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Now Comes The "Specter Of Deflation": The Money Printers' Latest Scam
Submitted by David Stockman via Contra Corner blog,
The Fed’s public relations firm of Hilsenrath & Blackstone was out this morning with the official line on the market’s tremors of recent days. It seems that $10 trillion in freshly minted digital money at the world’s major central banks over the last eight years—-that is, a tripling of their balance sheets to $16 trillion—- is not enough. Not only is 2% inflation still MIA, but it now threatening to enter the dark side:
Behind the spate of market turmoil lurks a worry that top policy makers thought they had beaten back a few years ago: the specter of deflation.
Never mind that there is nothing close to a sustained run of negative consumer price indices anywhere in the world. The recent modest abatement of what has been 45 years of relentless consumer price inflation throughout the DM economies can be readily explained by short-term oil and commodity price movements and exchange rate fluctuations. Indeed, the money printers are always gumming about inflation-ex food and energy— so here it is.
During the most recent twelve months, the CPI-ex food and energy is up 1.7%, and that compares to 1.8% in the prior year and 1.9% in each of the two years before that. Indeed, since the turn of the century the CPI less food and energy has risen by an average of 1.9% annually. So now that it has tumbled all the way down to 1.7%——a fractional emission of pure statistical noise from the government data machine—-we are suddenly drifting into a deflationary crisis?

And, no, the data is no different for Europe. There is no sudden lurch into a sustained downward price spiral. Instead, European consumers are enjoying a period of only marginal erosion of their purchasing power. Thus ,during the most recent twelve months, core inflation in the euro area has risen by 0.7% and that is virtually the same rate as the prior year. Going back to the pre-crisis peak in September 2007, the average core inflation rate has been 1.1% for seven years running. Again, there is no step-wide plunge in the consumer inflation trend—-just a reasonable approximation of price stability.

Self-evidently, the current brief interval of inflation slowdown has happened before. So what has occurred during recent months cannot be described as some deeply embedded structural condition that changes the whole course of economic life.
In fact, what possible explanation do the Keynesian money printers have for what they imply to be an economic disease that could be called SODS (sudden onset deflation syndrome). That notion is empirically false as shown above, but by their lights where did it come from all of a sudden? The overwhelming driving force in financial markets and worldwide economies during the past few years has been the ultra-stimulative, “unconventional” monetary policies. No one disputes that—especially the fast money traders who rightly insist that its always and everywhere about the Fed.
Certainly, the monetary politburo in the Eccles Building would never agree that ZIRP and QE are responsible for deflation. So, it must be some kind of horror show dead hand from the grave—-a relapse of the financial crisis contagion. But of course they never explained where that came from, either.
Well, they did say that central bank policy had nothing to do with it. Not even Greenspan’s desperate slashing of money market rates to an unprecedented 1% in the spring of 2003 had anything to do with the explosion of variable rate mortgages and the “refi” stampede. The latter resulted in gross mortgage originations at a $5 trillion annual rate compared to historic originations in the $1 trillion range, and provided the catalyst for the housing price explosion and mortgage equity withdrawal (MEW) based consumption boom which followed.
Nope, it was all greed and animal spirits getting too frisky. Why that keeps happening after periods of extreme central bank stimulus and Wall Street coddling, they don’t say. Likewise, now we have “deflation” suddenly welling up among the masses on main street. The latter are held to be reluctant to spend, thereby causing inflation to weaken and the spending impulse to consequently falter even more.
This outbreak also remains unexplained, but the cure is the same: More monetary accommodation which means that ZIRP and N-ZIRP (“near ZIRP” or trivial increases in the target rate after ZIRP is officially lapsed) must be extended as far as the eye can see.
All of this is empirical nonsense, of course. In fact, its a blatant con game. The only reason that there is an appearance of a troublesome “inflation shortfall” is that recent rates have been below the arbitrary 2% “policy” target that has been set by Keynesian central bankers all around the world.
