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Gonzalo Lira And The Boiling Frog: Effects Of QE2 On The Bottom 80% Of The U.S. Population

Tyler Durden's picture




 

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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Wed, 11/10/2010 - 17:42 | 717783 Fractured Space
Fractured Space's picture

What policy tools do the PTB have left to flight inflation if it breaches the 4% mark?? Hedonics and Substitution?

Wed, 11/10/2010 - 19:30 | 718131 RockyRacoon
RockyRacoon's picture

Yeah, they'll replace the costs of vegetables with the cost of a packet of seeds, multiplied by the contents -- and they'll count the seeds.

Wed, 11/10/2010 - 22:41 | 718563 blunderdog
blunderdog's picture

The steak you bought yesterday is inherently better than the steak you bought a year ago.

The stuff you bought a year ago is moldy and rotten.

Wed, 11/10/2010 - 17:43 | 717788 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

You mean, "economy".

Wed, 11/10/2010 - 17:58 | 717844 Dr. Richard Head
Dr. Richard Head's picture

Hey Wanger - You are an ignorant fucking asshole cunt twat!!!!  Short-term pain of 42 million food stamp recipients being starved cold during the winter for the benefit of asset holders, but in the end it will be ok.  You are a fucking propagandist bitch that is delusional.  The fact that you refer to an upcoming population reduction that will allow those left over to begin consuming again is sign of your stupidity and lack of moral compass.  I am so sick of your perverted mindset of ignoring the facts.  QE1 benefited no one but the cronies in Capital Hill and Wall Street.  QE2 is going to crush a substantial portion of the population and you consider this short-term pain?  You’re a god damned son-of-a-bitch that is nothing but a shill for the establishment.  GO TO FUCKING HELL ASSTARD!!!!

Wed, 11/10/2010 - 18:16 | 717891 rosiescenario
rosiescenario's picture

..hey, don't sugar coat it....come out and say you disagree strongly....

IMHO the tea party is just too wimpy....what we need is some grass roots push for a few states to secede from the U.S. on the basis that all our Federal tax dollars are ending up with a few fat cats on Wall St.

If Californians did not pay their Federal taxes, we could balance our state budget overnight. I think we need a few folks talking about that as an alternative to what the Fed is doing.

Wed, 11/10/2010 - 19:33 | 718139 Husk-Erzulie
Husk-Erzulie's picture

Cascadia bitchez!  Washington, Oregon and Idaho.  Free ports of Seattle, Tacoma and Portland and a 100% silver backed currency.  No fractional reserve allowed.  Sorry Cali, you can't play.  :-)

Wed, 11/10/2010 - 22:49 | 718574 Treason Season
Treason Season's picture

And we got the Tridents to back us up too!

Wed, 11/10/2010 - 19:32 | 718136 RockyRacoon
RockyRacoon's picture

Yo, Rich, good going.  I 'bout shat my chair.  

Wed, 11/10/2010 - 19:44 | 718171 Bob
Bob's picture

Now you're putting it plainly.  Sucks to be sane, though. 

Wed, 11/10/2010 - 20:57 | 718321 Captain Courageous
Captain Courageous's picture

Meds much?

Wed, 11/10/2010 - 22:06 | 718490 tmosley
tmosley's picture

He's mad as hell, and he's not going to take it anymore.

I feel the same way.

Wed, 11/10/2010 - 23:47 | 718682 Yits and the Yimrum
Yits and the Yimrum's picture

folks, load the larder and load into cash eqivalents ASAP (CANDO, silver. gold) as these Assclowns are burning down the house and you know they are well stocked

now I hear stories they will not provide cash to the teller machine vendors, and you just know that they must be "ready" to smash any opposition as they are turning up the heat to the Max

I'm loading, and all other priorities are on hold because these asshats are in end game mode

FEDEX is going to make a killing, as the food stocks of healthy foods are emptied in panick over the next 18 months

of course you can allways get your $5 box of frosted GMO flakes, just don't plan to come off that toxic high without professional medical attention

good lord, we knew this was coming and it is ugly

Wed, 11/10/2010 - 20:00 | 718201 Fractal Leverage
Fractal Leverage's picture

Nothing of substance in this comment.  No fact based points just predictions of the future.

Wed, 11/10/2010 - 23:26 | 718651 Katharotes
Katharotes's picture

Harry,

 

HUH??

Wed, 11/10/2010 - 17:22 | 717705 traderjoe
traderjoe's picture

Calling it QE2 (which is what we all do) feeds into the benign nomenclature offered by the elites. Perhaps we should call it something like:

RMP2 - Reckless money printing 

DDB2 - Dollar debasement 

BB2 - Banker bailout 

Any other ideas? Change the name to reflect the reality and try to change the nature of the discourse...

Wed, 11/10/2010 - 17:26 | 717722 Joe Davola
Joe Davola's picture

You missed the obvious:

 

FU2

Wed, 11/10/2010 - 17:31 | 717733 Cyrano de Bivouac
Cyrano de Bivouac's picture

How about Fed Lax 2?

Wed, 11/10/2010 - 23:07 | 718611 Bananamerican
Bananamerican's picture

"Weekend at Benny's II"

Wed, 11/10/2010 - 17:43 | 717790 Fraud-Esq
Fraud-Esq's picture

We only speak the King's English...

Wed, 11/10/2010 - 19:36 | 718148 Husk-Erzulie
Husk-Erzulie's picture

Qualitative Sleazing

Wed, 11/10/2010 - 19:45 | 718175 Bob
Bob's picture

BB2.  The rest of the world is quite clear about it.

Wed, 11/10/2010 - 17:29 | 717723 malek
malek's picture

According to the BLS table, more than a third of households have higher annual expenditures than income...

I thought we had a credit squeeze and almost non-existent savings?

Wed, 11/10/2010 - 21:21 | 718387 apberusdisvet
apberusdisvet's picture

if you are underwater, and not paying a bankster, you probably have at least $2k extra to spend each month.

Wed, 11/10/2010 - 22:08 | 718500 tmosley
tmosley's picture

They are likely living with parents or friends, or receiving some sort of remittance.

Wed, 11/10/2010 - 17:34 | 717730 Camtender
Camtender's picture

I hope the web seminar " hyperinflation in America " is recorded for later viewing as I cannot watch next Thrusday evening.  Worth $75?????

