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Rosenberg Still Sees Deflation Despite Consistent Speculative "Limit Up" Opens In Pretty Much Everything
Despite every commodity opening limit up virtually every day for the past two weeks on expectations of a free money tsunami about to be unleashed (and a 14th weekly increase in M2 which we will describe shortly), David Rosenberg still adheres to the belief that deflation is not only here to stay but get worse. And, frankly, we don't disagree. It has long been our contention that the sublimation from deflation to hyperinflation will not pass through the inflation phase at all (or it may, but will last for exactly one millisecond as $3 trillion, by then, excess reserves are released and send every price up by a few quadrillion percent). In the meantime, the input cost-price mechanism is still broken, which leads Rosie to believe that the fact that the 30 Year just closed at an increasing inflection point with the rest of the curve going tighter, is to be ignored. Alas, with corporate margins approaching zero (and if you are Amazon, probably already there) companies face one of three choices: become banks, and borrow at ZIRP, and lend money to their customers via private label credit cards (unlikely), shut down, or raise prices. The last one is what will happen, and will finally put an end to the ridiculous consumer disrectionary rally that has perplexed humans (but not robots) for quarters on end. Furthermore, as to Rosie claims: "For all the talk of how higher Chinese wages were going to be transmitted to higher prices of these imported items, it does not seem to be happening" we will shortly post some thoughts which confirm that this is precisely what is happening.
More on Rosie's denial:
DEFLATION RISKS INTACT
Despite a speculative equity market binge, a weakening U.S. dollar, an economy that seemingly avoided a double-dip recession last quarter, and a renewed boom in commodity prices, what continues to prove elusive in this illusory recovery is pricing power in the broad retail sector.
How apropos it was for Ben Bernanke to utter the word “deflation”, not once, but twice, in his Boston speech this morning. Because fifteen minutes later, the September consumer price index data were released and showed a goose-egg — that is 0% — on the key core CPI measure (which excludes food & energy), for the second month in a row. In the past, this has happened but 7% of the time, so it is a rare enough an event to at least mention.
The headline rate of inflation, despite everything that has been thrown at it in terms of unprecedented monetary, fiscal and bailout stimulus, sits at 1.1% today. The core rate, proven to be the key driver for bond yields, which is why it is a focal point, is now running at a mere 0.8% year-over-year rate, the lowest since March 1961 when Ben Bernanke was in grade school.
While QE1 may have worked in terms of bringing mortgage and corporate spreads out of orbit and preventing an all-out contraction in the money supply, it has not managed to stop the economy from sputtering, the unemployment rate from remaining near 10%, and underlying inflation from grinding lower. Consider for a moment that when the Fed first hinted at QE1 in December 2008, the jobless rate was 7.4% and the core inflation rate was 1.8%.
While commodity prices have been firming of late with the downdraft in the dollar, what is key is that we are seeing discernible deflationary trends evolve in many segments of the service sector. Movies, personal care services, hotels, delivery services, and education all deflated last month — education deflated at its fastest pace ever. This is no longer just about rents, which are now stabilizing.
Moreover, despite what the price of cotton is doing, clothing prices are still in decline, and other “goods” such as furniture, appliances, audio-video equipment, motor vehicles and home improvement all posted price declines last month as well.
For all the talk of how higher Chinese wages were going to be transmitted to higher prices of these imported items, it does not seem to be happening. Either that, or margins for several retailers are in the process of being crushed. The latest National Federation of Independent Business Sentiment Survey showed that company-pricing plans are virtually nonexistent. Therefore, it would make sense to assume that once we get pass this bump in the form of a weaker U.S. dollar and surging commodity prices, the risks of deflation will intensify again.
All the efforts to date have only managed to slow the pace of decline in consumer prices; they have not prevented core inflation from hitting four-decade lows. Right now, the long bond yield provides a 150 basis point premium over 10-year Treasury notes at the price of taking on nearly nine extra years of modified duration. Sounds like a handsome trade-off because even if the Fed is not targeting the 30-year maturity, a 3% real yield still looks fairly attractive from our lens.
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great article thanks 4 posting T D
That was actually an excellent choice during Weimar. Well, up until the night before the Rentenmark appeared anyway.
I had an interesting conversation about inflation/deflation with some colleagues.
If I borrow $500,000 from a bank and I never pay that loan back has money been destroyed?
If Ben prints $500,000 and no one wants to borrow it has money been created?
If I borrow $500,000 from a bank and I never pay that loan back has money been destroyed?
-If I borrow your car from you, and never give it back, was the car destroyed?
If Ben prints $500,000 and no one wants to borrow it has money been created?
-If a company's Treasury holds shares and doesn't issue them, are they dilutive?
To answer your questions, don't you have to know what happens to the money?
For instance, if you borrow from the bank and take the money in cash and then buried it, then yes the money has been 'destroyed'. If you leave it at deposit at the bank, then no, the money was never actually created (just offsetting accounting entries). Extreme examples, but don't the questions need more information?
