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If Everybody Is Importing Inflation... Then Who Is Exporting It?

Tyler Durden's picture




 

Recently, some have started to ask a very pertinent question when it comes to the global Current Account: with every developed and developing country supposedly seeing a surge in exports, just who is it that is doing all the importing? Sean Corrigan from Diapason takes this question, and flips it on its head, as regards the printing of money and the "trade balance" of inflation: if every central bank continues to excuse itself from taking responsibility from what is now a global money printing pandemic, claiming it is merely importing inflation... then who is doing all the inflation exporting? Read on for some brilliant observations...

From Sean Corrigan of Diapason Securities

In his recent Congressional testimony, our dangerous monetary Dr. Moreau was forthright in defence of his latest wild experiment in inflationism, saying that the rate of the fall in the value of people's money was "expected to persist below the levels that Federal Reserve policymakers have judged to be consistent with their mandate."

Obviously, the Chairman has not been to the gas station recently, nor has he popped out to the supermarket to restock his larder or he might have noticed that, as AP reported at about the time he was speaking, "Some food makers... began selectively raising prices within the past few quarters. Those higher prices have begun filtering into stores. Supermarkets have resisted price increases for some time, hoping to hold onto their cost-conscious customers in the tough economy. But chains such as Kroger now also say higher prices are coming..."

As the article goes on to note, such notables as Kellogg, Sara Lee, Smucker, Tyson Foods, and McDonalds are well on the way to taking steps to defend their margins with overt price rises while many companies have already moved to disguise the adjustment by changing portion sizes or switching to lower grade ingredients.

Cotton prices have, meanwhile, more than doubled in the past 5 months — potentially pushing up apparel costs across the board — an escalation which has not been seen in a like period for at least half a century.


While Bernanke is trying to blame such inconveniences on demand in the emerging markets (without inquiring too closely into what it is that such demand is predicated upon), the disinterested observer might note that it is not entirely a coincidence that this latest resurgence has occurred as he and his colleagues have done their best to make good on the cart-before-the-horse, Jackson Hole doctrine of raising inflation expectations in order to lower hypothetical real yields in some corner of the de Wittian multiverse (incidentally, a source of obvious contradiction when he now attempts to deflect his critics with the claim that such expectations have remained gratifyingly 'stable')

Indeed, as the next figure shows, the rate of increase of proper (Austrian) money supply this past semester is in excess of trend to its greatest degree since the immediate LEH-AIG, core meltdown SCRAM and lies in the 96th percentile of the last three decades' range.

Moreover, as the graph appended in large format at the end of this article makes plain, the implementation of QE-II via the programme of buying Treasury bonds has been mirrored in a surge in commodity prices no less strikingly than did their rebound from the post-Crash lows correspond to that of QE-I.


But, as one TV anchor challenged me earlier this week, "isn't a little bit of inflation a price worth paying for an increase in employment" to which the answer is unequivocally, "No!", not least because of the eternal temptation to try to avoid ever paying it.

More fundamentally, this whole issue of using monetary and fiscal 'stimulus' to repair a slump which has been typically brought about through previous, ill-judged attempts to steer 'policy' has at its heart a dirty little secret. Because of the entrenched factional interests of the Entitlement State — often, but not always, reinforced by labour union militancy — the same Fabian elite whose bankrupt, Tooth Fairy wishfulness has cost far too many souls their livelihoods perennially despairs of anyone ever regaining employment by facing up to the tough but inescapable fact that the man giving them a job has to earn his living, too.

Thus our leaders routinely quail before the political and presentational difficulties of telling those who have misleadingly become accustomed to a better standard of living in the Boom than their input into the productive process actually merits that they must now face a less comfortable reality and temporarily accept less reward for more effort while the economic structure reorders itself in a more sustainably fashion.

Ultimately, the so-called Keynesian miracle is based on the shallow deceit that if Mohammed will not go to the mountain of lower unit, nominal wages, the mountain must be transported to Mohammed using the machinery of inflation to reduce the real value of those same wages.

The only problem with this nostrum is that it fails — in typical aggregationist fashion — to see that what counts for each individual employer (the idiosyncratic human atom who helps constitute the featureless, mathematical abstraction called 'employment') is that the monetary value of the sales of his particular goods or services must rise faster than the sums he expends on the workers who give rise to them — i.e., that the value of their marginal product exceeds once more their marginal cost, or else there is no point hiring them.

Even that is not the end of the story, for our businessman also needs to pay for all the other inputs which go into his endeavour — raw materials, plant, equipment, components, capital means, rent, taxes, and levies such as mandatory health-care, carbon taxes, unemployment 'insurance', and pension contributions (the last, you will notice, thoroughly amenable to alleviating political action of a far more beneficial kind).

It should be obvious that, once the authorities begin monkeying with the volume of money in the system, it rapidly becomes almost a matter of happenstance that any one company finds itself in the favourable position that its costs will inflate more slowly than its revenues: it should be even more apparent that it is an outright impossibility that this can be the case for everyone, all at once [see the succeeding figure for a very broad brush illustration in the case of the UK].

Further complications arise from the consideration that the very fact there has even been a Bust proves that an inordinate number of people had previously been lured by the economy-wide Ponzi scheme of the Boom into lines of work which have now been shown to be either sub-marginal, or completely unviable. Part of the reason for this is that the Boom has introduced a progressively wider and more pervasive disparity between what people do to acquire their own purchasing power and what they choose to spend it on (whether that takes the form of end-goods or debt service payments).

Given this reality, what do you suppose are the chances that the renewed inflationary tide will not only lift all boats equally — that there will somehow arise absolutely no differential injection, or Cantillon, effects - but that it will preferentially refloat the seabed wrecks of those which have foundered amid the Bust and so miraculously restore employment and income levels to their former, febrile heights?

Beyond even this, a further malign feature of inflation is that it makes the reading of the underlying balance of supply and demand - not just for specific goods, but for all goods in their ever- shifting, near-infinite matrix of interrelations - even more difficult than usual because it corrupts the signals inherent in their relative, even more than in their absolute, prices.

Think of the transmission of money in the act of exchange as the sending of a communique describing some essential features of what took place in that transaction and why. Now imagine that the text of the message is arbitrarily and unpredictably altered — sometimes with the addition of characters, sometimes with their deletion - and also that the time taken to deliver such missives is expanding and contracting in what may be a quasi-random fashion.

Contemplate the difficulties which also arise because of the time-varying nature of the inflation. Because the inflation is an extraneous act of political will (or financial caprice) — and so is subject to sudden stops, starts, and redirections — it represents a dangerous aggravation of the normal entrepreneurial hazards inherent in organizing profitable production on into an uncertain future in a constantly-evolving economy.

At the very least, this confusion should serve to heighten actual business risk even if ostensible risk premia are being artificially suppressed by the weight of new money acting on the financial market - a combination which is all too likely to lead an entirely new fleet of White Star liners on to the rocks of the inevitable Bust to come.

 


If there is not yet much hope that an inveterate 'output gapologist' like Mr. Bernanke — or, for that matter, Mr. King — will be persuaded of the foregoing, there are clear signs that — somewhat belatedly, perhaps — some of those in office in the emerging market power houses have begun to waken to their peril.

In Brazil, official rates have been raised four times for a total of 250bps and there is a great deal of expectation that another 50bps is in the pipeline. India, for its part, has moved the repo rate up in seven stages for a cumulative 175bps with, again, another 50bps thought likely to materialize over the next couple of months. China, of course, has so far only managed to steel itself to deliver three hikes of 25bps in an interval in which the annual CPI could well have accelerated more than three times as fast.

That said, the latest editorial in the official People's Daily mouthpiece was fairly uncompromising on the interpretation which it hoped would be put upon the latest of these rises.

"To sustain sound and stable economic growth, Chinese policymakers must take more measures to prevent inflation from escalating further... The timing of the announcement, at the very end of the lunar New Year holiday, displays an extraordinary sense of urgency. Had the pressure of accelerating inflation not been so huge, Chinese central bank officials would not have needed to break their holiday to take action..."

Just in case we were in any doubt of his inflationary intent, Chairman Bernanke had the gall to express an open disapproval of the move — branding it as 'surprising'. Given that he blames China for rising food prices, this may seem just a little too cute, but his incoherence was only compounded by his remarks that instead of interest rates, the Chinese should revalue the currency and so redirect exports to meet internal demand.

