Tag Archives: Inflation

Doug Casey on the COVID Thanksgiving Restrictions and the “Great Reset”

It’s pretty clear that we’re heading toward a totalitarianism that’s even more total than what we have now. From Doug Casey at internationalman.com:

COVID Thanksgiving

International Man: Thanksgiving and the holiday season are here. The COVID hysteria has justified a new wave of government restrictions.

Many governors and mayors are ordering citizens to “stay at home” and cancel their traditional plans.

Is this a “new normal” in which local officials feel emboldened to dictate more and more of what people can do in their own homes?

Doug Casey: There’s not much question about it. First, let me draw your attention to an important fundamental: the type of people who go into government. It doesn’t matter if it’s national, state, county, or city government.

They’re the kind of people who think they know what’s best for others and like bossing them around. They see the virus as a great opportunity to make themselves important and to cement themselves in power. They want to deconstruct America. The phrase “build back better” is being used not just by people in the new Biden regime but by people all over the world.

These people see the COVID hysteria as an excuse for a “Great Reset.” They don’t describe exactly what the elements of the Great Reset might be, but they’re hitting the same notes sung by the people that go to the World Economic Forum in Davos. They’re promoting a great change in the world at large and America in particular.

It appears the world is ready for it; however, it’s for the same reasons that Biden won the election. I listed six factors why I thought Biden would win in our interview a couple of months ago: the virus hysteria, a pending economic collapse, negative demographics, the moral collapse of the old order, and the Deep State, and, of course, cheating—which was critical in the short term. There’s no question that stormy times are ahead.

We’re headed for a great leap forward—to borrow a phrase from Mao—in State power. Much higher taxes, much higher inflation, much more regulation, a big drop in the general standard of living, and a fair measure of social chaos.

Continue reading→

The U.S. Government Will Inflate To The Bitter End, by MN Gordon

When you only have one solution to your problems, you go with that solution. From MN Gordon at economicprism.com:

The big news organizations say Joe Biden’s the next president of the USA.  That claims of election fraud and fixing are baseless.  Do you believe them?  Do you trust them?

Regardless, Biden’s acting as if.  He’s talking to foreign leaders.  He’s meeting with vaccine makers.  He’s making big plans.  He’s planning big things.  But, apparently, he’s not progressive enough.

This week, for example, an organization called Justice Democrats accused Biden of appointing corporate-friendly insiders.  They say these “corporate-friendly insiders […] will not help usher in the most progressive Democratic administration in generations.”

Certainly, Biden’s getting plenty of advice.  The political puppet has left many strings to be pulled.  Elizabeth Warren and Chuck Schumer want Biden to erase the first $50,000 of a person’s student loan debt.  According to Schumer, “Joe Biden can do that with the pen as opposed to legislation.”

Will Biden listen to them?  Will he listen to progressive superstar Alexandria Ocasio-Cortez?  On Monday, Ms. Ocasio-Cortez, tweeted:

“Student loan forgiveness is good, actually.

“We should also push for tuition-free public colleges to avoid this huge debt bubble from financially decimating ppl every generation.  It’s one of the easiest progressive policies to ‘pay for,’ w/ multiple avenues from a Wall St transaction tax to an ultra-wealth tax to cover it.”

Wow!  Biden hasn’t even moved into the White House and things have gone stoopid silly.  Where to begin?

Continue reading→

Inflationism Has Overturned Society, by MN Gordon

If you were alive for the entirety of human history and you bet against every single government maintaining the value of its money, you’d be batting 1000. From MN Gordon at economicprism.com:

Every now and again, when a sense of doom falls suddenly upon them, the bulls turn to bears.  That is to say, they turn from buying stocks to selling.  What is it that prompts them to panic?  What turns emotions so quickly from greed to fear?

The answers to these questions come a dime a dozen.  You can certainly dream up answers that are at least as good as anything professional analysts put forward.  The most convincing answers, whether true or not, are often those tied to current events.

For example, on Monday stocks sold off.  The Dow Jones Industrial Average (DJIA) dropped 410 points.  The popular rationale was that stocks sold off because of gridlock in Congress over passing a new stimulus bill.  On Tuesday the DJIA was up 113 points.  Apparently, this was because stimulus talks were back on.

But that was before Wednesday, when the DJIA dropped 97 points because the imminent stimulus agreement was still imminent.  Then, on Thursday, the DJIA jumped 152 points because stimulus talks were getting warmer.

