All fiat currencies are no more than floating abstractions of value. Society has put its faith in fiat currency issued by governments. These government-issued currencies are not backed by a physical commodity, such as gold or silver, but rather by the promises from the government that issued it. A difficult question investors today face is determining which assets will appreciate most thus rising in value and which form to hold their wealth.The value of fiat money is derived from supply and demand and the stability of the government that issues it. Over the years many promises have been made that simply cannot or will not be honored. History and many real-life examples exist that indicate that promises are easier to make than keep.

It is very possible in the near future we may see a strong bifurcation of the financial system. The Hard Asset Inflation / Paper Asset Deflation Theory laid out below is based on the idea that as wealthy individuals begin to realize the fragility of the current financial system they will shift their investment preferences to items of substance.

This repositioning of wealth in assets could occur rather rapidly during a period of inflation. If such a revamping of how the wealthy invest takes place it could drastically add to any inflationary trends. In short, some investments would fall like a stone while others soar. Imagine real estate doubling in value while pensions are cut and stocks falter. This dovetails with my theory t he Fed should be ecstatic so many people have been willing to invest in intangible assets because it has helped to minimize inflation.

…click on the above link to read the rest…

A Reader Asks “Does an Increase in Money Supply Cause Inflation?”

September 2, 2023

A Reader Asks “Does an Increase in Money Supply Cause Inflation?”

This seemingly simple question, is not so simple. What is the money supply? How does one measure inflation.

Other Deposit Liabilities vs M2, monthly average via St. Louis Fed

ODL vs M2 Chart Notes

Other Deposit Liabilities (ODL see description below), is a monthly average.
M2 is a monthly measure through March.

A Better Definition of Money

The main difference between ODL and M2 is that ODL does not include currency or retail money market funds.

Currency is accepted at an increasingly fewer number of business establishments and simply cannot be used for very large sized transactions. Retail money market funds never became an important medium of exchange. Both are becoming a far less used medium of exchange.

ODL has the additional advantage that it is the main source of funding for bank loans and investments, making ODL both a monetary and credit aggregate. Friedman would not be surprised that the need to change the best definition of what constitutes money would change over the years.

The above three paragraphs from Lacy Hunt at Hoisington Management.

Whether or not one uses M2 or ODL, money supply has generally been decreasing. Why the Fed cannot release M2 more timely is a mystery. It’s July 15, but the latest M2 is for May. One might wonder “What the H is the Fed hiding?”

Definition of Inflation

Some Austrian economists would say increases in money supply do not “cause” inflation, it is the definition of inflation.

If you hold that view, then deflation is the opposite and we are in deflation now.

Some mean the CPI when they refer to inflation. Others, notably the Fed, think the Personal Consumption Expenditures (PCE) price index is the best measure of inflation.

The huge problem with both the CPI and PCE is that it does not include asset prices, especially housing.

…click on the above link to read the rest…

“No Way Out” for Global Markets Trapped in a Doom Loop of Debt

April 23, 2023

“No Way Out” for Global Markets Trapped in a Doom Loop of Debt

In this compelling conversation with Wealthion founder, Adam Taggart, Matterhorn Asset Management principal, Matthew Piepenburg, addresses the current and vast range of headline market topics, signals and risks. Inflation, deflation, risk assets, bond stress, cryptos, war, bank failures, CBDC’s rise, trapped policy makers and, of course, the topic of precious metals are all carefully and plainly discussed.

Piepenburg’s broader views on current and future financial conditions are bluntly yet realistically presented as a “no way out” scenario for global economies distorted by cornered central bankers. The bottom line is as simple as it is incontrovertible: The global economy is stuck in a doom loop of debt.

Either central banks raise rates to allegedly “kill inflation” by killing the economy and markets, or they resort to more mouse-click money and kill the currency in your wallet.

Historically, all debt-cornered nations spur collapsing markets followed by collapsing currencies and inflation-driven social unrest. Leaders of all eras and stripes (left or right) then address this unrest with tighter, more centralized controls over our economies and lives. CBDC is a classic and modern symptom of this timeless pattern. So is war. The current era will be no exception, as history (from ancient Rome to Chairman Mao, or Napoleon to the rise of fascist leaders of the 1930’s) offers no exception.

Piepenburg tracks the current evolution of this trend in a Federal Reserve that has tightened too fast and too high, breaking everything in its path in one dis-inflationary debt or banking crisis after the next, which are inevitably “solved” via more inflationary and mouse-clicked dollars. End result? Currency debasement, for which gold is one obvious and historical solution rather than “gold bug” apology.

