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THIS WEEK’S EDITORIAL
PEAK INFLATION IN UNITED STATES: In recent editorials, BOOM wrote about the importance of the August US inflation data release on 13th September and warned readers to watch closely for it. This data release was of particular importance in regard to the future direction of the US financial markets.
We all know now that the market reacted badly to the release with the Dow Jones Index plunging by 1,363 points at its worst on the day with many major stocks such as Google, Apple and Microsoft, smashed in the process. However, trading volumes were only marginally higher than normal and there was no strong follow through on the stock index futures market which remained steady after the close of trade. It was all a little unconvincing to the skeptical eye.
Take note, BOOM was pleasantly surprised by the data. It showed some very positive signs that we are either very close to the Peak of CPI inflation in the US or perhaps already past it.
There was only a 0.1 % increase in the MoM (Month on Month) number for the CPI Index. Last month, the increase was Zero. The non-seasonally adjusted figure came in at negative – 0.4% after being – 0.1 % the previous month. For the third month in a row, the non-seasonally adjusted CPI stayed close to 296 with the August figure coming in lower than July. The seasonally adjusted figure was also relatively static for the third month in a row.
The market was spooked by the Core CPI Index Month on Month figure which rose by 0.6% when the “expected” number and the previous number was 0.3%. And the Core CPI (YoY) rose from 5.9% to 6.3%. This index excludes food and energy. The immediate reaction was “bad result” but this kneejerk must now be looked at in context.
Just 90 minutes later, the figure for the Investor’s Business Daily (IBD), TechnoMetrica Institute of Policy and Politics (TIPP) Economic Optimism Index was released and rose strongly to 44.7 from the previous month’s figure of 38.1. The Small Business Optimism Index (NFIB) also rose from 89.9 to 91.8.
This is remarkable in the circumstances. There was also no strong flow of rebound investment volume into the long bond market with their prices rising marginally on the day. Also worth noting is the fact that Consumer Inflation Expectations numbers produced by the New York Fed fell for the third month in a row. Quote: “Inflation Expectations Continue Decline at the Short-, Medium-, and Long-Term Horizons
Median one- and three-year-ahead inflation expectations both posted steep declines in August, from 6.2 percent and 3.2 percent in July to 5.7 percent and 2.8 percent, respectively. Median five-year-ahead inflation expectations, which have been elicited in the monthly SCE core survey on an ad-hoc basis since the beginning of this year and were first published in July, also declined to 2.0 percent from 2.3 percent. Expectations about year-ahead price increases for gas also continued to decline, with households now expecting gas prices to be roughly unchanged a year from now.”
As the week unfolded, Gasoline, West Texas Crude and Natural Gas Continuous Contract Prices all ended the week lower by 2 – 3%. Copper likewise, down 1.44%. The US Dollar Index continued its strength.
Conclusion — we are close to the Peak of Inflation in the USA. The Fed must be extra careful here not to overcook their actions and would be advised to talk tough but carry a weak stick.
THE FUTURE OUTLOOK: This moment is critical. Everyone wants to see the end of the Covid Panic Demic, the Peak of CPI Inflation and the end of the War in Ukraine with subsequent lower energy prices and re-instatement of the normal supply chains for goods flowing from China to the West.
The WHO has just announced the former after the CDC admitted that their management of the whole fiasco was faulty. Fauci is in rapid retreat. The CPI inflation Peak could well have passed already and the war in the Ukraine will drag to a stalemate as we head into a bitter northern winter.
BOOM expects Russia to accelerate its offense as winter approaches with the recent Ukraine “advance” possibly becoming a trap which could speed the end and a return to diplomatic settlement. If so, everything could change quickly. In such negotiations, Russia may even take pity on Germany and Poland and resume energy supplies. That is unlikely but we shall see.
US ECONOMY CONTRACTING: According to a report from the Wall Street Journal, deposits at American banks fell by a record $370 billion in the second quarter of the year, the first decline since 2018. When deposits fall, it means that bank loan credit money creation is falling. Less demand for money suggests that the economy is beginning to contract significantly.
