Category Archives: banking

Are the Halcyon Days Over for Joe Biden? by Patrick J. Buchanan

Did Joe Biden have any halcyon days, his whole entire life? From Patrick J. Buchanan at buchanan.org:

On taking the oath of office, Jan. 20, Joe Biden may not have realized it, but history had dealt him a pair of aces.

The COVID-19 pandemic had reached its apex, infecting a quarter of a million Americans every day. Yet, due to the discovery and distribution of the Pfizer and Moderna vaccines, the incidence of infections had crested and was about to turn sharply down.

By May, the infection rate had fallen 80%, as had the death toll.

Thanks to the Operation Warp Speed program driven by President Donald Trump, the country made amazing strides in Biden’s first 100 days toward solving the major crises he inherited: the worst pandemic since the Spanish flu of 1918-1919 and the economic crash it had engendered.

But Biden’s pace car has hit the wall.

Where economists had predicted employment gains of a million new jobs in April, the jolting figure came in at about a fourth of that number.

One explanation: The $300-a-week in bonus unemployment checks the Biden recovery plan provides may have been a sufficient inducement for workers to stay home until their benefits ran out.

Workers might reasonably ask: Why go back to work when we can take the summer off, with full unemployment, plus $300 a week?

After the crushing jobs report came the inflation figure from April.

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If Not Now – WHEN?? by Dennis Miller

The Fed is never going to do anything about inflation. It can’t, the government can’t pay higher rates and the Fed has to keep buying the government’s debt. From Dennis Miller at theburningplatform.com:

My grandfather was a WWII Army Sargent, an uneducated farmer with a Ph.D. in common sense. One of the lessons he preached; the longer you ignore a problem, the more it will grow.

Fed Chairman Jerome Powell never met my grandfather.

This Schiff Gold article confirms my grandfather’s thinking: (Emphasis mine)

“During a webinar sponsored by the Economic Club of Washington DC, Powell said the economy can handle the current debt load. But he did warn that the long-term trajectory of the US budget is unsustainable.

‘The US federal budget is on an unsustainable path, meaning simply that the debt is growing meaningfully faster than the economy. And that’s by definition unsustainable over time. It’s a different thing to say the current level of the debt is unsustainable. It’s not. The current level of debt is very sustainable….’

Powell said the US government will eventually have to ‘get back to a sustainable path.’

‘That is something that is best done in very good times when the economy is at full employment and when taxes are rolling in. This is not the time to prioritize than concern.’

…. Newsflash – this will never happen.

Of one thing you can be certain – politicians will always find a reason to borrow and spend money.

…. Powell is right when he says the federal budget is on an unsustainable path. He’s wrong to imply anything will ever be done about it. The powers that be will stay right on that unsustainable path to the bitter end. And it will be a bitter end.”

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It’s Getting Serious: Dollar’s Purchasing Power Plunges Most since 2007. But it’s a Lot Worse than it Appears, by Wolf Richter

There are lies, damn lies, and government inflation statistics. From Wolf Richter at wolfstreet.com:

Fed officials, economists “surprised” by surge in CPI inflation, but we’ve seen it for months, including “scary-crazy” inflation in some corners.

The Consumer Price Index jumped 0.8% in April from March, after having jumped 0.6% in March from February – both the sharpest month-to-month jumps since 2009 – and after having jumped 0.4% in February, according to the Bureau of Labor Statistics today. For the three months combined, CPI has jumped by 1.7%, or by 7.0% “annualized.” So that’s what we’re looking at: 7% CPI inflation and accelerating.

Consumer price inflation is the politically correct way of saying the consumer dollar – everything denominated in dollars for consumers, such as their labor – is losing purchasing power. And the purchasing power of the “consumer dollar” plunged by 1.1% in April from March, or 12% “annualized,” according to BLS data. From record low to record low. Over the past three months, the purchasing power of the consumer dollars has plunged by 2.1%, the biggest three-month drop since 2007. “Annualized,” over those three months, the purchasing power of the dollar dropped at an annual rate of 8.4%:

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US Core Consumer Prices Explode Higher At Fastest Pace Since 1981, by Tyler Durden

Inflation is in the ascendancy, thanks to nonstop debt monetization since the end of 2019. From Tyler Durden at zerohedge.com:

After March’s blowout 0.6% MoM surge in headline CPI, analysts expected a modest slowdown MoM, but surge YoY due to the base-effect comps from April 2020’s collapse. However, it appears analyst massively underestimated as headline CPI surged 0.8% MoM (4 times the +0.2% expected) and exploded 4.2% YoY. That is the biggest YoY jump since Sept 2008 (and biggest MoM jump since June 2008)

Source: Bloomberg

Core CPI was expected to rise by the most this millennia, but it was hotter than that. The index for all items less food and energy rose 3.0% over the past 12 months; this was its largest 12-month increase since January 1996… and the MoM jump of 0.92% is the biggest since 1981

Source: Bloomberg

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Jim Grant: The Fed Can’t Control Inflation, from SchiffGold

It’s a comforting notion to many people, the idea that wise bureaucrats can manage something as complicated as the economy. Too bad they can’t do it. From Jim Grant at schiffgold.com:

 

Federal Reserve Chairman Jerome Powell insists inflation is “transitory.” As prices have spiked throughout the economy, Powell’s messaging has essentially been, “Move along. Nothing to see here.”

