This Is Not The Inflation You Are Looking For

Tyler Durden's picture

Because one chart is worth a thousand Fed Chairman press conferences...

Courtesy of Sean Corrigan of Diapason

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tecno242's picture

If Pimpco thought inflation was transitory.. they sure as hell wouldn't be 23% net short treasuries.

DosZap's picture

Uh, even morons get that, it would show the REAL rate.

Why even bother showing a lying sack of flaming feces numbers, and leave out the main costs of sucking oxygen?.

Add 10% to it.

XPolemic's picture

If Pimpco thought inflation was transitory.. they sure as hell wouldn't be 23% net short treasuries.

LOL. Wanna try again?

A short treasury position is a call on higher interest rates, which is deflationary (usually).


1. PIMCO holds 89B in cash. Cash loses it's value in an inflationary environment.

2. PIMCO sold down it's MBS positions. Mortgage Backed Securities are worth more in an inflationary environment, and can go to nothing in a deflationary one (as the mortgagees go under water and default).

3. As mentioned above, fixed income assets decrease in price when interest rates rise, so taking a short position against FI is a bet on deflation, not inflation.

Of course, Tyler thinks that PIMCO just made the mother of all errors betting on deflation, and I would personally have to agree. In order to get deflation, the Fed needs to stop monetizing the debt, but then if the Fed stops monetizing the debt, who will buy it? No one. So in order for the Fed to stop monetizing the debt, the USG will need to spend less money, this will either mean

a) Shutting down military operations in the Middle East, suspending payments to the MI complex for new technologies and closing US bases around the world


b) Stop subsidizing people's medical care,


c) or stop paying social security benefits


d) terminate 30% of the Federal workforce.


e) Invent 1000 amazing world changing technologies that can be immediately mass produced and sold to the world (AHA HA HA HA HA HA HA HA)

Since a through e above are absurdly improbable, monetization is likely to continue, BUT WHAT IF IT STOPPED????

Talk about making the bet of your life.

Bleeping Fed's picture

More like transitionary...As in transitioning to stagflation.

TruthInSunshine's picture


Actual Unemployment Rate = 22% (see John Williams SGS *Shadow Government Statistics* alternative unemployment rate reflecting methodology that includes "long-term discouraged workers" that the Bureau of Labor Statistics in 1994 under the Clinton Administration redefined away from those considered "unemployed."

Real Inflation Rate = 8.8% Annualized (with a head of steam baked into the cake to possibly accelerate this significantly by Q3)

Government Net Transfer Payments = 51% of U.S. Population

1 out of 7 Americans on SNAP (aka Food Stamps)

U.S. Deficit (Annual Revenues - Expenditures) = -1.9 Trillion

U.S. Debt = Officially stated as 15 Trillion as of 2011 (actual is 56 Trillion to 202 Trillion; reference David M. Walker & Laurence Kotlikoff) - U.S. Is Bankrupt

U.S. Government Spending as % Component of U.S. GDP at Present = Approx. 1.6% (so if GDP is stated as 3.2%, U.S. 'Organic' GDP is only rising at 1.6%)

Approximate % of GDP Growth that is Nominal & Attributable to Inflation = 1.1% (so that 'Organic' 1.6% Growth in GDP is closer to 0.5% - not enough to stop further job losses and close to the point whereby we could start contracting again very soon)


You're Doing A Heckuva' Job, Bernank! (crushing consumption and organic economic & job growth while ratcheting inflation higher, all in one fell swoop)

JR's picture

Growth in GDP is closer to 0.5% - not enough to stop further job losses and close to the point whereby we could start contracting again very soon.

Thomas Jefferson, Andrew Jackson, Charles Lindbergh Sr. and all the rest…they wouldn’t be surprised at this development for they foresaw what happens when a thriving nation is surrendered to a central bank. Thanks for your hard work, TruthInSunshine.

jus_lite_reading's picture

Notice how the chart volatility steadily increases over the years. It almost looks like a seismograph leading up to a major earthquake and then BOOM! Notice the return of the volatility in large directional movements. Yup, it's bad folks and we can expect another major shock to the global economy very soon just by looking at this chart. Game over.

TheTmfreak's picture

Or hell think of like a heart rate monitor. Goes all crazy like then all of a sudden... Buuuuuuuuuuuuu (flat lined).

serotonindumptruck's picture

And the Bernank is all out of epinephrine, or any other cardiac drugs.

An AED (Automatic External Defibrillator) will work to restart a dying heart once or twice (QE1, QE2), but eventually the efforts to prolong life will fail, and the patient will expire.

Smartie37's picture

Nearing Escape Velocity once again --- but in which direction !?!


It's like the old tv show for BB and crew:

"We control the horizontal, We control the vertical"


but they CAN'T control the Outer Limits

MacGruber's picture

Totally agree. Plus the other thing you notice is that there has never been a controlled landing in prices. As much as the Fed likes to think of themselves as a moderating force, it always ends up in wildass swings. "Contained" is not the word I would ever use to describe this mockery.

NOTW777's picture

instead of OBL this is the picture they should hide

we all know this anyway from living life

FoieGras's picture

Why does the chart start @ 1990? Why not 1980? Would put things into perspective.

citationneeded's picture

I want to know why it says 8.8%. Should be 6.2%, no?


EDIT: Ahh, this uses non-seasonally adjusted numbers, FYI. So, perhaps more volatile than it should be.

Smartie37's picture

Would be interesting to overlay the SPX / DJIA on top of this..............

