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Inflation Is When The Price of The Most Valuable Things (Such As Your House or Small Business) Drop Precipitously During High Unemployment, Right? Reggie Middleton on Stagflation, Pt 2

Reggie Middleton's picture




 

The definition of “Inflation” is when the “value” and “price” of some of the most widely held and most used assets fall dramatically in price… NOT!!! Well then, why are all the financial rags, blogging pundits and mainstream media outlets crowing about inflation? Mr. and Mrs. Editor, stand up and stick that “S” on your chest. That’s right, not Superman, but “Stagflaton Man”.

In continuation of my rant from last week () and my preparation as keynote in the sold out ING conference on real estate valuation, I present to you the broke back moniker of what many would have you believe is a byproduct of rapid economic growth.

We also have the WSJ reporting Euro-Zone Inflation Hits 29-Month High

The euro zone’s inflation rate jumped unexpectedly to its highest level for 29 months in March, strengthening the case for the European Central Bank to raise interest rates.

To add to the above: South African Producer-Price Inflation Accelerates by More Than Expected. South African price inflation translates to higher input costs somewhere, as does the dearth of supply coming out of Japan. This is not about inflation. Input prices are increasing amongst a general global economic stagnation. This is the worst of recession and inflation -combined. The ugly step brother... What have hear dear friends is the creature called STAGFLATION! I warned of this two years ago, and in detail. Everyone was having the inflation-deflation debate, totally ignoring the very distinct – no, actually likely scenario of the worst of both worlds.

Reference All Throughout Last Year and During the Inflation/Deflation Camp Debates, I Warned of the Risks of Stagflation. Did I Have a Point? Let’s Look at the Numbers Behind the Numbers… Monday, July 26th, 2010:

Let’s make this quick and clean. Enter the first leg of the formula from the archived BoomBustBlog post referenced above…

Wages Fail to Keep Pace with Inflation: WSJ

  • Median weekly earnings rose 0.8% in the 2nd Quarter this year, against 1.8% CPI growth in the same period
  • Excess supply in the labor market has kept wage inflation low
  • On a year over year basis, wage growth based on occupation has been barely positive, or in some cases wages are showing deflationary pressures

Which leads to a hint of the Stagflationary conclusion…

Five months ago, I queried, ““, and went in depth to answer my own question after CNBC reported “Jobless Claims, Inflation Jump as Economy Wobbles

Both the number of workers filing new applications for unemployment insurance and producer prices unexpectedly surged, dealing a setback to hopes the economy was showing a strong recovery.

Have you noticed that nothing else much has changed in those five months or so?

But first we have to reinforce the (absence of) labor component of the thesis, ex. unemployment…

See All Throughout Last Year and During the Inflation/Deflation Camp Debates, I Warned of the Risks of Stagflation. Did I Have a Point? Let’s Look at the Numbers Behind the Numbers for the balance of the article.

_______________

Commodities have always made a good inflation hedge because inflation indicates and overheated demand component in a rapidly expanding economic growth cycle – hence the consequential demand for things drives prices up. Think about the booming economy, bubble housing and the demand for concrete, copper, timber and tin – all of which have made excellent inflation hedges. During stagflation, those things reliant on economic growth, ex. housing, CRE, commodities depress in demand along with demand in general – thus blunting their historical correlation and hedging capabilities in relation to inflation. Add in the atrocious supply/demand imbalance in most residential and commercial real estate sectors, and you have what could amount to the antithesis of a price inflation hedge.

My graphic below shows how real estate and commodities have been among the best inflation hedges.

image003_copy.png

Don’t look for this to necessarily be the case this time around. Is it because it’s different this time? No! It’s because this time around its not inflation, it’s….

Don’t be believe everything you read in the media (unless its BoomBustBlog, of course :-) .