Moreover, when this 2% target is taken with such literalistic rigor as to rival creationist doctrine regarding the scriptures, it can make trivial differences appear profound; and to cry out for new forms of policy action—which is what the monetary central planners are actually all about.
In fact, there is no proof anywhere that 2% inflation on the CPI enables extra GDP growth. It’s just a flat-out invention of the monetary scholastics who have seized control of the world’s financial system.
The truth is, the 50% gap between 2% and 1% inflation is a distinction without a meaningful difference. Indeed, there is no difference at all when it comes to the fundamentals of true economic growth and wealth creation—-except that higher inflation is always slightly worse. Yet due to the unquestioned status of the 2% inflation target, the central banks are getting a free pass in the public debate.
In fact, it is worse than that. They are being postured by their public relations firms in the financial press as fireman at the ready to remedy the very problems they have previously created. Thus, Hilsenrath & Blackstone note,
….fresh signs of slow global economic growth, falling commodities prices, sagging stock markets and declining bond yields…… suggest the deflation risk hasn’t gone away…
Com’on. The welcome decline in oil prices and other commodities that is currently helping to ease the inflation indices is not anything bad that needs to be combatted. It represents an overdue cooling of the 14-year global commodity boom that the combined central banks of the world have stimulated through their massive support for artificial economic growth fueled by cheap credit; and by the free money induced transformation of commodities into still another speculative asset class.
Here is the major commodity index. Since 2000 it has risen at a 8% annual rate—-a trend that could never be sustained under a regime of sound money and disciplined credit management. And now that the world economy has reached the maximum extent of the central bank enabled boom and has begun to falter, the Fed’s PR men are out flogging a new mission. That is, for the central banks to arrest the dangerous collapse of global commodity prices.
It puts you in mind of the boy who killed his parents and then threw himself on the mercy of the court because he was an orphan.
So here’s the real reason the nonsense of 2% inflation targeting and the specter of deflation is being fed to the compliant financial press by the policy apparatchiks running the central banks, IMF and the major nation treasury departments. In a word, governments have buried themselves in debt, and are desperate for an excuse to inflate away the real burden.

So they have invented the Big Lie of the present era. Namely, that the cause of low growth is “low-flation”. And the simplistic arithmetic behind this false proposition is a wonder to behold. In the case of the Euro-zone, for instance, real growth has been registering at less than 1% per year and with inflation in the same zone, nominal GDP is hardly growing at all.
Yet public debt continues to soar and there is no political will to stop it outside of Germany. Already the EC fiscal compact agreed to two years ago is being cast aside because it is inconvenient for the socialist politicians and opportunists who run France and Italy, in particular, but most of the balance of the EC as well.
So the financial policy elite has invented a “twofer”. Get inflation above 2% and, presto, growth will rebound to the 2-3% zone of Keynesian “potential GDP” growth. Soon enough, the public debt/GDP ratios will stop rising and all will be well.
Indeed, the data for Italy shows the real scam behind the deflation scare in spades. Its nominal GDP has been essentially flat for seven year running, yet is public debt has continued to rise inexorably. In a word, it is buried in a debt trap.
Moreover, Italy is only an advanced case of the universal condition in the DM economies. Stated differently, the specter of deflation is not about economic analysis or honest monetary policy options. Its just a cover story for an intended fraudulent default on public debt of monumental proportions.


The fly in the ointment, however, is that this inflationary default scheme can never work. Central banks have buried the world in massive malinvestment and unsustainable credit fueled growth that will eventually collapse. So a classic hyper-inflation will never break-out because there is too much capacity in the world economy to permit labor, commodity and industrial prices to explode.
At the end of the day, the central banks can’t levitate inflation, and they surely cannot cause production, enterprise and labor productivity on the supply side of the economy to accelerate by sloshing N-ZIRP liquidity through the money markets. The latter impossibility is already proven by the anemic recovery in the US and the triple dip now enveloping Europe.
