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Stagflation 2011: Why It Is Here And Why It Is Going To Be Very Painful
Stagflation 2011: Why It Is Here And Why It Is Going To Be Very Painful
Courtesy of Michael Snyder at Economic Collapse
Are you ready for an economy that has high inflation and high unemployment at the same time? Well, welcome to "Stagflation 2011". Stagflation exists when inflation and unemployment are both at high levels at the same time. Of course we all know about the high unemployment situation already. Gallup's daily tracking poll says that the U.S. unemployment rate has been hovering around 10 percent all year so far. But now thanks to rapidly rising food prices and the exploding price of oil, rampant inflation is being added to the equation.
Normally inflation is a sign of increased economic activity, but when the basic commodities that we depend on to run our economy (such as oil) go up in price it actually causes a slowdown in economy activity. When the price of oil goes up high enough, it fundamentally changes the behavior of individuals and businesses. Suddenly certain types of economic activities that were feasible when oil was very cheap are not profitable any longer. When the price of oil rises to a new level and it stays there, essentially what is happening is that more "blood" is being drained out of our economy. Our economy will continue to function when there are higher oil prices, it will just be a lot more sluggish.
In some way, shape or form the price of oil factors into the production of most of our goods and services and it also factors into the transportation of most of our goods and services. A significant rise in the price of oil changes the economic equation for almost every business in the United States.
Today, the price of WTI crude soared past 100 dollars a barrel before closing at $98.10. The price of Brent crude increased 5.3 percent to $111.25. The protests in Libya are certainly causing a lot of the price activity that we have seen over the past few days, but the truth is that oil has been going up for a number of months. Right now we are only seeing an acceleration of the long-term trend.
Things are likely to get far worse if the "day of rage" planned for Saudi Arabia next month turns into a full-blown revolution. Up to this point, the revolutions that have been sweeping the Middle East have been organized largely on Facebook, and now there are calls all over Facebook for the "Saudi revolution" to start on March 20th.
That date is less than 4 weeks away. If Saudi Arabia plunges into chaos, the price of oil is going to go through the roof.
A rapidly rising price for oil is really bad news for the U.S. economy, because it is going to mean lots of inflation. Unfortunately, this also comes at a time when the economy is also feeling the inflationary effects of more quantitative easing by the Federal Reserve.
So if rising oil prices are going to cause more inflation and if rising oil prices are also going to cause our economy to become even more sluggish, what does all of that add up to?
It adds up to stagflation.
Wikipedia defines stagflation in the following manner....
In economics, stagflation is the situation when both the inflation rate and the unemployment rate are persistently high.
This is going to rapidly become the "new normal" for America. High oil prices are going to cause the cost of just about everything to go up, and high oil prices are also going to cause the economy to slow down thus making the unemployment numbers even worse.
It is going to be just like the 1970s all over again.
Only worse.
Economists differ as to how much rising oil prices affect U.S. GDP, but almost all of them agree that rising oil prices do cause a decline in U.S. GDP at least to some extent.
If American families have to spend $10 or $20 more each time they visit a gas station, that means that they are going to have less discretionary income. They won't be able to spend as much at the stores.
Not only that, but since the price of oil affects the price of almost everything else, Americans will find that their dollars have reduced purchasing power.
An oil crisis would force American families to stretch their already overburdened budgets even farther.
So where is the price of gasoline going from here? Well, the average price of gasoline in the United States is rapidly sneaking up on the $3.20 a gallon mark. Almost everyone believes that it is going to be going significantly higher.
Tom Kloza, the chief analyst for the Oil Price Information Service, was recently quoted in USA Today as saying that he believes that the average price for gasoline in the United States will reach somewhere between $3.50 and $3.75 a gallon by April.
As I wrote about yesterday, there are other analysts that believe that we are going to see $4.00 gasoline in the United States by the end of the year, and there are some that believe that we could see $5.00 gasoline if revolution sweeps Saudi Arabia.
If gasoline becomes that expensive and it stays there for a while, it is going to seriously start affecting the behavior of American businesses and American consumers.
Just remember what happened back in 2008. Andrew Busch of BMO Capital Markets recently told CNBC the following....
"Remember when oil was last at $140 (a barrel), Americans reacted and cut the amount of miles they drove."