Here’s one area where Jim Rogers has proven to be overtly accurate, and more than once. Food. People will eat, and they will eat in inflationary, deflationary, and stagflationary times. Reduce supply, which is something that has recently and still is occurring, and you implicitly increase the proportionate demand portion of the equilibrium. It is not possible to rapidly increase food supply either. If I have the time, I will delve into this further. I also have several other installments on the stagflation topic, and how it can relate to the coming continuation of the global real estate crash. Stay tuned.

 

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Mon, 04/04/2011 - 18:35 | 1134712 red_pill_rash
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“Whoever controls the volume of money in any country is absolute master of all industry and commerce.”

 James A. Garfield

Mon, 04/04/2011 - 18:30 | 1134698 akak
akak's picture

I vote for "Bernanktion" --- a rapidly increasing supply of disinformation, lies, oligarchic power concentration and general misery, and a falling supply of real wealth, political responsibility and truth.

Mon, 04/04/2011 - 16:33 | 1134154 Zero Govt
Zero Govt's picture

Reggie

We have a stagnant economy (deflating in truth if you took away Govt stimulus), rising inflating commodity prices and deflating asset prices (eg. property). 

Trying to tag this mixed bag of an economy with one word is near impossible, even Stagflation doesn't cover it properly. In fact the real problem is not describing the economy, it's trying to put one simplistic name tag on it using the limited vocablory of academics and economists!

Why do we feel it necessary to 'tag' something so complex as the economy with so many different markets with a one-name-fits-all label anyway? I think the task is not only simplistic but futile (pointless). Better to deal with each sector individually (a task complex enough) than try to boil something as big and multi-faceted as the economy down to some harmoginised margarine of a label

So stag-in-deflation it is then!!!!

Mon, 04/04/2011 - 16:08 | 1134045 cocoablini
cocoablini's picture

The FED has destroyed the US economy with their 11th hour tactics- increasing the amplitude of each crash. They inspired the dotcom bubble, recovered that with cheap money for the "millenium" turnover, then 9-11 came with more cheap money which targeted real estate. 2008 was the biggest so far, nearing the great depression implosions. The next one, because asset values are build on 100% government control economy valuations and not a price discovery system within the retail community, will probably be the last.
That would mean the primary dealer system rebelled and the US financial system collapsed.
So, we are in a full hologram now. A fake marketplace with fake customers and a befuddled citizanry. The IMF now talking shit about higher taxes and austerity for us.
The next step is simply a global economic system dictated by IMF, g20, Builderburger Nazis

Mon, 04/04/2011 - 15:54 | 1133977 moneymutt
moneymutt's picture

To me its not surprising that what is happening is sort of the mirror opposite of the early 2000s, food and oil were real cheap and housing was inflation but CPI said no inflation because inflation in house prices didn't count.

Early 2008 was a prelude, house prices were decreasing, food/oil etc were increasing....to me it is a bit scary to see same trends as we saw in early 2008, regular folks money getting diverted to comodity producers/speculators, while house prices are declining...does that mean in 6 months we will have have Fall 2008 again?

Mon, 04/04/2011 - 14:29 | 1133522 cocoablini
cocoablini's picture

This is FEDFLATION, which benefits no one except the apparatchik

Mon, 04/04/2011 - 14:27 | 1133514 cocoablini
cocoablini's picture

Reggie is correct in that price inflation is ruining the buying power of Americans( or the world) while many asset values a declining. So part of the economy has price inflation- but other parts have deflation. What do you call that.
This is a semantics issue only because the definition of inflation and deflation are commonly thought of as polar opposites.
Since all money is credit and fiat, its easy to inflate currency and credit.
When the system crashes and runs in reverse, it's called deflation but deflation is a money and Political event.
To prevent credit destruction, asset price deflation and low money supply( money supply is not just what is printed but your ability to borrow and lever on an asset like a bond) the government steps in to create a fake higher market for commodities and assets.
It has totally failed holdimg up and reflation the housing market- and thus people have less credit borrowing power. Less credit means less spending on cars and construction etc.
Call it stagflation, hyperinflationary credit collapse, deflationary or Dud-flation( where inflation takes buying power away and so does deflationary credit) it doesn't matter. Its just words. So, yes, Ben Bernanke can create his statistic in GDP but basically nobody is doing well in this "amazing" inflationary environment except those who can access free money and ZIRP- the wealthy. And that is all that matters in the United States of Kleptocracy. Obama 2012!