What if i took out a $500,000 loan to buy a $500,000 property. That property is now worth $250,000 and I don't pay any of it back, it gets re-po by the bank, and now no one wants to buy it?
Anyways...none of us could agree thats why I brought it up here.
In the instance of a $500,000 loan to purchase a home, NO MONEY IS ACTUALLY CREATED/LOANED. See Mako for his repeated explanations of this.
Offsetting accounting entries are created on the bank's books. The bank does not actually use any reserves, cash, etc. It is accounting (fractional reserve) magic (and why some people argue that the bank actually gave no consideration in the deal, and why there can be no standing/mortgage and/or the bank is actually counterfeiting money).
So, in this example, since no money has been created, no money is destroyed. Especially if the bank is allowed to carry the house on its books at mark-to-fantasy. Now if it takes a loan write-down, that might impact its reserves and therefore have an impact on its ability to 'lend' elsewhere.
That's my take, I'm happy to be corrected...
http://en.wikipedia.org/wiki/First_National_Bank_of_Montgomery_vs_Jerome...
Money is being destroyed. The bank no longer receives monthly payments that it can then leverage and loan out or use to purchase assets.
It took a viewing of the Money As Debt series of videos on YouTube to really get the notion of fractional reserve banking straight in my head. But here's the thing: It's not like there are no consequences to that misallocation of capital/malinvestment. A certain amount of wealth that was previously thought to exist (in the form of the value of that home) has ceased to exist. This kind of thing is effecting personal balance sheets, and taken in aggregate it effects the balance sheets of financial institutions, the housing market en toto, and the broader economy.
The $500K is payed to the seller of the home. Say the sellers owned the home free and clear, the entire $500K is credited to their bank account. They go out and buy a $200K condo, a $50K car, $50K on a RV, $100K in physical gold and leave the other $100K in their bank account.
The buyer created a debt for themselves, secured by the home as an asset. Agreed that the bank is just a broker of the debt. The beneficiaries of the newly created debt are the sellers, whom now have $500K to spend.
Not much different than charging a $100. purchase on your credit card. The merchant benefits from the sale with $100. credited to his account by the credit card company. The credit card company can securitize the debt and make money off the spread between what they charge you in interest and what they sold the debt for.
But that wasn't part of the question. They didn't own it free and clear...they had a 500k mortgage and walked away.
Asset destruction vaporizes money. The monetary effect of destroyed performing assets is immediate. If you have a car that is paid for and a flood carries it away the effect is no so immediate, but the cash or trade-in value you would have realized upon its sale is vaporized. Similarly, if your car was paid for and you only carried liability insurance, a nasty hail storm may reduce its value 50%, so half its value is destroyed, and the monetary equivalent of half its value is vaporized when the car is sold or traded.
"What if i took out a $500,000 loan to buy a $500,000 property."
Someone is on the other side of that purchase, the sellers. When he "buys a $500K property" there is a recipient of the $500K. If the seller of the property has no mortgage or debt securing the property, they get the $500K credited to them.
The buyer has the $500K debt to walk away from leaving the owner of the debt with the security, the home (if the mortgage was done properly).
If a tree falls in the forest, and nobody hears it, is it because it was turned into fiat currency before it even hit the ground?
If a fat girl falls in the forest do the trees laugh?
If a homeowner fails to pay his mortgage payment, and no one is able to foreclose, is it a default?
Ben ponders the old question:
"If a quadrillion trees fall in the forest to print fiat currency and nobody sees them, do I have to make a sound?"
What do you think?
By the way, does Ben create currency or money?
What do you think?
Even a rookie like me can see that money lets people buy and do things they want, including buying and controlling other people, i.e. power politics. Less money = less power. More money = more power.
If you can enslave a person, a business, or even a government with debt, you own them. This is the goal of the banking cartel: to enslave the globe in debt.
Ben creates debt. Debt is a power tool. By printing money he creates leverage for the banks to keep us all running on an eternal hampster wheel of debt.
http://therookiecynic.wordpress.com/2010/10/15/your-lethal-education-par...
Where did the bank 'get' the money to begin with? Did they not just fractionally create debt out of thin air?
Until that fictional debt is turned into real stuff, it's just a notion. There's no real creation nor destruction going on, there's only a raising or lowering of the purchasing power of what we call money.
Sort of...I mean the bank has to have deposits even in a fractional reserve system of banking in order to create money.
However if the personal deposits in the bank shrink than money is destroyed
If I have a mil in my savings account than the bank takes that 1mil and loans it out 9 times. But what if I remove $500,000 from my savings and buy gold? Than there is less money on deposit to loan.
...Until the Fed hands them another wad of bills.
Maybe your bank now has less money on deposit but whoever sold you the gold now has the $500,000 and (assuming it gets deposited) his/her bank has more money from which to loan. Evening the balance.
"Money itself isn't lost or made, it's simply transferred from one perception to another" Gordon Gekko.
(assuming it gets deposited)
Assuming it got deposited the IRS would want to know where it came from and I would have to pay capital gains on it.
Thats why gold is largely done hand-to-hand so there is no record.
