Tag Archives: Monetary inflation

The Bear-Market Rally in Stocks, Bonds, Mortgages Wiped Out: Why This Nails the Parallel to the Dotcom Bust, by Wolf Richter

This is a debt contraction, and when debt contracts, assets prices go down. From Wolf Richter at wolfstreet.com:

But this time, there’s over 8% inflation.

The Dow Jones Industrial Average on Friday closed about 300 points below its June 16 low, thereby having more than wiped out the bear-market rally gains. For the Dow, the bear-market rally started on June 17 and ended on August 16. During the two-month rally, the Dow had jumped 14%. By Friday at the close, it was again down 20% from its all-time high.

The S&P 500 Index, on Friday intraday, fell through its closing low of June 16 – the infamous 3,666 – and then bounced a little to close 27 points above the June 16 low, at 3,693. During the two-month bear-market rally through August 16, the index had surged 17%. By Friday, the index was down 23% from its all-time high.

The Nasdaq closed about 2% above its June low. During the two-month rally, it had soared by 23%. Many of my Imploded Stocks that are now trading for a few bucks, had shot up by 50% or more, and a bunch of them doubled, before re-imploding after mid-August.

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The European Central Bank’s Zimbabwean Model, by Declan Hayes

The ECB and EU are trying to inflate Europe’s troubles away. From Declan Hayes at strategic-culture.org:

As the Dutch farmers are showing, that is something worth opposing von der Leyen, Lagarde, Stoltenberg and Europe’s other Quislings and the perches they pontificate from.

Though the function of European, German, Japanese and Zimbabwean central banks is to enable the credibility and efficiency of the financial side of their respective economies so that the real side of their economies may achieve the nation’s broader macro economic goals, NATO’s central banks have obviously and disastrously abandoned those tasks for reasons this article makes apparent. Because Zimbabwe, like Germany’s Weimar Republic before it, has reached annual inflation rates of 90 sextillion per cent a year, Europe should not be emulating the financial and economic basket case of Harare.

Whatever about Zimbabwe, Germany has been famously down this road before and, in a total reversal of earlier post-war policies, seems determined to traverse it again. The European Central Bank, based in Frankfurt, is printing euros as quickly as their colleagues in Zimbabwe are printing Zimbabwean dollars, as the Confederates printed their Greybacks and as Weimar printed their famously worthless marks.

Although Weimar’s woes were many, two of the most pertinent were that the Kaiser borrowed immensely to fund his armies, whose victories were supposed to enable him to repay his nation’s debts, and that the Western allies bled defeated Germany’s resources dry, thus opening the way for Herr Hitler once Weimar fell. Europe’s central banks are following this very policy today. They are doling out billions to ease energy bills, to bribe farmers and, most notoriously, to feed the money laundering Ponzi scheme that is Zelensky’s Kiev junta. The money supply, at more than 15 trillion euros, is at record levels and real interest rates are in negative terrain, pauperizing pensioners but failing to kick start their fuel starved economies. Inflation,.Germany’s bane, is again on the march as too far much money is in search of far too few bags of fire wood; and English toilet paper has increased in price by 50% in the last few months, Albion is really in squeaky bum time.

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Inflation is turning hyper, by Alasdair Macleod

Governments have no solutions to their food and energy crises other than more debt. Look for Covid-style debt and monetary expansion to those crises, which will only exacerbate inflation. Look for economic contraction as banks curtail lending. From Alasdair Macleod at goldmoney.com:

Money supply took off during covid lockdowns. It is now about to take off again to pay everyone’s energy bills. But that is not all.

Demands for currency and credit to be conjured out of thin air to pay for everything will be coming thick and fast. Expectations that energy prices, including European electricity, have peaked are naïve. Putin has yet to put the winter and spring screws on Europe and the world fully. It will be surprising if global oil and natural gas prices in Europe are not significantly higher on a twelve-month view. And Europe has messed up its electricity supplies — that is where the energy costs will rise most.

