The Road To Stagflation

Econophile's picture

From The Daily Capitalist


This is an article I wrote for a newspaper that is a reprise of my reasoning why I think we are headed for stagflation. The article will appear next week, but it will be familiar stuff for Daily Capitalist readers.


The Fed voted two weeks ago to print money as much money as they think is necessary to fight deflation, economic decline, and rising unemployment. It is a major policy change little noticed by the media.

There has been a lot of noise in the media lately about deflation. While a few of us have been forecasting deflation and a decline in the economy for some time (your truly since December, 2009), it is as if most economists had just discovered it.

The reason for all this concern is the weak economic data coming in:

  • Jobless claims jumped to a 9-month high which forecasts rising unemployment.
  • Consumer spending is softening.
  • Disposable income is flattening.
  • New manufacturing orders are declining and inventories are rising.
  • Durable goods orders are falling.
  • Credit continues to shrink, both for consumers and businesses.
  • GDP was revised downward for Q2.
  • The Consumer Confidence Index took a big slide.
  • Commercial and industrial real estate is still declining.
  • Home sales continue to decline.
  • Some of the leading indicator indices are falling, such as the ECRI and the Consumer Metrics institute.

There are two more data points that really have the Fed concerned. One is that the Consumer Price Index is very low. While you would think that low rates of inflation are good, the Fed wants inflation.

The other thing that bothers the Fed is that money supply is declining and has been doing so since last December. They think that we may be heading for deflation.

What does all this mean? It means that everything the Fed and the federal government have done to revive the economy has failed. From massive fiscal stimulus (spending $787 trillion on mostly wasteful projects), to the TARP bailouts of Big Money, to zero interest rate policy (“ZIRP”), to gimmicks such as Cash for [your industry here], they have failed to stimulate the economy.

With all the bad data coming in, it is no wonder that the Fed, as reported in the minutes of its June, 2010 meeting, was so pessimistic:

Participants generally anticipated that, in light of the severity of the economic downturn, it would take some time for the economy to converge fully to its longer-run path as characterized by sustainable rates of output growth, unemployment, and inflation consistent with participants’ interpretation of the Federal Reserve’s dual objectives; most expected the convergence process to take no more than five to six years.

They are saying that they think it could take 5 or 6 years from 2008 for things to turn around.

What they overlook is that it is the Fed’s manipulation of the money supply that is the cause of our boom-bust cycles: they are the problem, not the solution. And that is why their policies are failing.

Which gets us back to the inflation-deflation issue. It is an axiom of faith with the economists who control Fed and government policy that the economy needs a little bit of inflation to grow. They think that all the Fed has to do is step on the money pedal and the new money stimulates the economy, money supply grows evidencing healthy business lending, prices rise modestly, employment rises, and the economy grows.

The only problem with that idea is that it isn’t working.

Why have they failed?

It all has to do with the banks, mostly the regional and local banks that finance about one-half of our economy. These banks have two problems. First, as a result of the crash, their balance sheets are clogged up with (mostly) bad commercial real estate loans. Bad loans tie up a lot of capital that banks would otherwise lend out. Second, because of the economic decline, business customers aren’t borrowing. And it’s not just because banks have tightened lending standards; businesses see weak demand plus, with all the new laws passed, they are very uncertain about the future.

The Fed saw the plight of banks and they lowered the interest rate (the Fed Funds rate) to zero on money banks borrow from the Fed to make loans. They have also massively increased the pool of money available to banks to tap into (money base).

But, if banks aren’t lending and borrowers are reluctant to borrow, the new money never gets lent out, and the giant pool of new money just sits at the Fed as banks’ reserves.

Since the money is not being lent out, which is their main tool to increase money supply, money supply is now declining, and that is deflation. This is why the Fed is very concerned with a potential “deflationary spiral,” a phenomenon that occurred during the Great Depression.

What can the Fed do? They can’t lower the Federal Funds rate because it is already as low as it can go. And this hasn’t worked anyway.

This is what the big change in Fed policy was all about.

There was a huge internal fight at the Fed between the anti-deflationists and the anti-inflationists, and the anti-deflationists won. The Fed decided they would fight deflation through “quantitative easing” or “QE.”

