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Gonzalo Lira And The Boiling Frog: Effects Of QE2 On The Bottom 80% Of The U.S. Population
Submitted by Gonzalo Lira
The Boiling Frog: Effects of QE2 On The Bottom 80% of the U.S. Population
An old metaphor: If you take a frog and drop it into a roiling pot of boiling water, it’ll jump right out, unscathed. But if you put that same frog in a pot of cold water, and then slowly raise the heat, that frog won’t move. It’ll stay in that pot of water, calm as can be, right up until it is boiled to death.
I’ve been arguing that the unpayable Federal government debt, coupled with irresponsible Federal Reserve policies, will inevitably lead to a hyperinflationary event and currency collapse. In order to prepare for a web seminar on hyperinflation in America, I’ve been looking at the issue of how to safeguard assets before a currency collapse, and how to identify opportunities in the midst of a hyperinflationary crisis.
But along the way—inevitably—it’s led me to consider the issue of the effects of hyperinflation on the American people. Not even hyperinflation—just regular old rising consumer prices: How will they affect the average household.
It’s disturbing.
Even if you don’t buy my hyperinflation call in the least—and a lot of very smart people don’t—the recently announced Quantitative Easing 2 policy of the Federal Reserve has had and will have a profound effect on the dollar.
And a profound effect on the American people—especially the bottom 80%.
Bernanke’s stated purpose in QE2 is to spark consumer spending, and thereby reignite the economy. To do this, Bernanke and the Fed will pump $600 billion into the Treasury bond market, in monthly $75 billion increments—at minimum. According to the Fed’s statement, if more “liquidity” is needed, then by golly, more liquidity will be pumped into the economy.
QE2 is really the official start of a race-to-the-bottom debasement of the U.S. dollar.
No one doubts this—and no one would dispute that such a currency debasement will bring about upward pressures on consumer prices across the board. Indeed, this is the explicit purpose of QE2: The Fed is trying to induce inflation, as it believes that inflation will bring about a reignition of the stagnant American economy.
A lot of commentators have been discussing what QE2 will mean for equities and the various bond markets. People are talking about the Treauries’ yield curve—but not much about what QE2 will mean for the rest of the American population: The middle class, the working poor, the poor, and even the upper-middle class.
So let’s give it a go:
Taking Bureau of Labor Statistics data for 2009, which can be found here, we can put together this simple chart of household incomes and expenditures for last year, divided by quintiles:
Data, from Bureau of Labor Statistics, can be found here.
Data in unadjusted U.S. dollars.
(A note on the data: Housing expenditures include mortgage payments or rents, utilities, and heating, including heating oil. Transportation data includes use of public transportation. Food includes “Food Away From Home”—a remarkably high proportion of expenditures, at 41% for the entire population, skewering to almost 50% for the top quintile, and almost 30% for the lowest quintile. The figure “% of Annual Expenditures” represents how much food, housing, clothing and transportation—the basic necessities—represents of the total expenditures of each quintile. The figure “% of Income” shows the basic necessities as percentages of after-tax income for each quintile.)
Now, it’s no trick to see that rising prices of basic necessities—as a result of plain vanilla Fed-induced inflation, and not the hyperinflation I am positing—will affect everyone: But especially the middle class, the working poor and the poor.
It would be nice if we could quantify that effect. But we can’t just input a hypothetical inflation rate, apply it to the data, and come out with a number expressing how much each percentage point of inflation will affect each quintile of the population.
We can’t because, as prices rise, people buy less of a necessity: Higher gas prices means people drive less. Higher food prices means people eat less, or less quality of food. Higher heating oil prices means people heat their homes at a lower temperature—or in some cases not at all.
But although we can’t easily quantify it, we can comfortably make certain claims about the effects of rising consumer prices on the population.
The first claim I would venture to make—and one that I don’t think will be particularly controversial—is this: Any household spending more than two-thirds of their after-tax income on food, housing, clothing and transportation will suffer an immediate, negative impact from the Fed’s efforts at induced inflation.
That covers pretty much the bottom three quintiles of American households. So 60% of the U.S. population will suffer an immediate effect of rising prices—the stated policy goal of Ben Bernanke’s QE2.
QE2 is having the immediate intended effect of pushing up asset prices, bouying up the financial sector—but it’s also pushing up commodity prices, which have been rising ever since QE2 was first toyed with as a policy option back in the spring.
Lag times may vary, but rising commodity prices inevitably translate into rising consumer prices for basic necessities on Main Street. QE2 is directly responsible for the rise in the last few weeks of all commodities. This will inevitably lead to higher consumer prices.
This inevitable effect of rising prices for the basic necessities gives lie to the stated goal that the Fed has of helping the American people by way of QE2. The policy is not helping—on the contrary: A minimum of 60% of the population will feel immediate, unavoidable pain directly as a result of QE2. They will spend more for basic necessities than they spent previously for them.
Or else, if they don’t spend more, they will consume less. This ought to be obvious: People who cannot afford to spend more on a necessity will instead consume less of it, be it food, gas, or heating oil.
So here’s Fed Lie Number 2: QE2 will not get the economy spending again—on the contrary, rising consumer prices brought about because of QE2’s pushing up commodity prices will insure that the population cuts back on consumption, even if in nominal terms they are spending the same, or even more.
The key assumption that I am making, of course, and which has to be made in any analysis of the effects of rising consumer prices across socio-economic groups, is that wages and salaries will either not rise, or will rise with a lag time of no less than six months.
This is an easy assumption for me to make: Even in the best of economic times, wages and salaries do not rise in lockstep with an expanding economy. And we are currently not in an expanding economy.
It is reasonable to assume that, during a period of steadily rising prices coupled with stagnant economic growth, wages and salaries will not rise for at least six months, if not longer. And of course, if unemployment were to rise above the current U-6 rate of 17%, then obviously aggregate wages and salaries would contract further—which would further aggravate the effects of the rising prices of basic necessities on the bottom 60% of the population for sure. If unemployment continues to rise, then that bottom 60% would begin to grow into the bottom 70% or 80%—maybe even hit the top quintile as well.
Wages are key. If inflation hit consumer prices as well as wages in equal measure, the net effect would be zero—which is more or less what you see in ordinary expansion-driven inflation, the kind prevalent in healthy economies: There are price pressures on commodities, which eventually translate into higher prices at the supermarket—but there are also price pressures on wages, as the economy in toto is expanding, and therefore bidding up scarce labor as it grows. In an expanding economy, prices might be rising—but wages are rising too, so no complaints.
However, in a stagnating or contracting environment—such as what we are experiencing now in the American economy—there are obviously no pressures on wages: If anything, there are downward pressures on wages and salaries.
So if commodity prices rise, people—especially the poor, the working poor, and the middle-class, but maybe even the upper-middle class—are really going to take a hit, as more of their after-tax income goes to paying for basic necessities.
Some people might think that the debasing of the dollar via QE2 will mean that the real cost of housing will fall, as rents and fixed mortgages will be undermined by inflation. They might think this is a good thing.
