Tag Archives: Monetary inflation

Doug Casey on the Ridiculous Policies for Addressing Inflation and Rising Prices

Posted on July 13, 2022 | Leave a comment

Prices are rising because too much fiat-debt currency is chasing too few goods. It’s a central bank created problem, but of course politicians to have all sorts of “solutions” for it. From Doug Casey at internationalman.com:

Ridiculous Policies for Addressing Inflation

International Man: Recently, President Biden acknowledged inflation and its impact on Americans.

But he blamed “Putin’s Price hike” for the rising prices.

What’s your take on this?

Doug Casey: As Milton Friedman pointed out many years ago, inflation is always, in every instance, a monetary phenomenon. In other words, it’s caused solely by printing money. Period.

We have inflation in the United States because the Federal Reserve has been printing money by the ton. Is that going to change anytime soon? No, because the US Government is running one to two trillion in deficits—and that’s certainly going up as the economy goes into collapse over the next few years.

There’s no way that the government can finance those deficits except by selling the debt to the Federal Reserve.

The American people aren’t in a position to buy government debt. The Chinese and the Japanese are selling US paper. The only buyer is the Fed. And when it buys government paper, it monetizes it. It does this by crediting the federal government’s accounts with commercial banks with newly created dollars.

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This Implosion Will Be Fast – Hold On To Your Seats, by Egon von Greyerz

Posted on July 4, 2022 | Leave a comment

Things fall apart much faster than they’re put together, and markets go down much quicker than they go up. From Egon von Greyerz at goldswitzerland.com:

The massive money creation in the 2000s has led to a debt and asset bubble, which is about to burst. Investors will be shocked by the speed of the decline and won’t react before it is too late.

The massive money creation by central and commercial banks in this century has resulted in a growth of global assets from $450 trillion in 2000 to $1,540 trillion in 2020.

DEBT TO GDP GROWTH

As the chart below shows US debt to GDP held well below 25% from 1790 to the 1930s, a period of almost 150 years. The depression with the New Deal followed by WWII pushed debt to GDP up to 125%. Then after the war, the debt  came down to around 30% in the early 1970s.

The closing of the gold window in 1971 ended all fiscal and monetary discipline. Since then, the US and much of the Western world has seen debt to GDP surge to well over 100%. In the US, Public Debt to GDP is now 125%. Back in 2000 it was only 54% but since then we have seen a vote buying system with a money printing bonanza and an exponential increase in debt to 125%.

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A Wartime Economy Coming… Here Are Two Things That Could Happen as a Result, by Chris MacIntosh

Posted on July 1, 2022 | Leave a comment

War is so horrible that most people don’t want to think about it. That’s understandable, but the consequences could be tragic. From Chris MacIntosh at internationalman.com:

Wartime Economy

Things are a tad wonky.

The problem that market participants are not thinking about is this. When combining the most levered global and US economy in the history of our planet, record low interest rates (lowest in recorded history), the greatest disruption to world’s energy supplies as well as direct and indirect attacks on our food networks, not to mention sanctions against Russia and hence Ukraine — two major exporters of food. The consequences of all of this have delivered to us the highest inflation in four decades… oh, and this was BEFORE the Russkies went hunting for biolabs in Ukraine and the attendant fallout.

The result… or at least one result is in the graph below.

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Posted in Business, Collapse, Debt, Economics, Economy, Energy, Financial markets, Geopolitics, Governments, Politics, War

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The Truth About How Governments Will Use Inflation To Redistribute Wealth, by Nick Giaumbruno

Posted on June 29, 2022 | Leave a comment

This is a good article and the cherry on the sundae is that Nick Giaumbruno is one of the few who knows the correct economic definition of inflation. From Giaumbruno at internationalman.com:

Inflation To Redistribute Wealth

Inflation is the single biggest threat to your financial well-being.

That’s not exactly a revelation for most people. However, propaganda muddles the issue, so there is a lot of confusion.

Though he was wrong on just about everything, John Maynard Keynes was on target when he said:

“Lenin was certainly right, there is no subtler, no surer means of overturning the basis of existing society than to debauch the currency. This process engages all the hidden forces of economic law on the side of destruction, and does it in a manner not one man in a million is able to diagnose.”