Well, over the long run, that does makes sense for the ordinary Chinese, but it completely misses one or two obvious, interim objections, namely that: (a) since capital and labour is heterogeneous, Ben - as we discussed above - a painless reallocation would be impossible to engineer outside of a Harvard eco department spreadsheet and (b) even if, by some miracle, domestic consumers did manage to take up all the redirected, former export goods (and at a profitable price for their makers), pressure on world resources would hardly abated by the cessation of Chinese saving this involved (however inequitably 'forced' much of this may currently be).

For their part, the Chinese were quick to shoot back at their decrier that:-

"In addition to such domestic factors as rising food prices and labour costs, the super-loose monetary policies that major developed economies have adopted to inflate their way out of recession are also undermining the country's efforts to curb inflation by driving a large amount of capital flows into emerging economies including China."

"...[Bernanke's] remarks indicate that the United States is far from even recognizing the danger of too much cheap money, which, to a certain extent, led the world into the worst global financial crisis in more than 70 years in the first place, and now threatens to fuel runaway inflation in many emerging economies."

What a funny old world it is: all this 'imported' inflation everywhere we look and, seemingly no-one to be found anywhere who is actually responsible for 'exporting' it.

 

 

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Sat, 02/12/2011 - 20:57 | 956680 RobD
RobD's picture

O.T Fight Club is on TNT at 6:00pm pacific.

Sat, 02/12/2011 - 21:13 | 956708 MsCreant
MsCreant's picture

No, fight club is on, here, now.

Sat, 02/12/2011 - 21:19 | 956718 Trimmed Hedge
Trimmed Hedge's picture

I'm too cheap to afford cable.  : (

Sat, 02/12/2011 - 22:41 | 956853 Bringin It
Bringin It's picture

MsCreant and Trimmed Hedge one on top of  the other.  Excuse me while I ponder that for a moment ;)

TH. re. cable - try download.

Sat, 02/12/2011 - 23:16 | 956919 Cash_is_Trash
Cash_is_Trash's picture

La inflacion es exportada por los Estados Unidos.

El Visconde Monetario Von Bernankestein es el responsable.

...hijo de su puta madre.

Sun, 02/13/2011 - 02:21 | 957209 Mentaliusanything
Mentaliusanything's picture

Correct - The reserve currency is what all comodities are priced in.

Weaken the currency you force the lift in asking prices (or you will go out backwards)

Strong reserve currency means cheaper life.

Sun, 02/13/2011 - 02:44 | 957225 Michael
Michael's picture

Someone should forward the past three days postings at ZH to BB.

Sun, 02/13/2011 - 15:41 | 957957 Cash_is_Trash
Cash_is_Trash's picture

I don't trust Zero Hedge, it's all fact and realistic data, that just doesn't do it when the whole country is living a lie.

Sun, 02/13/2011 - 03:37 | 957261 Hook Line and S...
Hook Line and Sphincter's picture

Si, senor basura.

Mon, 02/14/2011 - 02:23 | 959000 sbenard
sbenard's picture

LOL! Now I know why you wrote that in Spanish! When I lived in South America, I always found that profanity didn't seem to have quite the bite in the other tongue!

And by the way -- I couldn't agree more!

Sun, 02/13/2011 - 04:37 | 957290 Wood
Wood's picture

I have fight club on blu ray anytime I want.  Meatloaf still dies.  Forward or backward.  I cry everytime.

 

edit:  you should reserve the domain:  zerohedgefightclub.com soon as you can.  just sayin'....

Sun, 02/13/2011 - 05:02 | 957302 10kby2k
10kby2k's picture

What if our politicans had balls ....like any fighter.  Just a bunch of vaginas.

Sun, 02/13/2011 - 07:27 | 957346 slackrabbit
slackrabbit's picture

In life he was known as Meatloaf.. in death "his name is Robert Paulsen"

;-)

Sat, 02/12/2011 - 21:12 | 956698 snowball777
snowball777's picture

the guilty

But seriously...is BernankeMoreau responsible for Russian wheat fires, failed cotton crops in Pakistan, and cold weather fucking up the veggies in Mexico?

At least some of this inflation has to be based on supply shocks and increased EM demand...not all of it mind you, but we do ourselves a disservice to pretend that it is all Bennie and the Inkjets.

 

Sat, 02/12/2011 - 21:18 | 956714 mberry8870
mberry8870's picture

Personally I think there are a number of things working at once, growth of a middle class of about 2 billion people, bio-fuels, weather and the impact on the margins of this massive amount of currency printing at the same time. I think the issue is that this irresponsible printing money at this time tipped the scales.

Sat, 02/12/2011 - 21:50 | 956767 More Critical T...
More Critical Thinking Wanted's picture

 

It's not money printing. It's called "more trade".

ZH asks this rhetorical question:

Recently, some have started to ask a very pertinent question when it comes to the global Current Account: with every developed and developing country supposedly seeing a surge in exports, just who is it that is doing all the importing?

It's like claiming:

All districts in a city report heavy outbound car traffic. If every district is reporting heavy outbound traffic then where is all the inbound traffic??

How about the simple concept of "there's heavy traffic in both directions"?

Did the concept of "increased trade all around the world increasing both exports and imports" never occur to the genius who wrote this article?

So this article earns the #1 spot for the most idiotic ZH headline ever :-)

 

Sun, 02/13/2011 - 01:37 | 957141 Terminus C
Terminus C's picture

If all countries are seeing a current account surplus... then there is an issue of reporting.  If all countries are just seeing an increase in exports then you may have a point.  For the most part I understand you to be a troll (judging from your previous posts) and I think that you recognize my initial statement to be the intention of the headline.  If the second interpretation I mentioned was the intention, then you have a point.

Sun, 02/13/2011 - 08:05 | 957373 More Critical T...
More Critical Thinking Wanted's picture

 

If all countries are seeing a current account surplus... then there is an issue of reporting.  If all countries are just seeing an increase in exports then you may have a point.  For the most part I understand you to be a troll (judging from your previous posts) and I think that you recognize my initial statement to be the intention of the headline.  If the second interpretation I mentioned was the intention, then you have a point.

So you agree with me that the sentence I quoted is bogus on its face?

Now, you imply that it might just be an honest mistake and that the intended text would have to be about the account balance. Except that the article does not even cite any current account and import/export statistics. It keeps babbling about the Austrian money supply and PPI statistics - which are as far from global trade data as it gets.

AFAICS the article is pretty much bogus in its entirety, and the bogosity starts right in the first paragraph. The article apparently tries to make up for blatantly broken links of logic by volume - but science does not work that way: it's the weakest link that breaks the chain. I'd prefer a half-page article that is robust in its entirety and does not make elementary mistakes.

Btw., you think I'm a troll, still you agree that I made a valid and relevant point? That's a pretty funny definition of 'troll' :-)

 

Sun, 02/13/2011 - 02:26 | 957211 system failure
system failure's picture

$BDI???

Sun, 02/13/2011 - 08:15 | 957374 More Critical T...
More Critical Thinking Wanted's picture

 

The Baltic Dry Index increased by 20% in the last 2 weeks.

Funny enough, that development was not reported on ZH, only when it was dropping :-)

It's a bit like ZH's gold price reporting: weekly and monthly highs are always reported - and sometimes even intraday highs are reported as big news, but weekly lows or monthly lows of gold - that's not news on ZH :-)

 

Sun, 02/13/2011 - 09:12 | 957411 DonnieD
DonnieD's picture

Baltric Dry declined 60% since September and 75% since last May. How does that correlate with demand pushing up prices?

We are living in a world economy that is centrally planned by governments and the governments lie their asses off to stay in power. Do you really believe the US GDP/inflation numbers, much less Chinas?

Sun, 02/13/2011 - 09:59 | 957434 More Critical T...
More Critical Thinking Wanted's picture

 

Do you really believe the US GDP/inflation numbers, much less Chinas?

The US inflation (CPI) numbers were largely confirmed by an independent MIT project recently featured on ZH:

http://www.zerohedge.com/sites/default/files/images/user5/imageroot/von%...

http://www.zerohedge.com/sites/default/files/images/user5/imageroot/von%...