Do you see the connection?  Do you see the correlation?  Does it imply causation?  Or is it all a great game of chasing the wild goose?

Moreover, what if the new coronavirus bailout bill passes, but it’s only $1.9 trillion?  Is that less bullish for stocks than a $2.2 trillion handout package?  These are the sorts of inane questions one must ask in a world where the stock market’s been corrupted by government intervention.

Continue reading→

Status of the Social Security Trust Fund, Fiscal 2020: Beware of Vicious Dog, by Wolf Richter

There will probably be something in the Social Security Trust Fund for future retirees, but don’t expect the benefits to keep up with inflation. From Wolf Richter at wolfstreet.com:

Will Social Security Be There for You? Yes, but…

The Social Security Trust Fund – officially the Old-Age and Survivors Insurance (OASI) Trust Fund – closed the fiscal year 2020 at the end of September with a balance of $2.81 trillion, the second highest fiscal-year close, behind 2017, up by $6.8 billion from a year ago, and up by $10 billion from two years ago, according to figures released by the Social Security Administration. The Trust Fund has vacillated in the same range since 2016, after growing substantially over the past decade.

The balance is seasonal and peaks in June. The all-time peak was in June 2017, at $2.85 trillion. In June this year, the balance was $2.84 trillion. So far so good:

The Trust Fund invests exclusively in special issue Treasury securities, of two types: $2.797 trillion in interest-bearing long-term special issue Treasury securities and $14 billion in a short-term cash management security, called “certificates of indebtedness.” These securities are not publicly traded, and so their value doesn’t change from day to day with the whims of the market. The Trust Fund purchases them at face value, and the US Treasury redeems them at face value.

By contrast, a bond mutual fund that holds marketable Treasury securities must “mark to market” its Treasuries on a daily basis (producing a gain or loss).

By investing exclusively in Treasury securities that are not exposed to market whims, the Trust Fund follows the most conservative – meaning, low-risk – strategy possible.

This setup is an efficient, low-cost way of administering the Trust Fund and doesn’t allow Wall Street to extract fees and load the fund up with risks. That’s why Wall Street hates the Trust Fund and wants to “privatize” it in order to get its hands on the $2.8 trillion, extract fees out of it, and use it as dumping ground for its risks.

Continue reading→

David Stockman on the Economy’s Role in The Upcoming Presidential Election

Will the economy continue to float on a sea of debt through the election? Probably. From David Stockman at internationalman.com:

Presidential Election

International Man: Bill Clinton’s infamous phrase during the 1992 presidential election was “It’s the economy, stupid.” How important of a role do you think the economy and a continued rally in the stock market will play in the outcome of the presidential election?

David Stockman: Well, in the befuddled mind of Donald Trump, probably a considerable role as manifest in his campaign oratory. And since there are less than 50 days left, he might get away with his groundless boasting. That is, we seriously doubt that the great reckoning will commence before November 3, meaning that he will keep peddling the “but for COVID” canard, claiming that, before that, he single-handedly created the Greatest Economy Ever.

Actually, it’s the greatest BS story ever told. It rests on the utterly misleading circumstance that the Donald entered office in month #90 of what became the longest business cycle expansion in history (at 128 months in February).

Consequently, his “record” was artificially flattered by the low U-3 unemployment rates (3.5%) that naturally occur during the last 38 months of the cycle as the inventory of unused labor is finally exhausted. Of course, that’s also exactly what occurred during the final months of the 118-month expansion of the 1990s and the 106-month expansion of the 1960s, when Democrats happened to be incumbent in the Oval Office.

But when measured by something relevant, such as the average real GDP growth rate during his tenure, it turns out that the Donald’s cherished “score” is the very worst among all the presidential terms since 1948.

Continue reading

China is killing the dollar, by Alasdair Macleod

If a country is clearly bent on depreciating its own currency, why hold either the currency or assets denominated in that currency. From Alasdair Macleod at goldmoney.com:

In the wake of the Fed’s promise of 23 March to print money without limit in order to rescue the covid-stricken US economy, China changed its policy of importing industrial materials to a more aggressive stance. In examining the rationale behind this move, this article concludes that while there are sound geopolitical reasons behind it the monetary effect will be to drive down the dollar’s purchasing power, and that this is already happening. More recently, a veiled threat has emerged that China could dump all her US Treasury and agency bonds if the relationship with America deteriorates further. This appears to be a cover for China to reduce her dollar exposure more aggressively. The consequences are a primal threat to the Fed’s policy of escalating monetary policy while maintaining the dollar’s status in the foreign exchanges.