Can you imagine what it would do to the economy if millions of Americans start sitting in their homes instead of doing their normal amounts of driving and flying?
In addition, one of the biggest problems with a higher price for oil is that it would cause our trade deficit to explode. According to the U.S. government, more than half of the oil that we use is imported. So every month we send the rest of the world billions and billions of our dollars and they send us massive amounts of oil. We rapidly consume all of the oil they send us and we continually need more. So we keep sending larger and larger amounts of money overseas and they keep sending us larger amounts of oil. In the process, our national wealth is being drained at an astounding rate. It is one of the greatest transfers of wealth the world has ever seen.
When the price of oil rises substantially, the transfer of wealth accelerates. This is a very bad thing for the U.S. economy. For example, when oil prices were above $100 a barrel back in 2008 our trade deficit for the year was almost 700 billion dollars.
It would be great if the Middle East would settle down and oil prices would start declining because that would really help out the U.S. economy. Unfortunately, it does not look like that is going to happen. Instead, it appears that we are steamrolling directly towards stagflation. Anyone that lived through the stagflation of the 1970s knows that it is not a lot of fun.
The cold, hard reality of the matter is that without cheap oil our lifestyles are going to change. Our economy was not set up to run on expensive oil. If oil moves well above $100 a barrel and it stays there it is going to bring about significant societal changes.
For the rest of 2011, the price of oil will be the number one economic indicator to watch. If it gets too high it is going to be an absolute disaster for the U.S. economy.
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I would suggest we all recall Gonzalo's Lira's piece on hyper-inflation. There was a lot out-and-out speculation in the piece that is beside the point. But the piece begins with a brilliant statement (at least for me).
Hyper-Inflation and Inflation are different things. Their names suggest that hyper-inflation is just really bad inflation, but GL is saying they are COMPLETELY different. I have been thinking about this ever since, and have some observations.
First, inflation is driven by credit expansion. Like our housing bubble: as the price of houses went up, bankers decide that was a real increase and accepted these inflated values as collateral for additional credit (loans). All that new money just drove housing prices higher. This is classic inflation asset prices going up, and money creation chasing the asset bubble. In this world people love money and want more, and they can get it because there is ample credit.
We all know how that ends. However, in hyper-inflation something totally different happens. People decide that money is not holding its value, so they begin getting rid of it in favor of hard assets. As all the hard assets get scooped up, the become scarce, and their price starts going up. But as prices begin to rise the perception is that the money is even less valuable, driving the whole process higher and higher. Because prices are rising, this looks like classic inflation, but it is really currency collapse: people don't love money, they hate it ! Most importantly, banks immediately relasize their loan book is going to be paid back in much less valuable money, which forces them to stop lending. In any modern society, that means a slowdown in the real economy; .i.e., deflation.
I would suggest that Hyperinflation begins during a deflationary cycle, after the collapse of a true inflationary credit bubble. What gets it started is the government trying to stop the natural (but politically unaceptcable) deleveraging; the natural and necessary destruction of bad debt. As government prints money (becasue the banks can't), they flood the system with excess cash. This excess cahs goes looking for a home which can drive up prices of essentials in a deflationary environment (which is still in full swoon). A little of this is fine, but too much begins to erode the value of the money in the average person's mind, and the hyperinflationary retreat from all forms of cash begins. If government stupidly just keeps printing money (and they may have exogenous reasons for this), this becomes unstable and you have the classic text-book hyperinflation.
One thing to notice is that hyper-inflation is DELFLATIONARY, not inflationary. The real economy is slowing down. It's just that we measure it in units of the rapidly disintegrating currency. So GDP, production, consumption, wages skyrocket as measured in toilet paper money, but in reality are shrinking. Eventually, the currency just collapses totally, and is replaced by a new currency. Sometimes this breaks the cycle. However, if the dollar collapses it will take the entire world with it, and there will be no external economy to help us out of a global hyperinflation.
Stagflation is a slowing economy with increasing prices, which is how hyperinflation starts: stagflation is incipient hyperinflation. In the 1970's going off the gold standard set the US and the rest of the world on a hyperinflationary path. This is when invented the word "Stagflation". This was thought to be a new phenomenon, they didn't realize it already had a name: Hyperinflation. Fortunately, Volcker understood the difference and what was happening, and nipped the "Stagflation" in the bud. Of course, the US was a creditor nation, and could survive very high interest rates for the length of time it took to shift psychology. It worked, and Volcker is rightly a member of the legion of Great American Heros.