So the US government's CPI metric appears to match reality.

China's inflation data I cannot trust as there's no transparency and no independent verification - and even the official data suggests very high inflationary pressures.

Baltric Dry declined 60% since September and 75% since last May. How does that correlate with demand pushing up prices?

Four important points:

  1. All data suggests that much of the food commodities price increases are due to reduced production/supply. Reduced demand for shipping Russian grain over the sea would result in a lower BDI.
  2. Most global food commodity shipping is not captured in the BDI (it is 'Baltic' for a reason) - so an uptick in demand in India or China would not show up in the BDI. And that is precisely what other data suggests is happening: India and China is importing (much) more food.
  3. Oil shipping is not captured in the BDI - and for oil too, much of the price pressure is due to production/supply problems: peak oil. Pressure on the supply side gets captured via decreased (or stagnating) shipping.
  4. There was a much colder than average winter in Europe:

https://secure.wikimedia.org/wikipedia/en/wiki/Winter_of_2010%E2%80%9320...

Which negatively impacts demand for shipping.

I'd expect a strong BDI up-swing to continue into the spring.

We are living in a world economy that is centrally planned by governments and the governments lie their asses off to stay in power.

We are most definitely living in such a world - but FYI, western government power to lie about key economic data is limited. There's a lot of independent/private data capture going on, so any 'big lie' gets figured out quickly. Most big companies rely on accurate economic data - so the demand for accurate data is very strong.

The power of authoritarian dictatorships to lie about economic data and to suppress independent data gathering is undisputed - we cannot trust anything coming out of China for example.

 

Sun, 02/13/2011 - 10:05 | 957453 Moe Howard
Moe Howard's picture

The problem with the numbers is that they don't take into account real people, real lives.

Say for example you are retired from the Army. You get a check about 1/10th of a retired LA police officer or fireman. There has been no cost of living increase for the last two years. On March 1st, Federal Withholding from Army retirement checks is going up for most retirees, and I quote:

Recent changes to the tax law, tax tables, and other legislation changed the amount of Federal Income Tax Withheld. These changes will be reflected in your Retired Payment dated March 1, 2011.

Give this some thought. What prices do the government claim have fallen? Big TVs, cars [I question this] and homes. Well, in my area, in the last two years, purchasing the same exact new vehicle costs over $2K more. I am sure it is the same elsewhere. A big TV for a retired person would be, at most, every 5 years. Home? Retired people who are actually retired aren't buying homes anyway, however, home prices are the same now as two years ago.

So the bottom line is the government is cutting retired military pay. They are doing this in two ways: Inflating the money supply so the cash the retiree gets is less; and increasing taxes to reduce real income. I am positive it is the same for people on social security.

I think what they have in mind is to cut the Federal Budget by reducing the worth of the FRNs paid out, and taxing the payout more. This is being done without holding messy votes in Congress.

The banksters inflation hurts real people. In other countries, like Tunisa, Egypt, Algeria, it starves the ordinary people. They aren't purchasing houses, cars, big screens. They are purchasing flat bread, cooking oil, sugar and tea.

Sun, 02/13/2011 - 10:20 | 957469 More Critical T...
More Critical Thinking Wanted's picture

What prices do the government claim have fallen?

COLA increases have been largely eliminated from wage deals in the Reagan and Bush anti-union and pro-business legislative and policy efforts. COLA adjustments were common in the 70s.

If you check the CPI data I quoted then after early 2009 the 'government inflation data' (and the MIT inflation data) shows steady increases in the cost of living.

 

Sun, 02/13/2011 - 16:13 | 958019 Andre
Andre's picture

I have to disagree based on personal anecdotal evidence.

  • 15 lb. bag basmati rice at Costco - up $7 in 3 months (15.99 to 22.99)
  • gasoline - up 11 cents in 2 months (2.95 to 3.06)
  • unsheathed copper wire, 12 ga. at Home Depot  - up 3ct./ft in 2 months (.23 to .26)

Other basic prices have risen here (WA state) as well to a similar degree.

I see the misstatement of the CPI as an act of psychology. In previous downturns there was enough liquidity to turn around and say "Things are better!" People would believe it, go out, and buy the country out of recession. At this point, the gap between the statement and the common experience is wide enough the credibility of the system is being undermined in the eyes of the common person, which is a definite problem for a consumer-based economy.

It does not help there is a disturbing employment situation, but I would rather not be flamed for going so far OT.

 

Tue, 02/15/2011 - 05:11 | 962867 More Critical T...
More Critical Thinking Wanted's picture
  • 15 lb. bag basmati rice at Costco - up $7 in 3 months (15.99 to 22.99)
  • gasoline - up 11 cents in 2 months (2.95 to 3.06)
  • unsheathed copper wire, 12 ga. at Home Depot  - up 3ct./ft in 2 months (.23 to .26)

That's +3.7% for gasoline, +13% for copper wire and +43% for rice.

Roughly in line with how these commodities moved (if you use WTI crude for oil, not Brent crude).

A couple of comments:

The last CPI reading is about 1.5 months old (it takes time to collect the data). Here's the latest CPI:

http://research.stlouisfed.org/fred2/graph/fredgraph.png?bgcolor=%23B3CD...

The December CPI was at around 3.5% YOY. I'd expect the next reading to go up.

You listed three products whose price directly depends on a given commodity's price that went up recently. But most everyday products (even including food) do not depend on commodity prices nearly as much:

For example a loaf of bread only has about 10% wheat cost component: the rest is labor and distribution costs - and those are not going up, with this labor market ...

 

Sun, 02/13/2011 - 10:58 | 957518 snowball777
snowball777's picture

The Baltic Dry Index increased by 20% in the last 2 weeks.

Geee...what major geopolitik event occured over the past two weeks near one of the most popular shipping lanes in history?

 

Sun, 02/13/2011 - 10:59 | 957521 Orly
Orly's picture

Don't kill his buzz, man.  He's on a roll.

/:

Sun, 02/13/2011 - 11:27 | 957557 More Critical T...
More Critical Thinking Wanted's picture

Geee...what major geopolitik event occured over the past two weeks near one of the most popular shipping lanes in history?

I suspect you did not realize that by stating that you clearly support the argument that commodity prices are predominantly affected by basic supply & demand forces (such as fears of Suez closing off shipping routes), not by liquidity from the evil Fed? :-)

 

Sun, 02/13/2011 - 11:44 | 957567 DonnieD
DonnieD's picture

Commodity prices are predominantly affected by supply and demand forces. It's the central bank's inflation on top of those prices that earns Genocide Ben his nickname.

Sun, 02/13/2011 - 15:27 | 957921 More Critical T...
More Critical Thinking Wanted's picture

Commodity prices are predominantly affected by supply and demand forces. It's the central bank's inflation on top of those prices that earns Genocide Ben his nickname.

Do you have actual hard data about how much global inflation was created by the Fed, or are you just throwing around baseless genocide accusations?

Also, did you know that more money in the US does not affect global supply and demand forced for food in any major direct way, so alone that statement of yours is in contradiction with your notion that there's significant 'Fed inflation' on top of supply & demand inflation ...

 

Sun, 02/13/2011 - 19:57 | 958395 skipjack
skipjack's picture

"more money in the US does not affect global supply and demand forced for food in any major direct way"

 

You have some fact behind that statement ?  Fed money printing goes first to the PDs, who turn right around and ...tada!...bid up commodities.  Which, I might point out, are mostly not based in the US.

 

 

Tue, 02/15/2011 - 05:11 | 962869 More Critical T...
More Critical Thinking Wanted's picture

 

Read the arguments I made above - they are full of references to hard data.

 

Sun, 02/13/2011 - 11:33 | 957569 Orly
Orly's picture

No, I think he's saying that a speculative blip on a chart secondary to a major geopolitik event should not be construed as a change in pattern.

In general, I hear your basic theme: it's not all doom and gloom out there- and you're probably right.  But you cheapen your argument by trying to hype up every last little detail and I think it is working against you.  It makes your arguments seem cheap and based on staccato signals of faulty information.  Kinda like watching Fox News.  /:

Just my opinion, of course, but it may behoove you to pick your battles more carefully.

