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Dollar Purchasing Power Plunges. Inflation +6.2%. For Urban Wage Earners +6.9%, Highest in 40 years, Most Monstrously Overstimulated Economy Ever.

November 12, 2021

Dollar Purchasing Power Plunges. Inflation +6.2%. For Urban Wage Earners +6.9%, Highest in 40 years, Most Monstrously Overstimulated Economy Ever.

Fed still printing money and repressing “real” interest rates to negative 6%, new vehicle prices spike by most since 1975, housing CPI jumps, food & energy soar.

The broadest Consumer Price Index (CPI-U) spiked 0.9% in October from September, and by 6.2% from a year ago, the highest since November 1990 (6.3%) and since 1982, according to data released by the Bureau of Labor Statistics today.

The Consumer Price Index for All Urban Wage Earners and Clerical Workers (CPI-W) spiked by 6.9% in October year-over-year, the highest since June 1982, nearly 40 years ago:

This CPI-W is the index upon which the Social Security COLAs are based, which are determined by the average during the third quarter. The Q3 average of 5.9% set the COLA for 2022 at 5.9%, the highest COLA since 1982, and there was some jubilation among beneficiaries a month ago. But now inflation is blowing right past that COLA.

As Atlanta Fed President Raphael Bostic pointed out, “transitory has become a dirty word.” This massive inflation occurred while the Fed still had its foot fully on the accelerator – $120 billion a month in money printing and near-0% short-term interest rates, meaning “real” short-term rates are at negative 6.0%.

The Fed has been saying over and over again ad nauseam for seven months that inflation will slow down somehow on its own, even as the Fed had the foot fully on the accelerator, and every step along the way, the Fed has grossly underestimated the surge of inflation, and continues to do so. The Powell Fed has unleashed a monster.

Here is Fed Chair Jerome Powell’s reaction to this inflation monster blowout, as captured by cartoonist Marco Ricolli for WOLF STREET:

…click on the above link to read the rest of the article…

Janet Yellen Admits The “Net Zero” Grand Reset Price Tag Will Be $150 Trillion

November 6, 2021

Janet Yellen Admits The “Net Zero” Grand Reset Price Tag Will Be $150 Trillion

For years, the climate change lobby was laser-focused on just one aspect of the “climate change” crusade: the end – which supposedly is some world where the temperatures no longer rise due to fossil fuel emissions (because we now live in a world of global warming as scientists agree, not to be confused with the global cooling hypothesis that emerged in the 1970s, when many were even warning of a new ice age) justifying the means. Meanwhile the “means”, or the final cost to taxpayers of all that endless, tedious virtual signaling, was almost never touched upon for a reason – as we first explained three weeks ago, the bill for getting the world from point A to that mythical, utopic point B, was so high, it would be double global GDP.

For those who missed it, here is an excerpt of what we wrote back on October 14, shortly after Bank of America published the definitive compendium on climate change and the coming Net Zero (i.e., great reset) world, and which we discussed in depth:

“while it is handy to have a centralized compendium of the data, a 5 minute google search can provide all the answers that are “accepted” dogma by the green lobby. But while we don’t care about the charts, that cheat sheets, or the propaganda, what we were interested in was the bottom line – how much would this green utopia cost, because if the “net zero”, “ESG”, “green” narrative is pushed so hard 24/7, you know it will cost a lot.

Turns out it does. A lot, lot.

Responding rhetorically to the key question, “how much will it cost?”, BofA cuts to the chase and writes $150 trillion over 30 years – some $5 trillion in annual investments – amounting to twice current global GDP!

…click on the above link to read the rest of the article…

The Mainstream Has the Inflation Story Backwards

November 4, 2021

The Mainstream Has the Inflation Story Backwards

The mainstream blames inflation on “supply chain bottlenecks.” But they have it completely backward. In reality, Federal Reserve-created inflation is causing the supply chain mess.

According to Biden administration talking points, the economy is booming. Americans are flush with cash. And they are demanding lots of goods. The supply chain simply can’t keep up. That’s why we’re seeing empty shelves and rising prices. Transportation Secretary Pete Buttigieg summed up the mainstream mantra.

