Why Biden’s Policies Are a Nightmare for Housing Affordability

From Brandon Smith

We’re enduring a stagflationary crisis – there’s no way around it.

It doesn’t matter how much oil Joe Biden dumps on the market from the Strategic Reserves.

It doesn’t matter how many jobs he is able to temporarily buy with $8 trillion-plus deficit spending.

It doesn’t matter how many times the mainstream media claims we are “in a recovery” or claim to see the “green shoots” of a “soft landing.”

In reality, most Americans are struggling to afford necessities – increasingly, they’re simply unable to participate in essential markets. The longer this goes on, the deeper the hole and the harder it will be for people to climb out.

Continue reading “Why Biden’s Policies Are a Nightmare for Housing Affordability”

Stagflation Warning Signs Getting Worse

Via Birch Gold Group

Stagflation Warning Signs Getting Worse

From Peter Reagan at Birch Gold Group

Recessionary times are bad enough on their own.

But an inflationary economy that isn’t growing, has a rising unemployment rate, and out-of-control spending can be even worse.

In economic terms, that’s known as stagflation.

From our deep dive on the subject, stagflation is more specifically defined as:

an economy that is shrinking, remaining flat, or growing at a very slow rate. When a nation’s gross domestic product (GDP), a measurement of all the goods and services produced in the country, either fails to grow or actually shrinks, economists will say the nation is economically stagnant. The relevant definition here is “showing no activity; dull and sluggish.”

There are three general characteristics of a stagflationary economy:

  1. Higher-than-average unemployment rates. Higher unemployment means there are fewer workers to contribute to increasing supply; at the same time, unemployed individuals will be very conservative with their spending, reducing demand and tamping down economic growth.
  2. Reduced consumer spending. Because consumer spending is a critical component of economic growth, reductions in demand contribute directly to a reduced GDP.
  3. Increased money supply. When central banks expand money supply or create credit, this directly contributes to higher prices, fueling the inflation portion of stagflation.

Continue reading “Stagflation Warning Signs Getting Worse”

America’s Prolonged Economic Stagflation

Guest Post by David Stockman

stagflation

Here is a large caliber smoking gun. The BEA series for real personal income less transfer payments is a pretty serviceable proxy for private market output before the impact of Washington stimmies and distortions caused by transfer payments and government borrowing. After all, earned income – wages, salaries, bonuses, profits, interest and dividends – is the payment to factors of production for output and therefore its reciprocal.

The long-term trend is slouching definitively southward. Since the pre-lockdown peak in February 2020, in fact, the growth rate has slowed to just 17 percent 0f its pre-2000 average.

Per Annum Growth of Real Personal Income Less Transfer Payments:

  • Feb. 1960 to Feb 2000: +3.62 percent;
  • Feb. 2000 to Feb. 2020: +2.08 percent;
  • Feb. 2020 to May 2023: +0.61 percent.

Continue reading “America’s Prolonged Economic Stagflation”

Here’s Why Stagflation Will be the Dominant Theme of the Decade…

Guest Post by Chris MacIntosh

Stagflation

Why stagflation — and not inflation or deflation — will prevail as the dominant theme for the decade?

This period is analogous to the 1930-40 period with an exception. The countries going into this particular crisis are debt laden as we’re at the tail end of the long-term debt cycle. Not only that but the largest reserve currency economic blocks (US, Europe, UK, and Japan) are now moving into the contraction/restructuring stage of the cycle.

Consider where we are now. In every major economic bloc with a currency system that is used as reserves (most notably the US, UK, EU, and Japan) we have reached levels where growth has stalled. This growth stall was prior to the 2020 lockdowns, by the way. Debt had already begun to be unsustainable in so far as debt laden assets had reached insane levels with simultaneous levels of accompanying debt. The ROI provided was in many instances negative. Remember those negative yielding sovereign bonds in Europe? Remember loss making (high tech whizz bang “growth”) such as the ARK Innovation Fund. Continue reading “Here’s Why Stagflation Will be the Dominant Theme of the Decade…”

Biden’s Plan to Lower Gas Prices Looks A Lot Like Communism

Via Birch Gold Group

Bidens Plan to Lower Gas Prices: Threatening Oil Companies (Are Price Controls Next?)