With QE, another tool the Fed has to increase money supply, the Fed buys Treasury debt (bills, notes, and bonds) from its primary dealers and prints money to pay for it. This puts money directly into the economy.

It’s not as if this is something new. From last year through April of this year, the Fed bought $1.25 trillion of debt issued by Fannie Mae and Freddie Mac. They also bought about $700 million of Treasury debt. This put $2 trillion of new money into the economy. This apparently wasn’t enough.

The second important thing they announced is that they will replace their Fannie/Freddie paper with Treasury debt. This seems harmless at first because the Fed is not increasing its total debt holdings—yet.

They announced this with a seemingly innocuous statement: that they would keep their current level of debt at about $2 trillion. In Fed-speak this means they are clearly worried about the sinking economy, and that they will print as much fiat money as they think is necessary to increase the money supply to induce inflation.

In economic terms, buying Treasury debt is called “monetizing” debt. In plain English it means that the government prints money to pay for its debts. This policy has been the downfall of many governments who destroy their currency through hyperinflation.

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StychoKiller's picture

No one's gonna recognize Stagflation is here until bond interest rates start shooting up, killing bond prices in the process -- ain't no one gonna be happy then!

rgh51's picture

Just to set the record straight. It was $787 billion not trillion. It will be about 10 years before the fed manages to get the debt to $787 trillion:>)

godfader's picture

The Fed "wants" inflation, but they are slowly learning they can't force inflation. It took the BOJ 15 years, maybe the US central bank will "learn their lesson" after 5 years and finally give up. That would make it 2012 -- 5 years after the first rate cuts.

We've seen neiter the Fed nor the BOJ can grow corporate or consumer credit volume.  The Fed by itself is completely irrelevant in the inflation/deflation/stagflation debate considering the amount of total debt/GDP outstanding. There won't be any consumer price inflation without credit growth and likely there won't be any credit growth to speak of for the next 5-10 years.

"With QE, another tool the Fed has to increase money supply, the Fed buys Treasury debt (bills, notes, and bonds) from its primary dealers and prints money to pay for it. This puts money directly into the economy."

Directly into the economy? Primary dealers are not the economy. It makes little difference to a bank if they have a 5 year treasury bond on their balance sheet or the equivalent of cash liquidity after the Fed buys the bond from them. I suggest the author study credit growth (or lack thereof) during the 30s in the US and 90s in Japan. There is no demand for credit hence no liquidity makes it into the economy.

Species8472's picture

T bonds are savings for most holders, if the Fed buys them the cash received is still savings and will go somewhere else, it will not be spent.

This is why the Fed is very concerned with a potential “deflationary spiral,” a phenomenon that occurred during the Great Depression.

Deflation for only about 2 yrs, by 1934 inflation was back at 6%


mynhair's picture

So big whoop if the Fed does more QE.  The result will be the same as the last QE in that the cash never gets into the hands of those that spend.  Where does an increase of velocity come from any time soon?  I see a decade of crap not hitting the fan, inflation wise.

Unless the Fed forgives all CRE loans.  That would turn the trick.  At least for me.

Edit:  Suppose these bogus banks could lend outside the US, thereby spurring OTUS recovery, and raising resource prices.  That would cause stagflation.

Dburn's picture

At the core, aren't all these fed policies just tinkering around the edges of the problem without addressing the core problems?   The one part of the fed's core missing is to help in the creation of jobs (that may not be the exact language) or at least help in creating conditions where the economy would expand so jobs would be created. I don't think maintaining prices that are out of whack to median income is going to create conditions that the economy can expand upon. If congress has created conditions where the CEOs and the Elites are able to push wages down with near impunity by eliminating employment  through technology, forced productivity, outsourcing,  stomping on innovation(small business) H1B visa abuses, non-enforcement of workplace discrimination laws and a slew of other items too numerous to mention, has the bottom line effect of reducing available positions to far less than available workers. Right now they say that there are 6 people for every job opening. That's generalization as there may only be one person or no persons wanting to pick fruit for $2.00 an hour who is an American Citizen despite the almost rabid encouragement of some of the elite here that Americans take those jobs and “Just get used to” what I assume the living conditions are of illegal Aliens. Strange that…A huge push to get rid of Illegal Aliens apparently so that Americans can work their jobs and enjoy their lifestyle.  