In further confirmation of this, the Atlanta Federal Reserve’s GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2022 has fallen to 0.5%, down from 1.4% just 10 days ago and down from 2.6% on September 1st.
The “Blue Chip Consensus” number is even more pessimistic. It is used by the Atlanta Fed as a comparator and has plunged below zero into negative range, indicating a confirmation of possible recession in the US economy.
Since the beginning of 2022, BOOM has expected an inflation-killing US and European recession in the 4th quarter. This prediction seems to have been accurate. We shall watch closely as September numbers for inflation are released on 13th October and retail sales MoM are released on the 14th. BOOM is expecting a significant contraction in US retail sales growth for September. If that happens, then a third quarter contraction in GDP would be very likely.
RUSSIAN EXPORTS GROWING: Liquefied Natural Gas (LNG) supplies to Japan from Russia have grown by 211% in quantity compared to August 2021. The value of that gas soared by more than 380%. Russian trade with China, India and Iran is also booming.
Last year, the trade turnover with China increased by 35% and exceeded $140 Billion. In the first seven months of this year, the volume of mutual trade grew by another 25%. It is expected to reach $200 Billion very soon.
TAKE NOTE OF SAMARKAND: The Shanghai Cooperation Agreement nations met in Samarkand during the week. Samarkand, also known as Samarqand, is a city in south-eastern Uzbekistan and among the oldest continuously inhabited cities in Central Asia.
The relations between Russia and China were clearly strengthened. They stand in opposition to the dominance of the US Dollar. China, however, must be careful. They earn Billions of US Dollars from their export of cheap goods. Their trade settlements are overwhelmingly done with US Dollars and Euros.
So the transition to other currencies is constrained by practicality. The fact that US Dollars and Euros are much more readily available than other currencies in the offshore Eurodollar market and in central bank foreign exchange holdings is the counter balancing force. Russian Rubles and Chinese Yuan are not as readily available.
BOOM has always said that the transition to a better world with currency equivalence in global trade and capital settlements is a long way away, perhaps 100 years. The key to that is the expansion of “EuroRuble” and “EuroYuan” denominated loan creation by global commercial banks and tax haven banks.
Until then, the US Dollar and the Euro will remain as the major, dominant settlement currencies unless Russia and China can find some way of rapidly increasing their currencies volumes in foreign exchange markets and in central bank holdings and can induce external commercial banks to write loans denominated in their currencies.
CHILLING WHITE HOUSE EXECUTIVE ORDER: Last week, there was an Executive Order released by the White House which effectively opened the floodgates for the Biotech and Big Pharma companies to accelerate their experiments on the people of America.
It is a disturbing document, over 6,000 words long, promoting yet more fiddling with the human genome in vivo beyond what has already happened with the release of the mRNA so called Messenger “vaccines” for Covid. It mirrors the FDA’s recent decision to grant emergency approval to the latest Bivalent Covid “vaccine” with no human trial evidence.
A major battle is brewing between the Christian religions of America and the current US Government. The genome is sacred to Christians (or should be). “Hacking the genetic code” as promoted by the WEF (World Economic Forum), especially its Israeli guru adviser, Yuval Noah Harari, will soon light the flames of argument about the future of the human race.
This matter can split the USA into two groups — those for and those against.
This sentence in the Executive Order is chilling, coming from a US President. It could have easily been written by Harari, Pfizer or by Moderna. Harari and Moderna, in particular, have made eerily similar statements in the past. Transhumanism should not come as an order from a President or Prime Minister in any nation with deeply Christian origins. Conflict is guaranteed to arise and split the nation.
“We need to develop genetic engineering technologies and techniques to be able to write circuitry for cells and predictably program biology in the same way in which we write software and program computers“
DENMARK – NO COVID VACCINES UNDER 50 YEARS AGE: Meanwhile, Denmark has effectively ended Covid vaccinations for the vast majority of people under the age of 50 years. The UK has also taken similar action in regard to children below 12 years of age. They had already previously ended Covid shots for nearly everyone under 18. The new rules go much further. Danes under 50 will only be allowed to receive the shots if they are at a “higher risk of becoming severely ill from Covid-19.”