Mon, 04/04/2011 - 15:13 | 1133737 Implicit simplicit
Implicit simplicit's picture

Why do we have to unify the relative theories. Call it like you see it. Inflation in some things (food, gas...etc), and deflation in others (wages, RE...etc.) Every which way you figure it, the poor and middle class are getting bumblasted, while the continued Ponzi(QEs, POMO, Defense, Health...etc.) benefits the top 10%.

Mon, 04/04/2011 - 14:01 | 1133342 PulauHantu29
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Real Estate cycles are 10-12 years. We had 10-12 years of higher prices...in this case 'Uber Prices" due to the Zero Down, no asset no job loans.

 

Now we will have 10-12 years of an Uber Fall in RE prices.

other commodities were not in a bubble. Gold, for example, is still underpriced, as is palladium and silver. So I expect gold, silver, etc to rise much more.

Oil is a special stroy since military lives off oil. This will continue to rise forever.

Mon, 04/04/2011 - 13:34 | 1133194 hardcleareye
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In a world were "Common sense is not so common.", you are a "find".

Mon, 04/04/2011 - 13:21 | 1133133 10kby2k
10kby2k's picture

But umemployment fell 8.8% last Friday. (or is 8.8% the homeless rate?)

Mon, 04/04/2011 - 13:37 | 1133124 whatz that smell
whatz that smell's picture

if i have $10 and the value of a bottle of maddog falls to $2.50, i will buy 4 bottles.

if i have $10 and a bottle of maddog rises to $5.00, i will buy 2 bottles.

inflation? $10, $5, or 2 bottles?... less bottles sold, higher price per bottle, deflating dollars.

deflation? $10, $2.50, or 4 bottles?... more bottles sold, lower price per bottle, inflating dollars.

i beg for pennies, collect $5, cheat the IRS, avoid credit and interest, buy maddog, get drunk....

...investment capital shrinks 500 pennies, tax receipts plummet, bank profits shrink, stock market tanks, commies run wild, plutocrats demand bailouts...

inflation? deflation?

in hell, austrians and keynesians inFellate and deFellate each other.

Mon, 04/04/2011 - 15:00 | 1133676 Votewithabullet
Votewithabullet's picture

many thanks.

Mon, 04/04/2011 - 12:58 | 1133020 Attitude_Check
Attitude_Check's picture

It's not stagflation either, although that is close. I remember the 70's and during stagflation assets rose in price, not just commodities.  It was wages that stagnated.

 

This time assets will(are) also dropping in price, along with stagnant wages and high enemployment.  This is biflation (simultaneous deflation and inflation).  The absolute most painfull combination.  The "great moderation" is unwinding.

Mon, 04/04/2011 - 12:23 | 1132832 dexter_morgan
dexter_morgan's picture

Interesting - seems today is the "lets convince everyone there is no inflation" day. Makes one wonder whats up with all the singing going on out of the same hymnbook.

Mon, 04/04/2011 - 11:59 | 1132711 Jerry Maguire
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The overhang of debt is what is "different" this time.  The only way to get your hands on any real money at this point is to borrow it.  Working for a living makes no sense, comparatively speaking, although working for a living is always necessary. 

Even so, what's happening is that the newly borrowed money is being disproportionately used to "service" the previously borrowed money.  Of course, this adds nothing to production.  The increase in M2 is simply being siphoned off by the financial "industry".  Essentially it's going down a black hole and disappearing, economically speaking. 

