StealthFlation Defined

Bruno de Landevoisin's picture

by Bruno de Landevoisin @ StealthFlation 



An intractable economic condition that inevitably arises as excessively issued fiat currency impulsively pursues non-productive wealth assets in a grossly over-leveraged economy which is being artificially reflated by monetary authorities in a desperate attempt  to synthetically engineer growth via extreme monetization.


This effectively prevents the real economy on the ground from realizing the healthy normalization and natural balance of free market forces necessary for the legitimate capital formation required to produce genuine and sustainable economic growth.


Also known as; wishful thinking, and robbing Peter to pay Paul.

Qe Cartoon 2

This entirely synthesized approach to capital formation engenders the following ruinous conditions:

1)  Fabricates stealth dormant velocity of money, concealing embedded inflationary risks to the economy.

2)  Produces highly unstable recurring capital market asset bubbles.

3)  Drives superfluous misallocation of investment capital, disregarding and disadvantaging the crucial SME sector.

4)  Generates excessive capital markets volatility and unpredictability, disrupting deliberate business development.
5)  Delivers lethargic overall economic activity with limited unsustainable growth.

6)  Encourages deleterious off-shoring of the manufacturing base.

7) Facilitates fantastic fiscal deficit spending sprees.

8) Decreases median income and job creation capacity.

9) Spawns extreme income inequality and social discontentment.

10) Eviscerates the very essence of money by grossly compromising the means of exchange. 


Purposely degrading this Nation's hard earned reserve currency status, which was so honorably passed on to us by previous generations who built this great country from the ground up through their virtuous and industrious blood, sweat and tears. Only to then implement a disgraceful monetary policy that deliberately steals from future unborn generations in order to facilitate living standards beyond our means, so as to sustain an unearned, undeserved and unprincipled culture of grotesque illegitimate debt financed over-consumption, can only be characterized as a deplorable unconscionable abomination of epic proportion.



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Cycle's picture

I think "screwflation" is a better term. What you need goes up in price, and what you want goes down.

torabora's picture

Let's not forget stupid tax increases such as Commiefornia's Cap and Trade coming in 2015....could be $.75/gal? ANY gas tax hurts the lowest and middle rungs....they don't have much room for extra spending at all.

George Washington's picture

Great post!  Powerful, yet short. Well done.

bid the soldiers shoot's picture

The best approach to halt inflation in a reserve currency like the USD, is with 20 aircraft carriers, 10 nuclear and 10 conventional.  


Bruno de Landevoisin's picture

First there was the honerable Gold backed Dollar

Followed by the strategic Petro backed Dollar

Now we have the detestable Bomb backed Dollar

bid the soldiers shoot's picture

Joe Sixpack doesn't care what backs the dollar if he doesn't have to pay too much for his namesake.

The only people who care about what backs the dollar are business school dropouts who've been in cash since March 2009.

Bruno de Landevoisin's picture

Not to mention that quite a few Joe six packs are begining to turn on to the Paul's og this world........



Bruno de Landevoisin's picture

Ron and Rand..................Capiche?


I'm the emperor of typos;-)

bid the soldiers shoot's picture

Maybe you know?

Was Rand Paul named after Ayn Rand or Sally Rand.

No biggie.  Just curious..

Bruno de Landevoisin's picture

Really?  When his son get's sent off to fight in a foreign military theater, will he care then? 

bid the soldiers shoot's picture

You mean the guy whose son is a drone operator, stationed in Vegas and billeted at the Bellagio?

I don't think so.

Bruno de Landevoisin's picture

No toy soldier, Boots on da ground.  Ask the fathers' of the boys who came back from Iraq and Afghanistan Jethro.

joego1's picture

I keep debating tossing everything plus the kitchen sink into PM's.....

AdvancingTime's picture

By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens. said John Maynard Keynes.

As the central banks print like crazy to control interest rates on bonds they devalue the currency. While there are not many Bond Vigilantes there are many Currency Vigilantes. A huge drop in the value of a currency will bring on massive inflation. The article below delves into when this will occur and what leads up to such an event.

GreatUncle's picture

Disagree on a point in what you quoted. If inflation was equal like for bankers, governments, elites then nothing changes but it does not work that way! Why not and THIS IS THE MOST IMPORTANT POINT.

By a continuing process of inflation created by leverage on loans or just outright QE you ensure that anything a serf it worth will never become too much to unsurp the elites current position. This system was designed by elites for elites so they can be gods whilst ordinary people are trapped in their slave like position FOREVER!

Hand a man a million dollars, then piss yourself laughing as they create 10x this amount rendering it only worth a fraction of what the man thought.


