors. Then Mr. Kuroda will be reminded of the old saying “be careful what you wish for”.

 

Conclusion:

Japan’s aging population needs rising prices like a hole in the head. The more “successful” Mr. Kuroda becomes in forcing prices up, the less money people will have to spend and invest. The economy will weaken, not strengthen, as a result. The advantages the export sector currently enjoys are paid for by the entire rest of the economy. moreover, even this advantage is fleeting. It only exists as long as domestic prices have not yet fully adjusted to the fall in the currency’s value.

If one could indeed debase oneself to prosperity, it would long ago have been demonstrated by someone. While money supply growth in Japan has remained tame so far, the “something for nothing” trick implied by the BoJ’s massive debt monetization scheme is destined to end in a catastrophe unless it is stopped in time. Once confidence actually falters, it will be too late.

 

JAPAN-TOKYO-BOJ-PRESS CONFERENCEHaruhiko Kuroda believes the economy is a machine, and he just needs to pull, the right levers.

(Photo credit : Stringer / Xinhua Press / Corbis)

 

Charts by: St. Louis Fed, StockCharts, BoJ, Tradingeconomics, Gail Fosler Group/IMF, Institute for New Economic Thinking

ARE YOU WORRIED ABOUT DEFLATION?

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Posted on 27th October 2014 by Administrator in Economy |Politics |Social Issues

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Grandma Yellen, Federal Reserve Presidents, Wall Street bankers, CNBC talking heads and Ivy League economists are terribly worried about falling prices. Are you?

Via The New York Post

Meat, fruit, milk and butter prices skyrocket

New Yorkers are bringing home the bacon — but can’t afford the beef.

The prices of supermarket staples such as meat, milk and butter are skyrocketing.

US Labor Department data show the bill for butter surged 23.7 percent over the last 12 months. Meat rose 13 percent in the last year, with beef jumping 17.8 percent — the biggest boost since January 2004.

Meanwhile, fresh fruits other than apples, bananas and oranges increased 9.5 percent and whole milk rose 8.7 percent.

“Our paychecks stay the same, but the food prices keep going up,” fumed Jody O’Toole as she shopped at the Associated Supermarket at Eighth Avenue and 14th Street. “You still gotta feed your family, but meat and milk are too much.”

Colleen Vincent, who lives with her mother in Brooklyn, said she’s avoiding meat and sticking to canned goods and cabbage, which she turned into three meals last week.

“I don’t do big grocery shopping trips anymore,” said Vincent, 37. “I have to buy something that gives me more bang for my buck.

“We used to buy beef — now it’s a special treat,” she added. “There are other things I want out of life. I don’t want to spend everything on food.”

Steve Gould, 68, was picking up seltzer water, bananas and yogurt and said he refuses to buy anything unless it’s on sale.

“I want people to stick their heads out the windows like they did in the movie ‘Network,’ and say, ‘I’m mad as hell and not going it take it anymore,’ ” Gould said.

At Associated, a gallon of whole milk was going for $3.99, an eight-ounce package of Breakstone butter was $3.39 and ground beef was $4.19 a pound.

In Chelsea, the Gristedes on 26th Street and Eighth Avenue sold milk for $4.99 a gallon, eight ounces of Breakstone butter went for $3.49 and ground beef was $8.49 a pound.

The Inflation/Deflation Train – Always on the same track!

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Posted on 13th August 2014 by MuckAbout in Economy |Politics |Social Issues

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Mucks’ Note:  The   Woodpilereport can be found at:      http://www.woodpilereport.com/.

‘Ol Remus is spastic with his post filings and you never know when one will show up and what it’s going to be about (kind a’like TBP)  Since he allows unrestricted reposting of his newsletter with credit, I will be taking advantage of that and bring his “reports” over to TBP whenever a fresh one shows up.  You might check the website directly now and again because ‘Ol Remus tends to stuff in baskets of interesting blurbs, quotes and such along with the main posts.

How you all enjoy.. Please let me know if it’s worth the trouble..          