What is inflation? How is it measured? What is coming next, and what can the average person do about it?

I’ll break it all down and give clarity to these fundamental and crucial questions.

Inflation is one of the most misused words in the English language. The original and correct meaning of inflation is an increase in the money supply.

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Spending it Forward? By Eric Peters

Posted on June 28, 2022 | Leave a comment

A strong argument can be made that it’s a good time to convert fiat debt instruments into actual, tangible things. From Eric Peters at ericpetersautos.com:

It’s hot outside, but I am splitting and stacking firewood – in anticipation of when it gets cold, not too many months from now. More precisely, I am stockpiling wood as a fallback – in the event the power goes out this fall. A not-unlikely event, given the “electrification” of everything. Also as an alternative, in the event the cost of propane rises beyond the constantly diminishing purchasing power of the currency we’re all forced to us to buy such things with.

But it is also a hedge.

The wood being more than just a source of heat – both to keep us warm and (should it become necessary) a way to heat food and even water, so as to  keep us clean. It is also a way to store the value of currency before it dissipates further.

Much better than a bank. Or rather, it is the best kind of bank there is.

The wood is a tangible asset, directly under my control. It can be withdrawn at any time and without even having to show ID. I can withdraw as much of it as I like, whenever I like, without having to worry about the transaction causing unwanted scrutiny. And – most of all – it will still be in my “account” come winter, even if the banks decide to lock my accounts with them, over something I wrote or said.

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David Stockman on Why the Great Reckoning Has Begun

Posted on June 24, 2022 | Leave a comment

The Federal Reserve has suppressed interest rates for decades, such that the economy can only function on what are historically very low rates. Now inflation is raging and interest rates are spiking. The Great Reckoning has arrived. From David Stockman at internationalman.com:

Well, that should have been a wake-up call. The 30-year mortgage rate soared by 24 basis points recently to 6.18%. So the latter now stands at well more than double the 2.65% rate which prevailed just 18 months ago in January 2021, and at the highest level since the tail end of the Great Financial Crisis in 2009.

In a word, the Fed’s fake economy based on ridiculously unsustainable ultra-low interest rates is coming to a thundering end. And far more abruptly and violently than the Fed and its Wall Street megaphones ever remotely imagined.

Not surprisingly, the eruption of the mortgage rate depicted above has sent housing “affordability” into the drink. In fact, housing affordability is now at the lowest point on record going back to the late 1980s.

Needless to say, household budgets are about to get hammered and the housing market is fixing to experience another great implosion. It would actually take a 30% drop in average home prices to reverse the affordability plunge just since the pre-Covid levels.

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Concurrent Deflation and Hyperinflation will Ravage the World, by Egon von Greyerz

Posted on June 24, 2022 | Leave a comment

FLATION is the suffix for the various phenomena that occur in fiat-debt systems. From Egon von Greyerz at goldswitzerland.com:

FLATION will be the keyword in coming years. The world will simultaneously experience inFLATION, deFLATION, stagFLATION and eventually hyperinFLATION.

I have forecasted these FLATIONARY events, which will hit the world in several articles in the past. Here is a link to an article from 2016.

With most asset classes falling rapidly, the world is now approaching calamities of a proportion not seen before in history. So far in 2022, we have seen an implosion of asset prices across the board of around 20%. What few investors realise is that this is the mere beginning. Before this bear market is over, the world will see 75-90% falls of stocks, bonds and other assets.

Since falls of this magnitude have not been seen for more than three generations, the shockwaves will be calamitous.

At the same time as bubble assets deflate, prices of goods and services have started an inflationary cycle of a magnitude that the world as whole has never experienced before.

We have seen hyperinflation in individual countries previously but never on a global scale.

Currently the official inflation rate is around 8% in the US and Europe. But for the average consumer in the West, prices are rising by at least 25% on average for their everyday needs such as food and fuel.