But this only makes sense if your earnings are absolute: If you’re boss is paying you in gold coins, or silver lingots. But if you live on a dollar income, especially a fixed income—as so many seniors do, let alone the average wage earner—even if your housing costs remain nominally static, rising food, transportation and clothing prices will still take bigger and bigger bites out of that dollar-based income. Please look at the last line of the above table—“Food, Clothing, Transportation as % of Income”—which I calculated precisely for this objection.
The only ones who won’t feel the pain of rising prices of basic necessities that bad is the top quintile—maybe. If they’re income comes predominantly from equities, maybe. If not, then they’re going to take the hit as well.
Way to go, Benny! Your QE2 is going to hit all five quintiles! Be proud!
As I have discussed in detail elsewhere, and which ought to be clear from my discussion in this post, Ben Bernanke and the fucking idiots at the Fed committed the post hoc ergo propter hoc fallacy with regards inflation: They seem to genuinely think that inflation begets growth, rather than understanding that growth begets inflation. (I don’t buy conspiracy theories that claim Benny and the Fed Fucktards are deliberately creating inflation to save the elite’s bacon—I think Benny and his Lollipop Gang are simply and genuinely stupid.) So he and his minions have started up QE2, hell bent on creating inflation in the American economy.
He seems to be succeeding, too.
According to Producer Price Index numbers, grains have risen 33% year over year, oil 20% year over year (both figures September-to-September, link is here). Ever since the idea of QE2 was floated back in May/June, commodities of all kinds have been steadily rising. And as of last week, when Quantitative Easing 2 was officially unleashed, commodity prices have surged even more—and will continue to rise for the foreseeable future. Not just precious metals but grains, sugar, coffee, not to mention oil—they are all rising.
Anecdotally, there is increasing evidence that food prices at the supermarkets have been rising for some time. I do not live in the United States, but I’m in close contact with literally dozens of people, both friends and business associates. From casual conversations and long discussions, I’ve been hearing that supermarket prices are rising across the board, and have been rising since at least mid-spring—yet the price rises do not seem to be reflected in the CPI.
That’s because of how the CPI—the Consumer Price Index, the traditional (and official) metric of U.S. inflation—is calculated. It uses data from past years—currently the 2007 and 2008 consumer survey—to create a basket of products, goods and services, which it uses to calculate monthly price changes.
However, the CPI doesn’t slice the baloney fine: If a product-x that was sold in a 20 ounce package for $3.99 back in 2007 is now being sold in an 18 oz. package at the same price, CPI does not compute that there was an 11.1% inflation in the price of product-x. Rather, according to the CPI, there was zero price inflation in product-x—because it sold for the same price, regardless of whether the package was 10% smaller.
But this is exactly what seems to be happening in food, as well as in other categories of what one would consider basic necessities: Foodstuffs are being sold in smaller units, cotton clothing is now being sold for the same price, only made of synthetic materials, and so on. A recent blog post on Zero Hedge highlighted the specific case of coffee at WalMart, previously sold in a package of 39 oz. for $9.88, now being sold for $10.48—in a 33.9 oz package. This represents a 22% jump in price. Cases such as this are common, and cropping up like mushrooms on the web—enough to confirm that stealth inflation is happening, without needing to stop by John Williams’ Shadow Government Statistics.
This brings the obvious question: If food, transportation, clothing and housing prices rise, but the CPI doesn’t measure it—was there inflation?
This isn’t a Zen koan or Berkeley’s tree falling in the woods—this is real. So my answer is obvious: Yes.
But according to the Fed and to most of the economic commentariat (except for a few notable and distinguished exceptions), since the CPI is not rising, there is no inflation. At least not in theory. In practice? That’s something else.
So! What does this all mean?
It means that Americans are the frog in the metaphor. Between 60% and 80% of them—to be precise—are slowly being boiled alive. The bottom 60% to 80%, to be even more precise.
Because of QE2 in all its iterations—its rumor back in the spring, its announcement last week, its forthcoming implementation—prices for food, housing, clothing and transportation are rising, and will continue to rise as Bernanke’s policy works its magic on commodity prices, and eventually reaches the supermarkets.
The financial sectors might be pleased that their assets are being bouyed by this flood of money coming from the Eccles Building—but the rest of the population will be drowning.
It won’t be just the bottom two-thirds of the population that will feel the pain of QE2: The upper-middle class and even the top quintile will inevitably see more and more of their income going to pay for basic necessities, while their wages and salaries remain stagnant—assuming, of course, that they’re lucky enough to still have a job.
All the while, since the Consumer Price Index will be lagging or flat, the mainstream economists and the Fed drones will keep up a steady chant of, “There is no inflation! There is no inflation!”—even as a majority of the population feels the squeeze of rising prices for the basic necessities. It’ll be a lot like a bunch of cooks, standing around the boiling pot, saying to the poor frog, “It’s only cold water! Don’t worry! It’s still cold! Trust us!”
So like the frog in the metaphor, the bottom 60% of American households will be slowly boiled alive by rising prices—
—brought by QE2.
As I said, you don’t have to buy my hyperinflation call and currency collapse scenario to realize this effect of QE2. This effect of Bernanke’s policy is immediate, undeniable, and inevitable: QE2 will hurt a vast majority of the American population, while helping only a very, very few.
To this, I say: Yeay, Benny—way to help the American people. Way to fucking go.
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The poor are damned if he does and damned if he doesn't and their ranks are growing. To the barricades, bitchez!
Arguably, and it obviously varies with the many numbers of possible scenarios, the poor and middle class benefit the most from a deflationary environment and sound money policies. The "money-changers" and inflation cause the most friction as a proportion of their incomes, and they have the least amount of power to protect themselves from inflation and dollar debasement. With deflation, goods get cheaper, and they can store the value of their excess labor over time.
Arguably, we could also have a grand debt jubilee and re-introduce a new Treasury-issued security (like a Greenback or Kennedy dollar) - issued without debt and interest payments - which would benefit the middle class greatly (as typical net debtors).
That word "jubilee" again... It does look like either default or hyperinflation (or a combo of both?) is coming to an America we used to know real soon.
I agree 100% with Gonzalo Lira that inflation will hurt the bottom 80% the most, no doubt.
If "they" default, creditors and bondholders take the hit.
Jubilee (default) and/or (hyper)inflation. Nasty.
Getting a little warm in here, no?
Then along comes the "lone nut" to kill anyone or group trying to keep the "money changers" from their tribute..
are you referring to JFK executive order 11110 which authorized a competing currency known as a "united states note" (backed by silver) as opposed to the "federal reserve note" (backed by nothing)?
http://3.bp.blogspot.com/_PB5-El7se4s/SS21VRgCWYI/AAAAAAAAMIg/LvauZPiqQe...
And the "lone nut" that killed Lincoln and his green back.. And the attempted murders of Andrew Jackson.. Yes... Always a lone nut comes along to save the banksters and money changers.. Those lucky bastards.. Good thing for them a portion of our population is crazy and will conveniently kill people that could impede their parasitic ambitions..