Wed, 11/10/2010 - 17:31 | 717735 RobotTrader
RobotTrader's picture

Biggest depression in recent history and the car stocks are going vertical.

Tesla up 19% today, and they lose millions every year.

 

The Nouriel Roubini's of the world (i.e. the bottom 80%) cannot afford the new luxury supercars being purchased by the Wall St. PigMen to shield themselves from inflation.

Instead, they are constantly running to the auto parts store to get new radiators, alternators, brake jobs, etc. and pay ever higher prices for refurbished parts made in China.

Any wonder why AAP is up another $3 after hours?

Wed, 11/10/2010 - 17:35 | 717750 Internet Tough Guy
Internet Tough Guy's picture

No HUI chart? No gold chart? You must be puking up blood; how much does gold have to rise per day to meet Sinclair's target?

Wed, 11/10/2010 - 17:38 | 717764 RobotTrader
RobotTrader's picture

46 more trading days.

$5.35/day to get to $1,650

Wed, 11/10/2010 - 17:49 | 717811 goldmiddelfinger
goldmiddelfinger's picture

meanwhile you're a homojo

Wed, 11/10/2010 - 18:28 | 717931 tmosley
tmosley's picture

And how many of those days will be POMO days?

54.

$1650 is conservative.  $1800 is much more likely.  $2000 is only slightly less likely.  $10,000 is not outside the realm of possibility, along with $15 loaves of bread with slices the size of a saltine cracker.  Incidentally, saltine crackers will be the size of goldfish crackers.

How many nickels did you get today?  They are up to 6.3 cents!  You must be rolling in the dough/scum.

Wed, 11/10/2010 - 21:51 | 718460 Careless Whisper
Careless Whisper's picture

@ robo

all the car stocks are getting pumped because of the gm offering. see folks, the auto industry is booming, get ur gm stock....

Wed, 11/10/2010 - 17:46 | 717789 malek
malek's picture

41 business days until January 15th, 2011.

( $1650 - $1403 ) / 41 = $6.03 increase per day

Correction:
Oops! RobotTrader above is correct, 46 business days to go.

Wed, 11/10/2010 - 17:46 | 717801 traderjoe
traderjoe's picture

How about a DF chart? A SLW chart?

Wed, 11/10/2010 - 17:56 | 717835 kathy.chamberli...
kathy.chamberlin@gmail.com's picture

robo your spot on about Tesla. i walk by the car dealership in boulder everyday. it is busy and i see lots of people driving them. i don't really like them at all. but i think boulder has something like 15,000 registered prius cars. these kind of people make me sick. and they drive so flow.

Wed, 11/10/2010 - 19:27 | 718121 hedgeless_horseman
hedgeless_horseman's picture

You left Woody Creek and the Roaring Fork Valley for a new sugar daddy in Boulder?  That is a down market move, Ms.

Mon, 11/15/2010 - 10:25 | 727393 kathy.chamberli...
kathy.chamberlin@gmail.com's picture

you know my old 'hood pretty well. i don't D O sugar daddy, not in boulder or anywhere else. not my M O.

  °   °

     !

… … … 

Her time has no past or future,

she lives everything she sees,

Her time doesn't spin outside here,

She lives in a time of her own.

Wed, 11/10/2010 - 19:39 | 718122 hedgeless_horseman
hedgeless_horseman's picture

The Tesla showroom in Boulder ain't selling shit.  Pasta Jays is doing more gross every month, and it does not have any public shareholders.

Wed, 11/10/2010 - 20:12 | 718225 SheepDog-One
SheepDog-One's picture

Pasta Jays! Youre a Boulderite? I didnt know that. Was just at Pasta Jays yesterday.

Thu, 11/11/2010 - 00:36 | 718740 StychoKiller
StychoKiller's picture

Ah yes, Boulder -- Colorado's own little slice of California -- how did any of you end up in Progressivastan anyway?

Mon, 11/15/2010 - 10:31 | 727409 kathy.chamberli...
kathy.chamberlin@gmail.com's picture

i am just here for the views. this place is very confused, let me tell you coming from a very confused person. but honest, these "higher" educated white elites are the dumbest ass things i have ever had to get through a l i v e. on a daily basis someone is turning to run me over, or hit my car with theirs, they even want to kill you when your just walking down the street. it is most dangerous in a four block radius around that damn over priced Tesla dealership.

Wed, 11/10/2010 - 19:44 | 718173 Uncle Remus
Uncle Remus's picture

Far more fucking money than sense.

Wed, 11/10/2010 - 21:16 | 718376 Jendrzejczyk
Jendrzejczyk's picture

@ Robo

"Tesla up 19% today, and they lose millions every year."

That doesn't sound ass-tard stupid to you?

Thu, 11/11/2010 - 00:37 | 718741 StychoKiller
StychoKiller's picture

Robo is merely pointing out that the Koolaid drinkers are overdosing, haven't you figured it out yet?

Wed, 11/10/2010 - 17:36 | 717736 Cognitive Dissonance
Cognitive Dissonance's picture

Bernanke’s stated purpose in QE2 is to spark consumer spending, and thereby reignite the economy.

I really wish we would stop tilting at windmills and chasing false hope. Bernanke can "state his purpose" all he wants and it won't change the fact that he's kicking the can down the road long enough to transfer all private debt held by the financial elite onto the shoulders of the taxpayer. And then he's going to let the entire stinking mess default.

Guess who's left holding "real" assets and who's left paying the bill. The system is unsustainable. Why won't we face this fact? "They" have. And "they" are preparing for this eventuality. Then the real purpose of this monetary insanity, central control of the regional or world kind, will show it's ugly face. And if it materializes, the average Joe will be begging for it by that point.

"Someone do SOMETHING. Please, I'm begging you."

We can stop this insanity in 3 months. Just stop paying your bills.

Wed, 11/10/2010 - 17:38 | 717769 Shameful
Shameful's picture

I'm always amazed how "good" statements are taken at face value and "evil" statements are seen as a joke or misunderstanding. Zimbabwe Ben says he is trying to help, and it's taken at face value. He says he will bury the Earth in dollars from his chopper and in that case he is joking.

Self delusion is a great thing. I've done some reading that suggests a lot of our brains developed to deal with lies and liars. I wonder how much that evolutionary arms race could still be going on.