This time is the same, but the outcome will be different. We are likely at the beginning stages of a global hyperinflation (hyperdeflation?). Everywhere you look, you have classic debt deflation being treated with gluttonous money printing. But this time nobody can stand the cure of high interest rates. Everybody, including the the US and the world financial system, is crippled with debt. Globalization has woven the entire world together so that we all fail or succeed together. Increasing interest rates will make paying the interest on all this debt impossible (if it isn't already). I don't think even Volcker could stop it this time; the mistakes have already been made.
This is in large part due to the confusion between the two inflations. The Fed looks like it thinks we can "inflate" our way out of our debt problems. But if they get confused between inflation and hyperinflation, look out below! I think they are confused, which is why Volcker got pushed out: he understands perfectly and wants to ruin their party. Yeah Baby! Party 'til it's 1,999,000,000,000,000,000!
As for how this will play out on the global stage, I have no idea. But I don't imagine it will much of a party.
For Felicia:
Anxiety
Anxiety should lead to an intelligent trial and error feedback loop, defining profit to guide the salesman as he goes, creating effective population adaptation, but the operators’ breeding program severs the intelligent decision circuit, leaving only automatic reptilian impulse response (RA), which is why crystal meth is so efficient. The other drugs are relative economic activity delay mechanisms. The reptiles were here long before humans, and have their place. They are opportunists, but cannot create circuits; they desperately need you for that.
What you see in the markets is the timeline outcome, decreasing volume and increasing pressure, set up over the last 4 decades as a chain reaction, which may only lead to one outcome … BOOM, because the operators cannot catch up to the symptoms, which they are bred to propagate, in real time. Any reptile can f*** to reproduce prodigiously and so exploit its environment. Creating and building life requires an intelligent pathway. When your intelligence is penalized, walk, don’t run, away from the black hole. Let it follow.
Keep pulling that proton through the looking glass, from different dc tracks, angles, until it gets on the devotion elevator, to provide constructive symbiotic resonance – time/space expansion from the black hole. The electron is the inductor, the neutron is the capacitor, and the proton is the potentiometer. You will require a jumper of jumpers from supply to the parallel decision system for reboot. You create the future; they write about it once it becomes the past, and the sheeple follow them. Pit the viper, which may only exist in time, against its own anxiety. Don’t fight Caesar; feed him.
Don’t be anxious about anything, but in everything, by lifelong prayer and petition, with thanksgiving, present your request to the unknown. And peace of spirit, which transcends all understanding, will guard your heart and mind. Be rich in deeds, generous and willing to share, until the end of age. Take heart and overcome the world. A cheerful heart is good medicine, but a crushed spirit dries up the bones.
Where three come together, there the unknown will be found. Greater love has no one but this, that lay down life for a friend. The man and his wife were naked, and they felt no shame. The future is a jump, across the abyss of time, which may only be made with devotion as the sail.
All the pieces are there; put them together to make the gate of gates.
Oh, like wow man, you must have done way more drugs than me! But I still did enough for this to make sense.
So just how does one bring down the price of agricultural commodities if you can't afford enough diesel to raise your planting density?
"Normally inflation is a sign of increased economic activity"
what a fucktarded statement....
You're not going to see 15% on a CD. Broad interest rates will remain well below the rate of inflation, which is the current situation in China. Inflation runs almost twice what interest pays. There is of course little or no demand for credit in this country, but the lending rates will remain attractive, if only to keep step with the Fed's desire to prop up housing prices, to allow further monetization, and due to flight to safety concerns. It's bits of Japan in the 90's, China currently, and the 1970's. The fuel shortage is non-issue (for Wall Street bankers) so who cares? We continue to kick the can down Wall Street.
The real economy cannot get too much worse than it is, by that the cash economy (major feature in the 1970's) this is money that was never being taxed, or measured anyway, but when your neighbor plumber needs $100 to fix your drain and it was $50 six months ago, you'll feel the pinch, but since you were paying him in cash, and he wasn't declaring it, BLS won't recognize it, just like they missed all those independent contracts who couldn't find work. That was a hallmark of the 70's by the way, the underground economy.