Exactly. It was a good article by Gonzalo, but he gets only 4 stars for this conclusion:
"I don’t buy conspiracy theories that claim Benny and the Fed Fucktards are deliberately creating inflation to save the elite’s bacon"
Well, Gonzalo, I don't buy the "inept/stupid" excuse any more! They know what they are doing. That doesn't mean they are all-powerful or smarter than us, it just means we have to stop these people, with more urgency than one would have if they were merely inept!
http://psychonews.site90.net
Yes, you are correct. They know what they are doing.. The book has been written, and it's now being read to us..
after they destroy the dollar, the imf will come to the rescue with the "bancor". they openly admit they want a world central bank with the imf global bankers in control of the new currency.
The 2nd to last chapter of The Creature From Jekyll Island is literally word for word what is happening here. I don't see how this can end nicely, or even moderately. I hope people reject the bancor/world currency, but is that is too much to hope for?
They do indeed know what they are doing [at a macro level] ... and they know the timescale they are working to across many fronts, where the financial collapse is only one front.
However, like all central planners, they can't accurately control the pace on each [micro level] front -- which is why I believe they are furiously adding more QE/POMO, for as long as necessary, to slow the financial collapse down in order to meet their overall timeline to global government.
Yeah, thats why they need to kick the can down the road in the financial sense, so they can get things ready on other fronts. What do you think is lagging? I'd say public acceptance.
People's willingness to go along with a massive change implemented by the same people in charge right now is NIL. So even though people are slow to wake up, they luckily still have some instincts.
http://psychonews.site90.net
I see no evidence of this. The public has no idea what is going on and what the outcome for them will be.
Agreed.
Isn't part of the plan to have the masses so desperate for a solution that they accept ANYTHING the 'leaders' put forth?
that is still to come. . . it will no doubt be event-full.
The short answer: Russia - http://www.youtube.com/watch?v=QCxjqPgHgpA
I find it interesting too that someone with such fire and brimstone in their writing and clear in-telligence too, would balk at calling a spade a spade.
Gonzalo, I'm sure you've heard about/read Eustace Mullins?
What is to refute?
The continuous inability or better yet, lack of desire to admit that the elephant in the room is stepping on your toes and crushing them, is a bad sign. And not factoring said elephant into the equation makes said equation meaningless. Kind of like modern physics. Meaningless.
Pretty turn of phrase not-withstanding.
ORI
http://aadivaahan.wordpress.com
Unfortunately, it still seems to be considered too 'fringe' to talk about the Federal Reserve as a private banking cabal that is intentionally siphoning the wealth of the country. Financial people (I am not aware of where GL fits in) - can talk about bubbles and solutions, etc. all they want, but can't seem to bring themselves to talk about the real problem: fractional reserve banking by private corporations that create money as debt at interest.
Yes TJ.
Unfortunately for most folks, reality lives in the fringes and their date with the fringe reality is approaching fast.
However it does get exposed, and get exposed it will, the ensuign cognitive dissonance will be deafening, madness inducing.
Perhaps that has been the plan all along, yes? ET et. al.!
ORI
http://aadivaahan.wordpress.com
I have to agree with you 100%.
For sometime I have thought that the Fed, and God know how many behind the curtain, are deliberately trying to destroy the wealth of the Nation (everyone below elite status, after all they have no nation they have the world to hid in, it is their oyster).
It might have been one thing decades ago for a leader to make mistakes, but not now. When the world, a world with players as powerful or maybe more so that the USA, tell us loud in your face, you are wrecking the world, this government best pay attention.
Mr. Obama, I voted for you, I will not make that mistake again. If the leaders of the G20 and your nation can not convince you to FIRE this destroyer of the people, you will pay the price for poor judgement, and so will all Democrats and any politian who thinks like you and Mr Bernake.
I am closing down my business because I can not pass on the increases in commodities of the last few months...copper, tin, brass, solder up 30%. So there are nine more jobs LOST Mr. President because your appointee has destroyed the dollar and you go along with it.
I agree. Anyone buying "incompetence theory" simply isn't paying attention. Mervyn King stated he wants to see the G-20 and IMF merge. The BIS being the world's central bank has been floated by other policy makers. Medved's world currency trial balloon during the same time period a year ago. The pope calling for world government in 2009. Gordon Brown saying international financial regulations were leading to a "New World Order" and on and on and on.
Read Ellen Brown's Tower of Basel, it's all right there. We aren't going to "accidently" end up with a new global reserve currency controlled by a new global central bank.
Supposed "wingnuts" have been CORRECTLY warning about this for decades. Only the dimmest of Aspergers suffering Ivory Tower types can buy the "incopetence theory". It's ludicrous and flies in the face of common sense
You have to be paying zero attention to what top power brokers are saying, have massive intellectual laziness or frankly be a coward to not see what's happening.
I like Lira's stuff except for his conclusion is non-sensical. It should be patently obvious to everyone that all of this was foreseeable after the LTM meltdown in the 1990's. It wasn't stopped though was it? No, it was expanded on an epic scale with even more instability baked into the international financial cake. Indeed it was and that's how Goldman et al profited on both sides with CDS. This is a controlled demolition of economies that are a threat to the NWO. Heck they admit to Jekyll Island now days. What's it going to take for people to wake up and smell the New World Order?
That was the lone gunman of the apocalypse in the Bible, right?
No, I believe it was the Lone Biker of the Apocalypse in Raising Arizona.
I would strongly argue that the poor and the middle class suffer most from a deflationary environment. Even though nominal prices may fall, real prices on essential goods and services rise further (in general) and especially in todays economic environment given that most people have very little savings. Also, in a deflationary environment, real interest rates rise regardless of nominal rates.
But of course, any assets that were inflated due to credit (aka, fantasy value units) become very cheap, even to the point of becoming worthless liabilities. Thats why the predator banks and smart money have always loved deflation and I would also argue that this is the asset stripping end game and that this is the very historical purpose of credit fueled debt itself. I am not a paper or a gold bug (so to speak, I'm an energy bug haha), but I'm long cash dollars (until after bottom anyway) despite what everyone may think. To the many millions of Joe negative equity 6 packs in the developed world, cash is money and will be for some time. There is only one way to fight the banksters and its not with pm's so until we force a change to the rules of the game, I'm holding cash as I don't buy the "Banksters are morons" argument for one minute. This is a massive headfake, feigning stupidy is the oldest play in the book, even 5 year olds know that ;-)
Oh, and whilst I'm on the soapbox I will add that it is also my opinion that a deflationary depression will do more harm to the developing world (cough, CHINA, cough cough) than in the developed world. Not even the most ruthless dictatorship can control 1.3 billion jobless and hungry citizens. China will eventually be broken up, its geograpic size and cultural/ethnic diversity has always (nb ALWAYS) been its greatest enemy.