Da chief's picture

Kong has this in the bag with suggestion that "currencies lead".

With the idea in mind that Japanese Yen has driven the large part of U.S equities rally over the past few months, one only needs to look at JPY strength developing over the past few months - while the gong show in U.S Equities pump carries on.

Take todays "geo political" factors with respect to Russia / Ukraine.

USD falls.....JPY surges and global equities fall on repatriation to the cheaply borrowed Yen.

It all looks so straight foreward / simple in this context.

As Japan do global markets / appetite for risk.

The simplest most straight forward trade getting long JPY vs Commods.



AdvancingTime's picture

I agree the JPY is doomed. At some point even the wealth running from Japan will not be able to rally our markets.

ThroxxOfVron's picture

I don't see the money being bandied about in that illustration: I see it flying into the fat banker's hand and his crossed fingers behind his back revealing the lie at the heart of the system that keeps his fat old ass in that nice armani suit.

AdvancingTime's picture

I contend the primary reason that inflation has not raised its ugly head or become a major economic issue is because we are pouring such a large  percentage of wealth into intangible products or goods. If faith drops in these intangible "promises" and money suddenly flows into tangible goods seeking a safe haven inflation will soar. Like many of those who study the economy I worry about the massive debt being accumulated by governments and the rate that central banks have expanded the money supply.

The timetable on which economic events unfold is often quite uneven and this supports the possibility of an inflation scenario. A key issue being one of timing. If the price of gas jumps to $8 a gallon overnight do you buy gas and not make your car payment or stop driving the twenty miles to work? Answer, it could be months before your car is repossessed so you buy gas.

 It is important to remember that debts can go unpaid and promises be left unfilled. If this happens where does it  leave us? Chaos and major disruption would result from such a scenario. As we have seen from the economic crisis of 2008 and following many other unsettling developments legal actions can continue to drag on for years.  More in the article below.


cynicalskeptic's picture

I contend that we in the US have so far been protected from the inflation we SHOULD see from recent rampant money printing because that money has NOT entered the general marketplace.

Much of the money printed since 2008 has gone to banks and financial institutions who have simply held onto those funds as added 'reserves' - deposited (and earning interest above its cost) with the Federal reserve.  This itself is a huge scam with the interet paid on PUBLIC funds going to BANKS who should be seeking funds from the opublic directly and paying them directly for those funds.  Why should banks pay YOU interest to get your savings and build reserves when they can get money from the Fed or Treasury for free (or close to it).   Those TRILLIONS are NOT in circulation and not adding to the velocity of funds - and in fact are DECREASING the average velocity of money in the overall system (add a few trillion to the money supply and have it sit - unproductively - and you're not impacting the economy... ironic given that the public justification for TARP et al was to 'stimulate the economy').

Some of the funds provided to banks et. al.  HAVE been used to prop up Wall Street - driving up stock prices but again, that does not directly impact the economy in a meaningful way- it's simply part of the smoke and mirrors strategy to make people believe thigns are 'better.'

Some of those funds ARE used to speculate in the commodities markets - those ARE contibuting to inflation directly.  With financial institutions 'investing' in aluminum, copper, oil, wheat and more, they ARE having a direct impact on prices.  I contend that as much of an impact - or more - is had by foreign companies and governments buying tangible assets - commodities - with $US holdings, preferring to hold somethign of real value instead of paper US promises.  You have seen China exchange a large amount of its dollars for minimg companies and energy contracts all over the world.  Some of that is felt here in the US but so far the rest of the world has seen more of an impact in the prices they pay.   'Arab Spring' was more about increasing food prices (and unemployment and government corruption) as it was about 'democracy'.

The role of the $US as the world's reserve currency is significant but it has been informally viewed as such long before Bretton Woods.  The perceived strength and stability of the US made $US desirable to hold.

For a hundred years the $US was increasingly viewed as a 'safe haven' - especially in the post WWII years.  Any US currency issued remains legal tender - compared to many foreign currency issues which have been voided or collapsed during that time period.   When the former Soviet Union allowed jews to leave int he 1980's many brough with them stashes of $US dating to before 1917 - held onto in families for over 70 years.   Many foreign citizens all over the world hold 'safe funds' in the form of $US currency or $US demnominated travelers checks.  The $US has been viewed as a safe way to hold savings - less likely to lose value than some local currency which may suffer extreme inflation or total loss of value.  Ironically, counterfeit $US notes are preferred ove valid local currencies in soem markets - and are more widely accepted than the local currencies.

$US are also the preferred medium of exchange for 'unreported' transactions in many nations where people seek to avoid paying high local taxes.  These transactions may be illegal but bay just as likely be quite legal.  Even if tax avoidance is not an issue you still have large transactions conducted using $US at the preference of one or both parties.

