Inflation Explained

Tyler Durden's picture

From the bears who explained quantitative easing so that even CNBC anchors now know what POMO is, comes the follow up: Inflation explained. So easy that no Ivy League Ph.D. is guaranteed to understand it.

Via Omid Malekan

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WaterWings's picture

Economics: Taking both sides so you can always be right.

Herd Redirection Committee's picture

Check out the work being done at the Capital Research Institute:

"On Psychology & Markets"

More and more people are catching on to the fact that two sets of rules are currently in place, one for the MEGAwealthy (net worth > $100 m), and one for the rest of us.  Besides the issue of the US government’s debt problems,  and spending more than they earn, there is the problem of the US dollar (world reserve fiat currency) on its deathbed, with a privately -owned central bank (the Federal Reserve) that has proven beyond a shadow of a doubt to have ONLY the interests of its private owners in mind.   Not only were the bailouts in 2008 a mistake, they were the largest theft in the history of mankind!  It was the largest reverse Robin Hood story in history!  The rich stealing from the poor to a degree only imagined (and probably salivated over) by the ‘great’ tyrants of the early 20th century, John D Rockefeller and JP Morgan.  Now in the 21st century we get Henry Paulson, Hank Greenberg, Ben Bernanke, Lloyd Blankfein,  Jamie Dimon, etc.

The question left to ask, then, is why haven’t EVEN MORE people woken up to facts, and the dire situation we find ourselves in?

redpill's picture

The poor get screwed, and in their enraged efforts to get revenge and advocate tax policy that goes after "the rich" they only succeed in screwing the middle, who don't have a lot saved and who don't have the resources to dodge taxes like their wealthy counterparts do.  In other words, unless you are on the bleeding edge of the QE-inspired wealth parabola, you're going to get eaten, either because you're poor and you're getting crushed by inflation, or because you're middle-class and the poor will eat you because you're the only thing they can reach.

High Plains Drifter's picture

this is why they invented walled communities. looking ahead.......

superflyguy's picture

do they have electric fence and gun turrets?

JFK.4PREZ's picture

spot on.  

interesting video on how eating the rich won't even save us from our tsunami-sized defecit:

gkm's picture

Completely wrong.  If you look at history in hyperinflationary environments, the poor did quite well relatively.  It was the middle class that took the shaft crossways.  Think about it - in the US the poor are likely on food stamps and more likely to not be working, hence no gas cost.  On the other hand, if Mr and Mrs Smith are living off their savings which is earning zero and their food and gas goes up then they are relatively worse off.  If this continues, they become part of the poor and their relative wealth has been irreparably impaired.  

It's all relative but if you don't have much (but for example a piggy bank of copper pennies) some day you too could be a millionaire and buy something from someone who held t-bills which are worth less than toilet paper.  At least that was the way in Weimar.

alexanderstollznow's picture

this might all make some sense were it not for the fact that almost all the TARP investments in banks have been paid back, with interest, + a profit on the warrants issued.  so the taxpayer isnt actually out of pocket on that side of it.  the only significant block of TARP outstanding is the investment in AIG.  AIG is paying back its TARP, and as of last month 70% of TARP was repaid.  the total amount was only about $400bn anyway, so that leaves about $120bn outstanding, most of which is represented by ownership of AIG.

it hardly needs to be stated that $120bn is hardly a great sum of money in the broad scheme of US fiscal position. all the more as it is actually currently secured by an asset and seems likely to be all paid back in the long run.  the $120bn is, for instance, about 1/5th of the sum wasted in Iraq for no useful outcome at all, and that is one thing the rantocracy on ZH cant blame Obama for.    

anyway, dont let these facts get in the way of good story.

lunaticfringe's picture

dude, not sure where you got your figures and conclusions...not supported by any media I read.

Herd Redirection Committee's picture

Either a paid shill, or he's drunk on the KoolAid.