Introduction

On 3 September, China’s state-owned Global Times, which acts as the government’s mouthpiece, ran a front-page article warning that

“China will gradually decrease its holdings of US debt to about $800billion under normal circumstances. But of course, China might sell all of its US bonds in an extreme case, like a military conflict,” Xi Junyang, a professor at the Shanghai University of Finance and Economics told the Global Times on Thursday”[i].

Do not be misled by the attribution to a seemingly independent Chinese professor: it would not have been the frontpage article unless it was sanctioned by the Chinese government. While China has already taken the top off its US Treasury holdings, the announcement (for that is what it amounts to) that China is prepared to escalate the financial war against America is very serious. The message should be clear: China is prepared to collapse the US Treasury market. In the past, apologists for the US Government have said that China has no one to buy its entire holding. The most recent suggestion is that China’s Treasury holdings will be put in trust for covid victims — a suggestion if enacted would undermine foreign trust in the dollar and could bring its reserve role to a swift conclusion.[ii] For the moment these are peacetime musings. At a time of financial war, if China put her entire holding on the market Treasury yields would be driven up dramatically, unless someone like the Fed steps in to buy the lot.

If that happened China would then have almost a trillion dollars to sell, driving the dollar down against whatever the Chinese buy. And don’t think for a moment that if China was to dump its holding of US Treasuries other foreign holders would stand idly by. This action would probably end the dollar’s role as the world’s reserve currency with serious consequences for the US and global economies.

There is another possibility: China intends to sell all her US Treasuries anyway and is making American monetary policy her cover for doing so. It is this possibility we will now explore.

Continue reading→

Inflation, deflation and other fallacies, by Alasdair Macleod

In history’s most economically productive periods, prices have usually fallen, not risen. From Alasdair Macleod at goldmoney.com:

There can be little doubt that macroeconomic policies are failing around the world. The fallacies being exposed are so entrenched that there are bound to be twists and turns yet to come.

This article explains the fallacies behind inflation, deflation, economic performance and interest rates. They arise from the modern states’ overriding determination to access the wealth of its electorate instead of being driven by a genuine and considered concern for its welfare. Monetary inflation, which has become runaway, transfers wealth to the state from producers and consumers, and is about to accelerate. Everything about macroeconomics is now with that single economically destructive objective in mind.

Falling prices, the outcome of commercial competition and sound money are more aligned with the interests of ordinary people, but that is so derided by neo-Keynesians that today almost without exception everyone believes in inflationism.

And finally, we conclude that the escape from failing fiat will lead to rising nominal interest rates, with all the consequences which that entails. The inevitable outcome is a flight to commodities, including gold and silver, despite rising interest rates for fiat money.

Demand-siders and supply-siders

In a macroeconomics-driven world, economic fallacies abound. They are periodically trashed when disproved, only to arise again as received wisdom for a new generation of macroeconomists determined to justify their statist beliefs. The most egregious of these is that inflation can only occur as the handmaiden of economic growth, while deflation is similarly linked to a recession spinning out of control into the maelstrom of a slump.

This error is the opposite of the facts.

Conventionally, macroeconomists split into two groups. There are the Keynesians who believe in stimulating demand to ensure there will always be markets for goods and services, which they attempt to achieve through additional spending by governments and by discouraging saving, because it is consumption deferred. And there are the supply-siders, who believe in stimulating production through lower corporate taxes and lighter regulation. Both demand and supply-siders advocate monetary inflation in the belief that their methods stimulate an economy so that government spending need not be cut.

Continue reading→

#MacroView: 5-Reasons The Fed’s New Policy Won’t Get Inflation, by Lance Roberts

Why unlimited fiat debt doesn’t create unlimited price inflation. From Lance Roberts at realinvestmentadvice.com:

At the recent Jackson Hole Economic Summit, Jerome Powell unveiled the Fed’s new monetary policy designed to create inflation. In today’s #Macroview, we will discuss the 5-reasons why the Fed will not get inflation, and why deflation is the bigger risk.

The current assumption is that the Fed’s new policy will lead to higher inflation.

