Category Archives: Currencies

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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The Inflation Monster Has Been Unleashed, by Bruce Wilds

Given the copious amounts of debt the Federal Reserve has monetized, rising prices are inevitable. From Bruce Wilds at brucewilds.blogspot.com:

The monster known as inflation has been unleashed upon the world and will not easily retreat into the night. This is reflected in soaring commodity and housing prices. Due to the stupid and self-serving policies of the Fed, we are about to experience a massive shift in the way we live. Bubbling up to the surface is also the recognition the Fed has played a major role in pushing inequality higher. This means that inflation is about to devour the purchasing power of our income and the savings of those that have worked hard and saved over the years.

Over the months we have watched Fed Chairman Jerome Powell time and time again cut rates and increase the Fed’s balance sheet. This has hurt savers, forced investors into risky investments in search of yield, damaged the dollar, encouraged politicians to spend like drunken sailors, and increased inequality. The greatest wealth transfer in history has already begun and the next crisis will only accelerate the process. Sadly, the same policies that dump huge money into larger businesses because it is an easier and faster way to bolster the economy give these concerns a huge advantage over their smaller competitors.

For decades the American people have watched their incomes lag behind the cost of living. To make matters worse, the official numbers of the so-called Consumer Price Index (CPI) have been rigged to understate inflation and not to reflect the true impact it was having on our lives. Want to know where the real cost of things is going, just look at the replacement cost from recent storms and natural disasters. Currently, the government understates inflation by using a formula based on the concept of a “constant level of satisfaction” that evolved during the first half of the 20th century in academia. This has skewed expectations and led many people to think inflation is not something they need to worry about.

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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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Every DOGE Has Its Day, by Doomberg

Has finance reached peak insanity? If not, it’s pretty close. From Doomberg at doomberg.substack.com:

Speculation on the stock exchange has spread to all ranks of the population and shares rise like air balloons to limitless heights…. The population was now engaged in evading taxation and devoting their money to speculative purchases…. Shares in respectable concerns which had paid a 20% dividend, were pushed higher and higher till the final holders could not expect a return of even 1%.” – Adam Fergusson, When Money Dies

How quaint.

I am an avid consumer of written history. As a doom-oriented pattern recognizer, the written chronology of historically transformative events provides an endless source of almost-relevant analogies to fret over. For those of us in the gold/hard money/real asset/Austrian school of economics, the ultimate doom porn is Adam Fergusson’s seminal book on the hyperinflation experienced in Germany after World War I, When Money Dies. Unlike most of you, I’ve only read it three times.

When I read the retelling of history, I try to imagine what the people were thinking in the moment. Not what they would later claim they were thinking with the benefit of hindsight, but how they digested the daily news headlines in real time, internalized the risks and rewards of the present day, and behaved in ways that I can only assume were in their best interest as they understood it. Did they sense what was coming or did they think things would quickly regress back to normal? How did certain people separate signal from noise and protect themselves, while others drowned in the oncoming tsunami of destruction?

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The Blockchain and the Future of Everything, by Ethan Yang

Why the blockchain is a revolutionary and transformative technology, from Ethan Yang at aier.org:

Writing, money, and ledgers, are the three basic building blocks that allowed humanity to progress past the days of foraging for berries and hunting wild game to the advanced global civilization we are today. Writing allowed us to convey knowledge and information that made it possible to cooperate and build on the findings of others. Money allowed for the efficient allocation of scarce resources and the facilitation of trade. Ledgers allowed all these activities and transactions to be recorded so we could trust one another beyond immediate friend groups. Being able to trust one another is perhaps one of the most important facilitators of economic and social activity. When you perform a transaction you trust that the service you’re getting is what you paid for. When you put your money in a bank, you trust that the bank is a reputable third party to store assets. When you use the internet you trust that your data is secure and won’t be given away to bad actors.

Being able to trust a person, a service, or a device is integral to the functioning of a complex and evolving society. Oftentimes the progress of society is limited by barriers to expanding trust whether it be avoiding scams, processing data, or embracing the promise of the digital age which understandably has many worried about trusting the technology to be secure. For this to happen, we will need to collect and process a tremendous amount of information about everyone and everything. Giving all that power to big corporations or governments to handle doesn’t sound like a great idea either.

That is what makes the promise of blockchain technology so revolutionary, as it possesses the potential to accomplish all these requirements to facilitate trust in a digital revolution without assigning that power to any authority, private or public. This is the topic of The Truth Machine, a book co-written by Michael Casey, a senior advisor at MIT Media Lab’s Digital Currency Initiative, and Paul Vigna, a reporter at the Wall Street Journal who specializes in cryptocurrency. The book was written in 2018, which is a true testament to its value as its predictions about the promise of blockchain technology only continue to realize themselves.

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The Rise of Bitcoin, by William J. Luther

A good explanation and history of Bitcoin, from William J. Luther at aier.org:

In hindsight, the rise of cryptocurrencies appears to have begun with the introduction of bitcoin in 2009. Earlier cryptocurrencies had been launched in the 1990s, but they failed to take hold. David Chaum’s DigiCash is widely thought to have been ahead of its time. Chaum founded his company at the start of the decade, well before the rise of e-commerce. By 1998, it had filed for bankruptcy. More generally, early “digital-cash firms made a fatal miscalculation,” Julia Pitta wrote for Forbes in 1999. “They figured, wrongly it turns out, that consumers would be leery of using credit cards on the Web and would demand tight security and ironclad privacy.”

It was not clear, at first, that bitcoin would be any different. Perhaps fearing the fate of e-gold creator Douglas Jackson, bitcoin’s designer(s) adopted a pseudonym––the now-famous Satoshi Nakamoto––and shared the upstart open source project in email to the Cryptography Mailing List on January 8, 2009. Nakamoto had circulated a white paper explaining the technical details a few months before. Congratulatory replies soon followed, but there was little indication that bitcoin would quickly become a household name. It was little more than a novelty discussed by a handful of programmers on the Internet.

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