Listen up, bro, as long as there are two sets of rules, not to mention no firm accounting standards being enforced, it doesn't matter if you think TARP was paid back or not.

TARP was at most 10% of the money that was conjured into existence back in October 2008.  How do we know whats on the Feds books any way?  By taking their word for it?

There's no:Mark to Market accounting

There is: a private banking cartel

TBTF banks

a fiat currency in the hands of an elite few. 

I could go on... 


fxrxexexdxoxmx's picture

As long as Obama never sends the military to a predominantly Islamic nation with oil everything will always be Bush's fault.

just_looking's picture

You seem to have some knowledge of the situation, so it suprises me that you believe that TARP was the only money 'spent' on bailing out the banks. 

raymondrza's picture

Are all the lost jobs paid back as well?  The tiny sum of 120bn is irrelevant when compared to the impact on unemployment.  Such a reckless diatribe.

Gully Foyle's picture

Why is Gordon Freeman explaining this to Davey's Mother?

oh_bama's picture
  • INFLATION EXPECTATION IS STILL WAY TOO LOW even after recent mild increase in food and energy prices. THIS MUST BE FIXED!!
waylon153's picture


Who is John Gault?  Just watched Atlas Shrugged and that sounds just like a line from one of the societal freeloaders.  Good movie, Graham Beckel plays Ellis Wyatt.

Turd Ferguson's picture

This is absolutely fantastic. I just wish I could get every American to watch it.

Dr. Richard Head's picture

Yes indeed.

My LinkedIn contacts have been given one to two links from ZH daily.  I wonder how many of them have been taking a look.  What I do know is that many "financial advisors" have been scoping out my profile now and I am not in an industry segment that has any sort of dealings with financial work. 

ZH - a beacon of truth in a sea of lies.

redpill's picture

"Yes, economists like to say contradictory things."

lol, understatement of the century

DaveyJones's picture

they do and don't like to

redpill's picture

Arrr, ye a clever one DaveyJones.  Have ye considered a career in high finance?

camoes's picture

We also have game theory to justify lying, cheating and avoid transparency, they are just using Nash Equilibrium, it's optimal for them to say there is no inflation

Hephasteus's picture

It's said that a contradictory mind is a sign of a superior intellect. But only by full of shit people.

knowless's picture

you need to quit thinking in black and white, try to appreciate the shades of grey.

FIAT_FixItAgainTony's picture

"sweat not the corrections for they are as a fart is to the wind."

cossack55's picture

Like it but too far out.  I'm already old and don't want to miss the end game.  Can you bring it up to 2014, or even earlier.

unclebigs's picture

Dummies....a $10.00 roll of '64 Kennedy Half Dollars now goes for $300.00.  Have wages increased 30x since 1964?  No.  They've increased around 5x.  The inflation trade is over.

Time to bend over and open the butt cheeks.



Dr. Richard Head's picture

Nice.  I just picked up all of the Kennedy Half Dollars from my local ghetto currency exchange market (pawn shop) for UNDER melt value.  Nice......

FIAT_FixItAgainTony's picture

did same a few weeks ago.  shiny ones too!

"sweat not the corrections for they are as a fart is to the wind."

FIAT_FixItAgainTony's picture

max is such a looney you gotta love him.  funny and smart and caring.  great guy.

btw many think i'm looney too, but i do see a few of those peeps coming around with some great questions.....  seeds do grow.  there is hope!

Careless Whisper's picture

brb... gotta check my full tilt poker account

John McCloy's picture

Some super hero analyst on CNBC a minute ago said even though he was wrong on gold and commodities he would take profits in the event a "Sell in May scenario arises and put cash to work when momentum returns"

  When asked if he is afraid of QE2 ending and that is his basis he said, "Oh no..not QE2 ending I BELIEVE THAT MARKET HAS BAKED THIS IN"

That is great news fellow ZHer's. Did you know QE2's end was baked in?