Demand is up … because income is up, because the president has successfully guided this economy out of the teeth of a terrifying recession.”

White House spokeswoman Jen Psaki told a similar tale. She said we have supply chain problems because “people have more money … their wages are up … we’ve seen an economic recovery that is underway.”

This sounds like a lot of spin. But in one sense, the mainstream is right. As Mises Institute Senior Editor Ryan McMaken pointed out in a recent article on the Mises Wire, they are correct when it comes to consumer demand and spending, even if they got it right for the wrong reason.

As Mihai Macovei showed earlier this month, the global volume of trade and shipping volume in 2021 have actually exceeded prepandemic numbers. For example, in the port of Los Angeles, ‘loaded imports’ and ‘total imports’ for the 2020–21 fiscal year (ending June 30, 2021) were both up when compared to the same period of the 2018–19 fiscal year. In other words, it’s not as if little is moving through these ports. In fact, more is moving through them than ever before. That suggests demand is indeed higher.”

But why is demand so much higher? As Psaki said, Americans have more money in their pockets. Wages are up nominally. But it’s not because the economy is booming. As McMaken points out, it’s due to inflation.

…click on the above link to read the rest of the article…

Waypoints on the road to currency destruction — and how to avoid it

October 30, 2021

Waypoints on the road to currency destruction — and how to avoid it

The few economists who recognise classical human subjectivity see the dangers of a looming currency collapse. It can easily be avoided by halting currency expansion and cutting government spending so that their budgets balance. No democratic government nor any of its agencies have the required mandate or conviction to act, so fiat currencies face ruin.

These are some waypoints to look for on the road to their destruction:

Monetary policy will be challenged by rising prices and stalling economies. Central banks will almost certainly err towards accelerating inflationism in a bid to support economic growth.
The inevitability of rising bond yields and falling equity markets that follows can only be alleviated by increasing QE, not tapering it. Look for official support for financial markets by increased QE.
Central banks will then have to choose between crashing their economies and protecting their currencies or letting their currencies slide. The currency is likely to be deemed less important, until it is too late.
Realising that it is currency going down rather than prices rising, the public reject the currency entirely and it rapidly becomes valueless. Once the process starts there is no hope for the currency.

But before we consider these events, we must address the broader point about what the alternative safety to a fiat collapse is to be: cryptocurrencies led by bitcoin, or metallic money to which people have always returned when state fiat money has failed in the past.
Introduction

When expected events begin to unfold, they can be marked by waypoints. These include predictable government responses, and the confused statements of analysts who are unfamiliar with the circumstances. We see this today in the early stages of an inflation that threatens to become a terminal cancer for fiat currencies.
…click on the above link to read the rest of the article…

“Transitory” Shortages & Inflation Are Actually Your Quality Of Life Being Stolen Right Before Your Eyes

October 26, 2021

“Transitory” Shortages & Inflation Are Actually Your Quality Of Life Being Stolen Right Before Your Eyes

The Washington Post published an op-ed urging Americans dealing with product shortages to lower their expectations. My response? Don’t settle. Failed policies have our country devolving.

There’s no doubt our country has all of a sudden slipped into the most precarious state we’ve been able to readily confirm with our own two eyes in decades.

We are suffering from runaway inflation, we have a monstrous labor shortage, and products we normally would have abundant access to are missing from store shelves. The country doesn’t produce anything anymore, we have doubled our Central Bank’s balance sheet in under two years and the money supply has gone parabolic.

Four reasons Americans are still seeing empty shelves and long waits for many products | MinnPost — Source: Minn Post

And engineering solutions for these issues requires correctly identifying where the problem is coming from to begin with. It appears we can either go one of two directions when we try to deduce the cause of these issues.

The first direction we can go in is to point to monetary and fiscal policy and look at their direct effects on the state of the country and our economy. This, I believe, is the pragmatic approach to solving the issues our nation faces.

The second direction, according to a new Washington Post op-ed, is apparently to blame and shame ourselves for being greedy and assuming that we ever deserved such a quality of life to begin with.