Old MuckAbout

 

Curtesy of The Woodpile Report 8/12/14

This train wreck isn’t simply going to hit a wall out of the blue. Actually, it has been forming and accumulating and expanding for many years now, and yet it has simply been ignored, particularly by the financial markets which have ridden this bubble to these extreme and historic heights. The only issue is, when does it hit the wall? The answer to that question is it’s not very far down the road, and I can promise you that is when all hell is going to break loose.

David Stockman at davidstockmanscontracorner.com

                    There’s good evidence our current inflation is artificially induced to stave off an underlying deflation. Deflation is a slowing of the “velocity of money”—a measure of how often a dollar passes from one hand to another. Deflation theorists say the velocity of money became near-catatonic in 2007-2008. The ongoing “money printing” is intended to compensate for the lack of real circulation. It’s this “money printing” that accounts for such inflation as exists, and even at that it’s not been effective. More technically, in the last twenty five years the M2 money stock has gone up 700% while prices have gone up 200%. It’s the dormant 500% we should worry about.

                      In a classic deflation like the Great Depression of the 1930s, currency becomes all but unobtainable, everyone sits on it, in part because they believed “everything will be cheaper tomorrow.” They weren’t wrong. Faith in the currency was justified by real events so it became more valuable over time. The question is, if we revisit real deflation, what happens to the price of gold and silver? The only honest answer is, nobody knows. History says the price for precious metals—including coins—will drop just like prices for everything else. And that’s the key, just like everything else. At minimum their relative value will be maintained and they’ll probably do better in terms of purchasing power.

                  Paper traders and promise holders will take inescapable losses because debt doesn’t fall with everything else, it becomes unpayable. Deflation incurs a relentless repudiation of debt—touchingly called “restructured debt” in its final phase—and the stair-step crumbling of everything connected to debt, including prices. Yes, gold and silver prices too.

                    1930s-style deflation is an economy’s rigor mortis, proof it’s well and truly dead and good evidence the regime may be next. Government will do anything to counteract deflation—or even talk of deflation. Which is about where we are now. The policy has been aggressive inflation—they call it stimulus or bailouts or quantitative easing—and it’s done in the sorriest strongman’s pest-hole and name brand empires. Political flavorings aside, there comes a time when inflation devolves into a frantic torrent of nearly worthless paper. It’s here the purchasing power of gold and silver go to escape velocity while that of currency soars twenty feet into the ground and disappears. Long before that, gold and silver won’t be on offer for any amount of currency.

                     By the time the handwriting is on the teleprompter it’s already too late. Holders of precious metals are ahead of this curve. They know it can take mere weeks for ordinary inflation to metamorphosize into an outright repudiation of the currency, meaning hyper inflation.

Hyperinflation arises as a result of money printing leading to a currency collapse and not from demand pull. The slight deflation that we are experiencing currently is a prerequisite for hyperinflation. The fear of a deflationary implosion forces governments to print money, leading to a collapsing currency which historically has always been the cause of hyperinflation.
Egon Greyerz, Matterhorn Asset Managament AG

                    In passing, there are other dimensions to all this. Given our lawless police state, our institutional corruption and the collapse of official ethics and personal values art-link-symbol-tiny-grey-arrow-only-rev01.gif, we’re closing fast on third world status. Already the lives of much of the population are indistinguishable art-link-symbol-tiny-grey-arrow-only-rev01.gif from the bottom reaches of the Third World. This protected subset of society, these professional voters, are paid to consume, know only consuming and despise all else. The coming debacle will be much less orderly than the one of the 1930s.

             Don’t imagine DC‘s ‘public servants’ would perform acts of selfless heroism in a currency collapse. They’ll lack motivation, credibility and legitimacy, perceived or otherwise. One last note. It was rebellions and secessions that finally dissolved the Soviet Union, long in the making, short in the doing. They succeeded because police and armed forces are fractional like bank reserves—not enough by orders of magnitude. It’s said the United States is nearly ungovernable even in times of stability and prosperity. Some states may save themselves in whole or in part. It’s the least happy of unhappy endings for our former republic, but the most likely.