Even if the seller of the gold wanted to avoid taxation, (s)he's not going to burn the money, it'll be spent (cash in hand) or laundered back into the banking system. It'll get deposited in someone's bank account, or more likely piecemeal in many bank accounts, sooner or later surely.
“The decrease in purchasing power incurred by holders of money due to inflation imparts gains to the issurers of money.” – St. Louis Federal Reserve Bank, Review, Nov. 1975, p.22
It is being turned into "real stuff."
Jamie Dimon and the rest of the TBTFs, are creating enough money to buy back the world's wealth they lost in the massive derivatives explosion. They are creating money out of thin air for themselves and buying assets at depressed prices as the first to use the money early in its circulation.
The former president of the Bank of England, Josiah Stamp, explained it: Bankers own the Earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough money to buy it back again…
“But if you want to continue to be slaves of the banks and pay the cost of your own slavery, then let bankers continue to create money and control credit.”
Stamp, who died in 1941, was reputed to be the 2nd richest man in Britain at the time.
if a man is in the forest and no woman is around, and he speaks, is he still wrong?
silly question: but is it possible that inflation / deflation camps are right at the same time?
Is it possible that in any given spectrum of thought that the two extremes could be right at the same time. of course not in all things...but ocassionally? like in this instance?
(crumbles napkin)..nah that dumb.
On a tangent from your point...first, I think the field of economics is a bunch of pseudo-science and alchemy, trying to masquerade as facts. Even BB admitted in his speech this morning that this was essentially an experiment in zero-bound monetary policy.
I believe the question of inflation/deflation is a ruse at the moment. I don't think economics has a term for what we are experiencing, perhaps stagflation. And then I think we have such a hard time defining even the term "inflation" (what index, timeframe, changes in inputs over time) that most of the arguments are simply moot. Can one really use a 20-30 year CPI chart produced by the BLS?
P.S. an economist on Bloomberg today denied QE2 was "printing money", saying it was much more "complex than that". Huh? No sir, it's printing money...
I see your point(s) and I am very simplistic when it comes to this topic. There has to be a balance between what you have, what I have and how valuable each party deems the other person's shit to be. period. It is a wide ranging topic though I admit. And economics tends to forget to factor human nature, the inevitability that you want more stores of value than the person next to you, and finally my favorite, the insatiable drive for sex (do NOT discount it)
Once people start getting into the technical bullshit of printing money or what QE really is, that is how you know they are trying to run a shiny distraction/hide the truth sausage . so its probably a bunch of binary 1 and 0's. Most people understand printing money..hence they know it's illegal to, for example heat up your home printer and start printing fun bux..(actually there's a thought..what if ben and co. said "ah okay, so everyone can start printing US dollars, that'll get us to where we're going quicker"). That joe is the way to get people to understand the net effect of what these jerk asses are up to.
It's 4pm on a friday and i'm drunk already. fuck this market, and fuck fiat!
The ice cubes never stood a chance! Enjoy the weekend...
p.s. I was just using your comment as a way to get to the top part of the discussion - I'm vain that way. I too think that there a very few people that understand the idea of our "debt money" (I don't include myself in that group though I am trying to get up to speed). Most certainly our entire government is one giant 'rabbit hole'. I spent last night reading about the IRS being a Puerto Rico collections agency (and not a legal agency of our government) - trippy stuff.
I spent last night reading about the IRS being a Puerto Rico collections agency (and not a legal agency of our government) - trippy stuff.
oh yeah, please refer. have a FOAF down that side..the carribean is rife with U.S. meddling. Been hearing about what looks to me like shadow bank holidays in Barbados and Aruba. Don't quote me but I think they have a 2-1 peg on the dollar there at least.
I'm sorry, but I have to disagree. Bernanke will (if he isn't already doing so) outright buy equities. He is looking to push up asset prices, he will probably have to start single targeting those assets.
With the purchase of ETF's or futures he won't put too much buying pressure on any given stock, but will increase the wealth effect (what greenspan has been saying he needs to do).
For now, you can't fight the huge wave of buying. I know I tried and failed, I'm now flat waiting to see what will happen.
Have you seen the NASDAQ 100 chart, it is up 20% in less than 2 months. GOOG, AAPL, etc straight to the moon.
this appears to be a party that ben and alan are throwing. yet everyone is leaving the party and getting the hell out of dodge...quickly. that does kill the wealth effect, does it not? games games games
Clusterfuckation, Bitchez!
As good old Mark Twain said, history doesn't necessarily repeat, but it often rhymes. The "D" monster is now at least twice as big as in the aftermath of the dotcom bust, and the Fed is out of ammo. Keep pushin' on that rope fools.
History does repeat. First as tragedy, then as farce.
Gou,
Very interesting.
It is biflation. Deflation in labor and asset prices (houses, currencies, equities - more to come on those) while costs of daily necessities have inflation (food, gas, ores, water etc). Not a pretty picture as people have less net worth and less income but need more to get by with costs increasing. Riots or crime? Many already not paying debts but you're screwed if you're a saver.
Biflation indeed.