Peter Schiff has been saying the central bankers at the Fed can’t actually tell the truth about inflation because even if they acknowledge it’s a problem (and it is) they can’t do anything about it.

In a recent talk, Jim Grant, investment guru and founder of Grant’s Interest Rate Observer, echoed Peter, saying the Fed can’t control inflation.

During a webcast sponsored by State Street SPDR ETFs, Grant said he thinks “there’s a gale of inflation of all kinds in progress,” adding that he believes it will take the Fed by surprise and “overwhelm our monetary masters.” Grant said, inflation is “clear and present and will manifest itself in our everyday lives.”

That sounds like the exact opposite of Powell’s “transitory” mantra.

Peter has said that once the Fed is forced to admit that inflation isn’t transitory, it will be too late to take action. Grant made a similar prediction, saying inflation will “catch the Fed flatfooted. In response it will “prevaricate” – meaning speak or act in an evasive way. In fact, that already seems to be the central bank’s strategy.

The question is can the Fed actually control inflation. Grant doesn’t think so.

I think the Fed is under the misconception that it controls events. Sometimes, events control the Fed, and I wouldn’t be surprised if this was one of those times. The Fed thinks that not only can it control events, but it can measure them. It believes it can pinpoint the rate of inflation.”

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Keep It Simple: Gold vs. a Mad World, by Matthew Piepenburg

Everybody should own some precious metals, not as speculations against currencies, but as protection—a medium of exchange and a store of value—should fiat currencies collapse. From Matthew Piepenburg at goldswitzerland.com:

Psychologists, poets and philosophers have written for centuries that many who have eyes refuse to see, and many who can think, refuse to think clearly–all for the simple reason that some truths, like the sun, are just too hard to look straight into.

Or as others have said more bluntly: “Truth is like poetry—everyone [fricking] hates it.”

When it comes to bloated markets, debt orgies and helicopter money, the rising fun of such “stimulus” is embraced, yet the template for its equally market-tanking, social-destroying and currency-debasing consequences are simply ignored.

The same is true when it comes to the “great inflation debate,” which is simply no longer a debate but a neon-screaming reality playing out in real time and growing more pernicious before eyes otherwise blinded by calming Fed-speak and bogus inflation scales.

Each passing day, the evidence of the inflationary cancer beneath the smiling surface of our still rising markets and “recovering/opening” economy increases, and thus, like it or not, the inflation topic just won’t and can’t be over-stated enough.

In short: Here I go again with the inflation thing…

From the Grocer to Buffet: Inflation is Obvious

Extreme US “stimulus,” vaccine rollouts, Europe’s eventual reopening, and rising commodity costs are accelerating the inflationary tailwinds which everyone from grocery store clerks and home builders to Warren Buffet can no longer deny or ignore.

As facts rather than theories confirm, commodity prices have surged from steel to copper, or corn to lumber while precious metals steadily rise against COMEX price fixers, CPI lies and other unsustainable boots to the neck of a coiled gold market positioned for big moves into late 2021 and beyond.

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What Will You Do When Inflation Forces U.S. Households To Spend 40 Percent Of Their Incomes On Food? by Michael Snyder

Perhaps we’ll eat less, or eat lower quality food. Inflation is showing up at the grocery stores big time, and it doesn’t look like it’s going to be “transitory.” From Michael Snyder at theeconomiccollapseblog.com:

Did you know that the price of corn has risen 142 percent in the last 12 months?  Of course corn is used in hundreds of different products we buy at the grocery store, and so everyone is going to feel the pain of this price increase.  But it isn’t just the price of corn that is going crazy.  We are seeing food prices shoot up dramatically all across the industry, and experts are warning that this is just the very beginning.  So if you think that food prices are bad now, just wait, because they are going to get a whole lot worse.

Typically, Americans spend approximately 10 percent of their disposable personal incomes on food.  The following comes directly from the USDA website

In 2019, Americans spent an average of 9.5 percent of their disposable personal incomes on food—divided between food at home (4.9 percent) and food away from home (4.6 percent). Between 1960 and 1998, the average share of disposable personal income spent on total food by Americans, on average, fell from 17.0 to 10.1 percent, driven by a declining share of income spent on food at home.

Needless to say, the poorest Americans spend more of their incomes on food than the richest Americans.

According to the USDA, the poorest households spent an average of 36 percent of their disposable personal incomes on food in 2019…

As their incomes rise, households spend more money on food, but it represents a smaller overall budget share. In 2019, households in the lowest income quintile spent an average of $4,400 on food (representing 36.0 percent of income), while households in the highest income quintile spent an average of $13,987 on food (representing 8.0 percent of income).

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Here’s How ‘Everything Bubbles’ Pop, by Charles Hugh Smith

The bubbles won’t pop all at once, but once they get going, it should be a wonder to behold. From Charles Hugh Smith at oftwominds.com:

But weirdly, and irrationally, bubbles pop anyway.