With a reduction of available jobs, even if the consumption economy were by some miracle reappear, we have a new condition of too many people for too few jobs regardless of economic conditions. Without innovation and limits on technology transfers to foreign countries which were enforced well after the Cold War, toxic gov’t policy has put barriers in the way of economic expansion. Inflation will most likely occur during expansion especially when businesses are caught short of supply.

The best example of this recently was the phenomena. After the 1990-91 recession job recovery was slow. Like now jobs were actively and permanently eliminated through a popular phrase at the time called "re-engineering". Then one day in 1995 Netscape’s IPO almost singlehandedly changed the deliberate elimination of jobs to panic hiring. If the revolution had not been 80-95% BS and true innovation was transforming the economy through all areas from consumption to exports, to manufacturing ( US contract Manufacturers were bid to enormous heights then) then we wouldn't be discussing this. Much of it was a bubble at worst or a overenthusiastic reception to technology that had no gone through a maturation stage that required decades with proper infrastructure build outs. Call that 70% innovation and 30% Bullshit. That would have been sufficient.

Our  Politicians have, mostly unwittingly because they just aren’t that smart, set barriers up to innovation which is the only thing that is going allow the US to survive in any semblance of its current incarnation. By not letting the bottom hit, and trying to keep a popped balloon take air, money is taken from area s of the economy that could produce the innovation that over a period of decades with a slower ramp time, pull us out. Instead we now talk of civil unrest, civil wars, blood , rioting and corporations screaming gives all your money or we shoot the dog.

The core problem then to me is corruption of the political process that has produced toxic domestic and international policy for short term gain without a thought to the long term implications. That means anything the fed tries, if it's on the up and up or not is going fail and fail spectacularly.

So why isn't the debate on the core problems?  No Innovation equals less jobs and downward pressure on wages with forced upward pressure on productivity that keep the C-Suites pay and overhead enormously bloated as it make their investors , the elites , wealthy or at least did until T.D.S.’S ( Trick-em . Dick-em and Stick em) HFT computers started stinking up the place.

Mitchman's picture


Why Jobs Have Gone AWOL

  •; background-attachment: initial; background-origin: initial; background-clip: initial; background-color: initial; display: inline; color: #666666; background-position: 100% 50%; background-repeat: no-repeat no-repeat; margin: 0px; border: 0px initial initial;">by Michael Pento

  • August 13, 2010

There are three primary reasons why the United States is suffering from structurally high unemployment: a pervasively irresponsible monetary policy, the continued attenuation of our manufacturing base, and an overleveraged consumer who must now reconcile his balance sheet. In reality, the latter two conditions are a direct result of the first. They are the result of a government that seeks to micromanage the cost of money and the rate of economic growth.

When the Fed prints money and monetizes debt in order to drag interest rates down, it necessarily encourages excess consumption. The boom in lending and spending results in rising prices, which misallocate what little genuine savings and investment remain. Because inflation is never evenly distributed throughout an economy, it usually gets concentrated into a particular asset bubble (whether Nasdaq stocks, real estate, or tulips).

If interest rates and the money supply are left to market forces (i.e., interest rates are a function of savings vs. the demand for money and money supply is restricted by the mine supply of precious metals), then resources tend to be allocated in the most efficient manner. However, when the Fed distorts these forces, employment gains are most prevalent in the building and servicing of the asset bubbles they help create. This means labor capital is not deployed evenly throughout the economy. It is concentrated on flipping stocks or houses, instead of expanding productivity or strengthening the economy's manufacturing base. But these behaviors are unsustainable. Once the bubble is popped, the economy must go through a period of deleveraging before labor can be reallocated in a way that makes economic sense.

As an illustration of this point, from January 2000 through today, the United States has lost over 6.6 million goods-producing jobs! Some make the excuse that higher productivity means less workers are needed to produce the same amount of goods. If that were true, then manufacturing would not have declined from 14.2% to 11% of GDP over the same period. Meanwhile, jobs in the housing and service sectors were doing much better. From January 2000 through June 2006, the economy added 261,000 jobs in real estate alone. And from 2000 through today, the service sector as a whole added over 5 million jobs.