In fact, bringing the monetary firemen in to douse with more kerosene the massive financial fires they have already started would only defer the day or reckoning–if even that. It would just mean that the financial casinos of the world would be given one more round of speculative juice, thereby inflating asset values to an even more dangerous extreme.
Some evidence for that proposition seems to be extant in the modest financial turbulence incepting even now.
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Moar money printing is certainly coming. The circumstances need to be set up where "We the People" beg the Ponzi Gods to fire the presses back up. CYA is all 'they' are looking for.
John Exter predicts the excess money / debt creation leading to a deflationary collapse followed finally by currency failure (hyperinflation) with gold moving to an enormous priice.
http://en.wikipedia.org/wiki/John_Exter
http://www.goldmoney.com/research/research-archive/a-banker-for-all-seasons-the-life-and-times-of-john-exter-champion-of-sound-money
http://www.goldmoney.com/research/research-archive/A-BANKER-FOR-ALL-SEASONS-PART-II
http://www.goldmoney.com/research/research-archive/a-banker-for-all-seasons-part-iii
Debolaflation
The problem is everyone is labling the same word on different problems.
Changes in prices is not inflation or deflation. Rising and falling prices are a symptom of inflation and deflation.
Deflation is a collapse of the money supply. Which is bad for everyone. This is the fundemental flaw in a debt money system. As debt is paid off that money is extinguish out of existence back to the ether it orginally came from. If no one is borrowing new money into existence at the same time, like in Europe today, then your money supply starts contracting - and this is bad. This is why your money supply should not be tied to the creation of new and ever expanding debt.
The excess reserves the Federal Reserve has created are not directly fungible into the money supply at large except through a very narrow and concentrated funnel in Wall Street.
Stackers,
So, what's your alternative?
Good post, by the way.
Freegold?
Not " free" gold.
Umm 100% secured lending, like what is supposed to happen instead of allowing banks to increase leverage through unregulated trades? How about marking bank's assets to market everyday. They can time trades on nano-seconds and they can't calculate the real value of their assets every day?
Escrava,
The Government should print and spend the base money into existence free of debt. You set up something like a 4th branch of government that is strictly firewalled from political bias and regulatory capture. This 4th branch of government will use metrics to determine economic growth and the need to grow the money supply to matching growth in population and such. This branch of government will then tell the rest of the government how much it is going to give them to spend and it will be illegal for them to borrow more.
The banking system will be split into two system. One a simple checking account clearing house that charges a small user fee. and the other a consumer lending bank where deposits are held in something like a CD with the express knowledge that if the loan is not paid back then your money is gone. Something could be set up so that loan losses would be taken proportionately out of all accounts so you would not get wiped out. Differing rates of return would cover varying credit risk. Defaults and loan repayments dont contract the money supply in this system it's simply transferred.
Beats me how you actually implement any of that and make it work ..........
Stackers,
So, check the link below in how to make it work.
http://realcurrencies.wordpress.com/
Make sure you read the comments by Ross N. and REN.
Let us know what you think; what you found!
Stackers
That's pretty much what Hitler did. And WOW did that piss off the Rothschilds. So much that they mobilized the entire world to stop the guy, and made his entire existence into a mythological evil (like nobody's ever mass-murdered before). Notice Stalin mass-murdered at least one order of magnitude more humans but he got with the debt-money program, so, you know, no problem.
Seize Mars,
There are some truths to what you wrote. Hitler was very popular and the Germany economy was very successful; but not for the Jews.
Hitler spent heavily on the military (Empire) and social programs (public spending) such as 1922 Youth Welfare Act.
Hitler, or his advisers, understood the combination of private-money (fractional lending) and interest (usury) on the power of private sector that can be turned into debt (serfdom), inflation, hyperinflation, deflation and, depression.
Also, in 1920’s, Germany, as well as Britain, started facing Peak Coal. Hitler, or some of his advisers, realized that and they tried to get to the Middle East oil. That was a NO NO by the British bankers and US elite, that was ascending globally.