Sun, 02/13/2011 - 15:36 | 957930 More Critical T...
More Critical Thinking Wanted's picture

 

No, I think he's saying that a speculative blip on a chart secondary to a major geopolitik event should not be construed as a change in pattern.

I did not claim that.

I just countered the (incorrect) notion that a drop in $BDI means 'no supply & demand forces at play', because the index is mostly blind to supply squeezes and is mostly blind to non-European demand surges - and current food shortages are precisely due to supply squeezes in Europe and demand surges elsewhere.

The $BDI would obviously have to show big upticks on increasing demand - but I'm not making that argument.

(Regarding the picking of battles you are quite right - but my goal is to make arguments, even if they are complex or borderline - not to be always seen correct.)

 

Sun, 02/13/2011 - 16:28 | 958047 Orly
Orly's picture

"...my goal is to make arguments, even if they are complex or borderline - not to be always seen correct."

 

I'm with you there 100%, Critical T.  Rock on!

Sun, 02/13/2011 - 13:07 | 957708 snowball777
snowball777's picture

I suspect you haven't read the post at the top of this thread.

Sun, 02/13/2011 - 12:20 | 957635 the grateful un...
the grateful unemployed's picture

how much does Egypt make every time a ship crosses the Suez?

Sun, 02/13/2011 - 12:58 | 957695 zaknick
zaknick's picture

4-5 billion/year and 1 million barrels of oil per day cross it.

Sat, 02/12/2011 - 22:19 | 956827 FeralSerf
FeralSerf's picture

We're working on that middle class growth thing and it's rumoured that a solution for it is in sight.  Stay tuned -- you might even get to watch it contract.

Sat, 02/12/2011 - 21:26 | 956730 tmosley
tmosley's picture

Exactly.  Crops have never failed before for any reason.  Blaming the weather is not simply a convenient excuse.  The Soviet Union should have won the cold war, they just kept having droughts.  No-one could have been expected to produce like that.

Sat, 02/12/2011 - 22:29 | 956836 snowball777
snowball777's picture

you write these posts from a room with no windows, don't you?

...and a curiously high ratio of CO2 to oxygen.

Sun, 02/13/2011 - 02:08 | 957195 StychoKiller
StychoKiller's picture

"What is the Law?"

"To deny that we are printing, that is the Law -- are we not Banksters?"

Sun, 02/13/2011 - 09:08 | 957407 Bitch Tits
Bitch Tits's picture

See now, I see it as another financial scam. Odd how we're now hearing about all these horrible things happening in the food markets.

Kind of reminds me of the Toyota situation, which came about when American car companies were on their last leg. Now it seems that it was all "user error", after all, eh?

I guess it's time for food producers to get their pint of blood from the "non-productive". Or maybe just those "gambling" on food producers. It's the new post-real estate fad.

Sat, 02/12/2011 - 21:07 | 956700 Hedgetard55
Hedgetard55's picture

The fucking Icelanders are exporting the inflation, now, bitchez.

Sat, 02/12/2011 - 21:09 | 956705 gwar5
gwar5's picture

We are exporting inflation... and damn proud of it! ...Judging by the Bernank's reaction.

Sun, 02/13/2011 - 12:06 | 957613 HoofHearted
HoofHearted's picture

Both exporting inflation and keeping a good lot of it for ourselves. It's the least a humanitarian like the Bernank can do...share with everyone, and charity begins at home.

Sat, 02/12/2011 - 21:15 | 956710 mberry8870
mberry8870's picture

Well said.

Sat, 02/12/2011 - 21:24 | 956725 Everybodys All ...
Everybodys All American's picture

China I believe will continue to raise rates and will never give in to Bernanke's foolish dollar policy.

Sat, 02/12/2011 - 21:25 | 956728 Hephasteus
Hephasteus's picture

Cotton would have been much much much higher if we hadn't used tons of polyester fibers over the last half centry. Now that we have slow down on that. Oops.

Sat, 02/12/2011 - 21:30 | 956736 Twindrives
Twindrives's picture

As long as the Canadians continue to produce good whiskey I'll survive the other shortages.  

Sat, 02/12/2011 - 21:33 | 956738 soolebop
soolebop's picture

why does it seem like the plan is to destroy the USA? It seems like these policies are hurting our country way more than any terrorist ever did. The quacks who've been stacking canned goods or buying farm land and loading up on gold for years are not looking so quacky now! It's hard to believe that some 1 as smart as Bernanke can't see how disastrous QE is... Does it have some thing to do the 1 world government stuff? Because the only way for that to happen is if there is no more USA because we won't stand for it out right, but I swear this looks like a back door attempt to crash our system so they can offer a 1 world so called "better one"...

Sun, 02/13/2011 - 00:25 | 957040 Matt
Matt's picture

  I believe the goal from the Fed's perspective is to make American labour as affordable as Chinese labour. That way, Americans can buy goods from Americans once again, instead of buying everything from China, and this will help with the trade deficit, unemployment, and more.

  In theory, it sounds like a solid plan. Essentially, the Federal Reserve is trying to solve all the problems, since the Federal Government doesn't really seem to be achieving anything at all with regards to trade deficits, Chinese currency manipulation, and unemployment.

  From an execution standpoint, it does leave a bit to be desired, however, to put it quite mildly.

Sun, 02/13/2011 - 06:59 | 957336 Snidley Whipsnae
Snidley Whipsnae's picture

"I believe the goal from the Fed's perspective is to make American labour as affordable as Chinese labour."

I don't know if the Fed is attempting to level labor costs between the rest-of-world vs US, but if they are they have a long way to go.

I believe that a simpler way to look at the situation is that the country that can extract the most REAL gdp from a basket of commodity imports, especially oil, will win the export battle in the long run.

Of course, countries that have substantial natural resources have an automatic advantage in the gdp race.

I am setting aside for the moment that in the long run all exporters will be constrained by limits of natural resources.

"Chinese currency manipulation" ... a very disingenuous argument... there is no bigger currency manipulator than the US.

Sun, 02/13/2011 - 07:46 | 957361 AnAnonymous
AnAnonymous's picture

I don't know if the Fed is attempting to level labor costs between the rest-of-world vs US, but if they are they have a long way to go.

 

The FED is attempting to fight off other countries' efforts to level labour costs.

Other countries want to consume more and it goes through wage rise.

Sun, 02/13/2011 - 18:02 | 958210 sandvikpanther
sandvikpanther's picture

Reagan's first trade Secretary Of Commerce was Baldrige and he commented about this with respect to the NAFTA Treaty and whether American wages would match Mexico's.  This question is still in the process of being answered.  We will match their wage levels or have fewer jobs.  If Chinese wages rise to quickly work will continue to be redeployed to Vietnam and elsewhere.

Sun, 02/13/2011 - 18:03 | 958213 sandvikpanther
sandvikpanther's picture

Reagan's first trade Secretary Of Commerce was Baldrige and he commented about this with respect to the NAFTA Treaty and whether American wages would match Mexico's.  This question is still in the process of being answered.  We will match their wage levels or have fewer jobs.  If Chinese wages rise to quickly work will continue to be redeployed to Vietnam and elsewhere.

Sun, 02/13/2011 - 02:11 | 957198 StychoKiller
StychoKiller's picture

Something your avatar would appreciate:

http://www.frontiernet.net/~jimbot/tutmask.htm

fsck the NWO!

Sat, 02/12/2011 - 21:31 | 956739 palmereldritch
palmereldritch's picture

Conflation

Sat, 02/12/2011 - 21:53 | 956783 Hannibal
Hannibal's picture

Rice and beans with collard greens hosed down with a home brewski will do just fine, 'cause, frankly my dear "I dont give damn".

Sat, 02/12/2011 - 22:04 | 956801 blunderdog
blunderdog's picture

So...everyone is lying about everything all the time, sure. 

Seems to me that even if the USA is exporting, say, 90 million units of inflation per quarter, there's really not enough global demand, and we end up keeping some number of those inflation units here.  And if the exports result in too high a concentration of our inflation in a country that ships goods back to us, there's bound to be a bit of a carry-over effect.

All in all, maybe we can get Krugman to convince the Feds that we should subsidize our inflation-farmers to reduce overall production and keep the price high and the demand strong.  An inflation glut hurts the producers most of all, at least until we come up with some other uses for our productive capacity. 