America's anger will only simmer and boil over, just as we threw out Carter after one term, replaced by Reagan whose first act was to bust the air controllers union. Sound familiar?
Then there was the S&L crisis, in case you were counting on your Credit Union to protect your money. although if rates remain low perhaps that won't happen. In the 1970's retailers came out with generic brands of everything, in plain packages. That concept could make a comeback just for nostalgia sake. Not pretty at any rate.
Bernanke is just clipping coins, like the romans did. Devaluing currency at every step.
But that doesn't hyperinflate the economy if the credit market- loans implode faster than the coin clipping.
I do agree that the oil shock of 2007 was a fuse that blew up the bubble into smithereens. People bought smaller cars, GM's SUV market went to shit, then their finance dept went tits up, then the outlying burb market crashed because commuting was too expensive, then Bear Stearns MBS blew up, and the rest is history.
Japan is your clue here.
The only modern, fiat economy to have imploded with too much credit.
The deflation is massive.
Here is a good story on an inflation driver
Special Report -The biggest company you never heard of
Interesting. Thanks for posting.
~Misstrial
How can you define this as strict stagflation- which is a nether here nor there economic definition.
Ben Bernanke would love stagflation. That means he would have engineered an inflationary event and managed to rise the prices of everything.
We still have a house asset's value, or a derivative mark to market that has lost 40% of its 2006 value. For every gallon of gas, there is another asset or fake financial instrument that has lost value.
Those are typically credit instruments- which in modern society is money. Money in the US is based on credit only. M2 is just currency in the system, not the lost of 100s of trillions in asset value and credit destruction.
This is still a defaltion, and a deflation is not the inverse of inflation. Its when the entire financial system runs in reverse. Less credit, bank insolvency, government manipulation, wars, unemployement, price inflation via GOUGING not because of traditional inflation, lower GDP, asset balues like homes and cars lower. Just because gas is higher or Ben prints a few trill to stem the losses of 100s of trillions does not mean inflation. Price inflation of commodities is not the classic definition of inflation. Printing currency is a systemic problem of a ponzi scheme-
Information is irrelevant. News is irrelevant. We have printed prosperity now!
If we were paying real money for all this oil I would be concerned. Luckily, the rest of the world still accepts our newly printed dollars. When oil is priced in gold, we will be in real trouble.
"so every month we send the rest of the world billions and billions of our dollars and they send us massive amounts of oil. We rapidly consume all of the oil they send us ....... in the process, our national wealth is being drained at an asounding rate."
That's not the way I heard it!!! I heard that there was a 50 year plan to transfer all the Arab oil OUT of the Middle East and exchange it for what will be ( and is quickly becoming) WORTHLESS fiat money. Then at the appropriate time (NOW) foment the "revolt" predicated on their hatred and resentment of this scenario and all the evils associated with the AMERICAN EMPIRE building etc. etc. So that they cut off their flow of now GREATLY diminished oil reserves then the OIL companies clean up here by pumpin g our huge untapped reserves in Alaska now at the delectable $200 to $300 a barrel.
I have no way of knowing if any of this is even remotely true. But what DID happen to the Alaskan pipeline they built back in the 70's??
Eventually it will become like life in the 1950s after the system finally gets into balance. You will be making your own meals from scratch. You will be a one car family. Your vacation time will be spent at a nearby lake with camping facilities. Instead of the twin Merc. outboard $100,000 pleasure craft you will be using a rented row boat or paddling a rented canoe.
Sounds like life in New Zealand today.
hmmm.... thats how I live now.
The energy policy options applicable in each scenario will depend on the political option chosen in my humble opinion. Maintain Global expansionism or move to regional isolationism means different energy scenario options.
Four scenarios for the future :
1° Current one. QE to Infinity. Screw our debtors. We will not change our way of life. Is this a feasible route?
2° Fiscal policy to tax corporations and rich. Budget cuts in defense world wide (like under Clinton). Financial regulation. Reinstall Glass Steagall. GO after TBTF banks. Prosecute and shake up speculation/derivative bubble formation world wide. If the USA says 'yes we do' the world follows. Guaranteed! But this means ten years of pain and tears. Lost generation!