                    Deflation is historically more relentless than it is swift, typically it takes a year or two for the last holdouts to topple into the abyss. Inflation is historically as patient as rust, festering as a low-grade infection for decades. But hyper inflation goes from hint to full stride like a drag racer, typically blindsiding layman and professional alike. If deflation is a return to honest bookkeeping, hyper inflation is a book burning. And when the confetti blows away and takes its imaginary wealth with it, what remains are those things of enduring value: land, food, houses, clothing, tools, medicine—and gold and silver. History tells us this is so. All of history. In all places.

                There’s no predicting these things, but be aware socialist regimes consider any asset subject to eminent domain, including life itself. Government doesn’t give, it takes. It’s foolhardy to rely on government, ever, especially when things get sketchy. Whatever dire events lie ahead and however they unfold, precious metals will have their place, and bullion in the form of recognized coins is likely to have the widest acceptance. It may be wise to make them a part of your discreet holdings before government makes itself a party to every transaction.

                  Only a complete and irredeemable fool will store coins in a bank or any other off-premise location not under his direct control and personal access. Even the minimally prudent will keep them in a location unknown to anybody whose interest is not identical to his own. Nor will he generate avoidable documentation. We are deeper into the storm than most admit and many can imagine. While our well being is not assured by taking such measures, it’s imperiled if we do not.

 

Mucks’ Note: You might try a visit the website directly every now and then.  ‘Ol Remus tends to throw in bushel baskets of nifty thoughts, comments, quotes and other verbiage (all good) along the edges of his main post.  It’s a fun site to just browse.

Please let me know if you enjoy it enough for me to take the time to pick up new posts and bring them over to TBP

MA

SMOKING GUN FROM THE FEDERAL RESERVE MURDER OF THE MIDDLE CLASS

134 comments

Posted on 18th May 2014 by Administrator in Economy |Politics |Social Issues

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“Although low inflation is generally good, inflation that is too low can pose risks to the economy – especially when the economy is struggling.” - Ben Bernanke

“The true measure of a career is to be able to be content, even proud, that you succeeded through your own endeavors without leaving a trail of casualties in your wake.”Alan Greenspan

There you have it – the wisdom of two Ivy League educated economists who are primarily liable for the death of the American middle class. They now receive $250,000 per speaking engagement from the crooked financial parties their monetary policies benefited; write books to try and whitewash their legacies of failure, fraud, and hubris; and bask in the glow of the corporate mainstream media propaganda storyline of them saving the world from financial Armageddon. Never have two men done so much damage to so many people, so quickly, and are not in a prison cell or swinging from a lamppost. Their crimes make Madoff look like a two bit marijuana dealer.

The self-proclaimed Great Depression “expert” Ben Bernanke peddles pabulum about inflation being too low and posing dire risk to the economy, but is blasé that swelling the Federal Reserve balance sheet debt from $900 billion in 2008 to $4.4 trillion today with his digital printing press poses any systematic risk to the country and its citizens. Either his years in academia have blinded him to the reality of his actions upon the lives of real people living in the real world, or his real constituents have not been the American people, but the Wall Street bankers that pulled his puppet strings over the last eight years.

Now that he has passed the Control-P button to Yellen, he is reaping the rewards of bailing out Wall Street and further enriching them with QEfinity. Ben earned a whopping $200,000 per year as Federal Reserve chairman. He now rakes in $250,000 per speech from the very financial interests who benefited from his traitorous monetary machinations. I don’t think he will be invited to speak at any little league banquets by formerly middle class parents whose standard of living has been declining since the 1980s. Is it a requirement that every Federal Reserve chairperson lie, obfuscate, misinform, hide the truth, and do the exact opposite of what they say they will do?