As long as Germany was fighting Czechoslovakia or the Russians, that was OK.
Yes. What we were trying to say with debolaflation is that it is dangerous to assume the future will look anything like the past. Words like "inflation" and "deflation" will have no meaning in a worst case scenario where survival is the name of the game and the dollar is a distant memory. It seems, unfortunately, that we could go from this to that in a very short period of time. States would shatter into communities, who would be forced to band together out of necessity. To those in big cities, all we can say is good luck.
sorry to disagree, but deflation that manifests in falling prices (increased production with money supply remaining constant) is a natural function of a healthy productive economy that is growing through the proper allocation of capital that comes from savings.
Deflation, in the real world and not in the mind of Keynesian overlords, is NOT a collapse of the money supply. It icomes about from a growth in production of goods and services.
I agree that the money supply should not be tied to the creation of new and ever expanding debt, but IMHO, this is because debt is not money (even though our modern civilization has been trained to think so and use credit cards, for example, as instant money creation). The money supply never contracts, if left alone. It remains constant.
Guys, consider this:
Thermodynamics for Economists by Mark B Cunnington that goes by the name of Null Hypothesis, at “The Oil Drum”.
If you walk outside you’ll see birds chirping, trees whispering…., except we have nicer looking cars…
What’s so different about today that provokes Chicken Littles like me to scream that the world is about to end?
The answer to this is that our entire financial system, and its history going back at least 100 years, has been predicated on, and driven by, perpetual economic growth. That is what provides value to money. Money is literally created out of future debt….
People historically bought those bonds because they were reasonably confident that the economy would grow at a rate roughly equal to the bond coupon,
But in 1970 the US hit Peak Oil. As a result, its economy should have begun declining because it couldn’t grow anymore. But it didn’t decline, at least to the degree one would have expected. Why not? Because there was a fundamental change to the monetary system. In 1971, the US defaulted on its gold convertibility and the dollar became a fully debt backed fiat currency.
Those systems are dependent on perpetual exponential growth and they invariably, 100% of the time, blow up in hyperinflation. How did the US avoid that catastrophe? It (militarily) enforced the dollar as the world’s reserve currency, that’s how, which extended the US empire around the world and forced other countries to sell their resources (oil and manufactured gizmos) to the US in exchange for pieces of paper. That was a fundamental system change in 1971.
In order to keep the bond vigilantes at bay and prevent a runaway monetary collapse, in 1982 the Fed increased interest rates to about 20%. This “destroyed” the economy, but the alternative was hyperinflation which would have destroyed it as well. Back then, the economy could weather those high interest rates without completely collapsing because it wasn’t over-leveraged. And more importantly, the US still retained the world’s reserve currency, so it could run a perpetual trade deficit and CONTINUE GROWING – using other countries’ resources, who hadn’t yet hit Peak.
We are now looking at another imminent system change.
There is now no “productive” monetary asset left that can provide a positive real rate of return, absent central bank manipulation of select markets, at the expense of others.
We’re at Peak Oil. Duh! How can anyone seriously expect a consistent rate of return on their investments when the real world upon which those investments are valued isn’t growing?
Anyone who casually looks out the window and concludes that what is going in society now resembles anything close to historical norms is in for a big surprise.
The system WILL end, and it will not end with a whimper.
All this talk about whether total global oil production is up or down a …. it’s all just statistical noise.
The world will be on its downward spiral. And the naysayers taunting the doomers will mysteriously vanish into the woodwork, just like they always do after every ponzi scheme crashes.
http://markbc.net/doomer-economic-commentary/thermodynamics-for-economists/
Escrava Isaura
Thanks for the link to the excellent article,
You must be a friend of a guy who knew a friend of a friend of another, no?