3° Break up federal system. Go to decentralised state budgetry regulation. Free-for-all interstate competition and weakening of central authority. Risk of civil strifes and dismembering of USA.
4° Civil war or alternatively WW3 to save current empire. We'll see how the cookie crumbles after the fall out...if we're still around!
Which scenario do you want to move to and develop on?
One of the major strategic energy "mistakes" in the west has been the reluctance to switch to natural gas for transport.
Instead vast amounts of gas is wasted in electricity production when there are so many alternatives.
The reason , this would be a more capital intensive process and the banks do not make much money in such a environment - the banking and energy crisis are one of the same - it is simply a result of putting off future investment to sustain present lifestyles.
All those that talk of inflation/deflation/stagflation are wasting their breath. All that matters is buying power or purchasing power. Crash the system, crash it now. The sooner we do, the sooner compensation will find its way to people who are actually worth a shit.
they're papering the cage
they got their eyes on you
don't be rumplin the fleece
disbelievin in the tube
there was a warning sign
on the road behind
there's a lot of things said
blind led by blind
don't feel like god
but I am to them
I get my paper money
from a garbage can
keep enslaving / spending spree world
keep enslaving / spending spree world
keep enslaving / spending spree world
keep enslaving / spending spree world
keep enslaving / spending spree world
see the helicopter light
with a printer loving man
under a housing blight
with a central plan
the junkies take the pay
and can't refuse a hit
you take entitlements away
they're going to throw a fit
that's one more man
that will never succeed
that they'll always bleed
in perpetual squeeze.
pointing guns to make a fee world
pointing guns to make a fee world
pointing guns to make a fee world
pointing guns to make a fee world
pointing guns to make a fee world
Welcome to the world of globalization. Until the western world can compete with china etc.'s labor pool again, kiss your american pie in the sky dream goodbye.
Better get used to eating road kill and a bowl of rice if you can still get it now, before the fertilizer factories shut down for lack of feedstock.
Falak,: 'Why don't you guys move to Mexico..?'
Because if the majority of the latinos finally figure out how badly they have been fucked by the U.S. policy makers and corporations, they will tar and feather anybody that is fair skinned and ask questions later.
It isn't just Latinos that have been fucked. 99.9% of working people of all creeds. I work with many different cultures, they all know how to follow the money trail as it were. Now real change comes, one way or another. The blood of tyrants and patriots of liberty alike my friend.
I do not know what is wrong with you people. The Federal Reserve knows how to handle these things.
http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm
http://www.bea.gov/newsreleases/national/gdp/2011/pdf/gdp4q10_adv.pdf
Waiting for the Local Food Bank to run dry not listed as the countless millions on fed food stamps. The issue is larger then there reality.
The following qualified aliens are eligible for food stamps without a waiting period:
http://www.ssa.gov/pubs/10101.html
Why don't you guys emigrate to Mexico or go even further to Costa Rica and become the new Robinson Crusoe's. I don't know what to say, I'm on this side of the pond. Maybe the tsunami that you see is going to hit us as well. We don't feel we're so hocked in debt as to cave in like U guys in the USA. What a twister this one is turning out to be...the mother of all twisters. Hang on for dear life. Send the pay check to Obama for your outsourcing to central american banana republic. The corporates should fund you like they do their own outsourcing shenanigans. Seriously, what the US govt. should do is raise a special tax on large sized corporates to fund the small business sector. Better still, give all small businesses with a five year track record, a tax holiday for five years. I know this is pie in the sky and monday morning quarterbacking. But the fiscal policy of the USA is very biased to the advantage of big corporates who get tax holidays from off shore affiliates and neat transfer pricing tickets that avoid local Corporate tax, something small businesses cannot do.
It's a good idea but when they started talking about globalization 7 to 8 years ago, it was to strenghten the big companies.
And to profit from it, they overextended themselves and drained their cash reserves.
The big companies just can't pay such a tax, they would go broke.
What they will do is cut the wages of the US workers with about 20% through inflation
Increase commodity prices a bit more and in this way, the globalisation will proceed and "spread the wealth".
A bit less for the US, a bit more for the EU and a lot more for Azia.
@falak pema
if by 'this side of pond' you mean europe.. you're right..
europe is much healtheir than USA.. core europe germany/france/noth europe is in pretty good shape.. europe is export machine..
personal debt is low.. people are frugal here.. they know the history.. savings rate is high, not much housing debt or at fixed rate..