The Post recently published a piece called “Opinion: Don’t rant about short-staffed stores and supply chain woes”, which put this argument on the table, basically telling people to shut up and be thankful for the little they have.

…click on the above link to read the rest of the article…

Peter Schiff: Stock Up Now! Inflation Could Get Very Ugly

October 18, 2021

Peter Schiff: Stock Up Now! Inflation Could Get Very Ugly

The price of pretty much everything is rising precipitously. The CPI for September came in above expectations with a month-on-month increase of 0.4%. Peter Schiff appeared on Unfiltered with Dan Bongino to talk about inflation in Joe Biden’s America. Peter said you should stock up now because things could get ugly really quickly.

Bongino pointed out that while wages are rising, they aren’t rising as fast as prices. Wages have risen 4.6% while inflation has surged by 5.4% — according to government numbers. Peter said that is typically the trend.

The price of labor never keeps up with the price of stuff.”

Peter said the real problem is during and after COVID, a lot of Americans stopped working.

Unfortunately, they didn’t reduce their spending because the government made the mistake of replacing the incomes they lost with new money that the Federal Reserve was printing. So, we were making fewer things to buy, but everybody had more money to buy stuff, and so, prices just went ballistic. And they’re going to keep going up.”

Bongino pointed out that the rich have accounts and hedge mechanisms to shield themselves from the impacts of inflation. But what does an average middle-class family do to avoid the financial apocalypse of inflation coming down the pike?

Peter said, first of all, remember that inflation is a tax.

So, when the Biden administration says they’re not taxing people that make less than $400,000, they’re hitting them with this huge inflation tax.”

So, how do you avoid it?

Peter said, “Stock up now!”

Buy the things that you think you may need a year from now, two years from now. Buy it now. Especially the stuff that is nonperishable…

…click on the above link to read the rest of the article…

My “Wealth Effect Monitor” for the Money-Printer Economy: Holy Moly, October Update

October 6, 2021

My “Wealth Effect Monitor” for the Money-Printer Economy: Holy Moly, October Update

The bottom 50% need not apply. They just get to eat the soaring costs of housing. How the Fed totally blew out the already gigantic wealth disparity during the pandemic.

On Friday, the Fed released the detailed data about the wealth of households by wealth category for the 1%, the 2% to 9%, the “next 40%” (the top 10% to 50%) and the “bottom 50%” for the second quarter, after having released less detailed figures on September 23. You read the stories at the time about how the Fed’s money-printing and interest-rate-repression has enriched American households.

But the detailed data, just now released, show whose wealth jumped the most, and who got left endlessly further behind. It wasn’t households in general that benefited, but only the richest households with the most assets. The more assets they had, the more they benefited.

My Wealth Effect Monitor divides the wealth (assets minus liabilities) for each wealth category by the number of households in that category, which produces average per-household wealth within each category. The wealth of the bottom 50% is reflected by the jagged green line on the bottom, essentially on top of the horizontal axis:

Not shown separately are the truly rich – the 0.01% – and the Billionaire Class. The Fed wisely doesn’t provide any information on them separately, but includes them in the Top 1%.

But according to the Bloomberg Billionaires Index, the top 30 US billionaires are worth on average $69 billion per household currently, having gained on average $2.2 billion in wealth each over the quarter.

The bottom 50% of US households (green line above) – 63.2 million households – are worth on average $47,900 per household. But this includes $25,970 in “durable goods” (cars, phones, furniture, etc.), which for consumers are normally considered consumables, not assets, because their values are declining, and they don’t produce incomes.

…click on the above link to read the rest of the article…

The Biggest Federal Reserve Scandal

September 27, 2021

The Biggest Federal Reserve Scandal

Following revelations that Federal Reserve officials made trades in financial assets while the Fed was taking extraordinary efforts to “stimulate” the economy, Federal Reserve Chairman Jerome Powell ordered a review of the Fed’s ethics rules. While these trades appear problematic, they pale in comparison to the biggest Fed scandal — the Fed’s impoverishment of ordinary Americans, enrichment of the elites, and facilitation of government debt and deficits.