…click on the above link to read the rest…

The Fed Cannot Fix Today’s Energy Inflation Problem

April 10, 2023

The Fed Cannot Fix Today’s Energy Inflation Problem

There is a reason for raising interest rates to try to fight inflation. This approach tends to squeeze out the most marginal players in the economy. Such businesses and governments tend to collapse, as interest rates rise, leaving less “demand” for oil and other energy products. The institutions that are squeezed out range from small businesses to financial institutions to governmental organizations. The lower demand tends to reduce inflationary pressure.

The amount of goods and services that the world’s economy can produce is largely determined by fossil fuel supplies, plus our ability to use “complexity” in many forms to produce the items that the world’s growing population requires. Adding debt helps add complexity of various types, such as more international trade, more advanced education, and more specialized tools. For a while, the combination of growing energy supplies and growing complexity have helped pull economies along.

Unfortunately, the world’s oil supply is no longer growing. Without an adequate oil supply, it becomes difficult to maintain complexity because complex solutions, such as international trade, require adequate oil supplies. Inasmuch as we seem to be reaching energy and complexity limits, nothing the regulators try to do to change the debt and money supplies–even reeling them back in–can fix the underlying oil (and total energy) problem.

I expect that the rich parts of the world, including the US, Europe, and Japan, are in line to be adversely affected by high interest rates this time. With their high levels of complexity, they are among the most vulnerable to disruption when there is not enough oil to go around.

Figure 1. World oil consumption divided into consuming areas, based on data of BP’s *2022 Statistical Review of World Energy*. Europe excludes Estonia, Latvia, Lithuania, and Ukraine.

…click on the above link to read the rest…

Role Reversal: The Collapse of the Dollar-Enforced Empire

April 10, 2023

Role Reversal: The Collapse of the Dollar-Enforced Empire

The Soviet empire started to crumble around 1989. The time period between the forming of the North Atlantic Treaty Organization (NATO) in the late 1940s and the retreat of Russia from Eastern Europe with the eventual collapse of communism in Russia is known as the Cold War. There was a great power confrontation in Europe that did not result in war.

Essentially, US-led NATO stood its ground to prevent further Soviet expansion from the territory it occupied at the end of World War II and waited for the inevitable collapse. Now, perhaps not everyone saw the collapse of the Soviet empire as inevitable. But all one had to do was view the Soviet empire for oneself, up close and personal, which is what I did in the early 1970s as a young Air Force officer.

The State of the Communist Economy

The Russian economy at that time is painful to describe. Moscow and Leningrad (Saint Petersburg), the so-called jewels of the Soviet Union, were depressing. Everything was shoddily built. There were very few cars on the streets. There were no retail shops deserving of the name. Lines formed in the middle of the night awaiting the opening of the few bakeries. I saw this for myself from my hotel window on the Nevsky Prospekt in Leningrad. GUM, the “world’s largest department store” near Moscow’s Red Square, sold nothing that was equal to what could be found in any garage sale in the West.

Actually, that should not be a surprise since at one time all those garage-sale goods were marketable. I did not visit Berlin, but those who did say that crossing the Brandenburg Gate from West Berlin to East Berlin was shocking…

…click on the above link to read the rest…

“Dr. Doom” Nouriel Roubini Warns Of Stagflationary Megathreat

April 3, 2023

“Dr. Doom” Nouriel Roubini Warns Of Stagflationary Megathreat

Though the threat of an exponential liquidity crisis is a conversation that Bloomberg should have been seriously addressing two years ago, it’s good to see that reality is finally hitting the mainstream media. Nouriel Roubini, also known as “Dr. Doom” because he’s one of the few mainstream economists that’s not constantly touting the soft landing narrative, has been rather consistent in terms of covering the clash between credit liquidity, rising inflation and rising interest rates. Now, he’s talking about an incoming stagflationary “megathreat” that will crush credit while prices continue to rise, compelling central bankers to continue raising rates.

The Catch-22 scenario that central banks have triggered should have been obvious to every economist as soon as they began tightening into the financial weakness and instability created by the covid lockdowns. Instead, the narrative has been an ever escalating waiting game – Everyone was simply biding their time until the central bank pivot they assumed was coming. Except, it didn’t happen. As long as interest rates remain higher or continue to climb existing debt and new debt will continue to grow more expensive and less desirable. The lifeblood of markets for the past 14 years has been near-zero interest rates and easy fiat money circulating through banking conduits. Now, the dream is dead.