Rainman's picture

Kinda sorta looks like an oil chart

TheTmfreak's picture

They all pretty much look the same. (or exact opposites) All the same effects.

hugolp's picture

All the commodities more or less look like that.

GetZeeGold's picture


Stuart Varney just went total retard and declaired inflation is mild.





razorthin's picture

He's another dickass keynesian.  I hate that "conservative" fraud.

Thomas's picture

Yup. You cannot go total retard if you are already there.

Translational Lift's picture

What do you expect??.....He's English!!

crosey's picture

Stu's "metroecon" and can be anything whenever he needs to be.

Vanderdekken's picture

Wait, does this include food and gas prices? Because if it does... this chart doesn't reflect the true cost that everyday americans face. </sarcasm>

GetZeeGold's picture


Wait, does this include food and gas prices?


Who needs that stuff?


......said the bubble headed mouthpiece on CNBC.....the one with the black Porsche in the parking garage. /sarc still on




Bleeping Fed's picture

Food and gas overrated, just eat Ipads and ride bikes.

TheTmfreak's picture

Make sure to sniff your own farts while you're at it.

Re-Discovery's picture

You guys are really bugging me.  Didnt you hear the Minnesota Fed President say the Fed might raise interest rates 50 basis points at some time in the future.  I mean come on.  The Chairman told you directly at a Press Conference that there is no inflation risk.


Get it through your thick skulls.  And stop driving so often, you are the reason for higher Oil prices.  Go on diet while you're at it.  You eat too much.


Al Gorerhythm's picture

I need a carbon tax that will help me to stop driving so far each day.

i_fly_me's picture

And stop not hiring new workers, you are the reason for unemployment.

lordcoke's picture

i still think its gonna be deflation.  because all regional banks will be out of business. cash cash cash.

gofigure's picture

Deflation is the Fed's favorite confiscation practice, but it’s all on the edge of out-of-control which will end in hyper.  Question is: is it time for the Fed’s End?  (and of course what the meaning of is is)

NotApplicable's picture

Deflation in money substitutes, as they race for the casino exits, along with all of the toys they've financed with them. Everything we need though, will see massive price inflation, because the structure of production is irreperably damaged by this financial fraud d.b.a. The Fed.

j0nx's picture

Yeah it's called biflation and I think it will be hyper-biflation which is the outcome that I have been predicting for 3 years. Hyper inflation or deflation as an eventual outcome for the USA are both myths. We will get the worst of both just as we have been getting for the past year or so.

Cassandra Syndrome's picture

Too late. They printed way too much money. Furthermore the propensity to produce has diminished as the credit crunch has wiped out producers.

Finally the Velocity of money can only go up as this shit tied up in equities and commodity assets seeps into main street. Then people lose faith in their money and engage in more panicked transactions which raises the velocity further creating a higher demand for money. It becomes a self energising vicious circle.

Another concern of mine is the divergence between notional quantites of commodities on paper and electronic trades, and actual physical quantites today and potential physical quantities in future expiration contract dates. If the supply of physical is substantially lower than the papers than price can only go one way.

I think this was a reason given in the spread of price between Brent and WTI Crude Oil. Brent, I think is 65% backed by physical, whereas WTI is only 35%. Apply that rule of thumb across all the commodities.


LawsofPhysics's picture

Hmm, interesting thesis, BUT, does anyone know precisely how much paper money (not digital) is really out there?

zerozulu's picture

More you think more it becomes obvious that "GOLD STANDERED" is the way out. Gold is not "investment". it is store of wealth and elite don't like their money sitting idle and not making more money. Funny if you get interest on you "GOLD"

Sophist Economicus's picture

Well, looks like the higher the highs, the lower the lows


Anybody else see that nice blip in late 2007?   Looks alot like here-and-now...


Oh boy - hang on to your sphincters - could be a bumpy ride down



A Man without Qualities's picture

As painful as it may seem, higher inflation is necessary if the debt pyramid collapse is to be averted.  Unfortunately, we seem likely to end up with high inflation and low/ no growth, so we're screwed anyway...

Re-Discovery's picture

Speak for yourself, debt holding/owing slave.  Deflate/collapse away.  I bank with my local credit union.

trav7777's picture

you think your stupid FRNs are going to be worth shit if the US is insolvent?

People would be wise to review any of the dozen or so countries experiencing a currency wipeout just in the last 20 years.

I mean, I hear this crap about how stupid Americans are all the time and I have to start agreeing.  Wipeouts are COMMON.  Just because you haven't taken the time to inform yourselves of them or that the blathering talking heads on the boob tube didn't tell you about them doesn't mean they didn't happen.

In EACH and EVERY case, the sine qua non of them was unpayable debt owed by the sovereign.  There never has been any other cause of a wipeout.

It is useful to begin thinking of the bond and the currency as interchangeable.  That is because they ARE such in the modern fiat world.  The ONLY thing in the world you can GUARANTEE you can buy with the legal tender note issued by the CB is the bond issued by the sovereign.  They are joined at the hip.

The Central Bank relies 100% on the SOVEREIGN's ability to back the notes with real value of the levy of taxes, of real production, of State assets such as land, energy, water, armies, etc.  Without the government's "fiat" as to the tender status of the CB's notes, they have NO value.  As the sovereign goes, so goes the CB.  Who is going to enforce the legal tender provision?  The STATE. 

People wonder why CBs hold's an insurance policy AGAINST the sovereign's inability or unwillingness to enforce legal tender/value of the CB's paper.  If they have to, they can dust off the ingots and say "look, here is our real asset."  That is the only thing the CB has in its possession to persuade a consumer that their paper is worth more than something a schoolchild could doodle in his free time.