Perhaps instead of crops of inflation, we should implement incentives to produce innovation and prudence, instead.  We seem to be suffering a real shortage of those at the moment.

Sat, 02/12/2011 - 22:18 | 956819 Hephasteus
Hephasteus's picture

Well you run into the money leak problem. It's really apparent that a lot of the inflation is finding its way into the capital markets. But the problem is that the capital markets don't outperfom gold. So gold and silver are getting a huge chunk of the inflation and then equities. But it always ends up in food. There's simply too much cash for them to stuff it all in equities without it looking rediculous. There's too much cash to stick in gold without it looking rediculous. The biggest market and biggest turnover is always food followed closely by clothing. If you go through the history of money you will always find that number one thing that people have spent money on in all of human history is food. Number 2 thing in all of history is clothing. Which is where all the excess slosh will eventually land. So what's the price of grains and how's that cotton working out for ya.

Google clothing price inflation if you doubt me. When you cut money velocity and inflate now matter how hard you try to focus what you will inflate these 2 things will always eventually take the biggest hit.

Sat, 02/12/2011 - 22:49 | 956866 Bringin It
Bringin It's picture

They always say the money won't leak out, but of course it always does, because it's sitting in the hands of the world's most greedy bastards.  What good is watching it deteriorate while you hold it when you could be out buying Guggi bags?

I'm a farmer and we don't need much in the way of clothes here.

Get self-sufficient -IMO.

Sat, 02/12/2011 - 22:59 | 956885 Hephasteus
Hephasteus's picture

Well it's kind of predictable. When they set up the housing bubble. You can sort of tell that they had some sort of underlying plan to reflate it. They set it up so that a whole bunch of options arms would reset and then it would be fairly stable for a few years. Now we are back in another whole bunch of options arms resetting.

There's got to be some plan to get housing moving and into the inflation treadmill as it's the only thing that can really suck up inflation. The only thing I can think of was that when they tried to hype the housing recovering everyone with lots of wealth was supposed to dive in and start buying up houses to sell. But they didn't do it. Probably because they realized it wouldn't work and probably because the dual options arms reset was known by everyone shortly after the first crash. So people knew housing had a ton of drop in it. They always try to focus the inflation into housing and it ends up breaking the wage price ratio's. Why they had to finally bring it all down with gasoline prices I don't know.

Sun, 02/13/2011 - 10:17 | 957467 Orly
Orly's picture

"The only thing I can think of was that when they tried to hype the housing recovering everyone with lots of wealth was supposed to dive in and start buying up houses to sell. But they didn't do it. Probably because they realized it wouldn't work and probably because the dual options arms reset was known by everyone shortly after the first crash. "

 

That wasn't the problem.  The problem was that there were no guarantees from government regarding chain of custody of the mortgages.  No one in their right mind would actively invest in a vehicle that already had fifteen lawsuits attached to it.

They tried to whip that through Congress, remember, in the dead of night?  The Interstate something or other that would make it nearly impossible for the homeowner to sue for recourse against bogus paperwork.  The only thing that kept Byron Wein and the Boyz out was Jimmy Six trying to get a free house.

Don't be surprised when they announce that there will be no remedial legal recourse for shoddy paperwork.  It may go to the Supreme Court, which would probably rule that doing a job in a crappy manner did no practical or real harm to the little people who were paying their mortgages because the money was going to have to go somewhere anyway.  The ruling would basically get the big banks off the hook for bogus paperwork, unless there were real harm done in individual cases, such as the guy whose house was razed next door or the people who owned their house outright being kicked into the street in the middle of the night.

Once we get everyone over the idea that your house is not a stand-alone lotto ticket, things can move ahead nicely.

Sun, 02/13/2011 - 10:32 | 957484 Hephasteus
Hephasteus's picture

"Once we get everyone over the idea that your house is not a stand-alone lotto ticket, things can move ahead nicely."

You are never going to get states to give up participation in propertry rights. People will burn their goddamn city halls to the ground.

If states aren't careful and don't massively cut peoples property tax people will do it anyway.

It's just like auto insurance. Once they started charging so much for it that you are basically leasing the car you owned from the insurance company the game was over. Now no amount of force can keep people from willingly following auto insurance laws in their state.

Traveler's insurance will file bankruptcy this year.

Sun, 02/13/2011 - 11:16 | 957534 Orly
Orly's picture

The Traveler's?  Wow.  Bold.  I'm keeping score, so you know.

___________

Property rights is not what I'm talking about.  I'm talking about whether or not a (maybe...) registered notary didn't verify the chain of custody properly, so here, have a free house.

That's like being let off death row for a cop not reading you your rights.

People have the right to property.  That is the basic foundation of our country (USA...), I believe, and without those laws then all commercial trade as we know it today would cease to exist.  If I had no ownership, then I would work as hard as they did in the old Soviet days.

The lotto ticket I was referring to has more to do with legal technicalities than anything to do with basic rights.  We have to get people over the notion that they can get something for nothing.

I guess this is the Baby Boomer set giving us one last swift kick in the ass on the way out the door.  Gimme, gimme, gimme.

One day they may get over themselves but I think they won't find that out until after they're dead and buried.

Sun, 02/13/2011 - 12:31 | 957646 Hephasteus
Hephasteus's picture

You do not understand what MERs is trying to break and get control over. Your analogy is not modeling the underlying mechanics of the situation. Mers is trying to turn a homeowner who counterfeits his wholeness to the construction industry as a debt agent to a single banking entity. Transform that into a debt agent for a gang of seperate entities making regulation impossible. It's following the same model that caused all the brown outs in california. They are cutting up the power company and allowing people to lord over a block or a neighborhood or lord over a unit of energy. Which has happened making regulation impossible. People are paying 400 bucks a month for electricity in california when there is NO way they can possibly use that much energy. Governments are trying to create smart grid which will simply become easy ways to set the burden of your slaves. If you need 100 grand this month you simply program your meters to charge a 100 grand.

You also are not understanding the big picture. The same as your FX currency plays. You are looking for mental power and brightness in a meaningless detailed environment.

Sun, 02/13/2011 - 12:44 | 957665 Orly
Orly's picture

Okay.  You say so.

You can parse anything all day long and complain ad infinitum about Grey Davis and Ken Lay but the basic bottom line is that no one is getting harmed by MERS- in a practical sense.  The mortgage was agreed to and the payment should be made to someone somewhere.  There is no free lunch and that expectation is perhaps what is keeping us from a sane solution.

How you get from people expecting a free house because someone didn't dot their "T" to Enron, smart-grids and rolling brown-outs is beyond me.  I realise you have a gripe against the entire system but you're bouncing around rather incoherently.

For instance, "Mers is trying to turn a homeowner who counterfeits his wholeness to the construction industry as a debt agent to a single banking entity."

I'm sorry.  What the hell is that supposed to mean?

____________

Oh, and sell Euros!

Sun, 02/13/2011 - 13:41 | 957763 Hephasteus
Hephasteus's picture

It would seem that I'm bouncing all over incoherently because it looks like that until you understand the transitve property of authority and signed contract agreement and how it's violated through the strawman.

Mers does not technically work like the power grid scam. It legally works exactly like it. Mers takes one authority and turns into many authorities. The power grid scam takes one authority the power company and turns into many authorities. All in the hope that you can destroy the point of the legal contract by drowning it in an ocean of strawmen.

It's power is simply inferential through it's differntial nature. It's the ultimate in circular reasoning meant to destroy humanities mind. Pitting sincere promise against reasonable whimsy.

You best study the bank of international settlements and ISDA.

Sun, 02/13/2011 - 14:46 | 957856 Orly
Orly's picture

Under that idea, then Hephasteus, it would be apparent that this is a scheme- a conspiracy, if you will- of the highest order.  What you're describing sounds in many ways the way Carlyle Group performs many of its transactions: through third-party "strawmen" with no way to trace the original root of the money, nor any way to trace the proceeds back to wherever they are going.

The way I understood MERS, it was basically an entity set up by the big banks and mortgage writers to facilitate packaging crap mortgages and selling them to "unsuspecting" hedge and pension funds.  Are you saying that they were desinged to be the ultimate strawman here that could readily accept all blame in the mortgage crisis, yet have no one actually in charge and culpable for what they are doing?  I think I read somewhere that they have trillions in mortgages and like fifteen people running the whole outfit, mostly new notaries who were just trying to get a paycheck.