Roubini addresses the deeper problem in part when he notes the exposure of banks like SVB to bonds with declining value caused by rising rates. What he misses, and it’s surely something Bloomberg does not want to talk about, is the issue of ESG related programs and lending that made up a sizable portion of SVB’s portfolio…

…click on the above link to read the rest…

Peter Schiff: Bank Bailouts Will Devalue the Dollar

March 29, 2023

Peter Schiff: Bank Bailouts Will Devalue the Dollar

MARCH 28, 2023 BY SCHIFFGOLD 0 0

Peter Schiff appeared on NTD News to talk about the bank bailout and the March Federal Reserve meeting. During the conversation, Peter explained that everybody is going to pay for these bailouts because they will ultimately devalue the dollar as inflation skyrockets.

During his press conference after the March FOMC meeting, Jerome Powell said the banking system is “sound and resilient.” Peter said it’s not sound at all.

It’s a house of cards that is starting to collapse.”

Peter explained how the banking system became so unsound.

First, the Federal Reserve kept interest rates at zero for over a decade. During that time, banks loaded up on low-yielding, long-term Treasuries and mortgage-backed securities. With interest rates so low, they had to go out further on the yield curve. And the reason they were able to take so much risk is because the government guarantees bank accounts. That created a moral hazard. Customers didn’t care what the banks did with their money because they knew the government would bail them out.

Thanks to the mistakes the Fed has made since the 2008 crisis, we have a much bigger bubble now. The Fed caused the bubble that led to the financial crisis of 2008, and then they inflated a bigger bubble to try to paper over those mistakes and kick the can down the road so that we wouldn’t have to deal with the full consequences of resolving all those mistakes. And of course, we just compounded the problem with bigger mistakes and now the US economy is poised on the biggest economic disaster in its history.”

…click on the above link to read the rest…

Fed Fears Complete Economic Collapse – Peter Schiff

February 27, 2023

Fed Fears Complete Economic Collapse – Peter Schiff

Money manager and economist Peter Schiff said in October the Federal Reserve “could NOT win the fight on inflation by raising interest rates.” As inflation just turned up anew, it looks like he was right—again. Schiff explains, “Based on the recent data we got . . . the inflation curve has bent back up. The months of declining inflation are in the rearview mirror. Now, we are going to see accelerating inflation . . . and I think before the year is over, we are going to take out that 9% inflation high last year in year over year CPI (Consumer price Index) . . . and what that is going to show is what the Fed has done thus far in its inflation fight is completely ineffective. If the Fed is serious about fighting inflation, and I do not believe it is, it’s going to have to fight a lot harder than it has. Interest rates need to go up much higher than anybody thinks, but that alone is not going to do the trick. We also have to see a big contraction in consumer credit and lending standards rising so consumers can’t keep spending. . . . Consumers are running up credit card debt. That is inflationary. That is an expansion of the supply of credit.”

It gets worse when the Fed has to save the economy again. Schiff predicts, “I think the Fed is going to have to throw in the towel on the inflation fight because it will be fighting something it fears more, which is a complete economic collapse. . . .The federal government may be legitimately forced to cut Medicare and Social Security instead of illegitimately cutting it through inflation. . . .We have this collapsing standard of living, but think about it as a tax. This is what Americans are paying…

…click on the above link to read the rest…

Peter Schiff: You Think Inflation Is Bad Now? Wait Until Next Year!

December 6, 2022

Peter Schiff: You Think Inflation Is Bad Now? Wait Until Next Year!

Peter Schiff recently appeared on Real America with Dan Ball to talk about the economy, energy prices, and inflation. Peter said if you think inflation was bad this year, wait until next year with a much weaker dollar.

Dan set the interview up with a list of tech firms set to lay off employees. He asked how people can say the economy is just fine when you have tens of thousands getting laid off, nobody has any savings, and when the housing market is tanking.

Peter said they’re going to keep saying that, but it simply isn’t true. He pointed out that the entirety of the Q3 GDP increase was from a decrease in the trade deficit.

It’s not like it went away. It just got slightly less enormous than it had been. And that was for two reasons. The strong dollar enabled us to buy imports cheaper. But also, all that oil that was released from the Strategic Petroleum Reserve, we got to export that, so that increased our exports and reduced our deficit. And so that helped us out.”