“It is not the responsibility of the Federal Reserve – nor would it be appropriate – to protect lenders and investors from the consequences of their financial decisions.” - Ben Bernanke – October 2007

Greenspan, Bernanke and Yellen have always been worried about deflation, while even the government suppressed CPI calculation reveals that inflation has risen by 108% since the day Greenspan assumed office in August 1987. The dollar has lost 52% of its purchasing power in the last 27 years of Fed induced bubbles and busts. And these scholarly academic bozos have been worried about deflation the entire time. Since Nixon closed the gold window in 1971 and unleashed the two headed inflation loving gargoyle of debt issuing bankers and feckless self-serving politicians upon the American people, the dollar has lost 83% of its purchasing power (even using the bastardized BLS figures).

Any critical thinking person with their eyes open knows the official inflation figures have been systematically understated since the 1980’s by at least 3% per year. Should the average American be more worried about deflation or inflation, based upon what has occurred during the 100 years of the Federal Reserve controlling our currency?

I’m sure Greenspan is content and proud, as he succeeded through his own endeavors in rewarding, encouraging and propagating excessive risk taking by the Wall Street cabal during his 19 year reign of error. He exited stage left as the biggest bubble in history, created by his excessively low interest rate policy, blew up and destroyed the 401ks and home values of the middle class. This was the second bubble under his monetary guidance to burst. The third bubble created by these Keynesian acolytes of easy money will burst in the near future, further impoverishing what remains of the middle class and hopefully igniting a long overdue revolution.

Greenspan’s pathetic excuse for a career has benefitted those who owned him, while leaving a trail of casualties that circles the globe. His inflationary dogma, Wall Street enriching doctrine and Keynesian motivated schemes have drained the savings and confiscated the wealth of the middle class through persistent and devastating inflation. And it was done by a man who knew exactly what he was doing.

“Under the gold standard, a free banking system stands as the protector of an economy’s stability and balanced growth… The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit… In the absence of the gold standard, there is no way to protect savings from confiscation through inflation” – Alan Greenspan – 1966

The abandonment of the gold standard in 1971 set in motion four decades of consumer debt accumulation on an epic scale, currency debauchment, and real wage stagnation. The consumer debt accumulation was a consequence of the American middle class being lured into debt by the Too Big To Trust Wall Street banks and their corporate media propaganda machine, as a fallacious response to stagnating real wages when their jobs were shipped to China by mega-corporations using wage arbitrage to boost quarterly profits, their stock prices, and executive bonuses.

The bottom four quintiles have made no progress over the last four decades on an inflation adjusted basis. The middle quintile, representing the middle class, has seen their real household income grow by less than 20% over the last 43 years. And this is using the understated CPI. In reality, even with two spouses working today versus one in 1971, real household income is lower today than it was in 1971.

Click to View

The more recent data, during the Greenspan/Bernanke inflationary era, is even more disconcerting and destructive. Real median household income has grown at an annualized rate of less than 0.5% over the last thirty years. During the bubblicious years from 2000 through 2014, while Wall Street used control fraud and virtually free money provided by the Fed to siphon off hundreds of billions of ill-gotten profits from the economy, the average middle class family saw their income drop and their debt load soar. This is crony capitalism success at its finest.

The oligarchs count on the fact math challenged, iGadget distracted, Facebook focused, public school educated morons will never understand the impact of inflation on their daily lives. The pliant co-conspirators in the dying legacy media regurgitate nominal government reported income figures which show median household income growing by 30% over the last fourteen years. In reality, the real median household income has FALLEN by 7% since 2000 and 7.5% since its 2008 peak. Again, using a true inflation figure would yield declines exceeding 15%.

Greenspan and Bernanke’s monetary policies loaded the gun; Wall Street bankers cocked the trigger with their no doc negative amortization mortgages, $0 down – 0% interest – 7 year subprime auto loans, introducing the home equity line ATM, and $20,000 lines on dozens of credit cards; the media mouthpieces parroted the stocks for the long run and home prices never fall bullshit storyline, encouraging Americans to pull the trigger; government apparatchiks and bought off politicians and their deficit expanding fiscal policies, pointed the gun; and the American people pulled the trigger by believing this nonsense, blowing their brains all over the fine Corinthian leather interior of their leased BMWs sitting in the driveway in front of their underwater McMansions.