Some will claim that the prescription for boosting manufacturing output and employment is to destroy the dollar at an even greater pace. But the answer can't be found by simply forcing the Chinese to float their currency or by devaluing the dollar further. History clearly shows the currency manipulation strategy to be a complete failure. The most important factors in balancing trade are wages, taxes, and regulations within a country. A current account deficit cannot be balanced by lowering the value of a currency.

Another consequence of government's desire to manage interest rates and the economy is the accumulation of debt. Household debt in the year 2000 totaled $6.9 trillion, or 66% of GDP. Then government slammed on the monetary and fiscal accelerator to paper over the collapse of the equity market. Consumer debt skyrocketed as a consequence. Today, household debt stands at $13.5 trillion - over 93% of GDP. Job growth will be weak because the consumer must pay down this debt and will thus not be taking the risks associated with employment creation. Demand will also be weak because consumers are (responsibly) repairing their balance sheets instead of taking out loans to expand or start new businesses.

The bottom line is that it will take time for those erstwhile service-sector employees and others whose employment was associated with the previous bubble to become gainfully employed in the rebuilding of our country's manufacturing base. It will also take many years for the private sector to deleverage and be able to again expand its balance sheet.

Unfortunately, our government is not headed down the path to a sustainable recovery. They are trying to re-inflate the bubble instead of allowing the market to self-correct. Because of these efforts, they are piling on an intractable amount of public-sector debt that future taxpayers will be forced to service in vain. The near-term result will be slow growth and underemployment. As for the long-term, the sooner our government stops piling on debt and devaluing its dollar, the quicker we can start to heal.

AUD's picture

Probably true Mitchman, but I'm not sure how relevant in the face of, as Mr Noland says, a massive bubble at the heart of the worlds' monetary system.

Governments everywhere, eg. Australia, are issuing debt into this bubble like there's no tomorrow, now we have a hung parliment!, for the first time ever (apparently).

He's not the only one beside himself.

Mitchman's picture

The MSM here in the states was cheering the PM like she was the second coming of Obama hen she took over the job.

On a serious note, that is the way we are headed here.  Folks do not know which way to turn and here, at least, there is a huge leadership vacuum with a choice between the execrable Democrats and the venal Republicans.  We likely will end up with our version of a hung parliament as well.

StychoKiller's picture

Yeah, but at least the "debates" re: The Gay rights of unborn fetuses to burn US flags will entertain someone.

Sudden Debt's picture

You got it Dburn, and the real question is: Is or will there be done ANYTHING against it that these politicians keep getting their way and just keep on grabbing.

Obama had the biggest contributions by companies EVER in the history for his presidential campaign. And nobody thinks this is strange?

Even after handing out 1.4 trillion where no mortal being can say: AH, they invested it in that! I can see it!

2012: The next bullshitter will promise the world. And sell yet another part of America.

One can only wonder how much there is still for sale before all is gone.

jwthomps's picture

QE did not put money into the

economy.  It put money into the


Sudden Debt's picture

In Europe real estate prices are up 4% in the first half on average. Sales of real estate is op 32% Y to Y. Industrial orders are picking up.

Why is Europe growing and the US not? Wheren't they supposed to be worse off then the US?

Also, there inflation is 2.6% as we speak. Why don't the US learn from the Europeans?

And I'm not even going to talk about azia because these are passing us by at lightspeed.


DosZap's picture

Could it be their getting away from SOCIALISM?

While we are being driven directly into it?.


Why would you play a game, when you do not know the RULES?.


 You wouldn't, You refuse to play.

Sudden Debt's picture

most of them are getting pretty hard on immigration (France, Italy, Holland, England, Belgium...) and also welfare is now being controlled more.

Obama tried to force Europe to act like America and they didn't want to.

They did what they did was right. America did what America thought was right. And America is holding the bag right now.

Obama is only 1 man, in Europe there are dozens working on a local level.