“The new policy regime is an important evolution in our thinking about how to achieve our goals and another step toward greater transparency, The policy change positions us for success in achieving our maximum employment and price stability goals in the future.” – Fed Reserve Bank of NY, John Williams, via WSJ 

What exactly is this new policy? Well, that’s the interesting part, no one actually knows. However, as noted by the WSJ:

“The Fed said it would now seek to hit its 2% inflation target on average, and that it wouldn’t raise rates just to ward off the theoretical threat of inflation posed by a strong job market. The Fed, however, didn’t say how it would determine the average, and several regional Fed officials suggested that a 2.5% jobless rate was as much as they would tolerate. At the same time, with the economy in deep trouble, there is little expectation inflation will test the Fed’s target for years.”

So, to be clear, the Fed’s new policy is simply to “average the inflation rate” over a period of time and let the unemployment rate fall to as low as 2.5%. The last time the unemployment rate was at 2.5% was for one quarter in 1953 just before the 1954 recession set in.

Fed's New Policy Inflation, #MacroView: 5-Reasons The Fed’s New Policy Won’t Get Inflation

Continue reading→

An unexpected systemic crisis is for sure, by Alasdair Macleod

If you don’t think a financial crisis is on the way, check the stock market valuations and the balance sheets of the global systemically important banks. From Alasdair Macleod at goldmoney.com:

Downturns in bank credit expansion always lead to systemic problems. We are on the edge of such a downturn, which thanks to everyone’s focus on the coronavirus, is unexpected.

We can now identify 23 March as the date when markets stopped worrying about deflation and realised that monetary inflation is the certain outlook. That day, the Fed promised unlimited monetary stimulus for both consumers and businesses, and the dollar began to fall.

The commercial banks everywhere are massively leveraged and their exposure to bad debts and a cyclical banking crisis is now certain to wipe many of them out. In this article we look at the global systemically important banks — the G-SIBs — as proxy for all commercial banks and identify the ones most at risk on a market-based analysis.

Introduction

In these bizarre markets, the elephant in the room is systemic risk — visible to all but simply ignored. This is partly due to everyone in government and central banks, as well as their epigones in the investment industry and mainstream media, believing our economic problems are only a matter of Covid-19. In other words, when the pandemic is over normality will return. But Covid-19 has acted like a conjurer’s distraction: it has deflected us from the consequences of Trump’s trade wars with China and the liquidity strains that surfaced in New York last September when the repo rate soared to 10%.

The liquidity strains and the severe downturn in the stock markets that followed earlier this year before mid-March have been buried for the moment in a tsunami of central bank money. Liquidity problems following last September’s repo crisis and the S&P 500 index collapsing by one third between 19 February and 23 March were a clear signal that the multiyear cycle of bank credit expansion had already peaked. Ever since the last credit crisis in 2008, the banks had recovered their lending confidence and expanded bank credit, a classic expansionary phase.

Continue reading→

How Central Banks Made the Covid Panic Worse, by Kristoffer Mousten Hansen

Central bank funny money is like novocaine, it temporarily lessons the pain but your mouth feels worse after it wears off. From Kristoffer Mousten Hansen at mises.org:

Historical events are complex phenomena, and monocausal explanations are therefore by definition wrong when explaining history. Many factors go into explaining why people and the world’s governments reacted as they did to the coronavirus. It is, however, my contention that examining the inflationary policies pursued by central banks and governments are fundamental to understanding how the current corona hysteria developed.

Calling it hysteria may sound harsh. When the coronavirus first started to draw attention back in February, and when most Western countries instituted extremely restrictive measures in March, one could make a plausible argument that the world was dealing with an unknown and seemingly catastrophic disease and that therefore extreme measures were justified. To be sure, this does not mean that the measures implemented were in any way effective, nor that the sacrifices imposed were morally justified; but there was at least an argument to be made.

At this point in time, however, the Centers for Disease Control and Prevention (CDC) has repeatedly cut the COVID-19 fatality rate, and it is now comparable to a bad year of the seasonal flu (see the useful aggregation of studies and reports by Swiss Propaganda Research). The glaring question therefore is: Why do governments across the West act as if they were still dealing with an unprecedented threat? It is no good to simply reply that what politicians really want is power and that they are just using coronavirus as an excuse for extending government control. While a plausible claim, it does not explain why vast majorities in most countries support whatever policies their rulers have thought good. Given the extreme restrictions placed on social and economic life and the mendacious, ever shifting narrative used to justify them, one would think that there would be widespread opposition after four months. So why is there practically none?

Continue reading