Median household income in the United States peaked in 1999. The internet boom, housing boom and now QE boom have done nothing beneficial for middle class Americans. They have been left with lower real income, less home equity, no savings, and no hope for a better tomorrow. Most states saw their median household income peak over a decade ago, with more than half the states experiencing double digit declines and ten states experiencing declines of 19% or higher. It’s clear who has benefitted from the fiscal policies of spendthrift politicians and the spineless inhabitants of the Mariner Eccles Building in the squalid swamplands of Washington D.C. – the pond scum inhabiting that town. The median household income in D.C. stands at an all-time high. Winning!!!!

A former inhabitant of Washington D.C. spoke the truth about inflation and the men who benefit from it in the 1870’s. He was later assassinated.

“Who so ever controls the volume of money in any country is absolute master of all industry and commerce and when you realize that the entire system is very easily controlled, one way or another, by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate.” James Garfield

The Federal Reserve, a private bank representing the interests of its Wall Street owners, has been in existence for 100 years. It has managed to diminish the purchasing power of the dollar by 95%, while causing depressions, enabling never ending warfare, allowing politicians to expand the welfare state to immense unsustainable proportions, and enriched its true constituents on Wall Street beyond the comprehension of average Americans. In 2002 Ben Bernanke made his famous helicopter speech where he promised to drop dollars from helicopters to fight off the ever dangerous deflation. After the Fed created 2008 worldwide financial collapse he fired up his helicopters, but dropped trillions of dollars on only one street in America – Wall Street. He dropped turkeys on Main Street, and we all know from Les Nesman what happens when you drop turkeys from helicopters.

Les Nesman: Oh, they’re crashing to the earth right in front of our eyes! One just went through the windshield of a parked car! This is terrible! Everyone’s running around pushing each other. Oh my goodness! Oh, the humanity! People are running about. The turkeys are hitting the ground like sacks of wet cement! Folks, I don’t know how much longer… The crowd is running for their lives.

Arthur Carlson: As God is my witness, I thought turkeys could fly.

The intellectual turkeys running this treacherous institution create a new and larger crisis with each successively desperate gambit to keep their Ponzi scheme alive. Even though Greenspan, Bernanke and Yellen are highly educated, they are incapable or unwilling to focus on the practical long-term implications of their short-term measures to keep this perverted financial scheme from imploding. Denigrating savings and capital investment, while urging debt financed spending on foreign produced trinkets and gadgets passes for economic wisdom in the waning days of our empire. Courageous and truthful leaders are nowhere to be found as the country circles the drain. Farewell middle class. It was nice knowing you.

“There are men regarded today as brilliant economists, who deprecate saving and recommend squandering on a national scale as the way of economic salvation; and when anyone points to what the consequences of these policies will be in the long run, they reply flippantly, as might the prodigal son of a warning father: “In the long run we are all dead.” And such shallow wisecracks pass as devastating epigrams and the ripest wisdom.” – Henry Hazlitt – Economics in One Lesson

 

GASOLINE AT A NINE MONTH HIGH

26 comments

Posted on 26th April 2014 by Administrator in Economy |Politics |Social Issues

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Have you noticed the mainstream media propaganda machine has been silent regarding gasoline prices? When they are dropping they gush about the huge benefits for the consumer and the economy. When they are soaring, the sound of crickets. They must keep the charade alive.

It seems gas prices have been accelerating at a rapid pace over the last two months, with a 12% increase since February 10. They are up 13% from the November low and up 5% versus last year. But don’t you worry. The BLS assures us that gasoline prices have been dropping for the last two months. Ignore the extra $10 showing on the pump screen when you fill up. It’s an illusion. 

Now for the kicker. Gasoline prices usually fall from February through until May. Prices ratchet up around Memorial Day as the summer driving season kicks in and demand goes up. Last year prices fell from February 20 through May 1. This year they’ve risen in a straight line. Guess what happens in May? They rise some more. Last year we didn’t have a war in the Ukraine. Last year we had exactly zero damaging hurricanes in the Gulf Of Mexico.