++ there's huge source of commodities from RUSSIA.. kind of cheap/stable/and close to borders..
all this nonsense about Ireland/Greese/Spain/Italy is just from America/Brit mass media to shift attention from problems in USA..
at least in this countries politicos realised that debt binge cant go on 4ever, hence some kind of discussion and reforms .. here in USA... nada zilch..
fiscal problems in USA are worse than Greeece.. and USA is yet 25% of world wide GDP..
alx
We now have proof sheeple exist on the other side of the pond!!!!!
"all this nonsense about Ireland/Greese/Spain/Italy is just from America/Brit mass media to shift attention from problems in USA.."
I spilled my coffee laughing so hard....
TY Alex. I feel the same way but we have to stay cautious. There is a lot of uncertainty about the shadow banking system collapse in case of world assets deflation and subsequent back lash on european banks. Also the 'lumpen-proletarisation' of southern Europe will cause extreme social tensions on 'this side of the pond'! Let us not minimise that. There is also huge banking sector exposure that we, the public in Europe, are not aware of. Even very large banks, in the biggest european domino : Germany's landers banks, could go belly up. Also, American QE has an intense destabilising effect on Europe through hedge fund speculation for which the City in UK is a very active participant. So the European situation is very fragile, even divided. I don't know what the future holds for all of us if this thing unwinds in an ugly fasion.
Wages have been stagnant for years as Wall Street Execs take home even bigger Multi-Million Dollar then before.
Prices rising....pensions bust...munis deep under...massive deficit and non-stop printing.
Got Gold? Oil? Silver?
##Normally inflation is a sign of increased economic activity
i dont know why macroeconomics its so hard to understand..
DID YOU EVER EVEN RUN LEMON STAND..?? i doubt that..
missy,, what you call good inflation its actually called 'PRICING POWER'
let say you make fucking best lemonad in 'borough, so demand is huge,
so you want make more money so instead of making more lemonad you can just jack up price until demand is off and/or someone else makes better lemonad...
but commodities inflation is COST OF MAKING LEMONAD.. if sugar is higher, cyrop is higher, water is higher and on on, so you'are either absorb cost and dont push price cause you're afraid to lose customers so return on your investment (AKA glass of lemand) is lower, or you're just make price higher in hope of bigger price will equal lost demand..
but that just one side of equation.. most important is demand of customers..
if you lost jobs, or salary is lower, so they cut of consumption of discreet stuff to pay for basic stuff kids/food/insurance/etc..
comprendo missy... ?? ask for more if you want
I guess in HARVARD/YELL/etc they dont teach how to run real life business..
alx
ps
WHAT BERNANKE/FEDS WANT IS corp pricing power, thats why they afraid of deflation cause its not possible to serve the nominal debt accumulated then nominal revenues are falling.. but its posible only when salaries are growning...its who comes first chicken or egg.. no salaries, no demand, no demand no salaries...
instead they pushing COST INFLATION , SO MAKING IS WORST.. cause labor is biggest expense, so corporation in order ot absorb cost of stuff, reduces salaries, so less demand, so cycle...
Alex,in english please!
See my post above yours.......
@Aristarchan
yep,,, you're right... pretty good explanation of what is going on IN REAL LIFE..
but OBAMA/BENNY/TIMAH never worked in real life, they are life time public servants or academics.. they never put one dollar on the line..
my only advise to all hard working fellows,, DONT EXPECT THIGS GET BACK TO PRE 2008 .. it will never.. from here its dawnfall.. faster or slower.. doesnt matter.. no govement can run 100% federal budget deficit.. ever..
it will end in hyperiflation.. sonner or latrer... and before then %bonds will skyrocket..
you have debt, dont pay,, default.. you have free money, dont put into business, buy gold/siver..
for lo-middle income stack on basic stuff food canned/guns/liquor/ammo /drugs/etc...
sell al realestate if its not primary residence,, realestate eventually crash.. average house will be worh less 1 year income..
donwsize, move famly into rural, more safe place, off big cities...