But those impacts are already starting to reverse. The dollar is tanking.

And all of the economic data that’s come out so far on the fourth quarter suggests that GDP in the fourth quarter is going to be negative again.”

That would mean a drop in GDP in three of the four quarters in 2022. And Peter said the Q4 drop could be the biggest yet.

As far as the petroleum reserves, Peter said we’re going to run out sometime next year.

And I think in California, by the time Biden finishes his first term, and hopefully his only term, I bet you guys in California will be paying $10 a gallon for gas.”

…click on the above link to read the rest…

The Chris Hedges Report Podcast: Richard Wolff

December 1, 2022

The Chris Hedges Report Podcast: Richard Wolff

The Chris Hedges Report Podcast speaks with the economist Richard Wolff about inflation, growing income inequality and the looming disasters built into the U.S. economic system

Why Economic Models Neglect Energy, and Why That’s a Problem

November 30, 2022

Poland’s central bank predicts double-digit inflation until 2024

November 22, 2022

Poland’s central bank predicts double-digit inflation until 2024

(Natural News) The National Bank of Poland (NBP) has predicted that the Central European nation will be saddled with high inflation for the next two years.

According to the NBP, yearly inflation will hit 14.5 percent in 2022 and drop to 13.1 percent in 2023. Single-digit rates will only begin by 2024, when the country’s inflation is projected to decrease to 5.9 percent. The central bank’s inflation target of 2.5 percent is only expected to be accomplished in 2025.

Figures from Statistics Poland (GUS) showed that inflation in the country hit 17.2 percent in September, and increased to 17.9 percent in October.

The NBP also forecast a 0.7 percent growth in Poland’s gross domestic product (GDP) for 2022. Meanwhile, the GUS predicts a 1.4 percent GDP growth in 2023 and a flat two percent GDP growth in 2024.

Amid all these projections, economic activity in Poland is about to weaken because of the heightened uncertainty, a tightening of financing settings and the economy’s adjustment to higher commodity costs, according to the European Commission’s latest economic forecast.

“The Polish economy continued its upward trajectory in the first half of 2022, although a marked drop in inventories and investment led to a contraction in real GDP in the second quarter. Data on the real economy suggest that growth was at full steam in the third quarter, with industrial output and retail sales expanding at a solid pace. As a result, despite a deterioration in confidence indicators, the second half of the year is expected to see a relatively good performance, leaving annual real GDP growth in 2022 at a projected 4.0 percent,” the European Commission (EC) report said.

Increase in inflation due to rise in food and energy prices

As stated by the NBP’s November report on inflation, the present increase can be largely attributed to the rise in food and energy prices brought by the war in Ukraine and the enormous increase in money printing by global central banks during the Wuhan coronavirus (COVID-19) pandemic…

…click on the above link to read the rest…

A quarter of America could experience LONG BLACKOUTS this winter due to energy supply problems

November 22, 2022

A quarter of America could experience LONG BLACKOUTS this winter due to energy supply problems

(Natural News) Large parts of North America could face long blackouts and other energy emergencies this winter as supplies of natural gas and coal begin to tighten.

According to the latest seasonal assessment of the North American Electric Reliability Council (NERC), a large portion of the North American [bulk-power system] is “at risk of insufficient electricity supplies during peak winter conditions.”

The regional grids with the largest risk of experiencing supply shortfalls this winter are in Texas, New England, the Carolinas and the central system stretching from the Great Lakes region down to Louisiana.

The NERC’s report noted that supply shortfalls, higher peak-demand projections, weaknesses in natural gas infrastructure and inadequate weatherization upgrades for generators are contributing to the heightened risk of power outages.

The risk would be further worsened by severe weather putting stress on these already weakened grids by causing demand for electricity to soar while supplies of energy coming from natural gas, coal and backup fuels like oil remain low. (Related: In the middle of a global energy crisis, Joe Biden promises to SHUT DOWN COAL PLANTS all across America.)

“The trend is we see more areas at risk, we see more retirements of critical generation, fuel challenges and we are doing everything we can,” said NERC Director of Reliability Assessment John Moura. “These challenges don’t kind of appear out of nowhere.”

Electricity bills to go up in winter

NERC’s warning for the coming winter notes that around a quarter of American households will also see their already high utility bills soar even higher this winter as demand for power shoots up.

…click on the above link to read the rest…

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