"Even though nominal prices may fall, real prices on essential goods and services rise further" - huh? The Model T Ford cost $850 in 1908; however by 1925 the price had fallen to $290. http://www.measuringworth.com/uscompare/
Please explain your thesis of rising real prices in a context of falling nominal prices. Were you including some sort of wage conversion in there?
"Also, in a deflationary environment, real interest rates rise regardless of nominal rates." - Why? I'm assuming you are discussing the difference between the rate of deflation and the actual interest rate. Real interest rates are a function of risk - inflation risk, credit risk, etc. If inflation risk is minimized, real interest rates would decline. In addition, ANY positive interest rate environment suffers from the issue of money creation - you need an expanding money supply in order to pay BOTH the interest and principal. That's why BB is printing money - in order to supply more money to a collapsing credit system that is running out of enough money to pay both principal and interest. In our current system all money is created as debt. If a deflationary environment was supported, say 2% a year, this means that prices would decline and it might be that interest was not charged on loans at all (still a positive real interest rate). But therefore the money supply would not have to grow over time, except for some population and resource growth. Once you charge positive interest, money supply growth is needed, which is inflationary, all other things being equal. Which increases inflation risk. It's a self-perpetuating cycle.
"But of course, any assets that were inflated due to credit (aka, fantasy value units) become very cheap, even to the point of becoming worthless liabilities." - Why does this hurt the middle/lower classes? I'm discussing future generations, not just the current predicament. Credit growth increases prices, which means people need to take on more debt in order to afford the same standard of living. Without credit, prices would fall. Which means assets become more affordable. And since people can save money without much risk (because prices are declining), perhaps you could actually save up to buy a house. For cash. This avoids all of the interest charges, loan fees, mortgage insurance, etc., etc. That's the way they used to do it. [Yes, that would require a system reset.] Banks love deflation because they already have loans/collateral and can cycle from inflation to deflation to serve their purposes. If there weren't loans, they wouldn't benefit from deflation. Consumers would. The "money changers" create our money for free, charge us interest to use it, charge fees to hold it, etc., etc. Imagine a world where a consumer could avoid the 6-10% drag on their incomes by being debt slaves.
"There is only one way to fight the banksters and its not with pm's so until we force a change to the rules of the game, I'm holding cash" - how is holding cash doing anything but playing into their game? What's your way to fight the bankers? I don't think just owning PM's defeats them - I think using PM's to purchase services and create an alternative world would defeat them.
I agree that the bankers aren't stupid. They been allowed to suck parasitically off the economy for decades. They create an inflationary environment where all money is debt, and force consumers to borrow to avoid increasing prices - and thereby profit from their own design of the system. There has been no bigger swindle this century.
If that were true, we would have deflation rather than a Fed Chairman panicked at the prospect of even a whiff of it.
Truth be told, the predators make more money off the peons borrowing and revolving ... often multiples of the amount borrowed .... The Politicos are afraid of deflation because it costs them votes as the peons find themselves hemmorhaging what remains of their little wealth to cover their debts.
So it is in the better interest of the Criminal Elite to ensure the asset inflation debt loading bandwagon continues to roll.
I know this is totally missing the point of the article but it just erks me when this analogy is used. frogs don't stay in the pot during a slow boil. They jump out when it gets too hot. It's a total myth. Can we find a new analogy that actually holds true? Just sayin'.
The boiling frog story is a widespread anecdote describing a frog slowly being boiled alive. The premise is that if a frog is placed in boiling water, it will jump out, but if it is placed in cold water that is slowly heated, it will not perceive the danger and will be cooked to death. The story is often used as a metaphor for the inability of people to react to significant changes that occur gradually.[1] According to contemporary biologists the premise of the story is not literally true; an actual frog submerged and gradually heated will jump out.[2][3] However, a variety of 19th century research experiments suggested that the underlying premise is true, provided the heating is gradual enough.[4]
So "contemporary" biologist say this is a wives tale... hhmmm I'm just saying.
Lira is a sharp bold cookie. He ignores the powerful feedback loop mechanism on the hyper-inflation claim to hit by next year. The uniformly rising cost structure will result in added profit margin pressure for businesses in the USEconomy that bring about even greater profit margin erosion. That will force a steady and relentless job cut trend in direct response. Lira does great work. A bit cocky, he ignores a basic fact of economic life, RESPONSE MECHANISMS. In my Hat Trick Letter work, I always factor in the vicious feedback loop effect. This one will be powerful and will cause tremendous job cuts, followed by public outcry. Worse, it will result in known wrong project bids, which will later cause devastating losses and company shutdowns like in the construction business. Got half a million more comments on this important topic. I suspect Lira will be half right, by that I mean the price inflation needle will move halfway to where he expects it in his hyper-inflation scenario. The Jackass and Lira agree on the direction, just not the speed of movement, since the feedback will be horrible. Just imagine all the company liquidation sales and the competition, pitting dead businesses in liquidation against live businesses threatened!!
Anyone else stunned at how the price of oil has been suppressed at this range for seemingly forever? Preventing oil prices from breaching $100.00 must be priority #2 after supporting equities.
J McC,
You are right.
I saw an interview with a couple who lived in the suburban hindterlands of a large desert southwest metro area. Hard workers, long hours with even longer commutes. They bought about as much house as they could afford. They ran into trouble when gas surged above $4 a gal. Had it stayed there for long, they would have lost their house.
If their is another surge in gas prices with consumers on the ropes such as they are, it will be the tipping point for a lot of familes.
We ain't seen nothing yet in terms of bankruptcies and foreclosures if this happens.
With all other commodities surging even metals I am just astounded that it barely budges. $110.00 oil forces the Fed to cease and desist in my opinion. Also gas prices are a daily reminder or billboard perhaps that the zombies can see fluctuating while we are in a depression and with unemployment so low.
Rule #1 when the banks get the POMO is to not goose oil but rather suppress.
I suppose there is one important question:
Will the price of gold and silver rise faster than (hyper)inflation?
...
Sure, gold and silver will hold their value. But, will they beat inflation? If so, then the actions are obvious if you think QE2 (3 ,4, etc.) will lead to serious inflation. Buy physical!
If I recall accurately (and if the ZH poster(s) were correct), during the Weimar hyperinflation gold went WAY UP, such that 1 oz. bought a lot of assets there in Berlin.
Anyone else have comments on this? Thanks...
I did an exhaustive search some months ago on that gold value and buying real assets in Germany. Could only find anecdotal evidence and 3rd party stories. No facts nor numbers to support the old story. It's a nice story but as yet not proven by anything I can find.
Really? I came up with this in five seconds on Google: http://www.itulip.com/forums/showthread.php/7110-Weimar-charts
The data comes from a 1937 economics text.
Yep. Seen that. What I was talking about is a verifiable story of somebody "buying up 5 city blocks of Berlin with a speck o' gold dust". You know, that story of actually buying something with gold.
For that, you'll probably have to speak German and go see if they have German newspapers from that era available in your library.