Bankers are trying to reduce their loan exposure to rising interest rates, undermining GDP. Besides paying for everyone’s energy bills, rescuing troubled banks, collapsing tax revenues, and difficulties in selling government debt on rising yields, governments are expected to apply economic stimulus to support both their economies and financial markets.

Furthermore, this article points to evidence as to why the expansion of central bank credit has a far greater impact on prices than contracting bank credit. The replacement of commercial bank credit by central bank credit will have a far greater inflationary impact than the deflation from bank credit alone.

Attempts to rescue the American, European, and Japanese economies by replacing commercial bank credit with central bank credit will probably be the coup de grace for fiat.

We can begin to anticipate the path to the destruction of purchasing power for all fiat currencies, not just those of Zimbabwe, Turkey, and Venezuela et al. A global hyperinflation is proving impossible to avoid.

First it was covid, now it is energy… 

For the magic money tree, its exfoliation is just one thing after another…

Having recognised the impracticality of putting price controls on Russian gas and oil, the EU is turning to protecting all households and businesses from the energy crisis. Even Switzerland, and now the UK are bowing to the inevitable consequences of combining inflationary monetary policies of recent years, environmental wokism, and frankly irresponsible energy policies with the decision to sanction the world’s largest energy exporter.

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Central Planners of the World, Unite! By MN Gordon

Central banking is Soviet style central planning, and it has worked about as well as Soviet central planning did. From MN Gordon at economicprism.com:

Federal Reserve Chair Jay Powell wants a swift decline in the rate of consumer price inflation.  He isn’t getting what he wants.

According to the Bureau of Labor Statistics, consumer price inflation, as measured by the consumer price index (CPI), increased at an “official” annualized rate of 8.3 percent in August.

This exceeded Wall Street’s consensus expectations of 8.1 percent.  What’s more, it crushed investor hopes a ‘Powell pivot’ would come sooner rather than later.  On Tuesday, the Dow Jones Industrial Average (DJIA) crashed 1,276 points on the news.

Powell, a central planner, wants consumer price inflation to be about 2 percent.  Instead, he’s got something that’s over 400 percent higher.  What’s going on?

If you want to understand what’s up with raging consumer price inflation and Fed monetary policy, you must understand this.  Right now, in the United States as in most of the world, we have a scam currency that’s controlled by central planners.  Specifically, we have what Karl Marx envisioned in Plank No. 5 of his Communist Manifesto:

“No. 5.  Centralization of credit in the hands of the state, by means of a national bank with state capital and an exclusive monopoly.”

The Federal Reserve System, created by the Federal Reserve Act of Congress in 1913, is indeed a privately owned ‘national bank.’  It also holds a monopoly on legal counterfeiting in the United States.

Without the Fed’s policies of mass credit creation, it would have been impossible for the U.S. government to run up a $30.8 trillion national debt.  Without the Fed’s printing press money, the U.S. government never could have run annual trillion-dollar budget deficits for a better part of the last decade and a half.  Without the Fed’s fake money there would not be over 100 million people dependent upon the U.S. government for their daily bread.

This is the miracle of centralized credit.

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Democrats Propose Another Inflation Reduction Act To Combat Inflation Created By First Inflation Reduction Act

From The Babylon Bee:

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WASHINGTON, D.C. — With inflation and consumer prices continuing to skyrocket, Democrats in Congress have proposed a brand new Inflation Reduction Act to combat the inflation brought about by the first Inflation Reduction Act.

“We are so proud of what we accomplished with the Inflation Reduction Act, but now it’s time to address the runaway inflation that came about due to its passage,” said Senator Chuck Schumer on the steps of the Capitol this morning. “This new bill, which we’ve entitled the ‘Inflation From The Inflation Reduction Act Reduction Act’, will solve the inflation problem. You’re welcome, America!”

The gathered press reportedly threw their press badges in the air and cheered the heroism of the noble Democrat Congresspeople.

The Inflation From The Inflation Reduction Act Reduction Act will spend an additional $3 trillion, which is expected to keep the economy from collapsing until after the 2022 midterms. Sources say a third of the funds will go to Ukraine, with the rest going to solar panels in China, Congressional pay raises, and 92 million new heavily armed IRS agents.