In economics, things work until they don’t. Until next week. Make your own conclusions, do your own research. BOOM does not offer investment advice. SUBSCRIBE – FREE AT BOOM: http://boomfinanceandeconomics.com/#/
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BANKS DON’T TAKE DEPOSITS, THEY BORROW YOUR MONEY: LOANS CREATE DEPOSITS — that is how almost all new money is created in the economy (by commercial banks making loans). https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy Watch this short 15 minutes video and learn as Professor Richard Werner brilliantly explains how global banking systems really work. https://www.youtube.com/watch?v=EnC1UlnFLyI AND Watch for 4 minutes, this Bank of England explanation: Money is essential to the workings of a modern economy, but its nature has varied substantially over time. This video describes what money is today. https://www.youtube.com/watch?v=ziTE32hiWdk
Most economists are unaware of this and even ignore the banking & finance sectors in their econometric models. EMAIL: gerry {at} boomfinanceandeconomics.com
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LOTS to chew on here. But, no comments?
Several years ago I attempted to do a weekly series featuring 5 -10 Top Stories Of The Week. I believe it lasted for 3 episodes. Each of the articles barely got to 10 -15 comments. However, I know with relative certainty that had I posted each event as an individual article that it would have gotten 40, 50, or more comments (based on previous track record). I can only reach one inescapable conclusion …. folks are overwhelmed with too many stories in one post.
Maybe if you’d cut down the number of stories to one or two then there would be more comments.
Not a criticism …. just an observation. Remember, you paid $0 for this advice …. which is possibly what it is worth.
Your opinions and views are always important to me, Stucky. I have a great respect your input and would never value it at $0. But of course we all know how artists undervalue their work – I am guilty as much as any other. My wife is a brilliant artist working mainly on African animals. She gives them away to family and friends because to her they are worth $0.
Try as I may to encourage her, she finds every reason not to use this wonderful, God-given talent, all because of an introverted misconception of the value of her work, and more importantly,the risk of failure by rejection by her peers. It takes a lot of courage to risk failure. I was lucky, having trained with Xerox as a corporate systems consultant in the late 1970s; their intensely positive residential training courses still leave me with complete recollection of their mantras today, at 78! Brainwashing at its best.
But without it, I would never have had the courage to found my companies and risk their failure. This is a whole big bag of psycho worms that I won’t pursue here. So now I’m so OT (conditioning again) back to the subject matter.
It matters not to me how many comments I get, positive or otherwise, Stucky, for this is not my measure of acceptance. In fact had you thought that the fewer comments you get is no more an opprobrium of your publication than rather an accolade – a hidden acceptance of the general appeal?
“Success is failure turned inside out.” – “Failing is not falling over, it’s not getting back up again (think horse riding)” – “Success is not final, failure is not fatal: it is the courage to continue that counts. There is only one thing that makes a dream impossible to achieve: the fear of failure. I can’t give you a sure-fire formula for success, but I can give you a formula for failure: try to please everybody all the time.” – that is: “You can’t please everybody, all the time”. Just as you can’t fool everybody all the time.
Sometimes a lost sale is a gain – (the ‘lost sale close’). If you have been honest (HAGS) and told the prospect that you are not convinced that your solution is the best for him and to see a competitor – you have gained a friend and a potential sale in the future. https://www.lifehack.org/articles/communication/30-quotes-failure-that-will-lead-you-success.html
What we have here is a global, dynamic, multi-faceted, network of interacting variables of finance, markets, economics and geopolitics to name but a few. In my book I liken this to a complex adaptive system (natural systems of fractals, golden ratios and magic squares) which are impossible to separate. Gerry does his best to crystallise the essentials and present a possible forecast of events going forward. Good try though – thanks Stucky for your interest and valued thoughts and comments. Worth a read:
https://www.researchgate.net/publication/358117070_THE_FINANCIAL_JIGSAW_-_PART_1_-_4th_Edition_2020
GOOD stuff, AP!!