Wed, 11/10/2010 - 17:51 | 717824 traderjoe
traderjoe's picture

Unfortunately, most of the people "in the know" probably benefit from money-printing - politicians (keeps them in power), money-changers (bails them out), etc. Their assets/incomes will increase or at least be bailed out, more then they will suffer from the cost of living increases. 

The other 80% (or 98%) are too busy living day-to-day to understand or even know what to do to fight it. 

It's the governance of the many by the few, for the benefit of the few. 

 

Wed, 11/10/2010 - 19:52 | 718185 Bob
Bob's picture

Exactly. 

Wed, 11/10/2010 - 17:58 | 717841 Cognitive Dissonance
Cognitive Dissonance's picture

Self delusion is a great thing. I've done some reading that suggests a lot of our brains developed to deal with lies and liars.

I know a lot of people are tired of it, but this is the reason I constantly harp on denial and self delusion. We can't fight the first and last battle, the one with ourselves, without knowing the enemy.

Wed, 11/10/2010 - 18:14 | 717885 DoChenRollingBearing
DoChenRollingBearing's picture

Keep it coming Cog Dis.  Your stuff IS hard to read and digest, but your contribution to getting to the truth is almost beyond compare.

And each of us has to plough our own fields, and it is very hard work.

While each of us (so willing) does the internal work, we can always buy some gold while we are at it.

Wed, 11/10/2010 - 23:23 | 718642 Bananamerican
Bananamerican's picture

i own gold myself but sometimes the sense of "gold as salvation" just leaps off the pages of zerohedge at me and i wonder "what if it aint?"

i hope it will be

Thu, 11/11/2010 - 00:40 | 718743 StychoKiller
StychoKiller's picture

Can you think of anything better at this point?  I understand that ground-up Unicorn's horn is worth more, but I keep striking out at finding a supplier! :(

Wed, 11/10/2010 - 19:55 | 718196 Bob
Bob's picture

http://en.wikipedia.org/wiki/Identification_%28psychology%29#Anna_Freud_...

It's a simple matter of how long the lower class keeps getting fed together with how long the upper-middle class continues to profit from the game. 

Thu, 11/11/2010 - 00:13 | 718714 Babycatcher
Babycatcher's picture

Thank You CD.

It's hard breaking out.  Relationships are comprimised, sleep is disrupted, the atlas is shrugged.  No wonder most choose not to play.

But I've been playing too long...even when I knew it wasn't a game anymore.

And I want my children to know the truth that I've been reluctant to digest...their futures depend on it.

Wed, 11/10/2010 - 17:40 | 717776 SheepDog-One
SheepDog-One's picture

Yea I agree, I have great loathing for all IGadget buyers and all those who can be counted on to keep playing the game to infinity.

Wed, 11/10/2010 - 17:43 | 717791 traderjoe
traderjoe's picture

Yup. There is no way out of this. 2009 to now has just been an attempt to bailout the elites, finance the wars a little longer (see Obama give up on the Af deadline already), pump up their assets one last time, and give them a chance to prepare for the final collapse. 

Bonds have been re-liquified. Stocks to the moon (insiders and dumping). But housing is declining still, wages flat or lower, employment stuck (see job openings down 2 months in a row). 

Personally I give it 6-12 months, no more. There were unsuccessful in creating a new longer-term bubble, and will now start jumping ship. 

I just can't wait to see how it all turns out. Sad to see...

Wed, 11/10/2010 - 18:10 | 717876 All_the_kings_horses
All_the_kings_horses's picture

Steve Ballmer has sold Shares in Microsoft worth 1.3 Billlion Dollars.

http://www.bit-tech.net/news/bits/2010/11/08/ballmer-sells-microsoft-sha...

You can buy plenty of gold with that amount of money!

Wed, 11/10/2010 - 21:22 | 718390 sgt_doom
sgt_doom's picture

You said it all, CD.

Awhile back, a journalist, Josh Kosman, came out with an aptly titled book, The Buyout of America.

Although ostensibly about private equity leveraged buyouts and dire predictions as to their effect on the near future (although true enough), the PE leveraged buyout serves to illustrate just exactly what they've done to the American economy (and many others, as well).

When a PE firm does an LBO, they load the target company with debt, borrowing against it -- the company as their collateral -- to enrich themselves.

Now they, the banksters and cronies, do the exact same thing to the country and sovereign economy, by peddling securitized debt to a massive degree, they have loaded down America with debt, while enriching themselves.

And as interest payments on debt are tax deductible, so too do they avoid taxation by restructuring the taxation laws and allowing for the use of offshore SPVs, SPEs, SIVs, etc.

In effect, they are simply doing a leveraged buyout of the American economy (MBO category), with the resulting pump-and-dump, and that dump part will be really and truly nasty.

Pretty much the same thing they did back in the Great Crash and Great Depression, using Prohibition (1920-1933) to orchestrate gigantic tax cuts (no more alcoholic beverages to tax) and laundering their bootlegging and smuggling funds through the stock exchange.

Thu, 11/11/2010 - 00:18 | 718718 The LD
The LD's picture

Good book.

Wed, 11/10/2010 - 17:36 | 717742 plocequ1
plocequ1's picture

..

 

Wed, 11/10/2010 - 17:34 | 717746 Fraud-Esq
Fraud-Esq's picture

Bingo! This is an 80-20 game. So is politics. Everyone lies to the bottom 80% and fights to serve the top 20% to varying degrees. Lots of room up there.

IMHO, we will have no reform until the war WITHIN the top 20% commences.

Income tax brackets distinguishing $250K from 20M, for example, are NEEDED. (blackout discussion)

Loopholes closed over 50M on virtually everything. 

Capital gains as primary employed income, under 65 years old, increased to top rate.

Battle from small/med sized business on the protectionist Chamber of C.

People in the top 20 must declare WAR on the transactional top .025%.

The benefits of a war on the top .025 truly will trickle down.

 

 

Wed, 11/10/2010 - 18:20 | 717908 rosiescenario
rosiescenario's picture

...lick what's above you....kick what's below....and up the Sachs' ladder you will go.....

Wed, 11/10/2010 - 18:34 | 717970 Dapper Dan
Dapper Dan's picture

The Pareto principle (80/20 rule) has many applications.

 

Wed, 11/10/2010 - 17:34 | 717747 plocequ1
plocequ1's picture

Max Schumacker quote: "All of a sudden it's closer to the end than the beginning, and death is suddenly a perceptible thing to me, with definable features."