"If ANOTHER's claims are true -- that a consortium of oil states has cornered the gold market (and given the impressive circumstantial evidence, this could very well be the case) -- these "footsteps of giants" become the most salient and persuasive case for gold ownership I have seen in the past decade, if not the full twenty-eight years I have been in the gold business." -- Michael J. Kosares, president of Centennial Precious Metals, Inc.; author of The ABCs of Gold Investing
Then, in October of 1997 at the internet's only gold discussion forum of the day (hosted by Kitco), a series of remarkable postings began appearing under the pseudonym "ANOTHER", offering plausible answers to those questions. What followed in a seemingly incongruous stream of thought over many months was, in the fullness of time, seen to blend into a logical whole by many astute readers following the complete text. If you are not similarly moved to at least reassess your own view of the international financial scene after reading what's revealed below, then you are either firmly entrenched in your world view, or you've been numbed by too many hours of Wall Street's cheerleader (CNBC) and too many Friday nights with Louis Ruykeyser.
His choice to use an Internet forum to tell his story is surely a "story" in itself. Many who have read ANOTHER's "THOUGHTS!" speculate why he would choose this particular venue for his revelations. Why not a magazine article? Or a book? Rather than turning this Foreword into a treatise on the merits of the Internet, let it suffice to say that if ANOTHER and his motives are as implied, then there is probably no better venue than the Internet; allowing his "THOUGHTS!" to be disseminated rapidly, anonymously, and without editing by intermediaries. In addition, they could be efficiently targeted to go directly to the core market audience -- the gold analysts, brokers and investors who frequent such Internet sites as this, devoted strictly to the yellow metal. And after all, as a utility, isn't this capacity for specialization and instant communication what the Internet is all about?
http://www.usagold.com/goldtrail/archives/another1.html
Dapper Dan,
Glad that you like it. I love Nulls take.
Anyway, hate to sound like a broken record, but here’s where I stand:
1) I believe with every fiber of my being that our collapse will be a consequence of multiple failures.
2) Gold will be the last and the shortest bubble.
3) Shorting the dollar will be the trade of the century.
Beware what you wish for, because:
#2 will be confiscated by force; or by high taxes.
And #3 is treason against America, thus punish by death (war).
There's already been a deflationary collapse in aggregate wages paid.
Exactly right, which is why real estate has no where to go but down,
and small business gets no traction at all.
I guess we'll see. 99% of the market is expecting it, and you know what they say about the market. It usually sets itself up to fool the most number of people. QE certainly hasn't spurred sustainable economic growth and more have begun to recognize the massive gap between the markets and reality. More QE will only make that gap wider and it will be a race to see where that gap finally collapses. The sun will begin to burn the tops of the trees as they grow much higher. Sad state of affairs.
my neighbor's ex-wife makes $77 /hour on the computer . She has been unemployed for seven months but last month her payment was $15804 just working on the computer for a few hours. go to the website... www.job-reports.com
Deflation? That's fantastic.
It means my costs for: rent, food, utility, healthcare, taxes, and inurance premiums - will get cheaper - right?
The country that deflates first deflates best.
I'm not banging his drum, but... I watched Mike Maloney do a seminar on video. This is EXACTLY how he explained this will go down.
Deflation first, ( mainly in things we don't NEED to live) , inflation in items we need to survive ( food, fuel, etc ) and then hyperinflation caused by the government printing and overshoot trying to solve the deflation problem.
Then POOF!
I'm waiting for poof.
yep...the deflation will hit in cars, houses, other shit people want but don't necessarily need. You can already see that in the shitty retail news that's coming our way like a tsunami. Hell, even Ghetto-Mart (WalMart) is screaming about horrible sales lately. Even those dollar stores are going tits up. When the majority of the populace can no longer sustain shity stores like Ghetto-Mart or those fucking dollar stores, then you know the ebola's about to hit the fan.
So all that fiat that the sheeple aren't using towards crap anymore will start to find it's way more and more into the things people need...food, fuel, and paying down some of that insane debt they wracked up over the last couple years or more.