Keep this in mind please …. I gave my free advice From this perspective ===> I AM A THUMB WHORE!! 🙂
I love your dedication Stucky – I too give my valuable knowledge FOC – the current generations are going to need it every morsel of it as the isht continues to spread its steaming heaps of foetid trash, touching every vulnerable nerve of our suffering global populations.
We’re up Shit Creek with no paddle in sight!
I have to laugh when I see these prognostications about inflation. Most of whom are being made by people who have never actually experienced it, as most of the people who have, are retired now.
Inflation, is not linear, and there is no reason to believe we are anywhere near the peak. It will take a serious recession to put the brakes on inflation now, just as it did in the 80’s.
Inflation, once it gets near double digits, begins to feed upon itself. Wholesale purchasers must figure inflation into their business models, raising prices before their costs rise, in order to stay ahead of the curve. Once that psychology takes root, the only thing that changes it is warehouses of inventory that cannot be moved.
In addition, people need to understand what the objective is, of the people who caused the inflation to begin with.
One of the main goals of the Great Reset is to forward socialism by forcing people to become dependent on government subsidies for necessities. To make housing, food, and energy so expensive that they are un-affordable for the majority of people without government subsidies. Then to make those subsidies conditional upon compliance with government mandates. You see the governments will not need to force people to comply, they will do so willingly to receive subsidies. However, in order for this to work, inflation will have to much worse than it is today.
Perfect Jdog – you are over the target and your bomb-run is ready to go! My own prediction in my book Part 1, Chapter 13 is a long, slow, debilitating depression through this decade until a localised economy with short supply chains emerges. By then of course the global population will have reduced to a more manageable one billion or so – last seem in 1800AD:
https://www.researchgate.net/publication/358117070_THE_FINANCIAL_JIGSAW_-_PART_1_-_4th_Edition_2020
I am writing PART 2 now and posting some updates as events unfold:
https://austrianpeter.substack.com/p/the-financial-jigsaw-part-2-localisation?s=w
But the first 14 pages of the Introduction to Part 2 are to be viewed at RG:
https://www.researchgate.net/publication/358116877_THE_FINANCIAL_JIGSAW_-_PART_2_A5_Update_V1_-_2020
My brief answer to that is look up the Roseto Mystery. These idiots don’t have the slightest idea about what is really good for humanity…or maybe they do and that is why they are trying to create a virtual world that we must live in. It certainly explains why they favor separation mandates and virtual jobs and virtual classrooms etc. etc.
It might even be a virtual universe, perhaps we are merely computer simulations engaged in a complex adaptive system:https://www.sciencedirect.com/topics/neuroscience/complex-adaptive-system
Fine Young Cannibal? Not.
Looks like the offspring of John Brennan, with that scowl.
I’m beyond sympathy, regardless the circumstances around this one.
Maybe the victim was hungry too, and scarfed down this putz’
soylent green bug sammich when he wasn’t looking.
Or perhaps the vic took cuts, in the race to the men’s room, from indigestion,
from said speculations.
“Would you like a side of earlobe with that bite of a human snotlocker, bud?”
Mike Tyson: “I twied it once. Wudn’t dat tasty.”
Suds- The sooner folks refuse to eat plants based crapola, the sooner that whole movement will die and fade away. This is about (((certain people))) gaining complete control over EVERY aspect of your life right down to every morsel of food.
Every evening around dusk anywhere from five to fifteen wild turkeys parade through my driveway as they roost behind my house each night. They would make a very TASTY turkey sammich if real meat disappears. I’m going to have a real sammich even if I have to hunt/trap it myself.
This might be hard if they effectively kill meat production. Seems like they are trying to.
But they will never eliminate a localised economy – there is always a PLAN B:
https://austrianpeter.substack.com/p/progressing-plan-b-a-quarterly-review?s=w