Someone somewhere knows something and they must know as well that their time has practically expired.

I contend that something must be done before QE III comes around because the gen-pop is not going to go for just throwing money after this thing.  People are starting to grumble...loudly.  I also contend that the focus this time is going to have to be to the root of the problem, namely bad mortgages, option ARMs and the whole bit.  If they try to shaft the taxpayer with this one, there could be a massive sit-in on Pennsylvania Avenue before they know it.

If these bad mortgage pools are bundled and sold by the Treasury (via the Fed...) in some sort of Save America Bond campaign, how would MERS stand to gain or lose in that case?  The buck is going to have to stop somewhere and the giant shell game will come to an end eventually.

Eventually.

Sun, 02/13/2011 - 14:13 | 957808 blunderdog
blunderdog's picture

There is no free lunch...

Yeah, that's really the problem, so when the bank sells a nonexistent entity to collect an immediate fee and also KEEPS that nonexistent entity as a source of incoming debt-payments, it's elementary that someone is being harmed somewhere.

No free lunch.  Bankers have had one for a long time.  It's over.

Sun, 02/13/2011 - 20:04 | 958405 skipjack
skipjack's picture

"I'm talking about whether or not a (maybe...) registered notary didn't verify the chain of custody properly, so here, have a free house"

 

So you're OK with no due process ?  That someone who doesn't own the title can take your house from you ?  That the banks, who fucked up the paperwork and separated the note from the mortgage should get to foreclose on something they don't own ?  The buyer shouldn't get a free house, but the banker should ?  Really ?

 

The first rule in a creditor's lawsuit is proving who owns the debt.  You can't collect if you can't prove you own it.  The banks can't prove they own it...but people like you think they should collect anyway ?  What kind of retarded thinking is that, or are you a bankster shill ?

 

No one says the debt goes away.  It simply becomes unsecured, like credit card debt.  Let the banks try to collect that unsecured debt.  Fuck 'em.  They screwed up, they lose.

 

 

Sun, 02/13/2011 - 20:28 | 958453 Orly
Orly's picture

Hardly a banker shill.  All I have been saying is that if it becomes unsecured debt and the banksters have no valid lien against the property, then say so.  Somebody call the ball somewhere!  All this about everyone is afraid to touch mortgages because they might get sued because someone didn't do the paperwork correctly is what is holding us back from finding a real solution to the problem.

No one is entitled to a free house, regardless.  If the debt then becomes another form of debt rather than that of the property itself, then fine.  Let's get it over with already.  The suspense is killing me.

Sat, 02/12/2011 - 23:12 | 956911 Stimulus Billy
Stimulus Billy's picture

Yep. Fed is pushing on a string if it is trying to get inflation where it would help- housing and employment. Does not seem to understand supply and demand there.  The fed needs to stop printing. Instead, deficit spending for investment in the future through government make work projects (energy infrastructure for example) would help get inflation where they need it- but no will for more gov spending (quite the opposite), yet they let the fed print, print, print as if no end to the magical powers of liquidity.  Go figure.

Sat, 02/12/2011 - 23:18 | 956912 Stimulus Billy
Stimulus Billy's picture

dbl post sorry and was replying to hephasteus

Sat, 02/12/2011 - 22:25 | 956833 Downtoolong
Downtoolong's picture

The financial industry is notorious for leaving obvious inconsistencies hanging from their statements and claims. I like to think of it as a derivative of their arrogance.

At the CFTC hearings in 2008 on oil price volatility and position limits, I noticed that every major investment bank which trades in oil (JPM, Morgan Stanley, Goldman, etc.) spoke and claimed that speculative trading in oil futures was absolutely essential to healthy futures markets. Yet, among this group, which is probably on one side of 90% of all oil futures trades, all claimed that they did not do any speculative trading in their firm.

 

Sat, 02/12/2011 - 23:34 | 956947 Caviar Emptor
Caviar Emptor's picture

Perhaps the Bernankenstein and his big money backers understand economics, but they clearly do not understand physics. Permit me to clarify. 

The deflationary fire-breathing jabberwocky that they're so ardently fighting is the result of a downsizing economy, not insufficient BennyBux. The demand side has been shrinking for years but was given the step ladder of credit to compensate. There was hope that by subsidizing the supply side that the resulting overproduction would vanquish inflation while creating commerce. And that might have worked if we were talking about an economy of love poems, puppy kisses and rainbows. In reality, irresponsibly stoking up demand for and now dependency on limited natural resources resulted first in relative shortages and now increasingly in actual shortages around the world. An economic killer has been turned loose. 

"Shop till you drop" wasn't meant to be a joke at the Fed. It was a religion. It was and still is the official mandate, the extant policy, the religion. If you, you and you don't shop shop shop, the entire US debt pyramid collapses. The overcapacity must be used. You must consume not a little bit of everything, but EVERYthing. Fill up that monster SUV in the midst of declining US oil production since 1970. Supersize those fries in the middle of an obesity epidemic. Bloat those desert McMansions that eat up fuel for air conditioning and water for pools and lawns. Inflation must be produced. 

But when the cost structure of middle class life exceeds the means of its citizens to afford it, then the net result is just a massive backslide of the middle class into impoverished lower class. That's what we have now that the jig is up. And creating inflation is just pouring gasoline on the fire. The response to the bursting of the credit bubble should have been deflation to bring prices back into alignment with buying power. And to bring trade and international monetary imbalances back into balance. 

But the Fed and their backers want to do everything to defy the laws of physics. They want imbalances to persist. They want the fluke of their past success to live on. They don;t want to face the fact that where the rubber hits the road is the area of global resource competition. Monetary stimulus is the poison, resource demand management would have been the answer. 

 

Sun, 02/13/2011 - 11:21 | 957553 centerline
centerline's picture

Nicely put.  Math versus the Fed.  Hmmm.  I think they can run equations in circles for awhile, but at some point the math will win.  In fact, it might be said that the best the Fed could do is lose slowly in such a way that the game can be restructred (most likely on a larger scale).  Methinks the actions of the Fed will turn out soon enough to only have been the fuel for an accelerated trip into destiny though.  Push those exponential curves at little higher for a more spectacular wipe-out.

Sun, 02/13/2011 - 12:30 | 957645 zaknick
zaknick's picture

+10000000000000000000000

Agree with everything stated. What a way to run a country, eh?

Sun, 02/13/2011 - 00:13 | 957013 mark mchugh
mark mchugh's picture

I'm no Keynesian, but their "inflation is a monetary phenomenon" meme is partly true.

Sure, you create inflation when you print money.  The insane part is thinking you can control that inflation - selectively inflating certain assets more than others.  Sorry Ben, but you don't get to decide what inflates and what doesn't.  The only question is how many people will die before he learns this lesson.

Historically houses underperform inflation.  Some historical data and 9th Grade math will prove it.  The house price gains of the last 30 years were driven by lower and lower interest rates.  When you strip out the effect of interest rates, houses didn't outperform inflation (not even close).  Trying to stabilize house prices by printing money simply won't work (go ask Japan).  That money will inflate food, energy and clothing (necessities), far, far more than houses.  We can comfortably fit seven more people in my house if necessary.

The people who think that their house losing value is the worst thing that could ever happen are going to find out just how wrong they are very soon.

Sun, 02/13/2011 - 07:22 | 957343 Snidley Whipsnae
Snidley Whipsnae's picture

Excellent points. In addition I would like to add that in a hyperinflationary scenario housing prices will drop to much lower levels than we have already seen.

During hyperinflation lenders will not lend for residential real estate. If the gov and agencies do not lend there will be no mortgages available...and, if the gov and agencies do lend the interest rates will be much higher, because of 'inflation expectations', and few will want to borrow money at very high interest rates.

Real estate, during very high and hyper inflation, is a dead horse unless buyers with cash step in and purchase at very depressed prices.

Real estate during a deflationary scenario is also a mostly cash market for bank balance sheats will be encumbered by fantastic mark to market re losses and they will have no money to lend.