That awakening is what the gov stooges, banksters, credit card scumbags, and all the other blood sucking leaches fears the most in America. Once the sheeple wake up and quit wasting what little they have on "stuff" and grow the fuck up a little then things will change drastically.
OMG...people might even start to budget and SAVE money or buy some phyzz silver!!! Wholly shit!!! It'll be a calamity when that happens and people turn their backs on this fucked up system.
Gee, how are things going to be when home prices collapse but interest rates can't be allowed to be raised because it would further tank the economy and all those hundreds of trillions in derivatives??? When the gov stooges have to trim the budget and pay some fucking bills rather than printing and borrowing, then what?
This house of cards finally falls...that's what.
Then inflation hits hard core...the next wave in that economic tsunami. As the world continues to run from the U.S. dollar and create a new monetary system and all those dollars start to find their way back to our shores...that's the next tsunami wave in this shit storm.
How about when people start to run on the banks and take what little fiat out that they might have? Capitol controls kick in...shit shuts down. Prices skyrocket...dollar collapses.
Got silver, gold, guns, ammo, medical supplies, storable food, water filtration systems, camping/hunting/fishing gear, etc.?
Cuz if you do...you'll be doing a million times better than 90% of the rest when this shit comes crashing down all around us.
Some things to add to your stash also: Tychem suits (NOT Tyvek), N100 surgical masks (NOT N95), full face respiratory mask, Nitrile rubber gloves (100 or more), booties, thick plastic and duct tape for seal rooms off, bleach, hydrogen peroxide.
Cuz ya never can be too sure or too prepared, can ya? Get that shit I just listed above now before it's too late and you can't get it cheap like you can now. If you wait another month you won't be finding it for less than a small fortune.
hyperinflation is NOT a result of .gov printing. It is a result of TOTAL loss of conifdence in the currency, so that NO ONE wants it at all. It leads the money printing, and does not follow it. It may come about as a result of lesser inflation, or some other economic characteristic.
This ^^^^^^^^
New law cuming? Spend 100% of your income or pay 80% tax on whats left over.
Be creative!
Sorry, deflation according to them is when the value of assets held by the elites goes down. Your costs mean nothing to them
Yes but they need us more than we need them.
You can expect those essentials to fall in cost BUT...first you will see your income, assets and investments plunge in value. You may even find yourself out of work as the Western economies are largely based on consumer spending which will also plummet.
Deflation is a foregone outcome of a credit based money. What the financial authorities do to fight deflation could easily result in hyperinflation. It's a paradox that deflation could easily lead to our respective currencies loosing most of their value.
Making money off of "diseasedness" is as old as capitalism itself.
Ebola on the other hand...
Can anyone tell me why 2% inflation is a reasonable target, given inflation is just a back-door tax?
Thanks, in advance.
Because the higher the inflation rate with 0% interest on savings the faster they can fleece the middle class.
15% real inflation won't do, they need 25% with a 2% "official" rate; the Elysium class needs enough to escape the mainland.
I was asking from the perspective of 'the little guy' - it wasn't really a question anyway, but thank you for taking the time.
When we had honest money based on silver and gold, there was little or no inflation. Life was more predictable.
But to your point, modest inflation made home ownership somewhat rational. The house wasn't worth more, in real terms, but the mortgage got inflated away. Now those benefits go mostly to government and banksters.
Just repeat to yourself over and over again:
It does not need to make sense, apparently, so logic will not help here.
Works best if you're wearing red ruby slippers...
I'm not an economist, but even I know that you can also drive prices lower to buy things at a bargain. In fact, you can inflate and deflate prices to steal from the middle class. Volatility is the name of the game.
They are scared to death they aren't stealing enough from us and our children.
Technically, it's not theft; if you know about it, and don't do anything about it.
It is theft if the system is rigged, and you not allowed to operate outside of the system.
