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Inflation expectation up 60% in 6 months – Thanks Ben!
It wouldn’t be fair to say that Bernanke is responsible for all the
run-up in global food prices. There are many factors at play. That’s not
to say the US monetary policy doesn’t have a central role in the global
commodities market. The Fed has a big axe. Policies like ZIRP and QE
encourage speculation. It's contributing to overheating in a number of
countries, this is adding to demand at every level. How much can we
blame Bernanke for the increases in global food/commodities prices over
the last year or so? My guess is about 25%.
I would make a similar argument for the stock market. Ben’s cheap money
has added to equity values. But he can’t take all the credit for high
stocks. I would give him kudos for about half of the fluff since the
summer.
At some point in the near future Ben is going to defend QE. I think he
will say that his policies are responsible for 90% of the stock market
advance and less than 10% of the commodities. In other words; he will talk his book.
There is one area that provides a clear-cut measure of what the Fed is
doing. I doubt even Ben would argue that he is not 95% responsible for
this success/failure. Inflation expectations have widened substantially since QE2 was first brought up by the Chairman in Jackson Hole. Consider these charts of 10-year coupons Vs Tips:
This is the post Jackson Hole period. Inflation expectations (Tens minus Tips) have risen damn near every week:
This looks back a few years. We are at the “wides”.
Bernanke can dodge a lot of things. He can’t dodge this. He might even celebrate this by pointing to it and saying, “Look what I have brought you!” “This is a greater measure of my success than the move in the S&P!” And that will hang him. Inflation expectations based on the Tips market have widened from 151 to 241 in just six-months. That comes to a real 60% increase.
Inflation expectations have been rising by about 10% a month. Is there
any wonder why global food supplies are getting short if key barometers
on future inflation are in high gear in the USA? If expectations are
rising 10% a month here, they are rising at 20% (or more) in dozens of
countries around the world.
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A friend points out another way to look at the 2s vs 10s . The 280
number stands out (pushing the highs). Put that number into perspective.
If you had a hundred G’s of spare cash you could eek out $3,360 bucks a
year by putting it to work in the ten-year. If you were afraid of where
rates are headed and just park it in the two-year you get a lousy $580
return. In order to get 3,360 of income you have to come up with 570,000
big ones. The yield on the 10’s is 6X’s richer than 2’s.
How could anyone not argue that the Treasury market is not distorted by
QE? This is another thing that Ben will point as a measure of his
success. He’ll eat those words too. There are some powerful forces being
whipped up. Lots of records. Too many for my liking.
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...biflation. Hard assets down, commodities up, and too,too much fiat swishing around the world.
just buy the fucking dip you bunch of fucking crybabies, the stock market ONLY rebounds and goes up higher and higher producing unlimited wealth for all...
How many treasuries does King own ???
No major currency is performing worse than the pound as Prime Minister David Cameron’s budget cuts slow growth and accelerating inflation limits the Bank of England’s ability to spur the world’s sixth-largest economy.
Sterling has weakened against all 16 of the most-traded currencies, depreciating even more than the euro, since the start of August. The three most accurate strategists for the pound expect it to continue falling and futures traders this month were the most bearish since September.
The pound, which appreciated 8 percent against the dollar after Cameron took power in May until November, has been trapped by the government’s efforts to close a deficit that grew to 11.1 percent of gross domestic product in the last fiscal year. Bank of England Governor Mervyn Kingis keeping interest rates at record lows to spark growth at the same time that inflation has remained above the government’s 3 percent limit for nine months.
“Tightening policy to rein in inflation in a weak-growth environment would be a double whammy against the pound,” said Lee Hardman, a strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “Rate hikes are currency supportive only if they’re consistent with stronger economic growth.”
The currency will probably fall to $1.50 by year-end, he said. The pound climbed 0.5 percent to $1.5969 as of 2:14 p.m. in New York. Analysts have been cutting their forecasts for the pound versus the dollar this year, with the median of 29 estimates compiled by Bloomberg predicting sterling will end 2011 at $1.54, down from $1.59 at the end of last year.
http://www.bloomberg.com/news/2011-01-18/pound-losing-to-euro-as-cameron...
Millions of pensioners and risk-averse savers in fixed interest deposits will be the biggest victims of government-sponsored inflation that amounts to a slow-motion bank robbery.