The depression induced by coronavirus, though really caused by so-called public health actions government took in response, was the official reason for the Fed’s increased asset purchases last year. However, the Fed actually started ramping up its money creating activities in September of 2019, when it began pouring billions a day into the repo markets, which banks use to make short-term loans to each other, in order to keep repo market interest rates low.

Coronavirus was just a convenient excuse for the Fed to do more of what it was already doing. Now, the Fed is using the limited reopening as a scapegoat for rising prices. Of course, anyone who understands Austrian economics understands that rising prices are a symptom, not a cause, of inflation. Inflation is the very act of money creation by the Fed.

Rising prices that diminish the average American’s standard of living are not the only result of the Fed’s manipulation of the money supply. The manipulation distorts economic signals, producing results including booms, bubbles, and busts.

Inflation has always benefited the well-connected elites who receive the Fed’s newly created money before the new money causes widespread price increases. The true motivation behind Fed policies was revealed by former Fed official Andrew Huszar in 2013. Huszar, writing for the Wall Street Journal, confirmed that quantitative easing kept stock prices high, instead of helping Americans struggling with the aftereffects of the 2008 meltdown.

…click on the above link to read the rest of the article…

The Inflation Train Isn’t Anywhere Near Full Speed

September 20, 2021

The Inflation Train Isn’t Anywhere Near Full Speed

The Inflation Train Is Nowhere Near Full Speed

Public domain photo from National Park Service

Federal Reserve Chairman Powell and other members of the Fed have been using the term “transitory” to downplay the threat that the last 16 months of skyrocketing inflation would last.

But inflation has been sharply on the rise since March 2020, with only a minor pause toward the end of last year before rising even more sharply since January 2021. Two Fed officials dissented in June of this year, but Powell’s money-printing habit hasn’t slowed.

The “light at the end of the tunnel” for the Fed? A miniscule .1% (one tenth of one percent) down tick in the official monthly inflation report this August.

You can almost hear the relief in the Fed’s chatter… “See, we were right! It was only transitory inflation, and it’s already going down! There’s nothing to see here, move along, buy more stocks.”

Don’t crack open the champagne just yet.

Unfortunately for us, the Fed’s optimism seems misplaced. That 0.1% reduction in monthly official inflation leaves us with a 5.3% annual inflation rate, more than 2 1/2 times higher than the Fed’s official inflation target.

And if you think everyday folks have it rough, small businesses have taken a major hit:

Inflation for businesses reached a year-over-year rate of 8.3% — the metric’s highest level since at least 2010.

On top of that, consumers are waking up to the reality that inflation won’t be “transitory,” but instead will likely stick around for a few years.

That’s because once inflation begins to gain velocity, it’s hard to stop. Inflation has serious momentum, just like a train. A fully-loaded modern freight train weighs tens of thousands of tons and needs over a mile to make an emergency stop. A controlled, safe stop takes much longer.

That very momentum is what Jim Rickards was concerned about back in February:

…click on the above link to read the rest of the article…

What Comes After Mind-Blowing Free-Money Blow-Off Spike in Retail Sales? A Spike Doesn’t Spike Forever

September 19, 2021

What Comes After Mind-Blowing Free-Money Blow-Off Spike in Retail Sales? A Spike Doesn’t Spike Forever

Powered by price increases.

Total retail sales – not adjusted for inflation, now a big factor – inched up 0.7% in August from July, to $619 billion (seasonally adjusted), up a stunning 18% from two years ago and 15.1% from a year ago. The insert in the chart shows that this wasn’t a proper “rebound,” as it has been widely called in the media today, but an uptick in a four-month down-trend from the mind-blowing superlative historic free-money blow-off spike in April. August retail sales were down 1.6% from that April stimmie-craziness:

A spike doesn’t spike forever. But Americans are still making a heroic effort to spend the pile of free money they got … the last two stimmies totaling $2,000 per person, the $800 billion in forgivable PPP loans that just about everyone with a little or big business got, extra unemployment benefits, massive gains on asset prices, all of it fueled by the Fed’s $4-trillion money-printing binge and the government’s $5-trillion deficit-spending binge in 18 months, which created the most monstrously overstimulated economy and markets ever.