From Peter Reagan

As the November 8th midterm election draws closer, the U.S. economy is still suffering from red-hot inflation, and that includes high gas prices.

In response to public outrage over the situation, President Biden had a novel strategy. Previously, the Biden regime had sold 180 million barrels of crude from the nation’s Strategic Petroleum Reserve (SPR), shrinking it to their lowest levels since the 1980s.

Did that work? The Treasury Department claims the decision “lowered the price of gasoline by 17 cents to 42 cents per gallon, with an alternate approach suggesting a point estimate of 38 cents per gallon.”

That’s not nothing! When California gas prices were nearly $7 per gallon (nearly $5 nationwide), we really were feeling pain at the pump. Continue reading “Biden’s Plan to Lower Gas Prices Looks A Lot Like Communism”

How to earn 9.62% during stagflation

Guest Post by Simon Black

It all started innocently enough.

It was July 2, 1997, and the Prime Minister of Thailand had just announced that their currency– the Thai baht– would no longer be pegged to the US dollar.

Big deal, right? It doesn’t seem like a boring press conference about an emerging market currency in Southeast Asia would even be noticed by too many people, let alone ruffle any feathers.

Continue reading “How to earn 9.62% during stagflation”

World’s Biggest Hedge Fund Makes the Ultimate Case for Gold

Via Birch Gold Group

Worlds Biggest Hedge Fund Makes the Ultimate Case for Gold

How much gold are you going to need? Like, this much, at least…”
Image CC BY 2.0 courtesy of TechCrunch

From Peter Reagan

This week, Your News to Know rounds up the latest top stories involving gold and the overall economy. Stories include: Bridgewater Associates CIO’s pro-gold outlook, the miserable effects of putting an end to the gold standard, and 4 reasons to buy gold’s current dip.

Here’s why Bridgewater sees gold as one of few assets worth owning

Continue reading “World’s Biggest Hedge Fund Makes the Ultimate Case for Gold”

Here Is What Stagflation Looks Like

Guest Post by David Stockman

Yes, we have some stagflation. Subsequent to the pre-Covid peak in Q4 2019, real final sales of domestic product have slowed to a crawl, rising by just 0.73% per annum during the last 2.5 years.

We much prefer this measure over real GDP because it removes the abrupt inventory swings from quarter to quarter, which can have out-sized impacts on the headline number. Thus, during the first two quarters of 2022 the reported back-to-back real GDP contraction was owing to inventory liquidation, not an actual shrinkage of current activity.

Continue reading “Here Is What Stagflation Looks Like”

The Extraordinary Popular Delusions at the Eccles Building

Via International Man

Eccles

Never in the history of the world has the financial well-being of so many tied to the economic competence of so few. Yet what emerged from the latest FOMC meeting (March 15-16th) indicates a complete lack of the macroeconomic fundamentals that is driving the markets.

Given how wrong the US Fed has been in its forecasts of transitory inflation, one would have hoped that Fed officials would have questioned some of their basic assumptions which had led to such dramatically erroneously conclusions. Yet, they continue down the path of mistaking bubbles for growth, extremely frothy market valuations for solid fundamentals and the cheery market consensus for a stable equilibrium.

Make no mistake—We are in extreme bubble territories for the asset classes of equities, bonds (despite the recent routing, valuations are still very frothy – more on that latter) and real estate. US GDP numbers these days are pretty much largely dependent on the reserve currency status and is just a pin-prick away from a cascading collapse on multiple fronts. What lies in the months and years ahead is sheer mayhem in the equities, bonds and real estate markets and consequently on the economy and currency markets as well.

A legitimate question at this point would be what has changed in the immediate past to convert what was an inevitable event to an imminent one? Just to point out, the fundamentals of the US Economy have been degrading for at least a couple of decades now and it was the apparently low consumer price inflation despite all of the monetary inflation (i.e. expansion of the money supply) that was masking the disease. Economists, investors and the general public have been mistaking the equity, real estate and bond bubbles (which are a direct consequence of the monetary inflation) as indicative of a sustainable economy. Continue reading “The Extraordinary Popular Delusions at the Eccles Building”

‘Dr. Doom’ Warns Of The Gathering Global Stagflationary Storm

Authored by Nouriel Roubini via Project Syndicate,

While recent shocks have made the current inflationary surge and growth slowdown more acute, they are hardly the global economy’s only problems. Even without them, the medium-term outlook would be darkening, owing to a broad range of economic, political, environmental, and demographic trends.