As some contributor pointed out yesterday, if prices are stagnant, but earning power is falling, that's inflation.
so the market participants will discern what will be deflated and what will be inflated. Is that what you're saying? Also, I don't know that crime is down. been seeing reports otherwise, but I know for a fuckin' fact that nyc crime data is fudged worse than BLS numbers..shit..they actively misclassify
http://www.nydailynews.com/news/ny_crime/2009/05/26/2009-05-26_nypd_crim...
http://www.nydailynews.com/ny_local/brooklyn/2010/10/09/2010-10-09_cop_b...
outter boroughs...fugghetabboutit!!..manhattan is on lock..although you will have the brazen daylight heist..'specially on 47th diamond district...also east side downtown, and neat wall street in financial district.
Finally-- inflation and deflation are figuring out a way to work together!
Thank you federal reserve system, it only took 100 years but you made it happen.
Last CNBC appearance David Rosenburg made, I couldn't stop starting at his double-chin. It looked really nasty.
Note the path of Core Inflation (chrat 1) after 1966, the last time it was this low...
maybe inflation expectations (ours, collectively) are doing exactly what they are supposed to do. I know the crazy debasement of the currency may go quickly to hyperinflation, but let's hope the sheep are just too dumb to understand and the fed gets away with years of pernicious inflation. and the chinese are into us so deep that they can't afford to sell us into oblivion, so just maybe we make it through? I've got it modeled at 20%.
I am wish you to some degree. What sticks in my mind though is the sheer number of differences between now and then in terms of household debt/savings, demographics (i.e. aging population), peak oil production (e.g. cheap oil), far less leverage in the system, Glass-Stegall, etc. Debt saturation will prevent introduction of further debt into the system that is critical to achieving inflation targets necessary to avoid a deflationary/liquidity trap.
The prices of education are going down? WHERE!?!?!?! Being a student the past several years I have watched massive increase follow massive increase every year. The gentle years are a mere 5%. Or is this number arrived at using hedonics. That the education is so much better that really its cheaper?
Hey shameful, the price of education has gone up concomitant with the amount of government aid money working in the ed system. In other words, given a larger input, the price first rises, then the cost rises to match it. It's all a game, brought to you by the education system equivalent of the federal reserve. It's a public-private cartel.
I don't know if they use hedonics to measure anything in ed, at least directly, but I'll bet we could come up with some interesting hedonics metrics to satisfy anyone's funnybone.
+1. The college system is broken. Anything the government backstops follows the same path. Just like housing. And we know that is going! LOL.
Oh I know it's because of the student loans. Hello moral hazard. The universities get paid so why should they care about price or quality of the education? That's why it's laughable to claim costs have gone down. Any idiot could do even the most minimal amount of research and see that prices have been skyrocketing for years. To me it taints the whole metric if they are going to tell bold faced lies.
well said
OT:
Harry Reid replied during the debate that he was wealthy because before entering politics he had been a high-priced lawyer. The only job he had before entering politics was as City Attorney of Henderson, NV for about three years. City Attorney jobs didn't pay squat in the '60's. He's a freaking liar.
If you want to lose some brain cells check out his video where he claims taxation in the US is totally voluntary. It's 6 minutes of pure torture. Made worse when one considers this is one of the most powerful Senators in the country and has a sizable personal fortune.
I remember watching that and being amazed at how idiotic he was allowed to be on camera. Harry Reid deserves nothing less than to be tarred and feathered, and run out of town on a rail.
I hear you. The last time I paid attention to him, I concluded he's completely insane
When these manipulated markets unwind, it'll make the flash crash look like a 'healthy correction'.
WHEN? WHEN WHEN????
@plocequ1
When? The day after you give up and throw in with the bulls. These "markets" are not for investors, only gamblers. That said, I prefer the odds and the ethics of a casino over the traps run by the grifters in DC and NYC.
Nothing goes up forever including this QE 2 speculative mania courtesy of a depreciating dollar. Of course if I knew exactly when reality would strike I would be on my private island now and not composing a comment. When everything is increasing in price everyone can find a reason to justify the move and continue to pile in similar to the housing bubble but the laws of economics are never repealed.
The "speculative mania", as you call it, will continue just as long as Bermonkey and his Fed lackeys continue to devalue the dollar. And just when, precisely, do you expect THAT process to reverse, or even halt?
I always imagine some speculator in Weimar Germany watching prices rise and telling himself "But at some point, there just HAS to be a correction!".
Therefore, it would make sense to assume that once we get pass this bump in the form of a weaker U.S. dollar and surging commodity prices, the risks of deflation will intensify again.
As the Mery-go-round broke down and we go round, finding love for a dime...
http://www.youtube.com/watch?v=MOg2wL9W_Vs
Sick, the comments are funny. "This sort of gives me a boner, and I'm? not sure it should."
Genius post really, perfect.
Thank you. I was going to post this old childhood favorite (where I first learned of this tune), but Daffy just couldn't top Lawrence Welk's rendition for the reasons you so ably illuminated, and more. Yep. Sick shit at its .. Best -
http://www.youtube.com/watch?v=q526mSA3TRs
SPY in terms of SLV is trading at a level equal to the March 2009 low.