This explains why you can have so much monetary goosing without making anyone better off, really.  Even Wall Street is just hanging on by its thumbs, hoping something good will happen.  But it can't.  Unless and until the debt is reduced or eliminated, everything is going to stagnate and decay. 

A jubilee, in other words.  But it's going to take some political courage by someone.

http://strikelawyer.wordpress.com/2011/01/15/amending-the-constitution-t...

http://strikelawyer.wordpress.com/2011/01/15/us-constitution-28th-amendm...

http://strikelawyer.wordpress.com/2011/01/15/28th-amendment-first-and-se...

http://strikelawyer.wordpress.com/2011/01/16/28th-amendment-section-3/

http://strikelawyer.wordpress.com/2011/01/17/28th-amendment-the-rest-exp...

And there are other related posts as well.  Read it and weep, since it will probably never happen.

 

Mon, 04/04/2011 - 12:28 | 1132865 LawsofPhysics
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Bring on the jubilee.  The sooner we do, the sooner compensation will return to those that are actually worth a shit.

Mon, 04/04/2011 - 11:56 | 1132695 malek
malek's picture

The Price of The Most Valuable Things (Such As Your House or Small Business)

According to who, measured in what?
I always thought the most valuable things were nourishment, clothing, and shelter.
Food prices are rising, clothing looks poised to do so soon, rents are mostly stagnant.

I wouldn't call a drop from bubble prices back to more normal valuations to be real deflation.

Mon, 04/04/2011 - 13:26 | 1133153 Reggie Middleton
Reggie Middleton's picture

The article states that asset prices are dropping, input prices (mostly commodities) are rising. What happens when these commodity prices rise to the point where no one will purchase them, easily illustrated by the example of companies swallowing input cost increases because they can't pass the higher expenses to strapped consumers. Either prices go down or the companies go bust. One way or the other, something's go to give. In order for an inflationary environment, you need more competition where everyone has access to the inflated money supply. More competition for jobs bringing higher wages, more competition for fixed assets bringing higher prices, etc. RE is not going dramatically higher anytime soon unless and until excess supply is rectified.

Mon, 04/04/2011 - 16:58 | 1134335 Chappaquiddick
Chappaquiddick's picture

Reggie I respect you Buddy.  You have big balls to come here and post and argue the toss with the ZH Group Think.  I can't think of anyone else with the guts to do that.  What is absolutely clear is that the picture is very confusing and almost everything except hyperinflation can be seen to be with us right now.  If the Fed are able to ride this out and get the economy back to an even keel then I doubt very much I won't be the only one to be simultaneously utterly bemused and very grateful.  However, given the numbers it seems obvious that the insanity of the last few years will instead translate into a more rapidly destabalising downward spiral leading one way or another to economic collapse.  However, rather than focusing on the confusion why not focus on that fabled recovery and list up the key economic factors that would in your view signal a recovery - forget the detail just go for the big 6 or 5 or whatever meets you easy to do test and lets chew that over.

Thanks for all your great work Reggie.

Mon, 04/04/2011 - 14:38 | 1133559 Temporalist
Temporalist's picture

"easily illustrated by the example of companies swallowing input cost increases because they can't pass the higher expenses to strapped consumers"

 

Except when the packaging shrinks to hide the inflation and they pass on smaller units to the unaware consumer. 

BTW assets like precious metals are rising.  I guess you consider those commodities though.

Mon, 04/04/2011 - 11:54 | 1132673 kaiserhoff
kaiserhoff's picture

Getting close to coming out of the closet as a deflationist, Reggie.  Welcome to the club.

Why not point out that "food" inflation is just another way of saying overpriced oil?  Commodity input prices are under 10% of most processed food cost.  The rest is transport and wages.

Mon, 04/04/2011 - 12:28 | 1132851 LawsofPhysics
LawsofPhysics's picture

Deflation/inflation/stagflation is irrelevant.  All that matters is purchasing power, period.  Can you as an individual or company purchase what you need to in order to stay afloat. I would not limit your hypothesis to oil.  I would say it is safe to say "overpriced energy", period.