I'm I the only one ready to fire bomb a Prudential office after seeing their ad pop up EVERY fucking time I change screens?
Cut a brother some slack, please.
Adblock Edge, Noscript, Ghostery, Flashblock, Nuke Anything are your friends.
Thanks. I tolerate most of the crap, because it keeps the site up. But this is torture.
TORTURE
But what's the solution for iPads?
Sell them.
Eat it.
Yes, Flashblock and Adblock Plus.
What ads? I've never seen any...
Yarip
I use adblock plus. It's free and I don't see any of those obnoxious ads anymore. I don't see the ads for Russian girls either.
Russian chicks are cool, I enabled them in adblock.
Let deflation happen I say. 99% of us would benefit from lower prices and the system would purge the bad actors out. This would give rise to investment opportunities for the sensible (smart) people who saved cash, gold and hard assets. Everyone speculating in the stock market and currently profiting from this FED backed charade deserve to get their fraudulent profits wiped out. Let the deflation happen!
.
"99% of us would benefit..."
That's why TPTB can never allow deflation to happen.
You have to print and get Yellen to go up my FAFSA if you want to fight inflation.
Inflation or Deflation? Keep 'em guessing and re-guessing.
IOW... NOBODY outside The Club gets to front-run the criminals who created this Ponzi.
Fed is talking QE4 maybe now....
http://www.telegraph.co.uk/finance/newsbysector/epic/ftse100/11166684/Ma...
Gott love it....the smell of desperation...lol...
Stockman has it backwards. Low growth is indeed low-flation... in todays financialized economic paradigm. Only buy inflating the already inflated financial markets can growth be achieved. Like any Ponzi scheme, it makes you rich, until suddenly you wind up penniless.
It's more like a cancerous tumor than any healthy kind of growth, but that's the present state of things.
"All the riches that we boast, consists in scraps of paper"
Speak for yerself. I am more commodity based.
...and it ain't perishable commodities, either.
It's actually a quote from 1720, or thereabouts.
And what you do means nothing when the majority of humanity is boasting riches in scraps of paper.
Monetary policy that can only succeed when there's inflation is fundamentally flawed. Markets go up and down. To make deflation the boogeyman is shining a spot light on a flawed system. Constantly interferring in attempts to keep the market elevated has many unintended consequences that has been discussed here several times.
Too many people over the age of 50 are relying on the status quo to continue even though they know it's flawed. There's good that can come from deflation but they end up on the short end of the stick so they don't want it to happen.
"At the end of the day, the central banks can’t levitate inflation, and they surely cannot cause production, enterprise and labor productivity on the supply side of the economy to accelerate by sloshing N-ZIRP liquidity through the money markets. The latter impossibility is already proven by the anemic recovery in the US and the triple dip now enveloping Europe."
Thank you for this view.
The USG has 70 to 220 TRILLION in unfunded liabilities over the next few decades, depending on who's providing the data.
Doesn't this mean the USG MUST increase the quantity of currency to at least double their obligations? After all, they'll need an economy (even if it's fake) that swirls currency from which the fascists can extort.
So assuming the fascists figure out a way to centrally manage an economy so it doesn't collapse completely (which they won't), they'll need at least ~200 trillion swirling around from which they can extort ~100 trillion to cover their liabilities.
In fact, they'll probably need much more, like 500 trillion. That's about 10 trillion a year that needs creating, assuming the USG doesn't obligate itself further (which it will, so the real number is probably a quadrillion or so).
The only path I can see if the USG expands QE, buying everything under the sun until it owns all of it, but keeps the presses going to cover all the promises.
I see no other way they can go, regardless of inflation or deflation. Hundreds of trillions are needed just to make the accounting work. Am I missing something?
The last nine presidents doubled the national debt, borrowed as much as all presidents before.
At the beginning it went well, looked productive but by now debt saturation is about to be reached though they try to buy some more time.
It is over! Exponential is a bitch with such a big exponent.