Does that mean stocks are 'cheap' right now? lol
been havin this gd argument forever.
Who CARES about the monetarist definition of deflation? Credit WILL continue to contract. However, if Ben prints the coupon and the par too, aggregate money unbacked by credit will increase.
PRICES will rise but credit metrics contract. The problem is that idiots who think that deflation is a lock (it is) believe this implies that prices will fall! So they make a mistake and hold FRNs. Prices won't fall.
They will for some things for which credit is a significant component of price. There is massive industrial overcapacity, so while liquidation runs, prices will seem attractive. At some point, though, you CANNOT cheat the price of oil. If it takes one barrel of oil to make something, it cannot be sold for less than $82 right now. Period.
Lack of demand does not affect cost of production. This is what most deflationists (the precious FRN crowd) fail to grasp. At the end of the inventory liquidation phase looms a gigantic reset upward in prices.
Nicely put Trav. Inflationary efforts by the Fed will only further screw up the commodities side of the equation. Speculation on commodities will fuel the fire too IMO as desperate money seeks quick and dirty returns. The net effect is what looks like inflation to the consumer. But the net effect is deflationary as income is increasingly cornered - compartmentalized. Input costs will not decrease and may in fact rise. As margins are squeezed, pay will drop and/or prices will rise. The feedback loop continues.
James Hamilton on CNBS this am saying exactly this - unknowable where the "inflation" "reflation" whatever rears itself. When pressed on wages he basically said what everyone payig attension knows: this is desperation longball. The foreclosure halt is essentially the HE withdrawal 2.0x. Only this time the "surplus" flows into basics vs. auto/house/discretionary as the structural (yes Ben it is structural not cyclical) employment problem tioghtens the noose. You have to laugh at the doublespeak about skill/time mismatch causing a cyclical issue. I guess this is the new euphamism (neologism) for the "savings glut"
When lenders start realizing that all home loans carry the kind of trouble and risk that is happening with squatters, they'll tighten even more.
Trav,
Lack of demand does not affect cost of production.
Not sure about this?? Lack of demand can in fact impact the cost of production if wages and other inputs are declining. The cost to make ice cream will fall if the cost of milk falls. Won't it? You are right that a business can only drop their prices to a defined point. All business will experience different inflection points concerning this. A business will eventually raise their price if they are in fact still in business when the cycle stops declining. It is this thinning out of competition that ultimately establishes the floor isn't it? Another way to view it is that it becomes "the survival of the most efficient". The most efficient businesses will be the last entities standing. This assumes the government is not interfering in the said industry.
To be technically correct, lack of demand does affect cost of production via a rise in input costs (say from risign commodity prices, energy, etc.) being offset by reducing labor, cap ex spending, or other costs of production.
I think what Trav was talking about though is that the relative perception on the consumer side the prices either rise or stay the same instead of decrease, as is the mainstream perception of a "deflationary" event. Rather, it is supply of money, the velocity of money that is slowing.
and oil aint ice cream. Not only can we not run modern society on popsicles instead but oil's milk, cows and sugar are special creatures. Wages down maybe but the oil is down even farther and harder and harder to get.
We are not going to experience hyperinflation as a result of commodity prices going up via demand and speculation. It is not going to happen. These types of price moves are eventually corrected when the buyers of the commodity's margin on the product they are selling reaches 0 or negative and then they will say enough is enough I'm not buying what you are selling or go out of business. Case in point oil at $140.00/gal. On the other hand if prices skyrocket because of a total lack of confidence from the international community and our citizens in the US then we (and the cows) are all fucked. But they are two distinctly different types of inflation one. One is a slower bleed and will correct itself and the other will break the Nation fairly quickly.
For prices to rise there has to be real demand for the product or service or commodity in question.. Oil at 82 is jsut at the wrong price.. Look at the pile up in oil inventories - they are the highest seasonally adjusted they have been in at least 10 years.. Oil is trading up here merely because of investment and speculative demand betting on weaker USD.. But once these "investors" figure out that there is too much inventory with not enough underlying demand - mind the gap.. We will crater down to mid 50s
I hope Obama sends me some of his stash before the banksters gets it all....
Oh crap I just got notified the dues at the deflationists lounge went up.
funny
Interestingly, I got an e-mail from e-Bay offering 6 month interest free on purchases through 10/31. The first thing I thought was "when did e-Bay start offering financing?" They have offered payment processing via PayPal for some time now, but no financing to my knowledge.
Sausagemaker
Repeat after me, inflation is a lagging indicator, inflation is a lagging indicator, ....
Thanks for this bit of common sense.
2006/7 = 100 = total credit and assets
2010 = 60
2012 = 40
40/100 = DEFLATION
.........................................
Govt. = 30/100 earned....and wants to move > 50
.....................................
Govt. solution to date ?
1) Accounting fraud
2) Counterfeit money
40/100 gets even smaller
..........................................