Moreover, when it comes to food, it takes over 500 kJ per mole to break the nitrogen-nitrogen triple bond and another 900 kJ per mole or so to reduce it to ammonia (something plants can actually use).  This energy input will sky rocket, and sorry to all those "green" people out there, crop rotation with legumes (that fix their own nitrogen by taking up bacteria to do it for them) won't work.  The Habor-Bosch process is the only way to reduce gaseous nitrogen to ammonia fast enough (the bacteria the do it do so slowly because of the energy cost) to feed 6 billion people plus.  The planet really does need a viable energy policy, badly. The energy is there, just need to get the politicians and bankers out of the way.

Mon, 04/04/2011 - 11:50 | 1132660 Badabing
Badabing's picture

Biflation: wants down needs up all priced in gold!

Mon, 04/04/2011 - 11:49 | 1132639 Eternal Student
Eternal Student's picture

Typo in the front page article at

http://boombustblog.com/reggie-middleton/2011/04/01/inflation-misconcept...

"The answer is STAGLFATION!". S.B. stagflation.

Curiously, ZH's spell check didn't find anything. Gotta wonder what staglfation is.

Mon, 04/04/2011 - 11:43 | 1132612 stormsailor
stormsailor's picture

reggie is the absolute best we have

Mon, 04/04/2011 - 11:43 | 1132598 GottaBKiddn
GottaBKiddn's picture

Sorry, Reg, You're beating a dead horse with this stagflation rant. Inflation is when the monetary supply is inflated. Prices rise well after inflation. So far the monetary supply has been hyperinflated, and we will surely have hyperinflation. To try to use falling real estate prices to deny present hyperinflation, is to ignore that throughout the last thirty or so years real estate valuations were mega-inflated. So the idea that dropping real estate prices cancels out present hyperinflation is misreading the facts. Real estate is deflating because it was hyperinflated. All prices will rise over time because the monetary supply has been hyperinflated. Stag nothing.

 

 

Mon, 04/04/2011 - 13:00 | 1133028 Doc
Doc's picture

+10!

Reggie is one of my favorites and most of his writings' are great. But he is merely playing a semantic shell game on stagflations vs. inflation. He's attempting to explain that we have stagnant and depressionary forces on one hand and inflation on the other; hence stagflation.

Unfortunately what he is missing is that in times of heavy inflation prices for many items go down during certain phases. Look at real-estate prices in Weimar Germany, France, Brazil, or Zimbabwe; initially they were losing value in real terms and for a time (in the beginning) in nominal terms. In fact during the Mississippi bubble despite John Law's attempts at inflation he was not able to reflate the Mississippi Company's stock price to its previous nominal highs, despite causing a hyperinflation and complete currency collapse!

We are clearly in inflation now. Just because workers' wages haven't risen or house prices remain depressed does not mean that we are in something else. In fact high-inflation is usually seen in countries suffering from large scale recessions. In trying to postpone or avoid immidiate pain governments resort to the printing presses!

 

 

Mon, 04/04/2011 - 13:19 | 1133115 Reggie Middleton
Reggie Middleton's picture

Thanks for the kudos, but to your point... What prices are increasing other than input prices? Real asset prices are dropping, and dropping fast. housing... Small business equity is dropping. big ticket consumer items (ex. cars)... The cost of labor is dropping, and dropping materially. Employment is low. The only inflated prices are that of input prices and equities. Input price increases equate to higher costs, yet those costs can't be passed onto a strapped consumer in termso of higher prices hence margins are squeezed leaving the companies to swallow the input cost inflation. Only but so muc of that can happen before...

One had best believe that many equity prices are not in line with their intrinsic value, as well.

China is clearly in an inflationary period now. The US and the EU, it looks like that man with the S on his chest, above.