The new reality with which many advanced economies and emerging markets must reckon is higher inflation and slowing economic growth. And a big reason for the current bout of stagflation is a series of negative aggregate supply shocks that have curtailed production and increased costs.

This should come as no surprise. The COVID-19 pandemic forced many sectors to lock down, disrupted global supply chains, and produced an apparently persistent reduction in labor supply, especially in the United States. Then came Russia’s invasion of Ukraine, which has driven up the price of energy, industrial metals, food, and fertilizers. And now, China has ordered draconian COVID-19 lockdowns in major economic hubs such as Shanghai, causing additional supply-chain disruptions and transport bottlenecks.

But even without these important short-term factors, the medium-term outlook would be darkening. Continue reading “‘Dr. Doom’ Warns Of The Gathering Global Stagflationary Storm”

Niall Ferguson: Seven Worst-Case Scenarios From The War In Ukraine

Authored by Niall Ferguson, op-ed via Bloomberg.com,

Most conflicts end quickly, but this one looks increasingly like it won’t. The repercussions could range from global stagflation to World War III…

Consider the worst-case scenario.

I have argued here before that the global situation today more closely resembles the 1970s than any other recent period. We are in something like a new cold war. We already had an inflation problem. The war in Ukraine is like the Arab states’ attack on Israel in 1973 or the Soviet invasion of Afghanistan in 1979. The economic impact of the war on energy and food prices is creating a risk of stagflation.

But suppose it’s not 1979 but 1939, as the historian Sean McMeekin has argued? Of course, Ukraine’s position is much better than Poland’s in 1939. Western weapons are reaching Ukraine; they did not get to Poland after Nazi Germany’s invasion. Ukraine faces only a threat from Russia; Poland was partitioned between Hitler and Stalin.

On the other hand, if one thinks of World War II as an agglomeration of multiple wars, the parallel starts to look more plausible. The U.S. and its allies must contemplate not one but three geopolitical crises, which could all happen in swift succession, just as the war in Eastern Europe was preceded by Japan’s war against China, and was followed by Hitler’s war on Western Europe in 1940, and Japan’s war on the U.S. and the European empires in Asia in 1941. If China were to launch an invasion of Taiwan next year, and war were to break out between Iran and its increasingly aligned regional foes — the Arab states and Israel — then we might well have to start talking about World War III, rather than just Cold War II.

Continue reading “Niall Ferguson: Seven Worst-Case Scenarios From The War In Ukraine”

The Stagflation Trap Will Lead To Universal Basic Income And Food Rationing

Authored by Brandon Smith via Alt-Market.us,

This past week during a conference discussing Biden’s “Build Back Better” scheme House Speaker Nancy Pelosi was confronted with questions on skyrocketing inflation. After referring to higher gas prices as the “Putin Tax”, she went on to offer perhaps the dumbest (or most insidious) denial on the causes of inflation that I have ever heard. She stated:

“When we’re having this discussion, it’s important to dispel some of those who say, well it’s the government spending. No, it isn’t. The government spending is doing the exact reverse, reducing the national debt. It is not inflationary.”

Anyone with a basic understanding of economics and how central banks operate must have felt their brains explode when they heard this, I know I did. But before I get into the numerous reasons why this claim is completely false in every way, I want to give a warning – It’s very easy in this situation to assume that Pelosi and even Biden are making these arguments because they are too stupid to grasp the fundamentals of debt creation, money velocity and fiat. That said, never mistake evil for mere ignorance.

All higher level representatives of the White House are briefed by economic experts (spin doctors) well before they answer any questions on inflation, and the things they say have been carefully scripted. It’s possible Pelosi mixed her lies up a little bit, but the narrative the establishment is trying to promote is well planned. Asserting that money creation is a counterbalance to inflation instead of the cause is not brilliant, but it’s not designed to convince many people, only create confusion.