America should divide their powder under the states and let them handle it locally. Even if 5 or 10 states do the wrong thing, it will still be the right thing as the majority will so the right thing.

DosZap, I don't think you fully understand the concept of "socialism".

It's not socialisme against capitalisme. It's a mix. And a society is judged by how they act against the weakest in their society. And America isn't doing that great in that. America doesn't mind shipping it's young man into war, but doesn't like to help their own.

Europe doesn't want to fight any unwinnable wars, it doesn't like it when their soldiers die. It helps their weak.

I mean, can it be that America isn't all that great compared to some? America is falling appart! And it's not like it's because they are spending to much money on their weak! It's because they are giving everything to their top 10 richest men in the country who hardly pay taxes!

America spend 1.4 trillion dollar, that is like giving 1.400.000 dollar to 1000.000 people!

There are 360 million Americans, if the state would have given EVERYBODY 4000 dollar, I do think the economy would have kickstarted itself!

There was no problem before the credit crisis! Companies only started going belly up in 2007 when all the credit was gone. Gone because of piramyd games made up to go bad so a few could make billions! And where are these guys now? In Jail?! HELL NO!

They don't have to bother about that. The goverment is in their pocket.


Muscletonian's picture



 Are you out of your mind?


"There was no problem before the credit crisis!"

Well I would say thats why we now have a problem, 30 years of credit expansion. That will now detract and effect people as the inverse of how every household has gone through 3 cars 3 houses 8 Ipad/Pod/Ihones and all other crap. Why would everybody be entitled to that?


Dismal Scientist's picture

Europe has Greece, America has California. They both have a single currency. The difference is the actions of the central bank and the relative prudence of government. I am not saying that Europe have got it right, because I believe the Euro experiment was doomed to failure from day one. The economic situation is dire in many parts of Europe, and will take years to recover. But the balance sheet health of the individual is greater, and this may well be why governments can get away with austerity measures now. It was their only chance to do so.

America could fix many of its problems if TPTB and Wall Street were put on a very short leash. It hasn't happened, and the moment is gone. A great opportunity lost which we all regret in the future.

anony's picture

You have got to be kidding or a partisan lefty apostle to think that the least of us are treated poorly.

For your information, the so-called poor have been living for generations on the largesse of the united states congress. They get 'free' medical care via medicaid, they get free housing via Section 8, they get free food, transportation BY PRIVATE taxi for their drug rehabilitation and on and on and on. The annual cost for these millions of sycophants is about $40,000 a year,each. To boot they get Free Cell phones!!

And there is nothing stopping them from multigenerational scamming.

Save your empathy for the rapidly diminishing middle classes that are getting screwed to the floor from the top 10% and the bottom 33%. 

NorthenSoul's picture

Some evidence about what you just wrote would be appreciated.

Mitchman's picture

IMHO, when the SHTF, the ECB did not have to waste its gunpowder buying $1.25 trillion of worthless residential real estate debt and have to follow it up with a $148 billion bail out (so far) of its GSE residential real estate GSE's.  In addition, the European Parliament did not waste its gunpowder on a $787 billion "stimulus" bill that went to the union cronies of the powers in charge or was wasted on worthless projects.

Finally, the Europeans have, on some basis, recognized that they need to get their deficits and their debt under control and have taken the steps to do so.  Not only have we continued on with our crazed deficit spending, but out FED's incessant printing of mony continues to misallocate capital throughout the economy, discourages the savings needed for capital formation and otherwise screw things up beyond any recognition.

Gully Foyle's picture

Is anyone else tired of these name the beast topics? It's like the Blind men and the Elephant story, with each person defining what the problem is from their limited perspective.

What I would be interested in is some strategy posts on how to weather the coming storm. Maybe some posts in the political and social impact that could possibly arise during and after the hard times.

We are talking decades here, generations will be rasied in a brand new economic environment. The young will accept this is the way things are. And they will point their fingers at US, just like we are at the Boomers.

You only have three choices, Deflation, Inflation and a combination of the two.

Will see those topics regurgitated over the next decade, until we are bored to tears?



Rebel's picture


I agree, and have been hoping for such an article. Everyone agrees on the problem, but I would like to learn more on just how far people are really going to prepare. I sometimes wonder if I am the crazy one for actually making some fairly drastic changes.