 

Wed, 11/10/2010 - 17:37 | 717748 Thunder Dome
Thunder Dome's picture

Gonzalo, I have been told that the frog will jump from the pot (if possible) prior to being boiled to death.  I, personally, have not tried this to see if it is in fact true.  I like to think the frog will jump, though.

Wed, 11/10/2010 - 17:44 | 717795 Cheesy Bastard
Cheesy Bastard's picture

What?  Oh sorry, could you repeat that?  I was watching Sportscenter and eating nachos.  Is it getting warm in here?

Wed, 11/10/2010 - 18:01 | 717851 kathy.chamberli...
kathy.chamberlin@gmail.com's picture

cheesy i know you have cheesy bitch and all. but i don't have any heat and i just freeze because i am so damn thin. my property repair man won't call me back. the only thing that warms me up is when i can have  sustained laughter when reading ZH.

Wed, 11/10/2010 - 18:07 | 717862 Cheesy Bastard
Cheesy Bastard's picture

Just tell her I call her Cheesy Bitch, and I won't have Cheesy Bitch very long.  I'm always glad to help a lovely damsel in distress, especially when she wants to keep warm.  Seriously, though, at least get an electric blanket or something until they fix your heat. :)

Thu, 11/11/2010 - 12:04 | 719485 flapdoodle
flapdoodle's picture

20% of the frogs will jump, and 80% will stay watching "American Idol"

Wed, 11/10/2010 - 17:35 | 717749 AbandonShip
AbandonShip's picture

How would Krugman respond?  Print to increase demand but not so much that it raises prices too far.   That's a fine line to walk and I doubt current models and policy levers can slice it.

How do the Keynesians answer the inflationary effects of printing?

Wed, 11/10/2010 - 17:37 | 717757 Internet Tough Guy
Internet Tough Guy's picture

Keynsians are snacks on the menu of half-starved inflation zombies in the future. Eat the rich.

Wed, 11/10/2010 - 21:25 | 718406 sgt_doom
sgt_doom's picture

Krugman's a wanker and in the same class as the rest of those brainless twits who have sold their souls, like that freak Thomas Friedman.

Or was that Freakman?

Wed, 11/10/2010 - 17:36 | 717752 RobotTrader
RobotTrader's picture

Obviously, the "bottom 80%" are luxuriating themselves by eating out every night at Chipolte Grille and Panera Bread.  Paying extreme prices for "gourmet fast food" doesn't seem to faze them one bit.

Wed, 11/10/2010 - 17:38 | 717765 Internet Tough Guy
Internet Tough Guy's picture

When will robospam interview the CEO of SLW?

Wed, 11/10/2010 - 17:44 | 717797 SheepDog-One
SheepDog-One's picture

Its luxury eating at Chipotle? Dont try to tell it to the Charmin man or Mr Tidybowl.

Wed, 11/10/2010 - 17:47 | 717807 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

The rich do not clean toilets nor do they wipe their own asses.

Wed, 11/10/2010 - 18:06 | 717860 kathy.chamberli...
kathy.chamberlin@gmail.com's picture

do you think? i never asked. what is a
World's Best Toilet Seat and Electronic Bidet

Wed, 11/10/2010 - 18:31 | 717950 Ratscam
Ratscam's picture

Ridiculous, this technologa is European style of the 80's. Check out Balena Douche WC of 2010, then you experience a serious self cleansing shit relief system, this world would need in other real lief aspects!

The US is so broke, it's mind boggling!

Wed, 11/10/2010 - 20:13 | 718227 goldsaver
goldsaver's picture

Yeah, but they don't list price. The other one is about a third an ounce of gold. Yeah I know, weird. But I've started thinking of my luxury purchase in terms of ounces of silver or gold. Keeps my thrifty.

Wed, 11/10/2010 - 21:02 | 718336 Cheesy Bastard
Cheesy Bastard's picture

LOL.  Makes a great holiday, birthday, or anniversary gift.

Happy bidet to you.  Happy bidet to you.  Happy bidet dear Kathy.  Happy bidet to you.

Thu, 11/11/2010 - 18:49 | 720547 MsCreant
MsCreant's picture

Cold or allergies?

Wed, 11/10/2010 - 17:46 | 717804 downrodeo
downrodeo's picture

"Obviously, the "bottom 80%" are luxuriating themselves by eating out every night at Chipolte Grille and Panera Bread"

 

So, it's the fault of the poor for being poor because they can't spend their money smartly? Is this essentially what you're saying?

 If thats the case, then while this may be true for some, to paint it all with such a broad stroke is dishonest.

Wed, 11/10/2010 - 18:04 | 717856 kathy.chamberli...
kathy.chamberlin@gmail.com's picture

i just went into a Panera bread cause i was so hungry, bagel a buck. they are all just fake white people that think it is so la te dah going in there with the girls. it is shit food at both places. the best place to eat is at home. or maybe take out soup.

Thu, 11/11/2010 - 01:29 | 718790 Money Squid
Money Squid's picture

Sounding pretty rough on Panera Bread. Sure, I'm one of the those fake white people (you have to be somebody) I think Panera's products are fresh, reasonably priced and tasty. Try their power breakfast sandwich. You sure you are going to a real Panera Bread of one of those Colorado imitation ones?

Mon, 11/15/2010 - 10:41 | 727427 kathy.chamberli...
kathy.chamberlin@gmail.com's picture

maybe it is fake, i don't know.

i would go to the one across the street at the Boston wharf waiting for the ferry to Hingam. that was shit, too. but the ferry was a gas on friday afternoon. all men with 6 packs enjoying the view if it were sunny. damn, i loved watching these guys enjoy themselves after a unvaluable work week.

Wed, 11/10/2010 - 17:36 | 717753 Shameful
Shameful's picture

I find it odd you think Ben is doing this because he thinks it's good and he is not helping a group. If he wanted to spur inflation why not just send everyone a few thousand dollars? He knows what he is doing, no group could be this dumb.

Sure we will have a currency crisis and people will suffer. Baked into the cake, we couldn't even stop it now. It's not like the country could even survive the Volker treatment. Look at those interest rates and overlay our debts and it just doesn't work. It's print till no one accepts Fun Bux!

Wed, 11/10/2010 - 17:42 | 717780 SheepDog-One
SheepDog-One's picture

Thats right Shamefull, 100%, the only logical course is buying things that insulate one from a coming currency crisis and societal meltdown.