Now the real value of money – or its purchasing power – is falling at 4.8 per cent, according to the Retail Prices Index (RPI), basic rate taxpayers need a gross return of at least 6 per cent from bank or building society deposits for the net value of their savings to stand still. High earners, paying tax at 40 per cent, need a gross return of 8 per cent to match inflation as measured by RPI. Needless to say, no such risk-free returns are available; other than on ‘teaser accounts’ with strings attached and where only trivial sums can be deposited.
Even on the government’s favoured measure of inflation – the Consumer Prices Index (CPI) at 3.7 per cent, soon to be used for public sector and State pensions – most savers need a gross return of more than 4.6 per cent to match inflation, while high earners need more than 6.1 per cent. While 22 bank accounts, including 19 individual savings accounts (ISAs), can deliver real returns to basic rate taxpayers, according to independent statisticians Moneyfacts.co.uk , savers with £10,000 in the average bank account have seen the real value of their money fall by nearly £500 since January, 2008.
http://blogs.telegraph.co.uk/finance...-by-inflation/
>>High earners, paying tax at 40 per cent, need a gross return of 8 per cent to match inflation as measured by RPI. Needless to say, no such risk-free returns are available; other than on ‘teaser accounts’ with strings attached and where only trivial sums can be deposited.
And what are gold and silver again? Their appreciation is not an investment; it's just preservation in the face of inflation.
If I had some money or credit I would buy some sex toys for babymama before the prices go up.
I think the end game is to sacrifice the bond market and protect the equity market. After all, it is all about jobs.
I realize that significant losses in the bond market means that the banking system gets nationalized, but what happens if the equity market dies?
Politically, there are more lives affected by the equity market than the bond market. My justification for that statement is that the top "x" percent of the elite basically are the bond market. The Main Streeters will not be too hurt if the "elite" take a hit when the banking system gets nationalized (a la banking holiday).
In a zero sum game there are winners and there are losers. Everyone expects the significantly larger bond market will end up winning. I think that view is in error. I don't think that will happen this time.
With the banks nationalized, and the Fed owning most of the equity market, inflation can wipe out the bond holders. An economic re-set can be obtained with the lowest political cost. It won't be painless (that is an understatement).
higher interest expense (lower bond prices) at this level of equity valuation, household and corporate leverage, and government (all levels) indebtedness would, imo, reduce equity prices because of revenue and profit shortfalls, not to mention the greater discounting of future cash flows attached to said equities. imo he's juggling running chain saws.
In the inflationary 1970's both bond and equity holders were sacrificed. See? No need to make tough choices.
Soon ZimBen and the Genocidal Inkjets will go down in history alongside others who got it so wrong it was mindblowingly wrong like Gordon Brown, 'an end to boom and bust'... before the biggest BUST who sold gold at the lows...ZimBen and his aides in genocidal crime... sub prime is well contained, and his latest 100% comment will be THE biggest quote in the last several hundred year history for it's sheer stupidy and utter nonsense
Who do you think is going to write history? None of this ever happened.
EIA reported an $0.11/gal week over week increase in Diesel fuel in the Northeast. I know there were a bunch of snow storms, but seemed a bit steep. Highest levels since Oct 2008. Just saying.
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=EMD_EPD2D_PTE_...
The elites now need war, any kind of war, including civil ones, in order to underwrite their excess of cotton paper.
Onion prices in India recently saw a 200% spike to now settle down to a 100% price spike. Dont know what the mechanism would be (if at all) for Ben's liquidity to feed into ultra-local food markets in India tightly controlled by a nexus of farmers and politicians.
Please feel free to use the chart and debate about it...
http://www.financialchat.com/sites/default/files/BALTICDRYOIL2011divergencekallioalert.jpg
They already have at least 2 wars on the go. One of them is the longest war ever fought by the US. If wars will solve the problem then the problem is already solved.
Iraq and Afghanistan aren't really wars, not even proxy wars.They are more like Imperial Police Action.
A real war would involve literally millions of deaths, would be the ENTIRE focus of the nation, and would of course allow the .gov reset the financial system.
What he said. They're going to need a real, no-shit, no-holds-barred sort of war... an industrial age war, not the information age sissy stuff we're busy on currently.
no, this covered by "law+enforcement" instead, war on crime ect.
maybe stagflation is permanant?
http://covert2.wordpress.com
stormin norman should be the prez.
You knew they were going to take it all the way anyway. They never fucking fold.