At publishing time, Democrats are already looking to next year by drafting the Inflation From The Inflation From The Inflation Reduction Act Reduction Act Reduction Act.

https://babylonbee.com/news/democrats-propose-another-inflation-reduction-act-to-combat-inflation-from-the-first-inflation-reduction-act

Inflation: State-Sponsored Terrorism, by Jeff Diest

Inflation is theft, which makes it criminal. It takes money from the productive and stealthily transfers it to the government and its cronies. From Jeff Diest at mises.org:

I. Introduction

Remember the quaint old days of 2019? We were told the US economy was in great shape. Inflation was low, jobs were plentiful, GDP was growing. And frankly, if covid had not come along, there is a pretty good chance Donald Trump would have been reelected.

At an event in 2019, my friend and economist Dr. Bob Murphy said something very interesting about the political schism in this country. He said: If you think America is divided now, what would things look like if the economy was terrible, if we had another crash like 2008?

Well, we might not have to imagine such a scenario much longer.

If you think Americans are divided today, and at each other’s throats—metaphorically, but more and more literally—imagine if they were cold and hungry!

Imagine if we had to live through something like Weimer Germany, Argentina in the 1980s, Zimbabwe in the 2000s, or Venezuela and Turkey today? What would our political and social divisions look like then?

Ladies and gentlemen, we live under the tyranny of inflationism. It terrorizes us, either softly or loudly. I suspect it will get a lot louder soon.

As the late Bill Peterson explained, “Inflationism, in today’s terms, is deficit-spending, deliberate credit expansion on a national scale, a public policy fallacy of monumental proportions, of creating too much money that chases too few goods. It rests on the ‘money illusion,’ a widespread confusion between in­come as a flow of money and income as a flow of goods and services—a confusion between ‘money’ and wealth.”

Inflationism is both a fiscal and monetary regime, but its consequences go far beyond economics. It has profound social, moral, and even civilizational effects. And understanding how it terrorizes us is the task today.

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Supply chains, interest rates and inflation, by Alasdair Macleod

Intact supply chains have been an intrinsic feature of the low inflation global economy for several decades and the U.S. and Europe have been big beneficiaries. Unfortunately, supply chains get broken when amity and trade are replaced by hostility and sanctions. From Alasdair Macleod at goldmoney.com:

The disruption of global supply chains is seen to be a temporary problem yet to be resolved, but there are good reasons to believe it is now permanent.

Following the end of the cold war against China and the foundation of a new peaceful era, American and other manufacturers began to expand their production facilities into China and South-East Asia. It was the beginning of what became a trade system based on global supply chains, increasingly sophisticated logistics, and just-in-time inventory management.

Global supply chains deliver enormous benefits between peaceful nations, but they cease to work when they are at war.

Souring trade relations between America and China, covid, and the disruption to international logistics pits them into an undeclared conflict. The trade environment is now against a background of an increasingly belligerent geopolitical struggle, involving both China and Russia on one side, and America and its allies on another. In the absence of détente, which now seems a distant prospect, the system of global supply chains can operate no longer. They must become re-established within national borders.

The consequences are long-term product supply disruption, higher consumer prices, and soaring energy prices already evidenced in Europe. Coming on top of a new trend of rising interest rates and contracting bank credit, it has the makings of an economic crisis for the West, to which governments are bound to respond by creating an inflationary storm.

This article analyses these new war-time trade conditions in the geopolitical context and examines the likely consequences.

The background to global trade has deteriorated

There is a general assumption that eventually, perhaps next year, supply chain difficulties will be overcome. It is the main plank behind central bank expectations, that after the current hiatus restricting product supply, consumer price inflation will return to the 2% target. The mistake is to conflate two issues: the supply chain problem, for which conditions have changed fundamentally, and the declining purchasing power of fiat currencies. However, the inflation outlook is tied up with the trade outlook.