Wed, 11/10/2010 - 21:56 | 718476 Careless Whisper
Careless Whisper's picture

im getting tired of telling friends and relatives they should buy some gold. they look at me like im crazy. now my attitude is, i mention it once, and if they think im nuts, fine, fuk 'em.

 

Wed, 11/10/2010 - 17:36 | 717756 There is No Spoon
There is No Spoon's picture

Price controls will be enacted before this is all over.

Wed, 11/10/2010 - 17:40 | 717767 sawyer
sawyer's picture

http://www.procurementleaders.com/news/latestnews/4509-clothing-retailers/

Look for retailers like the GAP, Levis, Aeropostal, etc... to take big hit on their margins in a year from now.  They sell a lot of cotton based clothing and they can't lower quality any more...

 

Wed, 11/10/2010 - 17:39 | 717771 Thunder Dome
Thunder Dome's picture

The poor ALWAYS get the shaft.

Wed, 11/10/2010 - 17:41 | 717778 RobotTrader
RobotTrader's picture

Well, at least CSCO is getting sodomized after hours....

Nobody needs those routers.

Wed, 11/10/2010 - 17:43 | 717787 SheepDog-One
SheepDog-One's picture

Aw they love getting sodomized and so do you.

Wed, 11/10/2010 - 17:47 | 717806 goldmiddelfinger
goldmiddelfinger's picture

He does it to himself

Wed, 11/10/2010 - 18:08 | 717870 kathy.chamberli...
kathy.chamberlin@gmail.com's picture

he is a HOMO.

oh i just noticed you have two swords. what kind?

Wed, 11/10/2010 - 18:34 | 717962 tmosley
tmosley's picture

He shares a bunk bed with Johnny Bravo in his parent's basement.

I have it on good authority that the top bunk is unused.

Wed, 11/10/2010 - 18:07 | 717866 kathy.chamberli...
kathy.chamberlin@gmail.com's picture

CISCO said it is giving all of it's workers a $1000 bonus this christmas. whoopy shit, chambers  homo.

Wed, 11/10/2010 - 18:48 | 718023 wretch
wretch's picture

Dude.  Come on.  You crunch technicals and then analyze the results by back-casting fundamentals.  I was initially charmed by your medieval teleology, but in the end your trust in the meaningfulness of derived technical data rings more like ignorance.

Wed, 11/10/2010 - 17:43 | 717793 MacedonianGlory
MacedonianGlory's picture

the Pareto principle

Wed, 11/10/2010 - 19:00 | 718045 wretch
wretch's picture

Agreed.  The emergent qualities appear to follow the golden mean.  I wouldn't be surprised to find the ratio reappearing recursively in the upper quintile as well.

Wed, 11/10/2010 - 17:46 | 717803 Anal Picnic
Anal Picnic's picture

I have an idea for civil disobedience. Let's have a mad shitter party. At a stated time, on a stated date, everyone heads (no pun intended) to their nearest public toilet, takes a shit and doesn't flush. It's small steps like this that lead to all out rebellion.

Wed, 11/10/2010 - 17:55 | 717831 traderjoe
traderjoe's picture

Certainly would be one form of an Anal-related Picnic. 

Wed, 11/10/2010 - 18:10 | 717877 kathy.chamberli...
kathy.chamberlin@gmail.com's picture

i would never EVER use a public toilet. i don't like public facilities in general. i wouldn't even use the libraries bathroom.

Wed, 11/10/2010 - 18:22 | 717913 traderjoe
traderjoe's picture

Studies have shown the tops of public toilets have remarkably few germs, certainly less then many other surfaces - like the bathroom doorknob, the faucet handle, etc. 

Mon, 11/15/2010 - 10:47 | 727439 kathy.chamberli...
kathy.chamberlin@gmail.com's picture

oh i know. the only public facility i use any more is the main post office. i always cover my hands with my sleeve to open ANY door. or kick it open. that is where germs are, door handles. i try to wear full fingered gloves when ever i can. now that it is cold i have to wear gloves. i even told my daughter when picking out various fruits at grocery to wipe hands cause other people have touched that piece of fruit and didn't take it. just my 2¢.

Wed, 11/10/2010 - 18:38 | 717988 downrodeo
downrodeo's picture

HAHA, a brown revolution...

The CIA can put that in their bowl and inhale!

Wed, 11/10/2010 - 17:50 | 717821 proLiberty
proLiberty's picture

My only reservation about the use of quintiles is:

1) the bottom quintile is bounded by having zero income and zero assets.  In other words  by being homeless and pennyless.  However, in many places in the US this can mean a certain amount of in-kind services and tax-exempt income from the welfare system;

2) the top quintile is openended in wealth and/or income.

In short, Warren Buffett and Bill Gates are such outliers they make some statistics useless.  There are not enough people sleeping in homeless shelters to equal the income/wealth of Buffett or Gates for one or two days.

It would be far more informative to use something like a range that excludes outliers such as only taking the top 95%.  However, there are a lot of poverty-mongers and supporters of wealth-leveling that would object to this.

 

 

 

 

Wed, 11/10/2010 - 17:50 | 717823 SumoPower
SumoPower's picture

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.

ARE YOU SERIOUS??? OMG!!!

Wed, 11/10/2010 - 17:58 | 717845 Sean7k
Sean7k's picture

There are a lot of assumptions in this piece- the biggest being Bernanke doesn't know what he is doing. I throw out the whole article at that point. 

The issue here is scarcity, not scarcity of goods, but scarcity of sellers when goods are denominated in dollars. The world is afloat in dollars. The FED is printing more and more of the kind that have no value in them. 

This is forced austerity, but with larger values, tax revenues continue to increase- further exacerbating the problem. America will be forced to pay for its' profligacy, but the politicians will be able to blame foreigners for it. 

As more dollars buy less goods, the dollar loses its' place as a reserve currency because it will no longer be the currency used to buy or sell the most goods. This is when things will get interesting, because people will start unloading them and at last count, there were twenty trillion being held worldwide. Don't think the euro is immune either. As the dollar goes, so goes the euro and yen. 

The only people doing any consuming will be the uber-riche. Probably in SDR's or some other money substitute. 