Mitchman's picture

GF, I agree with your post.  I think part of the problem with your strategy suggestions is that we are navigating uncharted waters and no one is sure what is going to happen next.  We keep watching what is happening like, to paraphrase Art Cashin, a guy walking a tightrope in a hurricane.  By all rights, the house of cards should have come down by now.  But it hasn't and extend and pretend seems to be living to fight another day.

The implications of a US government default are so gargantuan to the world's economy (or even the implications of another major stock market crash) that no one can be sure what will happen should such an event occur.  So as you suggested, we keep searching for definitions to an almost (almost) irrelevant part of the problem because it is the only way that we can begin to grasp the magnitude of what the consequences of what is happening really are.  IMHO.

Apostate's picture

Good Op-Ed.

So, why doesn't the Fed re-introduce a great-grandson of TARP program to eat up all that crap CRE debt?

Then, after the elections, the Donkeys and Elephants can work together to create a massive lending-and-jobs program that will shove the dollar over the edge. 

What do they care? The US went through exponential inflation during the 70s. They'll do it again. But this time, there aren't as many international escape valves to keep it under control. Not that it's that likely to stop them.

Gully Foyle's picture

Time for another question.

If you were a 21 year old who just graduated college, What would you do. You have say a Literature degree and no debt ( makes it easier).

Where would you go? What jobs would you seek?

This is a college student reading ZH, so he or she understands how precarious the economy is. How we are looking at decades before even a glimmer of hope appears.

My neice recently chose to drop out, she has a scholarship, and take an Americorp job in New Mexico. I thought that incredibly stupid.

Rebel's picture

I think the future jobs are in the trades. If times are good, they build things, if times are bad, they fix things. I visited a Junior College recently to just learn more about what they were seeing in placement of graduates (2 year). Interestingly, they said that there was a shortage of diesel mechanics, that every graduate got a job (+60K/year starting), and they would not get enough people into the program to meet demand. Electricians were all placed as well. Certified Wind Turbine Technologists  . . . same story, every graduate got a job, and they were unable to meet demand. They also said that LVN and RN's had a very high placement rate. I very much enjoyed the meeting with these folks. If I were to counsel young people . . . even those academically gifted ones, I would suggest taking a serious look at these segments of the job market.

Hulk's picture

Jimmy Rogers states that its the farmers that will be driving the Ferrari's in the future.

Just ordered mine, the farmer version has a PTO, of course...

blunderdog's picture

What any recent college grad should focus on is figuring out what kind of life is enjoyable and/or desirable.  No point in using your worthless degree to land a job you hate to pay for crap you don't need.

There is no more security.  No stability.  No financial future.

What one can expect is another 40-60 years of life.  Don't waste it thinking you'll buy a house in 10 years and retire in 30.

Slewburger's picture

Ditto with MM.

Make decisions based on where you want to be next.

Jan van Eyck's picture

Do not worry, she will drop out of Americorp within two years.Too bad about the dropped scholarship though.

DosZap's picture

Or, MOVE TO Singapore, as Jim Rogers is advocating, and has done..........take the advice of a real dumb SOB.

If I were your age, I would tear ass.

Gully Foyle's picture

Jan van Eyck

Then she gets to live on the streets.


Mitchman's picture

Youth is the best time to make that kind of mistake and hard life experience is the best teacher to show us the path that we do not want to take.  

Sorry for the sermonizing.

Gully Foyle's picture


I didn't see a sermon.

Yes I agree.

But the problem is she is cognizant of just how bad everything is. She still had two relatively safe years of college left. She jumped ship with no idea if her scholarship will still be there later on, or if she could even get some type of fincial aid because if the impending economic crisis.

Now she has no skills, no degree, and her only job recommendation will be Americorp.

That's a winner.


Dburn's picture

Zigging and Zagging.

When I graduated it was Right into the start of the 1980-82 recession. There was nothing in my area nor did I have time to sit at home and contemplate my fate. With $45.00 and a Amoco Credit card, I saw that Denver Co looked like the best place to get work now. Not weeks, but in days. 3 Days later I was humping rebar at a commercial construction site for the equiv of $20 an hour now. I had it good.