The $US has also been the medium of exchange in much of the world's illicit commerce for the last 70 years.   Think of all those billions held by drug lords and arms dealers as non-interest paying T-Bills.   The US Treasury loves such funds for that very reason.   

The amount of US currency held overseas - outside the US is enormous - and so far those funds have seen more of an impact from the declining value of the $US.   Dollars held in a foreign country are now often LOSING value relative to local currencies wheras in the past US DOLLARS were the safe haven for savings.   Some estimates put the amount of $US held overseas as HALF the currency held outside banks.

This enormous quantity of $US held outside the issuing country has benefitted the US enormously BUT that will become a HUGE liability if the rest of the world loses faith in the $US.

In recent years, when a nation has been profligate in its spending habits or poitical events have made its people lose faith in its currency there have been 'alternate' stores of value and exchange.  Hyperinflation in the collapsing Yugoslavia led people there to hold funds in German Marks.  In Zimbabwe, people held $US or South African Rand.     But if people lose faith in the value of the US dollare there is NO 'safe haven' - or combination of 'safe havens' large enough to accommodate the demand that would result.   There are not enough Euros, Swiss Francs, Singapore Dollars or any other combination of currencies to accommodate the amount of US dollars outstanding.

So...... what happens if the rest of the world perceives that the US dollar is losing value relative to other currencies and is no longer a 'safe' store of value?   We are already seeing China, Russia and other nations divesting $US paper holdings in exchange for TANGIBLE assets.  If unable to exchange $US for gold, other nations will scramble to buy SOMETHING, ANYTHING with some tangible value while the $US still has buying power.

God help the US if this occurs as all those dollars held overseas will be rushing back to the US (unwanted anywhere else) and used to buy whatever can be bought - companies, farmland, property, whatever..... a foreigner holding millions in $US will be more than willing to pay what appears to be an excessive price for soem tangible asset if the alternative is holding $US that are worthles abroad.   The US will be for sale - like it or not - UNLESS the US does the unthinkable and defaults - voiding out all those billions held overseas.     

Hence the currend conundrum - and willingness of the US to do ANYTHING and EVERYTHING to keep this from happening.  The US will try to continue imposing the $US on the rest of the world at the end of a gun for as long as it can - and when that fails......   well, full out war is one way to avoid a default and one way to keep the rest of the world from buying your nation up..... but how long a war can the US fight without an industrial base?

stopcpdotcom's picture

Please could someone at ZH do an article about the difference between currency and money.

nofluer's picture

Anything can be used as currency - anything can be considered money. Perhaps the below article will clarify it for y'all?

orez65's picture

"Please could someone at ZH do an article about the difference between currency and money."

Currency is a paper note issued by a country. For example, the US Dollar is a "Federal Reserve Note", a decorated piece of paper signed by a couple of ever changing bureaucrats.

Currency can be notes promising to be exchanged for gold or silver on demand. There are none of those in existance today.

Money is gold or silver.

ebworthen's picture

This is what Gold and Silver sing:

"It's a Barnum & Bailey world, just as phoney as it can be,
But it wouldn't be make believe, if you believed in me..."

AdvancingTime's picture

Anything can be used as a currency but money is printed by a government or bank. Because of the uncertainty in today's market and the direction events might take the subject of "value and worth" continues to garner a fair amount of interest and remains relevant.

History is chucked full of  distorted markets, debts unpaid, promises unfilled, and bubbles. These "interesting times" play havoc with the value of things and what they are worth. Like some of the cruel games children play you don't want to find yourself without a chair or holding the "hot potato" when the game ends. More on this important subject in the article below.


Boxed Merlot's picture

These "interesting times" play havoc with the value of things and what they are worth...



Yes, and as your article describes, when "faith" in "intangible promises" drops, opportunity knocks.  It will knock for one who can demonstrably prove worthy of trust.

Many of our most cherished and prized institutions are laced with fallacy, deceit and corruption seemingly beyond culpability.  Our judiciary has proven themselves to not be above exploitation, bribery and / or blackmail.   These are those from who must flow the most pure judgments in order to raise and build "faith" in "intangible promises".

Our jurists have failed and the people are now allowing the executive and legislatures to run roughshod with demonstrable physical force as an evil replacement to the preferable “high moral ground” from which to govern.

I’m sure there are many examples of their dereliction of duty, but the one which stands out most to me is the failure of prosecuting any one for control fraud as relates to the 2008 melt-down.  And by the way, my definition of “control fraud” would include the likes of B. Frank in an oversight position inside government as well as those in the “private” sector.