Wed, 11/10/2010 - 18:05 | 717858 goldmiddelfinger
goldmiddelfinger's picture

You won't have your feet kicked up on your crystal coffee table pontificating about the meaning of hyperbole when the revolution knocks down the door.

Wed, 11/10/2010 - 19:32 | 718119 Green Leader
Green Leader's picture

"Don't think the euro is immune either. As the dollar goes, so goes the euro and yen. 

The only people doing any consuming will be the uber-riche. Probably in SDR's or some other money substitute."

Here comes the Iraqi dinar...

Wed, 11/10/2010 - 19:50 | 718181 Husk-Erzulie
Husk-Erzulie's picture

The Iraqi "Swiss" Dinar is a really interesting study in paper money value and psychology by the way.

Wed, 11/10/2010 - 21:10 | 718359 tmosley
tmosley's picture

Nah, the next reserve currency will clearly be the Sudanese dinar.  I can sell you some now, at a great discount rate of 53,984 for a dollar.  I have it on good authority that it will quintuple after some secret meeting of Sudanese finance ministers.  Why I'm not holding on to them myself, I'll never know.  I must be crazy!

Wed, 11/10/2010 - 18:10 | 717863 Fraud-Esq
Fraud-Esq's picture

The unemployed today were FAKE employed off the easy money and credit sizzle of the 00's.

all fake with a delayed cost. All that income-made then had a high cost, today. It was all predictable post-NAFTA/WTO, which was the result of money seeking higher return. When Al Gore and Rush Limbaugh AGREE on something, people should stop and think! We could have faced the structural downside incrementally post-NAFTA/WTO. Instead, we papered it over with easy money, a massive asset bubble (fake wealth) and the fake jobs and income that goes with it. These 00's failures make incremental structural change harder.

Now, the bottom 80% will have to be sedated or they can take over the country...

Will they blow things up, end free trade or point a gun a China and demand they unionize?    

Wed, 11/10/2010 - 18:07 | 717865 jpintx
jpintx's picture

I see the central thesis of his article as correct.  That said, I have a question, is what we are in for really inflation or is it actually dollar devaluation?  May be this is a distinction without a difference, still, someone humor me and address this.

Wed, 11/10/2010 - 19:35 | 718145 Green Leader
Green Leader's picture

"Governments will find that they are unable to restrain themselves from printing ever more money in an endless wave of uncontrolled emission. At the same time, rising taxes, commodity prices, and costs of all kinds, coupled with a rising overall level of uncertainty and disruption, will curtail economic activity to a point where little of that money will still circulate. Inflationists and deflationists will endlessly debate whether this should be called inflation or deflation, unconsciously emulating the big-endians and little-endians of Jonathan Swifts Gulliver's Travels, who endlessly debated the proper end from which to eat a soft-boiled egg. The citizenry, their nest egg boiled down to the size of a dried pea, will not be particularly vexed by the question of exactly how they should try to eat it, and will regard the question as academic, if not idiotic."

http://cluborlov.blogspot.com/2009/12/predictions.html

Wed, 11/10/2010 - 18:08 | 717871 DollarDive
DollarDive's picture

There once was a man named Ben.
He printed more dollars than yen.
Stop ! - He was told - By a few of the bold.
As the World ran away with the gold.

Wed, 11/10/2010 - 18:33 | 717958 Ned Zeppelin
Ned Zeppelin's picture

There once was a man from Nantucket. . . .

Wed, 11/10/2010 - 19:02 | 718061 tmosley
tmosley's picture

He paid for his bread from a bucket. . . .

Wed, 11/10/2010 - 19:54 | 718195 Husk-Erzulie
Husk-Erzulie's picture

There once was a man from Grants Pass

Who had testicals fashioned of brass

When he banged them together

They played Stormy Weather

And lightning shot out of his ass

just couldn't help myself...

Wed, 11/10/2010 - 20:22 | 718247 DollarDive
DollarDive's picture

+1000000

Wed, 11/10/2010 - 18:13 | 717883 earnyermoney
earnyermoney's picture

Here's an interesting tweet from Margaret Brennan. Do not think that's priced into the market.

http://www.bloomberg.com/news/2010-11-10/fed-may-not-complete-600-billio...

Wed, 11/10/2010 - 18:23 | 717916 Sean7k
Sean7k's picture

Nice piece. Ugly numbers. Brings the point home...

Wed, 11/10/2010 - 19:50 | 718183 RockyRacoon
RockyRacoon's picture

Thanks for the link.  I'd love to send it on to some people but I'm afraid their eyes would glaze over, or it would interfere with Idol.  Is it available on their iCrap?  Some very sobering data.

Wed, 11/10/2010 - 18:22 | 717914 Pumpanddump
Pumpanddump's picture

The US Government's plan: More and more of the US population will be dependant on Food Stamps which they think will offset food inflation caused by QE2, QE3, QE4....

Wed, 11/10/2010 - 18:23 | 717917 philgramm
philgramm's picture

This is another way to put pressure on the populace.  Better spend your money before it depreciates and you can't buy sh*t with it.  The problem is that it works in the same way as all the other tricks they have been using all along (pull forward demand).  Financing for the car you can't afford, financing for the house you can't afford, credit card for the plasma TV you can't afford.  If you create a culture of little or no accountability or fiscal responsibility you will get just that...........the problem is that you will need people to be increasingly more irresponsible in order to keep the Ponzi going.  HeliBenny is finally seeing what happens when the populace decides that they aren't buying it.  People everywhere are deleveraging.  The retail numbers, home sales, and luxury item sales undercore this same fact.  Sorry Benny, you are just as fucked as we are.

 

Practical Anarchy bitches..................and gold bitches!!!!!!

Thu, 11/11/2010 - 11:17 | 719302 tip e. canoe
tip e. canoe's picture

my thoughts exactly.  they're trying to squeeze blood from a stone BY ANY MEANS NECESSARY.

“the worst thing that could happen to the world economy, not just ours but the entire world’s economy is if we end up being stuck with no growth or very limited growth.” -- big O 11/09/10


Wed, 11/10/2010 - 18:27 | 717928 Waterfallsparkles
Waterfallsparkles's picture

Bravo!!! My thought exactly.

Wed, 11/10/2010 - 18:29 | 717936 B9K9
B9K9's picture

Ah yes, another day, and another ZH article propounding the absurd principle that gentle Ben doesn't know what he's doing. Sigh. So once more I hoist my burden by attempting to explain yet again what the world is all about, and what is really driving the various moves & maneuvers we see taking place each day.