Later, looking for jobs where no one else was, I took a bellhop job in a big hotel. I never realized how much money those guys make. If they had a Bellhop quarterly trade rag, the AA bellhop at the 5 star Fairmont would have been on the cover. He had a photographic memory. He remembered customers from years ago , on sight and would call them by name. This made the CEO's and Staff look very important who stayed out there. Because of his skin color , they talked freely in front of him and without too much detail, he got some terrific stock tips to act on. H e would call his broker and then every few months would take a few days off at his Montana Ranch that he paid cash for.

 I was making way more per week that I was on the construction site selling Japanese tours of the Rocky Mountains, Delivering full bottle of alcoholic beverages after room service closed ( no 24 stuff then) Baggage tips, tour baggage tips, 10 Points on a rental car, 10 points on certain cabs that waited in the front who also drove me to work everyday at 2:30pm, restaurants and other hotels on overflows.

I had serious money for a 23 old in very little time and saving large amounts of money. To me living it up was having a small apartment at $120 a month, a Phone, no car, no bills and a great Italian Restaurant 1 Block away where $5.00 was a full meal.

All great until a woman got on the elevator and looked at me and said, your just doing this to get through graduate school. I lied and said yes. Killed by guilt, I traveled out east in 81 and got a job selling Music Instruments in the Rust belt. Huge mistake.

I didn't have near the debt load kids have today. I could have easily paid for an advanced degree if I had stayed in Colorado or I could have done the Bell Hop routine until my early 30s and had a pile of money to start a business or learned stocks and bought Microsoft in extreme quantities in 86 when $5000 was worth 22 Million within 14 years.

I zigged when I should have zagged by allowing myself to be influenced by what was consider "proper behavior" for a college graduate. Get that professional job.  Strangely enough I did get an offer I ultimately turned down and feel like that too would have been a great Zig vs a Zag. One of the Tobacco companies offered me a sales job going to all the stores and making sure their shelves were stocked with all the brands. Opening new accounts, expanding tobacco brands in existing accounts, taking care of slotting fee negotiation when necessary and being there frequently so a competitor wouldn't get your slots.

 Since I ended up doing that for another sector which was highly discretionary as opposed to addicting, I think I would have made a fortune at that age and advanced. But Smoking was getting a bad rap then and again I was influenced by the "proper respectable job ' peers of the day.

I ended up starting a business at age 25 which in my opinion is too young unless you have a ton of capital and a deep network of experienced  people you trust and the willingness to learn from them.

My advice  for young graduates and even thouse who decided that a huge debt load for education that really wouldn't do anything is too much., would be look into the nooks and crannies of today's society and take positions in industries that aren't that popular but have no problem coping. Tobacco would still be good surprisingly enough.


Everyone would hate you but commissioned sales on a decent route would put some money away. That offered terrific benefits simply because as now and back then , they make a boatload of money. They don't have an easy time finding college trained employees for obvious reasons or even people that looked good when dressed well. Women were a huge find for them. Women in sales in a male predominated buyers industry, is a goldmine. They just can't say no. Call it sexist or call it contributing to the deaths of addicted people. If a kid has a libertarian type attitude and is confident enough to walk away from old peers if an opportunity comes up that his peers would disapprove of, do it.

 Most kids wouldn't touch it. The kid that does will probably be rich and no they won't make you smoke. I don't smoke. I quit ten year ago. It's horrible, but when you sell something that costs 2 Cents to make for dollars that isn't illegal and now the states are more Dependant on then ever, you will make serious money. It's tough job. It requires a ton of energy. You have to literally be a van jobber and when the order is taken which sometimes requires hard selling, stock the shelves yourself. (No time to change their minds)  Much of it is cash and carry. Then a kid  can slip into raggedy ass clothes and go to a single payer  Health Care rally on the week-ends for the total trip through hypocrisy now.


Mitchman's picture

This is an absolutely fabulous post.  Thanks a million.

Mitchman's picture

I understand your frustration and concern. 