Might be available on loan, or even over the internet.
hyperinflation is a total loss of faith, so no one would sell REAL assets for that crap and no one would exchange gold for worthless currency and so no one would even put a value of land, etc in worthless currency so it is a moot point.
Only the daily basics were included in the spiral pricing since that small part of commerce HAD to continue somehow..
here is a good take on it, read the bottom parts if impatient..
http://www.pbs.org/wgbh/commandingheights/shared/minitext/ess_germanhyperinflation.html
When Money Dies - Adam Ferguson
The Dying of Money - Jens O'Parsons
The Lords of Finance
They are all available on pdf on the web if you want to download & read.
That question is only important if the inflationary period is substantially long... Our inflationary period is going to lead to either: a deflationary collapse (and resulting default) or a hyperinflationary event in which we lose faith in the dollar. In other words, I suspect the period in which PMs will be outpaced by inflation will inherently be small given inflation of this magnitude necessarily causes a decrease in consumption and ability to consume... which causes a viscous feedback loop. In short, the inflationary period cannot last with too much magnitude for too long and we'll need something to use after the dollar collapses and your guess is as good as mine for what it might be, but I think PMs are as good of bet as any.
That said, the supremacy of PMs is also fairly short lived because we'll get back on the money/compounding debt treadmill or, if not, that saddle will be placed on our backs.
Our inflationary period is going to lead to either: a deflationary collapse (and resulting default) or a hyperinflationary event in which we lose faith in the dollar.
No, I don't think there are only two outcomes as you suggest. The United Auto Workers and the American Federation of Teachers simply won't allow it. They have the most to loose in both scenarios and will most likely keep everything in balance, as challenging as it seems. Glenn Beck has done some work on this. Just watch his shows nightly at 8pm on Faux.
Now, there are some unions to watch out for. The American Federation of Musicians of the United States and Canada need to be watched because they are largely homosexual - I wouldn't trust them with a sack of Zimbabwean dollars. They'll crash the dollar just for the drama of it all.
Just watch Glenn Beck - everything will make better sense. Does anyone have any commercial free links to his shows?
Beck/Palin/Red Herrings 2012
Red Neck, I think I love you. I'm not kidding. Will you marry me?
lol.
In the spirit of ZeroHedge...
Depends on your dowry, and if you keep it regularly hedged.
By the way, that's is a triple entendre.
I'm amazing.
kudos on the hijack...
i have never really paid much attention to you, cause i don't get you.
just a double, i think† veloblade
You understand that Barky Obama is one of the best union busters of all time, don't you? Aside from WGT breaking that one down I can add that funding charter schools is idiotic, and that is a way liberal thing to do. I say this because they do not use unions. So how is it that Fem Dem libtards are breaking unions? Well they are fem dem libtards! I can't stand that you fuel the left right paradigm, as I could give a rats ass as to what Beck says. You are everything wrong with America. You can only see one side of the coin; there are two, if there is a coin at all.
I only have three problems with your post: the beginning, the middle and the end.
Otherwise, it's spot on.
To say that Obama is a union buster because he supports charter schools is knee-buckling stupid. And ObamaCare is a form of eugenics, right?
Why does the conservative Right in America have such a penchant for lunacy? Eugenics. Hitler. Mao. False flags. Gays cause hurricanes. Etc. Etc. Etc.
Perhaps if conservatives in America would stop the lunacy, paranoia and fear tactics, the parking lots at their rallies would be filled with something other than Buicks with Jesus stickers on their bumpers. Or trucks with gun racks.
God/Guns/Guts and Trucks 2012
You have a penchant for strawman arguements, but you know that. How do charter schools bust the teacher's union? Because they do not use the teacher's union. Charter schools bust the union because they do not use them.
I know the charter school argument.
I think it's utterly moronic to call Obama one of the best union busters of all time, as you did. Simply stupid.
When you connect the wrong dots, all you have is a knot.
I started out smug,
then moved on to derision.
Suddenly, I found myself overwhelmed with disbelief and hopelessness-
then a tiny sparkle of light calmed my fears
as I moved on to giggles, leading to the victorious LOL.
Thanks you sir.
Agreed... Sold my metal Monday... Always a momentum play for me but its getting to late into the game... Despite my best instincts, QE2 is not going to fool anyone, articles like this are proof of that and although hyperinflation is a real possibility, its a gamble I cannot afford... Until REAL END CONSUMER INCOME is rising at a ratio (at minimum) equal to that of nominal price increases of non-discretionary goods/services, delfationary forces will continue to win... The general public will never get a chance to buy into pm's, and besides, even if they did, how many people can actually afford to, be honest now??? Gold and silver is in a bubble like just about everything else and I say that not as an insult to anyone, its just plain bubble economics 101 ... A single $1400 investment in heirloom seeds, cigarettes, vodka and .22/7.62 cartridges is a much better value hyperinflation hedge for most folks IMHO, not to forget food and water of course and lets face it... If anyone is truly purchasing pm's as a hyperinflation hedge, they are either extremely wealthy or have their priorities badly mixed up because a dollar hyperinflation event is truly an apocalyptic scenario, and globally!!! ;-)...
PMs are a very tiny market. If the right amount of money was spent, they would not be tiny anymore.
I would agree that the single best $1400 investment is in the basics you describe. Spot on.
Beyond the basics, I would argue that PM's should be used as a portion of a hyper-inflation hedge (I believe in supply-withdrawal hyper-inflation). Not all dollar hyper-inflations have to apocalyptic. Better to be prepared for a wide range of scenarios, and I'd be surprised if there were true hyper-inflationista's that didn't have stocks of the basics in addition to PM's.
Let me explain my avitar.
It is a new road going up a mountain, and it goes to no where. The sign is a 10 or 20 thousand dollar masterpiece that indicates a right turn off ....the cliff to no where. I am standing stripped to my shorts having to pay for this government project to nowhere. I lost faith in my government, all i had left was blind faith and that made me a looser.
Gold and Silver are safe havens for lost faith. When you have no faith in paper money, any paper money, you convert to gold because history has always shown Gold to be the lasting basis for security. We use the term "wealth" to mean gold, it should mean security and faith to weather any storm man creates. You don't see churches papered in lira in Italy do you?
On that note. Anyone remembers how speculators drove oil prices to $150 the sumer of 2000 right before the presidential election that gave us MaObama (not a comment on the man or his policies)? And then quickly dropped to the 80s after the election? I always wondered who has enough cash and influence to pull that off. And if they can do it to impact an election, what else could they do it for?
2008 election..
Anyway... Add in the fact that the USDX was at 72 when oil was 146..
Couple weeks ago, oil at 85 and USDX at 75 ish.. Hmmm.. So what are they getting for their oil ???
"So what are they getting for their oil ???"
Gold.
Thank you for playing who wants to be a trillionaire!
You are correct Sir, typo, 2008 not 2000.
I figured that the $550 Billion being pulled from the markets on the 17th of September 2008 was done to influence the election. I never did get a good explaination on that, btw. What happened guys? I wasn't visiting ZH back then.