alx
There is a large portion of the economy that seems to operate "underground" as far as the Fed surveys and number crunching is concerned. If they have access to the conditions of small business in this nation, It is probably lumped in the anecdotal file, or yawned at as they once again check the cash reserve status of the big banks. Most of the companies that I do business with are busy as hell right now......but, they are busy as hell with a skeleton crew of employees after massive layoffs in 2007-2009. Most, if pressed, will admit that their business activity dropped off at least 50% during the great bust, and some are still there, some are back up to 75% or so, but have so ruthlessly cut expenses, that they are marginally profitable. But, the killers now are the expenses that are hard to cut and stay in business: freight, gasoline, local and state taxes and parts that are manufactured using commodities and PM's. I would mention health care costs, but some companies I buy from have dropped their health care plans all together. My business dropped about 50% as well, but I was already running at minimum levels (not because I was prescient...just a cheap bastard). But, since my angle is med equipment, I probably suffered more from hospital corporation's fear of Obama Care than I did the tanking economy. My business is back to about 70% of what it was in early 2007, but freight costs are killing me, as well as the price of gold, silver and copper, which many of my parts contain. In the area where I live, a doctor is doing fantastic (natch), a few musicians are doing fine - gigs seem to hold up even in the worst of times, a Dell executive is still only working 30 hours a week, and has seen his salary drop, and his health care contribution go up. A Mexican family that runs a chain of grocery stores that service immigrants seem to be doing pretty well, if you go by the new SUV's and house expansions going on. Once a month, they drive to Mexico and bring back a truck full of food and??? If gasoline skyrockets, it is going to hurt me going in, and going out, since I freight parts in, and freight them back out. Most of my suppliers have no expectations of returning to pre-2008 levels of business in the remaining decade, and many admit that a lot of their business before then was pumping the bubble. I tell them not to worry, we are pumping bubbles now, just figure out what it is, and more importantly, figure out how to get out before it pops.
BINGO! Wall street unleashed the moral hazard long ago. Black market or "underground" capital flows continue to grow as most do whatever it takes to survive and many do it simply to spite the government or because of a lack of "faith in the system". All tax free baby.
bubble=t bonds
More debt issuance and monetization is surely coming. Is it not? Can this process ever stop? Not until the absolute end of the monetary system that is the Federal Reserve, and a worldwide monetary reform is implemented by our wonderful fascist planners. The cycle of debt issuance and monetization is accelerating rapidly worldwide. Buy gold and silver, in order to save our individual and collective lives. This is it!
if i were chairsatan, i would be increasingly worried about my personal preservation. unless of course he winds up being non-human , after all.
people are already desperate out there. things are about to get fucking real.
I have been keeping track of my household expenses since 2009, and I can confirm the accelerating jump in gas prices. For 2010, in my part of the country, gas prices rose by 11.12%. So far in 2011 gas has risen 15.19%.
No worries though as the Bernank says he can reverse it in 15 minutes.
If anyone is interested, I have posted my overall cost of living at www.verifythecpi.blogspot.com.
I thank you for recording what is going on. The Empire of fools marches on about, well the the empire... The UTILITY, as defined what puts you at ease is being defined by fools. Any American by now can see what has been going for many decades. If not there is no hope for them by know anyway. As we are reminded the seal is IN the forehead not on it.
The Bernank is an expert on the wrong decade. 1970's here we come.
Drill baby Drill
You forgot the main reason it is here...his name is Chairsatan and his game is QE.
That would be The Honorable Mr. Chairsatan to you, lowly peon!
Why is M3 still shrinking (Shadow Stats)? Wouldn't M3 need to expand a lot to have major inflation on things besides speculators driving Food and Energy up with Ben's money ?
"Wouldn't M3 need to expand a lot to have major inflation on things besides speculators driving Food and Energy up with Ben's money?"
Those same "speculators" have also ramped the price of copper. Ever ask yourself what the point would be in buying a futures contract if your price expectation at the end of that contract is lower than the initial purchase price?
http://www.finviz.com/futures_charts.ashx?p=w1
Which of these ones is not like all the other ones? USD and it's treasury proxies, of course. Why was the USD decreasing in spite of a decreasing M3? Why was the USD decreasing relative to other currencies? "Evil speculators"?
You're overthinking this shit, dude. Just follow the money, the money that's actually trading hands.
Because it's not. M3 hit a bottom last year and has gone up, according to shadowstats.
@ ES
Oh Snap!