Solution ?
Entrepreneurship has to get a LOT BIGGER ....
And GOVT. has to get a LOT SMALLER....
GOVT. has to move to 10/100 from 30/100....
Solution ?
Eliminate corp./individual taxes....
Replace with the broadest thinnest tax possible...ie 10 basis points on cash balances....
........................................
Why ? GOVT. is not a solution...ENTREPRENEURSHIP PROMOTION is the ONLY solution....
..............................................
This has got to be the worst US Govt. admin. in history.....< 0 business aptitude....
A more granular analysis of the Retail Trade numbers:
http://www.census.gov/retail/marts/www/timeseries.html
This gives the granular view of the components of the trade figure we saw today.
http://www.census.gov/retail/marts/www/download/text/adv44510.txt
Grocery stores logged a brand new historical high this month. Note that this is nominal sales.
http://www.census.gov/retail/marts/www/download/text/adv45210.txt
Department stores down to lows not seen since September of 1992.
Small box retail focusing on high replacement velocity items are doing great, everyone else is either flat or declining.
This suggests to me that we're in a period of biflation, with prices increasing in commodities and decreasing in assets.
Over 10 Trillion dollars was destroyed in the 2008-2009 crisis. This was years of actual productivity and savings but Ben thinks he can recreate this in low volume, manipulation and rumors?
Deflation is a go otherwise we would have reflated where it counts already and that is housing. The stock market is not really as liquid as it seems as evident by actual volume in BAC in the past two days taking it down 10%. The game is over. The fears will not be soothed and all the attempts to scare shorts and convert them long is just emboldening them to be courageous since we are one misstep from destroying another 10 trillion.
Higher prices on Chinese goods will be transmitted in a few more quarters. There is a six to twelve months lag between the time retailers place their orders and the time goods arrive to markets. On top of increasing chinese wages, raw materials prices for cotton and chemicals are going through the roof.
I hope you don't think people are going to pay these high prices with unemployment is WORSE by then. When these products make it to the shelves, there is an ask price based on a margin. When that price collapses because nobody buys it and the retailer needs to move it, their margins get hit and they take a loss. This is deflationary. Commodities are used in products. Higher prices for commodities means higher prices for products. Commodities can shoot the moon for all I care, but unless it can translate it back into a product people want, need, and can afford, it is all deflationary. Someone is gonna take that loss.
Year after year has shown an explosion in inflation. A baby step back with cherry picked prices from one manipulated accounting week to another apparently is enough to give Bernanke the statistical propaganda he needs to devalue. Shadow Government Statistics has the inflation reality—and it’s hovering around 8.5%. It’s obvious Rosenberg has become a bank apologist but I’m a little disappointed to see Tyler join the wealth transfer campaign.
Rosenberg’s continued “the sky is falling” lamentations are beginning to be suspect in that the deflation line is just what the banks need; methinks he protests too much.
Rosenberg and Bernanke have no qualms about using the Fed’s control over money creation to pursue their dreams of wealth distribution—to Wall Street.
It’s David Rosenberg who told Tom Keene recently that the Fed should target and rob savers with ZIRP because by not doing so “the stock market would be hurt.”
Said Rosenberg: “What is raising interest rates going to solve? You can argue it’s going to help savers who have money in bank deposits. If you start raising interest rates what is it going to do to the stock market? Because the stock market is part of saving as well. If you raise interest rates what is it going to do to bonds? The bond market gets clobbered. A lot of people have their savings in bonds…”
But Rosenberg fails to point out that the bottom 90% of Americans on the wealth ladder hold only 18% of all stocks and bonds.
As to savers whose assets are devalued and to the entire middle class whose cost of living increases and whose jobs are lost as a natural consequence of monetary debasement, Rosenberg’s advice to them is “get small.” (as per this recent headline: Rosenberg’s Advice For Living In A Japanese-Style Economy: Get Small.)
As for more proof of inflation, protectionism is a predictable consequence of paper-money inflation.
Rosenberg got it right once, has lived off it ever since... he's been so wrong for so long now he doesn't warrant listening to
Rosenberg emailed this http://www.kansascity.com/2010/10/13/2309948/economy-devoid-of-momentum-ceridian.html
I thought deflation meant prices going down. If all the price indexes are either positive or 0, where is deflation? Also, since when promoting inflation became one of Fed's jobs? I thought they were supposed to maintain price stability, which mean close to 0 inflation. We now live in a bizarro world.
The nation’s overwhelming debt must be reduced, since mainstream economists still accept that borrowing cannot go on endlessly if there is to be real prosperity. Depreciating the dollar by inflation does that. If the dollar loses 10 percent of its value, the national debt of $13 trillion is reduced in real terms by $1.3 trillion. That’s why the Fed screams about a coming deflation, that’s why “Fed's Bernanke says [he] sees the case for further action with too low inflation,” so the Fed can continue the devaluation of the dollar.
Neat trick!