Sun, 02/13/2011 - 09:45 | 957439 Moe Howard
Moe Howard's picture

Inflation I have seen in my life, for example, Jimmy Carter. No jobs, super high interest rates, all necessities of life skyrocketing in price. My experience was: Cash was king. I purchased a Lotus Europa at the time, cheaply, because I had cash. Interest rates were something like 15 to 18% for a exotic car purchase if I remember correctly.

Sun, 02/13/2011 - 10:23 | 957472 Bob
Bob's picture

I was watching a 2006 Lotus Elise, 15k miles, primo aftermarket sound system, the works, for sale in North Carolina for $16,100 last November.  It took nearly two months to find a buyer.

Sun, 02/13/2011 - 10:35 | 957490 Snidley Whipsnae
Snidley Whipsnae's picture

I recently purchased a 72 Chevy pick up restomod. 454 cu in, 400 turbo w/shift kit, 411 posi rear. A beautiful frame off restoration...I will drive it occasionally but not often. Cost was $12,500. Cost of restoration to the person that did it? Minimum of $60K.

Would I rather have it than fiat dollars? Damn right.

Sun, 02/13/2011 - 10:51 | 957504 Moe Howard
Moe Howard's picture

Excellent purchase. Back in the day I was about to start to build a 'muscle' car when my brother pointed out to me it was much, much cheaper to purchase one already done from someone else, and I wouldn't have to do any of the labor. I investigated, and found out he was right. Even the classic 1960's untouched low miles muscle cars are cheap if you think about how much was paid over the years to store and maintain the car in perfect condition. Things are better than FRNs, that is a fact.

Sun, 02/13/2011 - 18:24 | 958250 the grateful un...
the grateful unemployed's picture

you're spot on, and it goes for all collectibles as well. but that's just part of inflation i guess, i think i have some little thing i had when i was a kid, i could sell for $100, but what's a hundred dollars really? to me it comes down the value of money, and really money seems cheap right now.

Sun, 02/13/2011 - 10:54 | 957511 Moe Howard
Moe Howard's picture

Sounds right. The reason? Often the person who wants a Lotus can't afford the insurance plus can't get a loan to purchase that type of car.

Sun, 02/13/2011 - 04:26 | 957287 ivana
ivana's picture

Who's exporting inflation?

Check major traders at COMEXex... where do they get the money from? Guess you know by now about "control" of silver-gold markets. Recent COMEX play is similar, just not surpressing prices but boosting prices as high as possible ... when they loose steam and puppet governments collapse soon after will oil erupt and than we'll see real inflation attack.

God help us

Sun, 02/13/2011 - 07:46 | 957360 jaro_g
jaro_g's picture

brilliant observations, tyler

thx 4 sharing :-)

jaro

Sun, 02/13/2011 - 08:43 | 957382 whatz that smell
whatz that smell's picture

keynesians bad, austrians good.

government bad, business good.

business owner good, union thug bad.

productive powerful rich good, lazy weak poor bad.

...fluff the pharoah, spank the slaves....

...did i miss anything?

 

Sun, 02/13/2011 - 08:48 | 957389 Zero Govt
Zero Govt's picture

yes, a few key points;

free society good, Govt (monopoly power structure) bad

free competitive markets good, Govt and law/regulation (monopoly power structure) bad

free competitive market in money, Govt and central bank (monopoly power structure) bad 

 

Sun, 02/13/2011 - 09:29 | 957422 Bitch Tits
Bitch Tits's picture

There will always be a monopoly power structure. Just watch one develop anytime you get more than two human beings together.

We will always have a need for public (Government/courts/something like it) intervention in all markets, because predatory human beings can be relied upon to take unfair advantage of other human beings.

Or we can do what you propose, and revert to survival of the fittest, and who cares about the rest? Let Grandma walk off somewhere and die. She's useless to us now.

 

 

 

 

Sun, 02/13/2011 - 09:44 | 957435 Bob
Bob's picture

Apparently you do not live in the Utopian fantasy world of the Noble Capitalist. 

Sun, 02/13/2011 - 14:21 | 957791 Zero Govt
Zero Govt's picture

Bitch tits

There will always be a monopoly power structure. Just watch one develop anytime you get more than two human beings together

Does marriage revert to a monopoly? Does the free market revert to monopoly? No neither do because when free society or free markets have the arrogant, sloppy, lazy or parasitical it handles it, it exits and leaves through the door. A stark contrast to the arrogant (Wall Street), lazy (GM), sloppy (Fanny and Freddie) and parasitical (Wall Street again!) who Govt props up.

In free market a few companies may achieve a dominant position for only briefly because in time competitors will start taking them apart. Where monopolies DO develop is in markets where Govt is present and regulates (controls with regulation and/or perverts with subsidies). That's because Govt is both the prop and protector of monopolists. Name some monopolies and i'll name how Govt has a hand in propping up and supporting all of them?       

We will always have a need for ...Government/courts... intervention in all markets, because predatory human beings... take unfair advantage of other human beings.

Yes dimwit, that's precisely what Govt does, provide a powerful ratchet for "predatory human beings" (parasites). Govt was designed by parasites and is infested and run by parasites to tax (suck the wealth) of society (see US banking, Unions, US oil, US property etc). Govt is the parasites home, wake up and smell the stink

Or we can do what you propose, and revert to survival of the fittest

What are you afraid of a company offering you discounts? It could hardly be worse than the Big-Govt/Big-Biz parasites currently systematically robbing citizens and business of 35-60% of their wealth. The parasites have total power to rob you: you pay tax or first get fined then get jailed (democracy eh?). Who is more dangerous, a petty thief, a fraud, Al Capone, a drug gang or the Govt? The correct answer is the US Govt. You have a 1 in 40,000 chance of being ribbed by a petty thief or fraud. You have a 100% chance of being robbed your entire life by the US Govt. Let's deal with actual REALITY rather than just a 1/40,000 chance ok.

Al Capone and drug gangs only fight turf wars against competitors and the US Govt. They never turn their guns on you (you're a customer) or try in any way to harm you, because you're their end-user who purchase their goods.

Criminals are not interested in you as targets, Al Capone just wants to serve you moonshine. Unlike Govt which robs your wage packet every month, taxes every product you buy and monitors and abuses you every time you travel or drive it searches you, questions you, tries to rob you with 100's of petty fines etc etc.

The biggest dustbin of robbers, frauds, monopolists, criminal enterprise and indeed warmongers in every country is Govt. Wakey Wakey... fat, drunk and stupid is no way to go through life son

Sun, 02/13/2011 - 08:51 | 957390 tom
tom's picture

I see a several different things going on simultaneously.

1) weather-related crop failures

2) global population growth

3) increasing productivity of poorer nations driving up the buying power of people whose marginal demand is for more and better food

4) increased dollar supply translating into appreciation of currencies of poorer nations with floating currencies, driving up the buying power of people whose marginal demand is for more and better food

5) increased dollar supply translating into domestic inflation of poorer nations with dollar-pegged currencies, increasing the affordability of imports to people whose marginal import demand is for more and better food

Personally I think real depreciation of the dollar is inevitable as US productivity can't sustain the current level of imports. The problem in my mind is that depreciation is happening through a combination of fiscal and monetary stimulus which is a very slow way to do it, and will leave the US saddled with unpayable debts.

Sun, 02/13/2011 - 09:06 | 957406 The Alarmist
The Alarmist's picture

Bernanke is the economic equivalent of Enrico Fermi pushing fuel rods into his atomic pile, which had no shielding and no cooling, in Chicago ... he knew in theory that he could run the pile with little or no risk of runaway or explosion, but it is still in the official history that this was a gamble taken in the middle of one of the most populous areas in the US. Benankestein is taking a risk the costs of which will be borne by billions of others if something goes wrong, but don't worry about Ben, 'cos he's got his.

Sun, 02/13/2011 - 10:12 | 957460 tradewithdave
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It's not a particular sovereign that is the culprit, it's a stratification similar to what you see in a CDO tranche.  It's being exported from upper class tranche to the middle and lower class tranche.  But you say that's not sustainable.  It doesn't have to be as long as there's a global currency reset switch coming.  Read how the Sack-Frost and Robert Frost's "Two roads diverged in a wood" and one was your deposits and the other was your payments... which road will you take?  There's no need to choose. 

http://tradewithdave.com/?p=5310

Dave Harrison

tradewithdave.com  

Sun, 02/13/2011 - 12:15 | 957624 sellstop
sellstop's picture

Maybe taxes weren't high enough:

Are taxes too high?