At long last, the moment you’ve been hoping for has arrived: you’re pitching your screenplay to a producer. Your agent is cautious but you’re confident nobody else has concocted a story as outlandish as yours. Your agent gives you the nod and you’re off and running:

Writer: Two guys start a cryptocurrency as a joke to parody the crypto craze, and they name it KittyCoin. It goes nowhere but then the greatest speculative bubble of all time takes off, it’s the dot-com and housing bubble times 100 but in everything, and within a couple months the entire economy is dependent on this bubble, and the bubble is dependent on KittyCoin, which has shot up 15,000 percent in a few weeks. A celebrity CEO who’s been promoting KittyCoin is invited to host a failing TV variety show, and now the whole economy depends on KittyCoin soaring even higher.

Producer: So it’s ‘The Big Short’ plus ‘Network’.

Writer: Something like that, only zanier.

Producer: I get the zaniness but it’s so implausible — it’s preposterous.

Writer: It’s an absurdist comedy.

Producer: But it ends with everyone being wiped out.

Writer: OK, a tragi-comedy.

And here we are, in the Greatest Bubble of All Time (GBOAT) hanging on the thin thread of speculators rotating out of one bubble into another even more improbable bubble. If there is no heir-apparent for the rotation, then players rotate back into an asset that already reached bubblicious heights and is awaiting the next booster.

The Everything Bubble is one for the ages, but alas, even the most glorious global Tulip Bulb manias crash back to Earth. So how do Everything Bubbles end? Like every other bubble ends:

Preposterous moves to implausible which moves to plausible which moves to inevitable. In other words, bubbles inflating to even more outlandish valuations are no longer merely plausible, they’ve become inevitable: the Federal Reserve will continue printing money forever, Americans have trillions of dollars in stimmy and savings they’re itching to spend, and so on.

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Three reasons why inflation is rising. Two of them aren’t going away, by Simon Black

Massive debt monetization, the font of inflation, will continue far into the future. From Simon Black at sovereignman.com:

A remarkable thing happened yesterday that tells you everything you need to know about inflation.

In the morning, US Treasury Secretary Janet Yellen stated bluntly that “interest rates will have to rise somewhat to make sure that our economy doesn’t overheat. . .”

For economists, an ‘overheating economy’ means inflation. So she was essentially saying that rates would have to rise to prevent inflation.

Yet hours later, she completely reversed herself, saying that interest rates would NOT have to rise because “I don’t think there’s going to be an inflationary problem.”

You don’t need a PhD in economics to smell the BS.

Inflation is not some potential issue down the road. Inflation is already here.

As Warren Buffett told investors only days ago, “We’re seeing very substantial inflation.”

Plenty of companies have already announced price increases to their consumers–

Proctor & Gamble, for instance, announced price hikes across the board on just about everything from diapers to beauty creams.

Hershey’s announced in February that it would be raising prices.

Food giant General Mills complained in February about a “higher inflationary environment” and “input cost pressures” due to rising commodity prices.

Clorox, Shake Shack, Kimberly-Clark, Whirlpool, Hormel, and Woka Kola Coca Cola are among the many companies that have also announced price increases.

And according to Bank of America Global Research, the number of mentions of “inflation” on corporate earnings calls has increased 800% compared to last year.

Inflation is clearly a concern of the largest companies in the world. Investors are worried. Consumers can see it.

And in a rare moment of truth yesterday morning, a politician almost admitted that she was concerned about inflation too.

This is not some wild conspiracy. Inflation is real. It’s happening. Let’s look at three key drivers:

1) Capacity Constraints

Last year the entire world shut down. Businesses and factories everywhere closed, and plenty of companies went out of business.

Many companies who survived took radical steps to conserve cash– laying off workers, liquidating inventory, and selling equipment.

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Hey Fed, Explain Again How Making Billionaires Richer Creates Jobs, by Charles Hugh Smith

The Fed’s real job is to monetize the government’s debt at an acceptably low rate of interest. All this other economic and financial stuff is just window dressing. From Charles Hugh Smith at oftwominds.com:

Despite their hollow bleatings about ‘doing all we can to achieve full employment’, the Fed’s policies has been Kryptonite to employment, labor and the bottom 90%–and most especially to the bottom 50%, the working poor that one might imagine most deserve a leg up.

As wealth and income inequality soar to new heights thanks to the Federal Reserve’s policies of zero interest rates, money-printing and financial stimulus, the Fed says its goal is to create more jobs. Really? OK, let’s look at how the Fed’s doing with that.

I’ve assembled a chart deck to display the consequences of Fed policies on debt, wealth inequality and employment. Recall what Fed policies actually do:

1. Zero interest rate policy (ZIRP) destroyed the low-risk return on savings and money market funds, stripping everyone not in the Fed-privileged rentier-speculator-financier class of safe, real returns on capital.

2. Zero interest rate policy (ZIRP) lowered the cost of speculation by financiers and corporations but left the interest rates paid by the working poor for credit cards, auto loans and student loans at extortionate rates.

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