"This is not real inflation because there is no wage inflation" He repeats that commodity inflation is not actual inflation.

redpill's picture

Real inflation is a lot more fair than commodity inflation, then.

Crummy's picture

Yes, unless you are living off savings.

redpill's picture

Well in that case you're screwed either way.  But that's sort of a given. No-keynesian-body likes a saver, doncha know.

Dr. Richard Head's picture

It depends on what the definition of real is.

Caviar Emptor's picture

I keep sayin': without wage inflation it's not the stagflation that everyone keeps pontificating about, like in the 1970s. During that decade wages rose nearly as fast as CPI, causing Supply-Siders to battle to come up with a plan: outsource labor costs by shipping jobs and factories overseas. They also did heavy work to break unions and collective bargaining power. The result has been 30 years of real wage deflation. 

So what we have today is biflation: commodities and anything tied to the paper economy is inflating thanks to Fed policy. THe real economy is in a deflationary spiral: Today CNBS reported California home prices deflated another 2.4% in one month. 

Lotsa Luck!

Thisson's picture

No, what we have today is simply a preference change.  People now prefer McNuggets to McMansions.  Food > Housing.

Kickaha's picture

Foreclosures are not generally considered to be "sales" which are figured into the statistics.  It would be more accurate to say that California's phony statistics are now 2.4% closer to the actual fair market value of housing right now, which is somewhere far south of the statistical number.

Waterfallsparkles's picture

I went to appeal my Property Taxes and the Assessor would not consider any Auction sales.  Even though the house next to one of mine sold for $25,000. less than my assessement. They also will not consider Foreclosure sales by Banks.  I do not understand because these are arms lengths transactions.  So, the Counties will not even consider the lowest priced sales for your property assessment.  Bummer.

InconvenientCounterParty's picture

Ever tasted a cake with every conceivable thing baked in?

I have and it's not good.

takeaction's picture

Brothers on Zero Hedge....I own a monster electronics store on the west coast.  Just got letters from Sony, and Kenwood....for huge disruptions in supply chain due to Japan Nuclear Disaster.  Many of the companies that make the chip sets and Knobs for these companies have to be abandoned.  Also we just received a 5% increase accross the board on all products due to a falling dollar.  Here is part of the letter from Sony..


"During this period of uncertainty Sony will stand strong alongside our valued retail partners. We commit to an orderly marketing plan that includes distribution stability, manageable and only necessary promotions, and inventory management which does not burden you on these issues.
I acknowledge that we have had to change our payment terms recently as a result of the cost of money in the USA. Please rest assured that we do not plan to introduce new MAP or margin erosion promotions that result in you bearing unreasonable burden. As a matter of fact, we will employ a playbook that matches the value of our product as determined by the consumer with the level of supply that is available. The traditional but very effective rule of supply and demand will be our guide."


MAP=Minimum advertised price.


What Sony is talking about is "Payment Terms".  We used to have 30 days to pay our bill from Sony as we do with all other manufacturers that we buy from.  Well, the paymnet terms went from 5% Net 30 to a straight Net 15.  This in essance is an increase in price of all SONY products by 5%.   Kenwood is doing the same thing. 


Also....last night, I drove my friend to the Toyota dealership to buy a new Highlander.  He bought one of the last ones in stock.  After talking with the owners of the Toyota dealership...they are expecting HUGE supply problems....

Just giving you a little insider heads up from what I am seeing.  This will really cut into many companies bottom line when it comes to profit reports.......

But as I have read here from you guys...

This is probably Bullish for stocks...LOL


Gully Foyle's picture

Hehe, knobs he said knobs, hehe

hedgeless_horseman's picture

Please rest assured that we do not plan to introduce new MAP or margin erosion promotions that result in you bearing unreasonable burden. As a matter of fact, we will employ a playbook that matches the value of our product as determined by the consumer with the level of supply that is available. The traditional but very effective rule of supply and demand will be our guide.

Inflation, bitchezzz!!!.