Here it is: peak oil is real. Not only is it real, but the leading players know it's real and are making appropriate preparations. And get this - the USA at present is holding an incredible advantage of not only being able take the lion's share of diminishing resources, but to both acquire & consume it at a tremendously inexpensive cost.

Consider this analogy: there is a room where pairs are playing musical chairs, except the loser(s) are taken out and shot. Now, one pair, an Army Ranger and a dumpy, fat kid, just happen to not only know the ending of each song, but get to choose the very song/end point as well!

However, the dumpy kid can't keep his hands out of the cookie jar, so the other players, who are resentful in the first place that this pair get to choose the songs, have stated that if the fat kid doesn't stop it, someone else will get to choose the song.

Now, I ask you, if you thought this game was a joke, then maybe the Ranger blows off these threats. But, after witnessing a few, very real executions, he's thinking to himself that perhaps if the fat doesn't stop, he's gonna have to take matters into his own hands first.

Because in this situation, there is no way the Ranger is going to be willing to take a chance of losing the privilidge of choosing the song/end just because some punk can't control his urges. Get the picture?

Moral of the story: if you don't understand what the players are playing for and the very real stakes for losing, and then stop & consider that one player has this amazing advantage, then you won't realize that there's no way in fucking hell that they are going to take any chances about losing that advantage.

Wed, 11/10/2010 - 18:36 | 717974 traderjoe
traderjoe's picture

Setting aside the fat kid analogy, what do think is going to happen next? 

Wed, 11/10/2010 - 21:51 | 718464 B9K9
B9K9's picture

I think there is going to be a legal coup, similar in many ways to what happened during the Watergate era. It's either that, or face a real 'enemies, foreign & domestic' situation as this mofo spirals out of control.

Under this scenario, Biden (Agnew) first resigns and Petraeus (Ford) is immediately confirmed as VP by both the House & Senate. Then say good-bye to 'Bama (Nixon), and give a big, warm welcome the 13th general to have become President of the USA.

Petraeus would be an obvious choice, not only for his experience/accomplishments, but also because he would be neither D nor R. Secondly, he'd have around 100 days in which to abandon the $FRN, switch over to a new Treasury greenback, and cajole all of our creditors to agree to some kind of swap.

Wed, 11/10/2010 - 22:03 | 718488 ebworthen
ebworthen's picture

Just when you think there will be some form of order imposed, chaos intervenes.

I really doubt your scenario; this is an all or nothing game.  There will be a slow orderly collapse, or blood in the streets and chaos; not the in-between you picture.

Thu, 11/11/2010 - 00:13 | 718716 SDRII
SDRII's picture

The scenario is ludicrious. The entire thing presupposes the country didnt know what it was getting when it elected Obama. In other words the approach is not a surprise. The politics of oil are surely front and center but the problem is a coalition of the willing to move to another standard. And another standard it will be; as the say we can do this the hard way or we can do this the easy way. The IMF/Security council changes are all about negotiating an eastern settlement that leaves intact the incumbant coalition of the washington consensus (interesting that GS is out with such lingo - maybe they read ZH too). The public has gone flacid and as some famous general is quoted as saying a civilization unwilling to defend its values is one that ceases to flourish, army rangers notwithstanding.  

Thu, 11/11/2010 - 01:12 | 718773 traderjoe
traderjoe's picture

I personally think they will create a false flag, regional conflict, or someone other distraction/fall guy to implement some of the items you discuss, including an abandonment of the FRN. I wish desperately for a Treasury greenback, but think the bankers will never allow that to happen without a coup from the people (who aren't aware enough of the parasitic nature of the FRN). 

Thu, 11/11/2010 - 08:34 | 718937 i-dog
i-dog's picture

I agree. The objective is the destruction of the FRN to enable the bankstas to move their control up a rung from separate individual CBs to the IMF/WB.

If congress were at all interested in saving/reviving the American economy, you'd think they would have taken at least one step towards reducing spending, or encouraging repatriated manufacturing, or protecting the borders! Instead, all they have done in the past 10 years is rapidly increase spending and declare more treasury-draining Asian wars while fleecing the middle class through very deliberate -- and legislatively enabled -- ponzi scams. Congress is demonstably a captive to the bankstas.

All they are doing now is kicking the financial can down the road long enough to impose totalitarian control over the bankrupt middle classes of the US and UK (and possibly Western Europe, too, though probably not in the immediate term (too many borders and too many independent governments, for now). FRB purchases of trillions in US Treasuries (which are a charge over the country's assets) ensures that they own the American people and all their remaining assets.

I think the "legal coup" already took place under JFK. That's when the raft of onerous executive orders -- giving the POTUS dictatorial powers under any declared "state of emergency" (which have now been in place continuously since the fake 9/11 "changed the world") -- were put in place and when the CIA (the oligarchs' private enforcement arm) manouevered the US into Vietnam to start draining the post-WWII prosperity and associated superpower status.

Petraeus may indeed become the figurehead soon, but this is simply the endgame in a long strategy by the bankstas and other powerful families to impose a single global government and banking system. IMO.

Thu, 11/11/2010 - 05:21 | 718921 Seymour Butt
Seymour Butt's picture

Wow, this is the most insightful take on the situation I've seen. Is deja vu all over again. 

Wed, 11/10/2010 - 20:37 | 718168 Green Leader
Green Leader's picture

"Here it is: peak oil is real. Not only is it real, but the leading players know it's real and are making appropriate preparations. And get this - the USA at present is holding an incredible advantage of not only being able take the lion's share of diminishing resources, but to both acquire & consume it at a tremendously inexpensive cost."

You got it right, indeed.

Great analogy, too!

I read USA grabbed Iraqui oil futures @ just $31/barrel.

USA's Baghdad embassy is its largest, Haiti's will be the FIFTH largest. Haiti had a 'mysterious' earthquake earlier this year and now a man made hurricane, following a cholera outbreak of one of the deadliest strains, attributed, apparently & allegedly, to Nepalese UN peacekeepers.

Connect the dots:

http://cluborlov.blogspot.com/2010/11/peak-oil-is-history.html

Peak oil is real and its downward slope will be steeeper that previously exposed.