New & used auto dealers and parts stores: Sales dropped another 3.6% in August from July, to $121 billion (seasonally adjusted), fourth month in a row of large declines off the free-money spike in March and April.

There is plenty of demand, and prices have surged amid inventory shortages of used vehicles and historic inventory shortages of new vehicles. Customers face dealer lots that are nearly empty and out of popular models amid rotating shutdowns of assembly plants globally due to the semiconductor shortages.

But these $121 billion in sales in August were still up 10.7% from a year ago and 22.2% from two years ago, in dollar terms, thanks to massive price increases – 32% year-over-year for used vehicles and 7.6% for new vehicles, according to the Consumer Price Index.

…click on the above link to read the rest of the article…

The funny-money game

September 18, 2021

The funny-money game

The sense of general unease that I detect among those I meet and discuss economics and financial matters with is increasing —with good reason. Clearly, what everyone calls inflation, rising prices or more accurately currency debasement, will lead to higher interest rates, threatening markets which are unmistakably in bubble territory.

The consequences of rising prices and interest rates are still being badly underestimated.

In this article I get to the source of the inflation problem, which is the monetary debasement of the dollar and other major currencies. An important part of the problem is that mathematical economists have lost sight of what their beloved statistics represent —none more so than with GDP.

I explain why GDP is simply the total of accumulating currency and credit which is wrongly taken reflect economic progress – there being no such thing as economic growth. Once that point is grasped, the significance of this basic error becomes clear, and the fiat currency paradigm is revealed for what it is: a funny-money game that will go horribly wrong.

There is only one escape from it, and that is to own the one form of money that is no one’s counterparty risk; the one form of money that always comes to humanity’s rescue when fiat fails.

And that is gold. It is neglected by nearly everyone because it is the anti-bubble. The more that people believe in fiat-denominated assets, the less they believe in gold. That is until their funny-money games implode, inevitably triggered by sharply rising interest rates.
Introduction

Those of us with grey hairs gained in financial markets can, or should, recognise that after fifty years the funny-money game is ending. Accelerated money printing has led to what greenhorn commentators call inflation…
…click on the above link to read the rest of the article…

Desperate Money Printing Leads to Depression – Dr. Marc Faber

September 12, 2021

Desperate Money Printing Leads to Depression – Dr. Marc Faber

Legendary investor, economist and market forecaster Dr. Marc Faber thinks central banks (CB) are not going to cut back the money printing. Just the opposite. He predicts CBs are going to print even more money at a faster pace to hold the failing economic system together for a little while longer. Dr. Faber explains, “What is perceived to be safe, namely cash, isn’t safe anymore. It is unsafe. You ask me what is safe? I don’t know what is safe anymore when you have money printers who print money indefinitely. I don’t think they can stop. I actually think they have to accelerate their money printing. So, stocks may go up, but in real terms, it doesn’t mean your standard of living will go up. Maybe the standard of living of the 50 richest people in the world will go up, but not the standard of living of the typical American . . . or the average American. That standard of living will go down. . . . All the money printing is a desperate measure to keep the voters from rebellion.”

Dr. Farber predicts that not only are we going to see more asset inflation, but dramatic wage inflation too. Dr. Faber, who holds a PhD in economics, says, “What I think will happen, and most people have not really considered, we will get wage inflation. For the first time since the late 1970’s, we will get accelerating wage inflation, and in some cases, quite dramatic. In some states, the minimum wage is $15. I could see that going up to $30 per hour very quickly. I don’t think inflation is ‘transitory’ (as the Fed proclaims). We will not have stagflation. We will have something worse. We will have rising prices and a depression in the standard of living of most people.”

…click on the above link to read the rest of the article…

Who determines prices?

September 12, 2021

Who determines prices?