Some say that we are paying too many taxes and that lower taxes will stimulate the economy. They say that if we cut the taxes that businesses pay,then they will create more jobs.Many of those same people say that we need to cut the size of government and that will create a strong economy.

Lets look at history. In the 1929 the worlds stock markets "crashed". In answer to that, President Hoover cut government spending. He wanted to get government off the backs of business so they could create jobs. The country commenced to go into the greatest depression ever known. After Hoover was voted out of office, Roosevelt dramatically increased government spending on social programs. The government debt went up. Then World War Two came and government debt went up dramatically. After the war, the economy took off and for the next twenty-five years grew at an astounding pace. These were the years that most of us older adults remember as the good times.
Let's look at tax rates and government spending during those years. Tax rates under Eisenhower were up to 91 percent for the top tax brackets. Business boomed. Government spending also went up. In the 1970's the oil price shocks and the cost of the Vietnam war caused inflation to grow. Stagnation and inflation in the economy led to the coining of the term "Stagflation". Finally, in the early '80's interest rates were deliberately raised for a couple years this slowed the economy enough to effectively kill inflation. During those years of high interest rates, savings was popular. Ronald Reagan was elected in 1980 on his pledges to cut taxes. He initially cut taxes, but the size of the government deficits he ran up quickly made him raise them again. He raised taxes in six out of the eight years he was in office. The economy took off. Growth was everywhere. Tax cutting by then was popular and has been used since as a sure way to get votes. Cutting the size of government has not been popular. So the government borrowed the money. They borrowed from us, and they borrowed from other countries. The money that was not taxed was free to be spent by those who earned it, AND the money the government spent was in the economy. The combination of government and private money is what led to the greatest stock market boom in history in the 1990's. Then when that was over, the real-estate market enjoyed a similar run due to the same reasons. Low taxes AND high government debt.
If taxes had been higher we would not have seen those booms. But we wouldn't have seen the busts that followed. That is the important point. Yes. Taxes are a "drag" on an economy. But taxes are money that is spent inside of an economy. The wealth does not go away. Much of government spending is for the essentials of a large nation. Defense. Infrastructure. Education. Research. These are investments in the future. The economy may boom when taxes are low, and interest rates are low, but then we are left with the mess to clean up, and no savings to do it with.
In times of prosperity it is neccessary to save, and taxes are a way of national savings. Funding of "safety nets", education of people, building a way of life that is commonly shared. This is saving. This gives us something to fall back upon when rainy days come.
So, when the economy picks up it will be wise to raise taxes and interest rates and start saving again. Will that happen. Not if "we" have anything to say about it, right?

Sun, 02/13/2011 - 19:01 | 958303 The Alarmist
The Alarmist's picture

"...taxes are a way of national savings. Funding of "safety nets", education of people, building a way of life that is commonly shared. This is saving. This gives us something to fall back upon when rainy days come. Funding of "safety nets", education of people, building a way of life that is commonly shared. This is saving. This gives us something to fall back upon when rainy days come."

Junked you because the only thing worse than a cynic like me is a wide-eyed koolaid drinker like you.

That is really a nice sentiment, but these cherished purposes are more often than not another name for wealth transfer. I have heard hundreds of people in dozens of countries bemoan the quality of public education and would gladly send their children to private schooling long before taking the public route. 

As for building a common way of life through taxes and government programs, are you serious? Sure, if the goal is to create a society of mind-numbed serfs looking for an easy way out. And I hear the thought ticking, "How else do we build a new melting pot?" Gee, if you call the results we have seen from the ever-growing army of $55k to $75k publicly funded Diversity Managers (the corporate ones do far better pay wise and might even be more effective) as evidence of an increasingly cohesive and coherent society, then I applaud this as a widely-share sense denial that seems to be tying more and more of your fellow americans together every day.

When the rainy days come, I look to use the umbrella I have bought for myself, instead of standing in the rain getting soaked while I wait for my publicly-mandated "savings" to kick in, but thank you for asking how I might like the fruits of my labors to be spent on others.

Sun, 02/13/2011 - 12:17 | 957628 Stuck on Zero
Stuck on Zero's picture

If China is still running a $200 billion a year trade surplus and they are not buying US trash notes what do you think they're buying?  They're taking their FX reserves and buying every commodity and commodity producer in sight.  Read the M&A news and you'll see a constant acquisition of mining companies, agricultural land, and primary producer etc.  They don't want to be caught with dollars when the paper goes to it's true value.

Sun, 02/13/2011 - 12:38 | 957655 the grateful un...
the grateful unemployed's picture

This is all a bit geeky but worthy of some attempt to reveal its message. Because money is communication. hmmm. And I forget which theorist posited that noise between the sender and receiver was the biggest obstacle to making a successful connection. Considering money, inflation is that noise. Or as Alan Watts once said, "The depression was a moment in time when men could not agree that 12 inches did equal one foot.." [para]. 

Then we consider what our Fed chief is doing to cut down the noise, well actually he is trying to create noise. The hard currency advocates are correct, that gold is money without the noise, which distorts the purpose of money.

And in the second paragraph, that the uneven course of inflation makes business spending plans even more uncertain, further restraining that investment.

 

BUT, and I really love that part about the Chinese. Bernanke does not live in a vacuum, he has people whispering in this ear, the Feds independence took a big hit under Bush, and Bushama isn't doing much to change that. The message is, we, the US can pull back from the global economy, and it will hurt everyone involved, but it will hurt you a lot more. Finally some truth, the Chinese have a paper economy, centrally planned, built mostly on politiburo dreams for the benefit of groups other than those who actually do the work (and they call it a workers paradise?) China will fold up. The age of America then would begin, I think, because like WW2 we come out on top. 

America is faced with two choices, demise and disintergration, demise is complete, and we won't allow that, although it would be better for the people and the spirit of the thing, disintegration (food is 30% of Chinas CPI, 7% of America's) affects them more than it affects us. That's our ace in the hole, and Bernanke has nowt hinted at it, whew, I am astounded at that comment, and of course the stern response from China. They heard it too.

Anyway there is more to this, the nature of monetary liquidity, is it more like water, or electricity, if its water you have to mop it up, if its electricty you just reset the circuit. The Fed thinks its electricity. if you get your fingers in the hot wires while you are standing in a puddle..

 

Think of the transmission of money in the act of exchange as the sending of a communique describing some essential features of what took place in that transaction and why. Now imagine that the text of the message is arbitrarily and unpredictably altered — sometimes with the addition of characters, sometimes with their deletion - and also that the time taken to deliver such missives is expanding and contracting in what may be a quasi-random fashion.


Contemplate the difficulties which also arise because of the time-varying nature of the inflation. Because the inflation is an extraneous act of political will (or financial caprice) — and so is subject to sudden stops, starts, and redirections — it represents a dangerous aggravation of the normal entrepreneurial hazards inherent in organizing profitable production on into an uncertain future in a constantly-evolving economy.


Sun, 02/13/2011 - 15:34 | 957939 DavidPierre
DavidPierre's picture

Max interviews Catherine Austin Fitts. They talk revolution, Ben Bernanke and the US dollar being a unit of war.

http://maxkeiser.com/2011/02/12/ote96-on-the-edge-with-catherine-austin-fitts/#comments

"...Israel extorts the USSA's leaders..."

Sun, 02/13/2011 - 15:58 | 957991 BernankeHasHemo...
BernankeHasHemorrhoids's picture

When are we going to finally say we've had enough of this guy and give him a long walk off a short pier? He is a criminal who goes down with the worst of Nazi Germany. I'll be glad when the Chinese have had enough and decide to sink what's left of the miserable Amercan empire.

Sun, 02/13/2011 - 18:07 | 958221 sandvikpanther
sandvikpanther's picture

The top Nazi banker was Hjalmar Horace Greely Schacht.  He was American born moved back to Germany.  Mind you he was preparing the Nazi War Machine for conquest.

Sun, 02/13/2011 - 23:18 | 958746 PulauHantu29
PulauHantu29's picture

"Pound cake" is now only 10 oz.....the former 16 oz frozen blueberry bags are 10 or 12 oz.....while prices have stayed the same or risen for these smaller quantities.

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