Do you have gas pains? If you don’t now, you will in the near future. But at least the High Frequency Traders on Wall Street get richer by the day as they front run you in the stock market. We’ve got that going for us. And as a Federal Reserve governor once said, “Let them eat iPads.”

I understand Janet Yellen is dreadfully worried about deflation. She doesn’t see any bubbles and the housing market is in full recovery mode. Now do your duty and charge that gasoline on your credit card and pay the Wall Street banks 21% interest on the rolling balance. Be a good American.

 

AND YELLEN IS WORRIED ABOUT DEFLATION

1 comment

Posted on 14th March 2014 by Administrator in Economy |Politics |Social Issues

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Don’t you just love the bullshit spin title to this MSM article. You’re not getting a fucking raise because the temperature is going up. The idiot writing this story can’t even pick up a calculator and realize the weighted average increase in heating the average home in the country was 9.8% higher than last year. The last time I checked you still need natural gas to power air conditioners in 49% of homes in the country. The price is currently 14% HIGHER than last year at this time. Where is the cost savings?

The MSM is nothing but a mouthpiece for the  assholes running this country. Next week Yellen will get up in front of a bunch of  paid off MSM faux journalists who will lob softball question at her. She will blather on about her fear of deflation. Meanwhile we are getting fucked up the ass with energy, food, health insurance, tax, and education inflation. But, at least our real wages are going down. We got that going for us.

You’re getting a raise in May — sort of

With spring’s arrival, Americans can shed layers — and spending

By Quentin Fottrell


Bloomberg

Nick Dykstra, a liquid fuels technician with Michlig Energy Ltd., delivers propane to a rural residence near Princeton, Illinois,

When spring arrives, many Americans might feel like they got a pay raise. That’s because the cold weather and a storm of other factors jacked up heating bills for many households, according to the U.S. Energy Information Administration.

Average prices for U.S. households heating primarily with propane are expected to end up 54% higher this winter than last year, while expenditures for homes using heating oil will be 7% higher, natural gas 10% higher, and electricity 5% higher, according to “ March Short-Term Energy Outlook ” by the U.S. Energy Information Administration. Persistently cold weather east of the Rocky Mountains and along the northeast drove up demand for all heating fuels, depleted inventories, and helped raise prices, the report found, but household propane prices experienced an especially high spike.

The reason for the propane spike? Damp corn in the Midwest. “Propane is used to dry corn crops and, last year, the Midwest had a particularly large and wet corn harvest,” says Sean Hillen, economist at the U.S. Energy Information Administration. “It got cold and stayed cold. People couldn’t get enough propane into the region fast enough and prices went through the roof.” Propane prices more than doubled from $2.08 per gallon in September 2013 to $4.20 by the end of January. He estimates that Midwestern homes using propane had winter heating costs of around $2,212, which were $759 higher than October estimates.

The good news: Just 4.5% of the 116 million homes in the U.S. use propane and 7% of homes use propane in the Midwest, according to the U.S. Census Bureau, while 49% of homes use natural gas and 39% use electricity. But this winter has also been much longer for most households. Between October and the end of February, the number of heating days was 13% higher than last winter — and 10% above the 10-year average.

This winter has been the coldest in four years, according to data released Thursday by the government’s National Oceanic and Atmospheric Administration. In fact, the average temperature in the U.S. during the 2013/2014 winter season was 31.3 degrees, one degree below the 20th-century average, the NOAA found.

“Natural gas is almost always the cheapest form of heating,” says Jeff Rogers, president of the Energy Audit Institute, an energy-audit training and certification company in Springfield, N.J. That, he says, has a lot to do with its relatively small carbon footprint. Around 10% of natural gas is used up during the generation and transmission process before it reaches consumers versus a loss of 60% to 65% for electricity, according to the Alliance to Save Energy, a non-profit coalition of industrial, technological and energy corporations. “Consumers are effectively paying for all that wasted energy,” Rogers says. “Whenever you’re buying a piece of meat, you’re paying for the whole cow. The same is true for electricity and natural gas.”