One of the consequences of the response to the pandemic and the disruption from Brexit is that labour shortages are appearing across the low-paid sectors of the economy. So much so that even the metropolitan liberal Guardian has begun to wonder whether the benefits of higher wages for the low-paid might outweigh the cost of having to pay more for a plumber or an au pair. As John Harris puts it:

“For decades, large swathes of the labour market have been run on the assumption that there will always be sufficient people prepared to work for precious little. But here and across the world, as parts of the economy have been shut down and furlough schemes have given people pause for thought, the idea that they need not stay in jobs that are exploitative and morale-sapping has evidently caught on.

“In the UK, meanwhile, Brexit remains a disastrous and chaotic project – but, among its endless and unpredictable consequences, leaving the EU has cut off employers’ access to a pool of people who were too often exploitable. Time has thereby been called on one of the ways that our dysfunctional labour market was prevented from imploding.”

Harris points to sectors of the economy – mostly low-paid – where employers have been obliged to increase wages in order to fill vacancies. And there is certainly some room for wage increases across the economy. But the emerging narrative is that this is a bad thing because it will create price increases. Much of the thinking around this issue though, is based on experiences and on economic models that last saw the light of day half a century ago. And with this in mind, we should take mainstream narratives with a pinch of salt.

…click on the above link to read the rest of the article…

Is Anyone Willing to Call the Top of the Everything Bubble?

September 7, 2021

Is Anyone Willing to Call the Top of the Everything Bubble?

Can extremes become too extreme to continue higher? We’re about to find out.

Is anyone willing to call the top of the Everything bubble? The short answer is no. Anyone earning money managing other people’s money cannot afford to be wrong, and so everyone in the herd prevaricates on timing. The herd has seen what happens to those who call the top and then twist in the wind as the market continues rocketing higher.

Money managers live in segments of three months. If you miss one quarter, the clock starts ticking. If the S&P 500 beats your fund’s return a second time because you were bearish in a bubble, your doom is sealed.

When the bubble finally pops and everyone but a handful of secretive Bears is crushed, the rationalization will cover everyone’s failure: “nobody could have seen this coming.”

Actually, everyone can see it coming, but the tsunami of central bank liquidity has washed away any semblance of rationality. My friend and colleague Zeus Y. recently summarized the consequences of this decoupling of markets and reality:

“I used to be with the Bears until the uncoupling was complete when the Fed started guaranteeing non-investment grade junk bonds. At that point, any semblance of sanity, much less probity, much less integrity was gone. Rinse and repeat with digital dollars going into the tens and even hundreds of trillions of dollars.

For two decades we fiscal sanity-ists have been assuming SOME baseline reality. I see none in sight and still plenty of assets to plunder and pump and still resources to suck and suckers to shake down. The system is running hot and wild on its own algorithms, and actual people are lying back and simply lapping up the “passive” income created by delusion-made-reality.

…click on the above link to read the rest of the article…

Facing Inflation Threat, German Investors Loading Up on Gold

September 3, 2021

Facing Inflation Threat, German Investors Loading Up on Gold

While most American investors have faith that the Federal Reserve can and will successfully tighten monetary policy to fight inflation — or have simply bought into the “transitory” inflation narrative — Germans are loading up on gold as a hedge against growing inflationary pressures.

Through the first half of the year, gold coin and gold bar demand in Germany hit the highest level since 2009 – the aftermath of the 2008 financial crisis. First-half demand for bar and coins in Germany increased by 35% from the previous six months, compared with a 20% increase in the rest of the world, according to World Gold Council data.

Raphael Scherer serves as the managing director at Philoro Edelmetalle GmbH. He told Bloomberg that gold sales for the company are up 25% on what was already a strong 2020.

We have a long history of inflation fear in our DNA. Now the inflation risk is picking up. The outlook for precious metals is very positive.”

Given Germany’s experience with hyperinflation under the Weimar Republic, it comes as no surprise that Germans are wary of inflation.

Gold investment took off in the country in the wake of the 2008 financial crisis and has been strong ever since. The global recession after the ’08 meltdown led to extremely loose monetary policy in Germany. The country has been in a negative interest rate environment for several years, and the Bundesbank has done billions in quantitative easing. Two and five-year government bonds have traded at negative yields since 2015.

The World Gold Council summarized why Germans tend to turn to gold when inflation looms.

…click on the above link to read the rest of the article…

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