 

Tue, 04/05/2011 - 04:39 | 1135918 Doc
Doc's picture

Reggie,

You keep referring to "input prices". Yet it isn't just commodities that are rising. Health insurance, education, and taxes are all rising as well. Labor prices are also rising; just not in America. The era of Asian wage deflation is finished. The Chinese are demanding higher pay and that is one of the largest inputs of all!

Like I said before you are playing a semantic shell game with the terminology. Stagflation was coined as a term in 1960s Britain and it means something specific: "HIGH INFLATION and stagnant economic growth". However, previous periods of high-inflation have almost always shown us that there was stagnant economic growth preceding high-inflation. Zimbabwe, Weimar Germany, or Brazil in the late 80s early 90s were hardly boom time economies with full-employement before their hyperinflations. The reason they espoused an inflationary MONETARY policy was because they had tapped out their ability to borrow on the international credit markets (sound familiar)?

Inflation is not a ubiquitous process whereby once the monetary spigot is turned on all prices rise in tandem. Certain areas of the economy are affected first. In Weimar Germany it was industrial wages as the government was literally handing freshly printed money to the workers of the Ruhr Valley.

The US is currently exporting a large part of its inflation through the carry trade but the part you have to remember is that monetizing government debt in order to pay Federal Employees is about as highly inflationary as it gets. The state has literally injected over a trillion dollars worth of funny money into the economy during the past couple of years. State workers and government agencies went off and spent that money; it didn't stay "trapped in excess reserves".

 

 

 

 

Mon, 04/04/2011 - 16:32 | 1134210 mdwagner
mdwagner's picture

The definition of inflation is outdated.  There are so many factors for it including:

Aggregate demand.

Government policy including tax increases, regulatory burdens and programs instituted to stimulate a particular market.

Wall Street demand including speculators.

Value of currency decreasing.

Raw materials (including energy) supply.

Increase in money supply.

 

To look at just one factor is not a valid judgment of whether we're going through a period of inflation or not.  

Mon, 04/04/2011 - 14:51 | 1133617 dizzyfingers
dizzyfingers's picture

Energy costs rising. One gallon of gas nearer $4 today than yesterday; it'll get there before July 4.

Cost of heating, food, cooking, cooling, driving goes up, so does the cost of everything else. Inflation.

It's happening now.

http://www.usatoday.com/money/industries/retail/2011-03-30-wal-mart-ceo-expects-inflation_N.htm

 

Mon, 04/04/2011 - 13:56 | 1133327 Rainman
Rainman's picture

+ 2 lost Japanese decades

Mon, 04/04/2011 - 13:56 | 1133313 LeBalance
LeBalance's picture

In discussions terms are important.

Inflation: increase in supply of credit/money/$$.

Market prices follow their own idiosyncratic way.

RE market: massively destroyed via "price inflation" and MBS fraud.

The combination of forces has destroyed the RE space for confident trading.

This is NOT a monetary effect on its own, it is a combination of effects.

Mon, 04/04/2011 - 14:03 | 1133351 Reggie Middleton
Reggie Middleton's picture

The term "inflation" is now used to describe price inflation as well, but more to your point.

"Inflation: increase in supply of credit/money/$$."

Thre is no increase in the supply of credit. Conversely, the supply of credit has literally collapsed. Try getting a mortgage or unsecured credit line now and compare the efforts to 4 years ago. Credit has increased to the FIRE sector, particuarly the largest banks, but those banks are hoarding it, despire increasing dividends, bonus payouts and derivative assets whose collateral are still rapidly depreciating in value on their balance sheets. No matter which way you look at it, input prices are the only things going up - unless you include the far from fundamental public equity markets. Private equity in SMB is not seeing such .