Below are some Commodity Price increases over the past year, quoted September 30, 2010, by Richard Benson:
Commodity Price % Increases
Year over Year
Agricultural Raw Materials 24%
Industrial Inputs Index 25%
Metals Price Index 26%
Coffee 45%
Barley 32%
Oranges 35%
Beef 23%
Pork 68%
Salmon 30%
Sugar 24%
Wool 20%
Cotton 40%
Palm Oil 26%
Hides 25%
Rubber 62%
Iron Ore 103%
http://queenbee-insidethehive.blogspot.com/
Rosenberg can't see.
Cotton, which had been going stratospheric with 4 limit up days in the previous six trading sessions, reversed today. It was nearly limit up again overnight, but closed limit DOWN instead. I am seeing bearish volume divergences all over the place for commodities, including corn, gold, oats, sugar, cotton, and the CCI.Even silver is flashing some warning signs. Corn has failed every day this week to break through 575/bushel.
It is hard for me to believe that on a day when Bernanke has virtually promised QE2, we would see signs of imminent reversals for many commodities, but my experience suggests that this is when they tend to occur -- when everything looks toward continued bullishness.
Yeah right... what is the last 4 months of the commodities curve looking like? So what if we get a correction on a hper inflated curve.
I also don't agree with Rosenberg, government CPI data is a farce and I haven't seen the price of movie tickets, services, etc that he is referring to actually fall.
While commodity prices have been firming of late with the downdraft in the dollar, what is key is that we are seeing discernible deflationary trends evolve in many segments of the service sector. Movies, personal care services, hotels, delivery services, and education all deflated last month — education deflated at its fastest pace ever. This is no longer just about rents, which are now stabilizing. - Rosenberg
LOL. It’s like we’re on this volcano and we’ve had this volcanic eruption of prices, such as in education, to the point where people couldn’t buy discretionary things and had to cut back and so, now, the price volcano trembles a little. And immediately it’s uh oh, from the monetary expansionists, we’re going back to flat earth! Not only that, but we’re going to have to encourage this volcano a little bit.
We the people, confused by this complex theft to disguise the truth, can't decide if this is inflation… or if it’s deflation… so let us just say that the money that we use to buy things with, such as movie tickets, is in the toilet. If that’s deflation, then it isn’t so good; if that’s inflation, then it isn't so good. Maybe we need a new term, judoistics, or something…
Bernanke’s pickup line--things just keep getting better, that’s why we have to attack the worsening problem--reminds me of foot-in-the-mouth Biden going around saying the Democrats are going to hold onto the House. IOW, it’s going to be different this time. You’ve gotta be on their teams to believe this stuff…
Farce is right.
"Maybe we need a new term, judoistics, or something…"
The term you're looking for is schema. The economy is a multi-faceted system of millions of inputs that the FED cannot model successfully. The cross currents are building now inside the schema; when they're resolved into the inflection or tipping point, either things will blow up or it's happy days are here again. The volcano will belch fire & brimstone or white smoke. No one knows when, but when it happens it will hit like lightning. The fact that deflation/inflation are simultaneously happening is not surprising at all & are typical in a schema period. Bernanke has a high probability of failure as he circles the rim of the volcano experimenting with his ideas. If he falls into it, he's toast.
Thanks, Lionhead. I like that. A beautifully put concept.
I think Bernanke, circling the rim of this volcano, is going to find out you can’t fool Mother Nature; a volcano is a volcano. And, IMO, this one’s going to blow…
And even if Bernanke were the smartest economist on the planet and his sole purpose was to solve this economy, he couldn’t do; it’s like herding cats. Central planning doesn’t work, particularly at this stage in the schema; even with all that power and money, it’s not working. All they can do is steal.
Tyler grow up. This is complete bullshit. How much is copper up in the last 6 months. We are in "imminent-hyper" - inflation now. Let's by-pass the deflation bullshit, especially as the governemnt is lying about real CPI anyway.
+1000
let me ask you: what % of your consumption basket does copper represent?
Copper is a leading indicator of the direction of the economy. Copper is used in everything electrical because it is an excellent conduction of electricity--“from transmission lines to internal distribution lines to appliances to computers - everything that uses or handles electricity uses copper.”
According to Pragmatic Capitalism on October 9, 2010: Dr. Copper Says the Coast Is Clear.
“Commodity prices have ripped in recent weeks as the market swings from expectations of a double dip to expectations of a sustained recovery. Copper, the metal often said to have a PhD in economics, has been no exception. The economically sensitive metal is up almost 40% from its summer lows. While equity markets dipped in August copper prices diverged and remained quite firm. Some have called into question whether copper is a leading indicator of the economy and stock prices, but one thing is clear from the recent action in prices – economic weakness does not appear to be a concern – for now…”
http://pragcap.com/dr-copper-says-the-coast-is-clear.
Barry Ritholtz is quoted as follows:
"Copper is the metal with a Ph. D. in economics. It's used in the wiring of homes and offices, in plumbing in construction, and it's also a key component in electronic goods.
"When it softens, it means we're making fewer homes, offices and computers."
Note: In housing the leading indicator is building permits, not construction; also, prices are an indication not only of demand but supply--both national and international.)