RockyRacoon's picture

I have a friend who has 2 sons who just started college this year.  They are looking at a bleak future in any major field.   They know it.  Their dad has promised to keep their rooms available.

Monkey Craig's picture

My coworker has a daughter who graduated last year from a rural Ohio university with a business admin degree. I don't know this recent graduate, so I'm unable to speak about her grades or interview skills. However, she hasn't found work and lives back at home with her father.

I'm not sure if it was in the Obamacare bill or it was my employer, but my health insurance now covers children under 25 years of age if they don't have insurance. I remember a month ago, my coworker was very happy that his daughter would have insurance for a couple years while she looks for a job. He also stated to me his intention to make his daughter's student loan payments for the forseeable future.

My kids are in elementary school. It is tough because I don't want to be like Tiger Wood's dad and force the kids into something, but I also don't want the kids to study Advanced Sanskrit or German Art History. I don't see who would hire them.

Kayman's picture

(the Fed) is the problem, not the solution.

The Fed is, indeed, the disease disguised as the cure.

1. they need to end ZIRP

2. they need to kill and liquidate the TBTF

3. they need to encourage savings (and encourage matching investment) instead of monetizing America's problems

And the politicians should encourage massive investment into eliminating the trade deficit (the biggest security issue this nation has had in decades)

And then they need to get the hell out of the way.

So far, the hot consumer products are all made in China and China is booming.

WTF is wrong with our leaders ???? Somebody has to step up to the plate, tell the American public the truth, and enlist the nation into rolling up their sleeves and fixing this badly injured nation.

Obama and Palin ??? Give me a frikking break !!!!!

DosZap's picture



Pls do not put her Palin in the same sentence with that SOB.

His policies,passed by Congress, signed without even reading, slapped together by Marxist's, and Union Leadership, are taking us to Hell.( Exactly as planned).

Stop and ask yourself ONE question.HOW in the hell did all these NEW PROGRAMS get put together, and printed, 2500-3000 pages PLUS,and brought up for Uncontested signing, in such a short period opf time?.

It would have taken MONTHS, they did it in days.

Whatever SHE would do, would be 1000x's better.

At least we know she's an American that TRULY gives a shit.

And you can bet your ass, she would not have the FAM, on 10 friggin vactions in one year.( Costing Billions)

While Rome fkin burns Part Deaux'..........and Americans 41% of the OLD workforce are on UE, and or , walking the sreets.

Kayman's picture

Gosh DosZap

It would be nice if you would put a little emotion into your position(s).

We've been going to Hell, at an accelerating pace since Clinton and Dubya. Obama is just another teleprompter reader sent to appear as a leader.

All the new programs were written by the Washington lobbyists- that's why it takes no time at all to generate thousands of pages of obfuscation.

As for your love for that true 'merican Palin- she can't string two words together to create a complete sentence or a thought, so you are right, we already had a Republican President with the same qualifications, so maybe precedence has been set.  And after all, when you are signing into law all the stuff the banking criminals send you, perhaps it is better that you don't understand it.

But coming from Alaska ( a former Russian colony) are you absolutely certain she is on our side ?  Just asking....

P.S. calling me Dude ette- now how did you know I was ambidextrous ?



RockyRacoon's picture

I am truly astounded by your comment.  Thank you for making your position known.

At least it is always good to know where a person is coming from.

tom's picture

I agree that the most likely result of QE2 is stagflation, but we aren't there yet. The Fed's recently initiated shift from mortgage holdings to Treasuries, as announced, is not QE and so is not enough to spur inflation.

However, if, as you seem to be assuming and as some major IB analysts are forecasting, the Fed is lying and it actually plans to buy Treasuries faster than its mortgage bonds roll off, that would be the start of QE2 and that would spur some inflation, to an extent depending on the scale of the QE and other factors, such as the pace of private-sector de-leveraging.

Where do you and so many others on ZH get the false impression that money supply is shrinking? M1 and M2 are still slowly creeping upwards.

covert's picture

so, how long until America goes the way of Rome? or maybe the way of the weinmar republic? or the old south? the endless pursuit of power also always destroyed government. with all the bureaucratic records, it seems natural the government would eventually learn. interesting that they don't.