 

Mon, 04/04/2011 - 16:14 | 1134096 SamuelMaverick
SamuelMaverick's picture

Exactly, the money velocity chart at the St Louis Fed site is a straight line down into the toilet.  Yours, Maverick

Mon, 04/04/2011 - 15:13 | 1133750 Spitzer
Spitzer's picture

before 2008, we had demand pull inflation. Now, we have currency devaluation inflation.Demand pull is a diffrent animal.

Mon, 04/04/2011 - 14:01 | 1133349 Reggie Middleton
Reggie Middleton's picture

The term "inflation" is now used to describe price inflation as well, but more to your point.

"Inflation: increase in supply of credit/money/$$."

Thre is no increase in the supply of credit. Conversely, the supply of credit has literally collapsed. Try getting a mortgage or unsecured credit line now and compare the efforts to 4 years ago. Credit has increased to the FIRE sector, particuarly the largest banks, but those banks are hoarding it, despire increasing dividends, bonus payouts and derivative assets whose collateral are still rapidly depreciating in value on their balance sheets. No matter which way you look at it, input prices are the only things going up - unless you include the far from fundamental public equity markets. Private equity in SMB is not seeing such .

 

Mon, 04/04/2011 - 12:53 | 1132952 robobbob
robobbob's picture

something to consider in your thinking.

The shadow banking system has collapsed by multiple trillions of dollars. Banks are loaded with toxic MBS and are not lending. Anything that requires borrowed money to purchase is stalled/falling in price.

Even Benny's printing is not keeping up with the loss of credit, so far. Its just distorting the markets by driving up input costs and squeezing margins at a time of falling product demand. 

But don't fret. Ben hasn't hit he turbo print button yet, so there's still hope for your big melt up.

Mon, 04/04/2011 - 13:12 | 1133084 Doc
Doc's picture

Robobbob,

I respect your opinion but would like to reply:

Yes you are right, the shadow banking system has collapsed, the money multiplier effect of the fractional reserve banking system is relatively stagnant BUT:

a.) The Federal Reserve has engaged in two rounds of Quantitative Easing roughly $1.6 TRILLION to $1.8 TRILLION. Monetising that much government debt is HIGHLY inflationary. The money is not trapped in "excess reserves" on bank balance sheets. It is paid out by the Federal Government to its employees and other recipients (maturing debt holders, client states, welfare recipients, medicaid, student loans etc.). They in turn spend it. What they are spending is base money, which will in time be leveraged by the banking system 10 to 1.

b.) Zero Interest Rate Policy: By setting interest rates at zero the Fed has turned the dollar into a funding currency. Money is borrowed in the US market across the world and reinvested in higher yielding currencies and economies. This is the mother of all carry trades (if there is a sudden unwind expect the dollar to go to the moon). Just about every country in the world from Brazil to Germany have been warning that this policy is creating assett bubbles across the world.

c.) Wage deflation from Asia has ended. The time when you could pay a 12 year old Thai kid to make plastic toys for a can of dogfood a day is finished. Living standards have rising in the developing world thus so have purchases of raw materials.

d.) If we weren't in inflation not all commodities would be rising together. When you have a rise in just about every single commodity in the index (minus Natural Gas), base metals, precious metals, energy, and agriculture have all gone up in tandem during the past year and a half. There is no clearer sign of inflation. This means that it is not just the supply or demand side rising but really the dilution of the monetary unit which measures the value of the commodity.

 

Best Regards,

 

Doc

Mon, 04/04/2011 - 11:38 | 1132571 disabledvet
disabledvet's picture

what i love about Jim Rogers is his truthfullness when it comes to stock picking ("i stink") let alone "everyone's bugaboo" known  so perfectly as "market timing." (only God, please.)  rational man is always "on the march"--even when drunk on his couch--but only a fool fights both the Fed and the tape.  jim rogers does neither.  i'm still waiting for a counter-argument to cash--in the 90's there were some fascinating arguments for it--and that's when money did grow on trees.  now "money doesn't do that and that makes cash worthless."  now "cue to meaningless employment nmbrs."

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