According to Bloomberg Oct. 12, 2010: "Codelco, the world’s largest copper producer, is boosting the premium charged to European metal buyers for the first time in two years… The surcharge, added to copper for immediate delivery on the London Metal Exchange to cover costs such as shipping and insurance, will rise 23 percent to $98 a ton next year (source undisclosed)... .
http://www.bloomberg.com/news/2010-10-12/codelco-said-to-increase-next-y...
P.S. The recession and housing crisis have fostered an ironic relationship between Dr. Copper and foreclosed and abandoned houses. Thieves are stripping the copper from the houses: in some cases the copper is more valuable than the house.
And no copper story would be complete without including how a tremendous volume of copper is being used to rebuild the infrastructure in Iraq. Widespread use of copper plumbing is part of the story, of course, and countless miles of electrical cable and connections are also part of the reconstruction of utilities the U.S. military destroyed.
Add to that the use of copper in the massive building enterprise in Iraq by contractors with political connections to Wall Street. If the bullets ever stop flying in Afghanistan, these same contractors are ready in the wings.
Back to copper theft, Iowa Cold Cases lists case after case by states and country. Says ICC: “Copper theft is a serious, deadly crime, and a growing epidemic. From Iowa to Ohio and Australia to South Africa, copper thieves risk their own as well as other people's lives, leaving in their wake paths of destruction and endless possibilities for more senseless deaths.”
For instance, “Earl Thelander of Onawa, Iowa, died from burns sustained in an August 2007 explosion after copper thieves stripped propane gas lines from a rural residence he and his wife were preparing for a renter.”
Or these reports of many past cases:
SANTA FE SPRINGS - A recent wave of copper thefts from area schools has prompted law enforcement officials to seek the public's help. Whittier police Detective Ralph Kremling said Friday that copper theft has reached epidemic proportions. "It's everywhere," Kremling said. "Anything that has copper in it is getting stolen. A major part of my caseload is copper theft."
Lights Out
Thursday, April 3, 2008, by Dakota
Officials in Los Angeles had to use lock boxes on downtown's lights because of copper theft; now the lights are out at a park in Corona where Little League baseball kids play because thieves ripped out the copper wires. "San Bernardino County sheriff's Deputy Roger Young, who specializes in metals thefts, said in a previous interview that metals are stripped almost daily from lights and other items to be resold to recyclers." [LA Times/Press-Enterprise]
Continued copper capers cost city’s citizens
DENVER – Thieves are still ripping off hundreds of thousands of dollars in valuable metal parts despite the city's dogged efforts to deter them. The copper thieves are going after backflow devices, which regulate water flow in irrigation systems. They are attractive because they are accessible above ground and can net the thief $30 to $50 at a metal scrap yard.
http://iowacoldcases.org/copper_theft_epidemic.html
imminent-hyper = before phase shift, ie deflation. Unless you are saying we are in phase shift now which means monday morning things will be up 50% then on and on.
Isn't hyper inflation a complete loss of confidence in the currency? In this case to be bought about by the activities of BB.
Deflation - for the past two years corporations have not given raises or very minimal. Unemployed people getting new jobs often way below their previous salaries. That is deflation.
Housing and commercial RE - collapse of prices, huge deflation. Billions (trillions?) of assets on bank balance sheets NOT marked to market, all need to be written off - more deflation
Oil was up to $150, now "just" $82, we have room to run.
Rosenberg's ideas are not fun or exciting. It's like a doctor telling you that you have cancer and have to take on chemo - but harsh reality
It’s not deflation; it’s Fed tyranny--a moral issue of indentured servitude caused by paper money and the deception that enables our rulers to use inflation to steal. Oil, two steps forward, one step back; housing, two steps forward, one step back; CEO corporate salaries to average worker pay from 107:1 in 1990 to 344:1 in 2007; banks, all steps forward, no steps back. Retail prices over the years—hundreds of steps forward, one step back.
It’ bad enough that governmental statistics fabricated by the investment bankers who run the government continue to lie about inflation but do we need allegedly well meaning Rosenbergs to continually help them pass along their poison?
Bernanke is robbing Peter on Main Street to pay Paul on Wall. Ask lynnybee, ask savers with bank deposits whose seed money is being wiped out by negative interest “earnings,” ask widows living on their reduced purchasing power off fixed insurance premiums, ask Social Security recipients receiving back devalued dollars to pay for rising mandatory expenses, ask Americans under employed because offshoring corporates such as Microsoft and Apple “cost-cut” their jobs…
Congressman Ron Paul’s got it right: “The economic consequences of paper money in the early stage affect lower-income and middle-class citizens… A fiat monetary system allows power and influence to fall into the hands of those who control the creation of new money… The insidious and eventual cost falls on unidentified victims who are usually oblivious to the cause of their plight. This system of legalized plunder (though not constitutional) allows one group to benefit at the expense of another. An actual transfer of wealth goes from the poor and the middle class to those in privileged financial positions.”
GOLD updated chart showing parabolic move.
http://stockmarket618.wordpress.com
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