Green tip of the day: I purchased a single cylinder, battery operated, wireless tachometer. It's going to be used to set my two cycle engines (brushcutter, trimmer & chainsaw) to run on aviation gas. It has a much longer shelf life than gasoline and higher octane rating (100).

 

Wed, 11/10/2010 - 21:24 | 718398 Cheesy Bastard
Cheesy Bastard's picture

Too bad Avgas is $5.00 per gallon.  Buy some stabil.  What kind of greenie uses 2 stroke engines, anyway?

Wed, 11/10/2010 - 23:00 | 718576 Green Leader
Green Leader's picture

From what I hear, some landscapers & grounds keepers do so because 2 stroke engines last about twice as long when run on AvGas. Plus, the increased performance is worth the price, too. The dealer that sold me my Shindaiwa 357 arborist chain saw sells AvGas to his customers. AvGas will last about 2 years without any kind of stabilizer.

"What kind of greenie uses 2 stroke engines, anyway?"

I'm not like the others. My mother always told me so.

Joke aside, I am a firm believer in appropriate levels of technology. I used to work at a nuclear power station, hows that?

Wed, 11/10/2010 - 18:30 | 717943 Ned Zeppelin
Ned Zeppelin's picture

"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."

Actually, I don't believe that is their intention, goal, agenda or anything else. The supposed mechanisms whereby QE2, its predecessors and inevitable progeny, keep morphing on an almost daily basis.  I cannot say what the real reasons are, I might be able to guess, but I can definitely spot the phony reasons when they are trotted out.  That is one of them, as is any other proferred reason that doesn't include the words "big banks" and "survival."

Inflation in the necessities, which is what this article is about, will cause a compression of margins in personal spending, and reduce amounts left for crazy things like, oh, just as a for instance, debt service. So people won't spend their dollars freely - as a matter of act, this kind of stagflation will lead to USD hoarding by consumers, or better said, conservation or rationing of dollars. Why? Wages aren't rising, so every dollar spent on a frivolity is one more dollar that might be needed tomorrow to pay for that ever more expensive tank of gas to get to work, or food for the kids, or cotton clothing so they can dress for school.

Harry's slowly growing economy might very well show up in the statistics as expenditures on these consumer necessities grow  (but only due to rising prices), but it won't be due to the economy growing, only the unit of measurement, FRNS, declining. 

As I like to point out to those around me who say gold is going up, I reply that gold is actually doing nothing but sitting there - it is Einstein's speed of light, against which all else is measured.  So gold up really means gold same, FRN down.

The only thing inflation will do, if it occurs in real estate (the last place it will show up) is to create new equity in currently underwater positions.

 

Wed, 11/10/2010 - 18:49 | 718025 GoingLoonie
GoingLoonie's picture

You have taken a very sane approach to all this.  But, when and if the dollar starts to free fall, buying will pick up as people try to spend while there is a little value left.  Given our leadership we may reach that point just as they did in the 80's in South America.  Can you say, "Harvard, Princeton and Yale values hard at work in the USA."

Wed, 11/10/2010 - 21:55 | 718472 B9K9
B9K9's picture

Harry and Robo are trolls. Why anyone would give them any credence, much less expend one iota of effort attempting to rebut their posts is lost upon me.

Wed, 11/10/2010 - 18:31 | 717947 Waterfallsparkles
Waterfallsparkles's picture

Another thought.  What happens when Bernanke depreciates the Dollar to the point that no one wants it?  Then what happens?

Wed, 11/10/2010 - 18:33 | 717957 Eyes on the World
Eyes on the World's picture

That, dear reader, would be the definition of HYPERINFLATION.

Wed, 11/10/2010 - 18:37 | 717980 GoingLoonie
GoingLoonie's picture

In case you have not noticed, that has started.

Wed, 11/10/2010 - 18:34 | 717964 GoingLoonie
GoingLoonie's picture

Senor Lira, Benny's intent is not to help US Citizens it is only to help his elitist wall street and pompous political friends.  He knows exactly what the outcome will be, and for that very reason intends to follow through on the QE2 threats he has made.  This is making me loonie!

Wed, 11/10/2010 - 18:41 | 717990 hambone
hambone's picture

QE has made austerity or balanced budgets unneccessary. No politician interested in being re-elected will willingly take away goodies while the option to simply "QE" more exists. Sure, fine to propose balances or tax increases so long as they are way out there and backloaded so we can pretend we'll do something we never truly intend to.

This is where Democracy made up of incapable CITIZENS fails. Politicians play to the lowest common denominator and are rewarded for this.

They have the reserve currency, they have the reserve military force (w/ large missiles that can shoot of the coast of LA and yet no one knows anything about it), they have QE and CB.

There will be no austerity or cut backs. QE allows for all.

QE allows us to buy up all new T and bond issuance and as importantly allows us to become the holder of nearly all T debt - this ensures no concerns about an interest rate spike in the future or preoccupation w/ China, Japan, etc. Welcome to 1% 10yr interest rates ala Japan...an investment return only our gov could love.

QE allows for housing to be resolved via Fan Fred buying and holding enough inventory to create scarcity and likely even able to restart construction (when they are only digital bits, no problem).

QE allows for UE resolution through unlimited UE bene's, foodstamps, etc. Like housing, we'll create wage appreciation via removing millions from the work force via unending bene's (ala Europe...why work if I can get free stuff for nothing).

QE allows politicians unlimited goodies and sure re-election.

QE ensures commodity ramp and then QE allows gov to come back and offer those most impacted gov programs to help deal with the unfortunate inflation.

QE allows for taxes to go down forever and ensures corporations needn't pay. QE allows personal taxes to be more a social control valve (too hot / too cold) than a real balancing mechanism.

QE means all branches of governments interests and those of the lobbyists (and their masters) are aligned over the law, the constitution, and our forefathers wishes.

QE allows whoever is in charge to change the rules on demand to maintain the desired situation.

My paradigm of what America is has been utterly altered (destroyed?) and please tell me I'm wrong - that there is some self regulating feature of economics that will restore the country, some revolutionary path that will make American's "give a shit" while they still can?  So yes, I agree hyperinflation somehow, someway seems imminent.

Wed, 11/10/2010 - 18:55 | 717994 Careless Whisper
Careless Whisper's picture

(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.)

hey, maybe he learned at princeton that inflation is good. yeah don't they teach that there?

either mister gonzo is really naive or he is unwilling to admit that the global bankers control mister ben.

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