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A Triple-Barreled Gun Is Destroying African Economies: Inflation, Government Debt, and Taxes, by Manuel Tacanho

Posted on June 19, 2022 | Leave a comment

You can lump the three under the general category of statism. That philosophy always has and always will destroy, not build. From Manuel Tacanho at mises.org:

Today it is conclusive that Africa’s socialist experiments failed, as did the state-led development approach. Not only was the heavily statist approach unable to develop African economies, but it made poverty worse. In this context of repressive state-driven economic systems, most African countries are trapped in a morass of high inflation, high debt, high taxation, high dependency, worsening poverty, food insecurity, chronic mass unemployment, and other pervasive problems.

Barrel One: High Inflation

Africa’s unstable and inflationary currencies have been a significant impediment to economic development because of their destabilizing and impoverishing effect. Organic and lasting economic growth must necessarily be driven by savings, not by debt, deficit spending, or money printing.

In the long run, inflation ends in the breakdown of the currency. This is what happened in Angola in the 1990s and in Zimbabwe in the first decade of the 2000s.

Evidence from the past and present, from developed and developing countries, unequivocally shows that inflation is a government and central bank policy that cannot go on forever and that does come to a catastrophic end, however long the run may be.

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No, Inflation Is Not A Product Of Corporate Greed, by Ranen Aschemann

Posted on June 17, 2022 | Leave a comment

Strictly speaking, “inflation” means expansion of the medium of exchange. That’s the province of the government, the central bank, and the banking system. Everyone else, and that includes mega-corporations, are just along for the ride. From Ranen Aschemann at mises.org:

Seventeen months ago, as the keys to the oval office changed hands, for all of the political animus and theatrics, one thing seemed a given: the US economy would roar back to vitality in historic fashion, a point of optimism in a nation of discord and incertitude. Yet hope would give way to ambivalence, which, in turn, gave way to serious doubt. Today, a pathetic 23 percent of Americans feel economic conditions are even “somewhat good.” The primary reason for such abysmal economic sentiment? Inflation.

As consumer prices have accelerated out of control over the past year, a new political narrative on inflation has emerged, one that alleges corporate impropriety as the primary catalyst. The motive for such a messaging shift from select members of the political apparatus is clear: a need to shirk accountability for evidently inflation-inducing policies. Unfortunately, the corporate greed narrative has apparently paid dividends to its progenitors, garnering increasing acceptance among the body politic at large. Indeed, according to one poll from Data For Progress, a majority of likely voters now believe price-gouging is a major contributor to heightened inflation. However, that inflation is brought about by corporate greed is a sophistic political lie in every respect.

Yes, corporations are greedy. People are greedy. It turns out that greed is a natural characteristic of the human condition. It always has been. Why, then, has inflation only recently exploded after 40 years of calm, now clipping along at better than four times the Federal Reserve’s target annual rate of two percent?

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Is Corporate Greed Behind High Gas Prices? By Michael Maharrey

Posted on June 16, 2022 | Leave a comment

Politicians love to point the finger at corporate greed for high prices, mostly to obscure theirs and their central bank’s role in fiat debt creation, which is the ultimate engine for higher prices. From Michael Maharrey at schiffgold.com:

There is a meme floating around social media that seems to prove greedy corporations – specifically oil companies – are the root cause of inflation.

How does this meme stack up to reality?

Short answer — it doesn’t.

The meme tells us that ExxonMobil earned $5.5 billion in the first quarter of 2022 compared with $2.7 billion in Q1 2021. The meme goes on to conclude “We’re not paying for gas, we’re paying for greed!”

This meme is a great example of the fact that trying to draw conclusions based on a couple of numbers pulled from any context will likely lead you to the wrong conclusion.

The meme uses ExxonMobil’s net income as the basis for its assertion. If you look at the company’s income statement, you will find the data is correct. The company reported a net income of $5.48 billion in Q1 of this year and $2.73 billion in Q1 2021.

First, it’s important to understand exactly what these numbers represent. Net income accounts for revenue minus all expenses, including operating expenses. taxes, interest, debt service, etc. This number is highly susceptible to accounting manipulation. This number is often reported as “profit.”

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