We still have tankers filled with oil sitting everywhere. Gas prices will probably lag this time around Im thinkin.
First, current production and consumption levels are even. There is anywhere between 73 million and 83 million barrels a day produced/consumed. Above ground reserves not counting emergency supplies are around 50 million to 55 million barrels. If Mid East oil went offline, we would lose at about half of production. So then the reserves would be used in less than a day.
Not to worry...
Florida!
Yes Florida, we will be drilling in a matter of months off Florida! The water is so shallow the tanker trucks can drive right up to the new platforms, no boats needed. Every canadate who won in Florida is PRO OIL, the Republicans now control all levels of government in Florida. Florida is broke, needs jobs, needs taxes...walla! Can't fry fish without oil. And, then there is South Dakota...more oil under them then in Iran.
$80.00 oil kills recovery, do not for one second think otherwise.
Right, like the EPA and the DoE would permit that. Shit, they would probably deny all permits and after finally loosing in court they would impose a 6 month moratorium, using faked data, to study the decision.
War has a way of making everything scarce, especially oil. Just saying.
If $4 a gal. was going to cost them their house, then they are fools who borrowed far too much money. $4 gas should cause you to cut back on discretionary spending, not causing you to lose your home.
Part of the problem'd.
John, I think what is limiting the rise in oil is an actually lack of demand in the end points. If no one is buying, the speculators can only bid so high before taking massive losses. We can pretend stocks are overvalued for long periods of time. Commodities have a delivery date.
it's the "price of money" (through ZIRP and the Fed's ability to maintain it) that is stunning and should "give pause." I'm as big an inflationista as there is but "right now the crisis appears to be European." We must ask why THIS is the case since "Eurolanders are the hard money folks that stand opposed to the dollar." More importantly "the Japanese that have zero rates and no inflation have seen their currency soar"? That might be an even BIGGER "weird one"--save for the fact that they don't seem to have the "entitlement" (read military) spending that we have in the USA. More to the point "this article fails to tell the story of THE SQUEEZE." That would be the horrendous combination of COLLAPSED HOUSING VALUES and RISING "OTHER" PRICES. In this sense "we are in a far worse condition than presented here." I've CONSISTENTLY complained about ZH'es "inaccuracies on both the positive AND negative sides." Still...I love ZH. Call it "a quibble."
"THE SQUEEZE." That would be the horrendous combination of COLLAPSED HOUSING VALUES and RISING "OTHER" PRICES"
This may be already clearly understood by readers, it has been written about many times.
As for Europe...the Fed buys their bonds to prop up the ECB. Otherwise the Euro would likely be dead, or soon dead...how do you unwind the EU in this enviroment? No one is kidding the ECB that 90% of Euro countries are bankrupt ( like us), so ECB keeps the Euro from collapsing in exchange for a higher Euro/USD. This may be why Bernake believes he is saving the world.
Germans are " hard money folks" the rest can't wait for the lunch bell.
Question still is, can the Fed POMO faster than debt defaults can deflate?
As it relates to Gonzalo's thesis, it doesn't matter.
All the POMO/QE $ are bidding up all limited-supply dollar-denominated assets. Food, clothing and fuel...the three core items for everyone...are dramatically increasing in price. The wealthy and the upper income will be able to adjust and manage. The poor are going mercilessly suffer. 43,000,000 pissed-off and hungry food stamp recipients are going to get increasingly hard to handle.
I'm guessing the government will increase food stamps and all other subsidies to keep the poor ahead of the game. There is no way Obama will lose this voting bloc. It's those right above that level that have to fend for themselves that will be fucked royally.
What's that? The Republicans are coming? Austerity to the rescue!
Call me crazy but don't see austerity coming. If there is austerity then pretty much ensures no growth the way our "leaders" would do it. And really where would spending be cut? The military? Not likely the blues love it and the reds are in love with murder. SS? Yeah the blue hairs vote which also kills cutting Medicare. There is really nothing to cut that would not be painful that could be done. So I honestly think they will just go and grind it out on the dollar till the hyperinflation storm ignites.
Agreed. There is no way this administration can go the austerity route without admitting they've been competely wrong on economic policy. They've bought into this plan hook line and sinker. Can you imagine if Bernanke comes out tomorrow and says he changed his mind, he's withdrawing QE?
I think it would be pretty easy for the administration to distance themselves from the notion that QEnfinity is patently flawed and that it was never their goal. They have complete control of the media and all of the popular metrics to measure our economic condition. As a result, they can impose the "fact" that our economy is all well/recovering. In other words, additional QE or large QE is unnecessary.
Essentially, any feat south of reflating the peak of the credit bubble is simply throwing money away. I'm not sure it's even fair to call it stimulus... Further, austerity can entail additional stimulus... it's just the rate in which the stimulus is rolled out... if less than QE 1/TARP, then we're essentially beginning austerity... if stimulus has not peaked in intensity, then we're still "stimulating".
The states are going to be forced to cut budgets... feds will have to follow suit... no way around it.
Also, given that the debt ceiling has to be constantly raised, with any congressional gridlock on the issue, we default. Not saying this will happen, just that depending on how sincere our newly elected oficials are, we are headed towards austerity, at least in promise...
Geez, I couldn't disagree with you more. Just look at the Obama-appointed commission on the deficit report:
http://www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/CoChair_Draft.pdf
Lower corporate taxes, as if they paid any fed taxes, and begin killing Social Security, which is good for decades to come.
Nope, global austerity movement meets with the Group of 30's approval.
It's in the cards, unless we cook them all in boiling water, or boiling oil, or....
Better aim for the head, because zombies can only be put down that way. SS has been dead for ever. There is no money in the lock box. This year the SS outlays in checks going out exceed the taxes coming in. So, its dead.
i can imagine it and that is what BB should do. It's called "do the right thing."
It really won't be necessary to make any announcements, simply bury it which I think will be done before X-mas. This sick puppy isn't flying with anyone. To keep pursuing it will get very dangerous quickly. Just my thoughts. Milestones
It really won't be necessary to make any announcements, simply bury it which I think will be done before X-mas. This sick puppy isn't flying with anyone. To keep pursuing it will get very dangerous quickly. Just my thoughts. Milestones
It really won't be necessary to make any announcements, simply bury it which I think will be done before X-mas. This sick puppy isn't flying with anyone. To keep pursuing it will get very dangerous quickly. Just my thoughts. Milestones
I think the spending cuts will be first to UEB and food stamps, then I think there be cuts to pensions and education. Then to SS and Medicaid/care. I think that it will be a year until the end but that is the way it is going to happen. This next year is going to either be brutal. Best case scenario is that it gets the guillotine somehow. The reason for austerity, apparent in Britain, is it keeps the system (barely) alive. If America does not take pay cuts on their living standard, the rest of the world will simply let it fail. And they may very well do so.