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The End is Nearing: A World Slowly/Openly Turning Away from the USD, by Matthew Piepenburg

The U.S. is managing to throw away a colossal advantage it held in global affairs: the world’s reserve currency. From Matthew Piepenburg at goldswitzerland.com:

With the USD losing influence, it would be the understatement of the year to say that we live in interesting times, for we certainly do.

But despite the inevitable attacks of appearing sensational, un-American or just plain cynical, I feel a more appropriate phrase boils down to this:

“We live in dishonest times.”

Below, I bluntly address the “Fed pivot debate,” the “inflation debate” and the USD’s slow global decline in the setting of a now multi-FX new normal in which gold’s historical bull market has yet to even begin.

These views are not based on biased politics, but honest economics, which for some odd reason, ought to still matter.

Let’s dig in.

The New Normal: Open Dishonesty

I recently authored a report showcasing a string cite of empirically open lies which now pass for reality on everything from the CPI inflation scale to the Cleveland Fed’s +1 real interest rate myth, or from official unemployment data to the now comical (revised) definition of a recession.

But a more recent lie from on high comes directly from the highest of all, U.S. President Joe Biden.

Earlier this month, Biden waddled to his podium and prompt-read to the world that the US just saw 0% inflation for the month of July.

Oh dear . . .

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Is the IRS Coming for You? By MN Gordon

One way or another the government is coming after your income, your wealth, your freedom, and eventually, your life. From MN Gordon at economicprism.com:

This week, while you were busy working, President Biden signed what he says is, “one of the most significant laws in our history.”

It’s called the Inflation Reduction Act (IRA) of 2022.  The name implies it will reduce inflation.  How pumping $750 billion into preferred sectors of the economy will reduce inflation is unclear.

But what is clear, and as confirmed by the Congressional Budget Office, is that the bill will force working-class Americans to pay an estimated $20 billion more in taxes over the next decade.

For the Biden administration, this is all part of its plan to consolidate power, push its socialist agenda, bury workers with crushing taxes, and destroy the middle class with soaring inflation.  The Build Back Better Act may have failed.  But the IRA, which cobbles together much of the trash from BBB, is now federal law.

We’ll have more on this in just a moment.  But first, some context is in order.

Where to begin…

Money provides the means for trading available goods and services.  If a person wants to increase their portion of goods and services, they must first increase their productivity.  They can do this in one of two ways.  By working harder.  Or by working smarter.

In an economy with stable money, those who gripe about not having enough money are, in essence, pointing out they should be more productive.  But in an economy with unstable money, like most economies of the world circa 2022, not having enough money can be a function of where your place is on the money trough…

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Inflation Makes People Poorer (And It’s the Government’s Fault), by André Marques

By the correct definition inflation is monetary debasement, and who’s in charge of the monetary mechanism? Governments and their central banks. From André Marques at mises.org:

The Consumer Price Index (CPI) in the US was 9.1 percent in June. Taking into account that the government lies about inflation, it is better to consider Shadow Government Statistics’ CPI (based on the 1980s CPI methodology), which was (as of July 13) about 17 percent.

The government claims that this high CPI is due to Russia’s invasion of Ukraine (you could argue that, one of the reasons is the sanctions on Russia’s economy, which don’t do much to harm to the Russian government and hurts ordinary people both inside and outside Russia). But this is just an excuse for the government to not admit the blame. It is clear the war has an influence on the CPI, as it eliminates the supply of various goods and services, which ends up increasing prices. However, the CPI has been going up since February 2021.

The 2020 and 2021 lockdowns (and the followed supply shocks) were also a big factor, but the real reason prices are going up is the inflation (monetary expansion) created by the US government both in 2020 and 2021.

Yes, supply shocks cause increases in SOME prices in the economy, but not a general increase in the prices of goods and services. If there is a supply shock of certain goods (making their prices higher), but the money supply does not change, there will be a new equilibrium of supply and demand for the various goods and services in the economy (since the money supply is the same and individuals will have to change the allocation of their budget, so the prices of the goods that will have a lower demand will decrease).

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