Continue reading “The Stagflation Trap Will Lead To Universal Basic Income And Food Rationing”

The Fed Just Guaranteed a Stagflation Crisis in 2022 – Here’s How

Via Birch Gold Group

The Fed Just Guaranteed a Stagflation Crisis in 2022 - Here Is How

From Brandon Smith

I don’t think I can overstate the danger that the U.S. economy is in right now as we enter 2022. While most people are caught up in the ongoing drama of Covid-19, a real threat looms over the nation in the form of a stagflationary tidal wave. The mainstream media is attempting to place the blame on “supply chain disruptions,” but this is a misrepresentation of the issue.

The two factors are indeed intertwined, but the reality is that inflation is the cause of supply chain disruptions, not the result of supply chain disruptions. If we look at the underlying stats for price rises in essential products, we can get a clearer picture.

Before I get into my argument, I really want to stress that this is a truly dangerous time and I suggest that people prepare accordingly. In just the past few months I have seen personal expenses rise at least 20% overall, and I’m sure it’s the same or worse for most of you. Safe-haven investments with intrinsic value like physical precious metals are a good choice for protecting whatever buying power your dollars have left…

Higher prices everywhere

The Consumer Price Index (CPI) is officially at the highest levels in 40 years. CPI measurements often diminish the scale of the problem because they do not include things like food, energy and housing which are core expenses for the public. CPI calculations have also been “adjusted” over the past few decades by the government to express a more positive view on inflation. If we look at the inflation numbers at Shadowstats, calculated according to the same methods they used in the 1980’s, we see a dramatic increase in CPI which paints a more dire (but more accurate) picture.

Continue reading “The Fed Just Guaranteed a Stagflation Crisis in 2022 – Here’s How”

Viewing Inflation Through Rose-Colored Glasses

Guest Posts by Martin Armstrong

Once “we get the pandemic under control, the global economy comes back, these pressures will mitigate and I believe will go back to normal levels,” Treasury Secretary Janet Yellen stated, echoing “transitory” sentiments by Fed Chairman Jerome Powell. Powell believes supply chain bottlenecks are the main culprit for inflation. Well, the Biden Administration appointed the secretaries of Commerce, Agriculture and Transportation to create a supply chain task force to fix the influx issues.

Continue reading “Viewing Inflation Through Rose-Colored Glasses”

The Looming Stagflationary Debt Crisis

Guest Post by Nouriel Roubini

Years of ultra-loose fiscal and monetary policies have put the global economy on track for a slow-motion train wreck in the coming years. When the crash comes, the stagflation of the 1970s will be combined with the spiraling debt crises of the post-2008 era, leaving major central banks in an impossible position.

NEW YORK – In April, I that today’s extremely loose monetary and fiscal policies, when combined with a number of negative supply shocks, could result in 1970s-style stagflation (high inflation alongside a recession). In fact, the risk today is even bigger than it was then.

    After all, debt ratios in advanced economies and most emerging markets were much lower in the 1970s, which is why stagflation has not been associated with debt crises historically. If anything, unexpected inflation in the 1970s wiped out the real value of nominal debts at fixed rates, thus reducing many advanced economies’ public-debt burdens.  Conversely, during the 2007-08 financial crisis, high debt ratios (private and public) caused a severe debt crisis – as housing bubbles burst – but the ensuing recession led to low inflation, if not outright deflation. Owing to the credit crunch, there was a macro shock to aggregate demand, whereas the risks today are on the supply side.We are thus left with the worst of both the stagflationary 1970s and the 2007-10 period.

    Continue reading “The Looming Stagflationary Debt Crisis”

    Stagflation Subterfuge: The Real Disaster Hidden by the Pandemic

    From Brandon Smith

    Stagflation Subterfuge: The Real Disaster Hidden by the Pandemic

    In recent economic news, headlines are being dominated by concerns over rising bond yields. Increased bond yields are a sign of a possible spike in inflation and, logically, they call for the Federal Reserve to raise interest rates in order to prevent that inflation.

    Higher bond yields also mean there is a competitive alternative to stocks for investors – both factors that could trigger a plunge in the stock market.

    Continue reading “Stagflation Subterfuge: The Real Disaster Hidden by the Pandemic”