Someone should be getting the guillotine, alright…
wrong order. food stamps will grow, retirements/medicine will get cut. We will default domestically before internationally. And then we'll get mad and repudiate our international debts because we want more entitlements. States are already dead in the water with retirement entitlements... nofuckingpossibleway to pay this shit.
basically, we'll squeek by through a tightrope of stimulus and whittling down expenditures... making even worse the government's picking of winners and losers.
the rest of the world will fail with us, but I suspect others may be in a better position to rise from the ashes.
the recession could end.
Yeah, please don't take my comments that we'll succeed in the controlled demolition... we will not. Rather, our attempt is to walk a ridiculously difficult tightrope... kind of like a downsyndromebearonaunicyclein50mphwindswithadrunkenantisemiteblowingaretardwhistlefrombelow. We know how it ends, the difficult part is timing...
Austerity is not coming, its already here and growing. Lose your job and not get another one, or get only for part time no benefits. If you are lucky enough to get antoher full time job you get paid less, little or no pension, limited or no health benefts, vacation, sick time. No increases to Social Security, cuts coming. Pay cuts for those still with jobs and longer hours, reduced pensions and higher pension costs for those that kept their jobs. Increasing prices and smaller product containers. Don't forget tuition, fewer classes, more expensive books - look to Russia Today to see video of England's students rioting over the trebling of fees. Austerity is all around hiding in plain sight.
Hiding in plain sight bitchez!
Those many millions of hungry cold citezens will hopefully vote the current idiot and his hee haw gang out of office- maybe that is Bernanke's motive...
As it relates to Gonzalo's thesis, it doesn't matter
QEII less than .001 of defaulting debt derivative markets, may not long continue to move markets, except down, and never did help the economy, just the cronies
Most of QEII may already be baked into high prices that sow the seeds of demand destruction
QEII may be sunk before Black Friday Christmas, with new Fed or Treasury appointments or a key House impeachment of a significant member of the 0 Cabal that did not already jump ship
Many potential candidates to scapegoat to deflect blame, starting with those on serial junkets
Cutting Food Stamps, Medicare or Social Security a non-starter that would wake up the frogs, particularly those with military training and arms
Whenever I read something about the 80%, I reach for my wallet
.
Excellent post, lots of thoughts. We are really in for lousy, if not frog boiling times. Like the metaphor btw, but do not want to be that frog.
Too late you say? Probably. But I own my home and don't eat out 50% of the time. My garden grows much of my necessities and I'll just share and try to keep the peace with neighbors. Gonna be different but not awful.
Unfortunately, the bottom 80% cannot afford to protect their wealth by buying:
Ralph Lauren jeans
Fossil watches
Coach handbags
Tiffany diamonds
Jaguars from Tata Motors
All those stocks are at 52-week highs.
good advice...
Why not mention ghetto fabulous Ross Stores?
yeah robo ralph lauren at it's highest since it's IPO. now i know a thing or two about luxury goods. ralph lauren is just plain shit, i bought a bunch of it at an outlet. don't really wear it much anymore, because the cotton is cheap and not soft. now i have been buying clothes cause i don't have any and it is getting cold. but yes prices are staying up in the high end, but you know i pay a lot for my clothes and they last and last and last. just like high count thread sheets. they are soft soft soft and last. so my theory is you spend a lot on your clothes just don't gain any weight and you can wear them for decades.
now i have been buying clothes cause i don't have any and it is getting cold
Yes, this must be true. The avatar you had in the summer when it was warm proves it... :)
yeah you should see my nips when it is cold. they are so hard and probably as cold as my feet and hands get. but i like mid range temperatures in the winter, 40's to 50.
kathy,
There is an old saying that is true.
" I am too poor to buy inexpensive things".
Buy once, cry once.
A surprising number of these items pass through my local Goodwill thrift store.
yes, mine too; i pay like $5 a shirt, $8 for jeans. max
Coach...just heard an analyst touting it the other day on CNBC...with a record number of folks on food stamps, this totally non-essential supplier of trivia forges ahead. If I had money to burn, I do not think I'd go flouting it...might prove unhealthy.
I live in a podunk mid-sized city with no real rich people by national standards. After the 2008 crash and burn, this luxury stuff is generally just a sign of who around me I don't have to take seriously. To me, it means they have a charge card and no clue that the world has changed.
yup, at some point hence, driving a Jaguar will just make "the boyz" zombie bait...
always a mystery to me why folk willingly "brand" themselves. . .
guess it's a herd thing.
I herd something like that too.
Hot iron and cold mind make big hiss and bee-line to TJ Maxx!
;-)
ORI
not even the ultimate bull in the form of me agrees that "inflating prices is the right way to move equities higher." In fact I'd call it worse than the Depression.
That was poor Robo. You can do better. Get a Blue Box.
Yea whatever Robo, real funny wit and humor. Well with any luck, China soon blocks this insanity in whatever form it happens to take. And anyone taking part in it is an enabler, and no better than Bernanke or any FED central bankster criminal. I dont care if people junk this or not.
Don't worry Sheep, the 80% will get restless when they start getting hungry and the 99'ers will be in the streets in no time. The bankers and the CRONIES on Wall St. will eventually get what they got coming to them. In the meantime they can enjoy their final days of vaction before they return to work and find their buildings surrounded by protesters. Americans are slowly waking up to the fact that the largest Heist in American history is happening right under their noses. You know this was always the plan, so just sit back and watch it blow up in their faces. While everybody is jacking off to their POMO smut, other countries are turning away and laughing at us. This will be the straw that breaks the camel's back because no matter how hard they try to decieve the world, the rest of the world isn't buying. You would have thought they got the message at the last G20 when Obama got laughed out of the meeting..Guess not, sometimes you just got to learn the hard way and unfortunately we are going to suffer for their outright stupidity!
What we'll suffer for, imo, is our complicity in hiding the bankster crimes rather than demanding justice en mass. I'm looking at you, upper-middle class America . . . folks like us who just did the gratuitous whining and moralizing while continuing to play the game, looking for how we can preserve our own positions while the rule of law died grotesquely in the town square.
We'll get what we deserve. I would submit that the sooner we get right with God--and our basic conscience as a society--the less painful it will be.
tahoe,
The Fuds/ DHS/ Mil, are well aware of this scenario.
IF or WHEN the riots, and killings start, (to my amazement they believe will happen first), they have/are already planning on how to handle the American people.
Of ALL the scenarios laid out on this Bolg, this is the one they expect FIRST.
Not Iran,not the M E, Not China, Not North Korea.
HOME
Check out the latest interview on King World News.com, where Eric King interviews Mr.Jim Rickards.
He FLAT out said this is what they are expecting, and are preparing for.
And, If I were our ENEMY, that would be the exact time I buried the hatchet in our ass.
My question would be,(if I didn't beleive it now) is WHY would they prepare for THAT scenario first?,simple, because they know it's coming.
(IMHO,it's been the plan all along).
I think it will have a short term affect on the lower 80% but I do believe we will start to see the benefits of this in the economy in mid 2011. Getting there will hurt a bit for some but the end result will be positive.
I have to agree with Ian Shepherdson here: “But I do think that the seeds have been sown now,” Shepherdson added. “And looking ahead 6-9 months I think about the middle of next year things will look a lot better."
He's a pretty smart bear and has been right more often than not. I'm on the same page with him regarding the economy. A bit of short term pain then the benefits and job growth start to kick in.
You have to agree with Ian Sheperdson here? WTF who is that, your poodle groomer?
You nevermind this article, probably didnt even read it, and go on to quote something external to this article to make your point and proclaim in a few months, things will look a lot better with wild job growth? Youve gone from silly, to irrelevant and purely ridiculous HarryWanger.
LOL. In 6 months when the shit here is piled to the celing I'm gonna shove Ian Shepardson's face into it till he drowns along with any other effiminate elitist upper west side pencil neck named Ian.
you're talking about the US here?
Read the fucking article, please: http://www.nytimes.com/2010/11/07/business/07gret.html
It's the same point I've been making here for the past two months. Read before you write nonsense people. Just because it doesn't fit your viewpoint doesn't mean it's wrong. Dear, lord!
Your betting on whether the fan is electric or handheld. That's a poor bet when it's done with public money and public's future.
And just because youve scoured the upper east side for some assclown named Ian who agrees with your ridiculous 'recovery at any minute' pile of BS doesnt make it right either!
We've been waiting for that magical "next quarter" or "next year" recovery for what two years now? Remember all the talk of a "V-shaped" recovery? Green shoots? Mustard seeds?
Waiting for the magical unicorns to poop Skittles in a rainbow sky...
"V-shaped" recovery?
"U"-shaped recovery?
"W"shaped recovery?
"L" shaped recovery? (probably most accurate)
How about an "O" shaped recovery?
Fucking Sesame Street economics. Whenever I hear these childish interpretations, it reaffirms my belief that we're royally and perfectly screwed.
+10 LMAO
O-shaped recovery, and prosperity is still just around the corner, and around, and around.
How about our y-shaped recovery? I'm an optimist . . .
for 2012 we get a ∞ shaped recovery...i'm a pessimist
NASCAR recovery, we keep going left and in circles.
Dude!
"\"-shaped recovery.
Remeber the "2nd half recovery" in 2008? That ended up being quite the "soft landing".
Yea Harry, I heard all the steel mills were going to open back up.... & a new Curtis Mathis plant coming on line, remember those... Oh & don't forget all those whirlpool plants that are reopening.... Harry you are starting to annoy me with your kool-aid bullshit...
Lot of "hope" in that article based on a comparison of the Swedish experience. Problem is, we did not choose the Swedish solution to our crisis so I'm skeptical of his conclusions on the coming recovery.
OK, i read it. i'm still not impressed. The NY times is a rag;I cannot trust them to give me objective facts.
"trickle down economics" is the mantra that I always seem to hear when I'm getting pissed on.
Much of the author's confidence in the forecast seems to be based on the premise that he(shepherdson) was right in the past, has a good record, and therefore will likely be right in the future.
"he was fundamentally right back then and has been consistently on target since. So, I am happy to report that he sees the beginnings of a turn in the economy that could translate to a rise in gross domestic product growth"
Shepherdson also says:
"The story is really that the credit contraction seems to be coming to an end.”
This isn't exactly inspiring confidence in me. The double negative terms are often an indicator that someone is trying to soften the blow. He blew it.
ps, one of those junks was me, i always try to own my junks, keep it real yo!
Ian states in the article.... "As commercial and industrial credit eases up a bit, Mr. Shepherdson said, it will unleash a pent-up demand among smaller companies for capital equipment, software, vehicles and other goods."
I read the article and don't believe in 6-8 months small businesses will do the above as they won't have consumer demand.
You got it. There is a plethora of credit and a dearth of customers.
Just blasting steam on a dying fire.
More reference to the 'pent=up demand'...I think what they mean here is tent up demand, as in record number of americans now living in tents. Tents UP!
Harry,
I read the article. Unfortunately, it's crap. I understand wanting to be optimistic and having faith in America, but that doesn't mean you should check your capacity for critical thought at the door. First, his entire argument centers around lending to small business "The depression in small businesses explains pretty much everything in the weakness of this cycle." This is absurdly myopic. Second, he goes on to compare the US response the the Swedish response to their banking crisis. Do YOU really think there are similarities here? The Swedish response was predicated on minimizing moral hazard, writing down valuations and liquidating bad debt. The US has done this exactly how? Third, even Sherperdson admits "Getting to zero is not bullish at the moment." It is far from certain that lending will not roll over again in the short to intermediate term. Go read some more of Mako's posts.
Yes, when Ian Shepherdson says something bearish, which is his usual mantra, he is treated like god by the perma bears. The minute he sees something slightly positive, which we are seeing, he's suddenly and "idiot" or "he makes no sense", etc.?
You guys are too funny.
Typical stuff. Nothing special. Stop cherry picking articles. Do some work of your own besides posting parabolic charts. (And don't point your finger back at me; I don't know shit and I'll admit it.)
'Routinely considered a God by the 'perma bears'....never heard of him before.
Harry, just stop. No more. Your comments are so juvenile that I don't even read them anymore. I just junk you on principle.
For the record, I've never heard of him before either. Good job addressing the points I made regarding that article... Oh wait, you didn't do that at all...
Your comments are all spot on, of course.
And that tired mantra about lending to small business: yes, it's a great idea, but most jobs derive from startups, and the banksters, and investment banksters and others benefitting from the bailout and this second de facto bailout (QEII) are all about Foreign Direct Investment (FDI), creating those startups anyplace but the USA.
bingo.
harry if you were really concerned about organic growth vs. extend & pretend, you would be putting your money where your mouth is and funding entreprenuerial startups instead of riding the tape in the stock & awe market.
your argument is based on a premise that many of us here see as faulty at the core : doing everything possible to keep the current trickle-down ponzi pyramid going & believing that what's good for the top will bleed down to the plebes below.
as our fair leader said many times : change does not come from the top-down, it comes from the bottom-up.
Harry,
Hope I do not take this wrong, but you agree with this dickwad?,( I have not read your comments over the last 2mos)
First it's in the NYT, and secondly, it's total BS.
I heard that when we elected Obama that world would love us, the planet would begin to cool, the seas would recede, etc.
ROTFLMFAO
Too funny. When I started writing my comment below, I considered writing:
"Cue a Robo chart of a stock being pumped and a Harry comment about slow and steady growth". But you both beat me to it.
QE will do nothing for the economy. Margins will get pressured. See DF today and yesterday? Incomes will be steady or declining. http://www.dailyjobcuts.com/ Muni's are getting squeezed and service cuts will increase. Ask your WA governor how she will meet the budget now that all the taxes were defeated.
Oh, and none of that stuff going on in EU will matter. See Maestro's house get a bid close to 50% below 2006 levels. No, nothing to see here, just fine and dandy.
LMFAO
Beans-CPB. Nice chart too.