Correct sir. The Fed is maybe 40% of the market right now, but soon it will need to be 95%.
Dude, you stole my name. Totally not cool.
OT... Dr. Obola is on the tube, explaining how everything is under control.
He speaks so well. He's using his White People voice. All the "g"s , and easy on the "s"s
Edit. 2 days off the campaign trail and golf course. this is fucking WAR!
Obama on Ebola
LOL
Did you see Mushelle go all President Camacho with the turnip? It's Idiocracy live.
http://www.youtube.com/watch?v=XIB1nqFpFMo
http://www.youtube.com/watch?v=S5wHRryA2aw
I think they mean that the .01% aren't able to steal everything fast enough before the whole thing burns down, at this rate.
and they will do what they are going to do
and get away with it too
I know this just by looking at the lack of eyes here
-working class get closer and closer to e bowl a soup a day
I think by deflation, they mean stawk non-inflation. Jesus, can't have that.
Cheap Fed money only results in stock buybacks and more financial engineering. If Ebola empties the malls and restaurants, retail will be decimated forever. QE4 and beyond is useless and the Fed knows that, but they are out of ammo. No doubt Janet’s phone rings all day with politicians demanding she intervene in the markets before the elections. When faith in Fed ends, we will enter a deflationary spiral. It will be the best thing this country has ever seen. Prices will tumble and people will have more buying power. It is coming…be happy, the Fed will fail.
I was listening to a syndicated radio show on the drive home. One of the staff said two family members have cancelled trips requiring flying. One was a vacation to London. The other was a trip inside conus.
And this was just one family.
I wouldn't fly for free right now. And a cruise ship? Duh.
And the more they say don't panic, the more people panic. This is for real. I tried talking about this to peeps 3 months ago. I was watching it grow in Africa. They just shunned me like a goofball. I could see it coming from a mile away, how it wasn't getting under control. Now it's out, on the loose. And that genie ain't going back in the bottle. The panic may cause more harm than the disease. And THEY know it.
Peanuts or popcorn? Hmm.
+1
Housing in my area would deflate if the PTB would let it. I've looked at 75+ houses, 95% of them are vacant and on/off market for months, and the realtors aren't willing to lower prices more than 10%. These places are showing signs of dilapidation from neglect, yet the realtors/sellers won't give. Instead, they lay out some fucking sob story like "grandma needs a liver transplant" or some other shit.
Fuck grandma, take 50% off the price and we can start negotiating. You'd think there would be some interest with a cash buyer but so far it's a no go.
That could all change in the next week or two. I'm willing to wait.
When money is free, prices stay high. When liquidity disappears, cash is dear.
"European consumers are enjoying a period of only marginal erosion of their purchasing power"
Stockman must be a banking shill.
Does he look at real consumption of goods , in particular social goods ?
Deflation in a token money economy may be a good thing , but we don't live within such a monetary system.
We live within a debt money system.
Deflation in such a system is outright theft.
"Deflation in such a system is outright theft."
Elaborate please? What is being stolen?
Inflation is outright theft by those who get the new money first, from those who get it later. If you are a debtor, I suppose it is a toss up whether you see your asset eroded by defaults (enforced deflation via malinvestment correction), or inflation (being paid back by printed money unrelated to its share of the productive economy).
it destroys the stock and flow dynamics of a economy
i.e.trade
You get a total collapse of the real physical economy.
People become poor , they sometimes die.
if society manages to survive the insiders pick up whats left and concentrate wealth even more.
You see capitalism since tudor times has got nothing to do with wealth creation.
Its a game about who can concentrate the wealth - even if this dynamic destroys the wealth.
You can see capitalism red in tooth and claw best in the eurozone.
Growth is now impossible here - the mask slips.
All that remains is concentration and wealth destruction.
Wealth is derivied from the old English term for wellbeing.
In reality it has nothing to do with claims on wealth that we see in the capitalist system of today.
Monetary Inflation vice Monetary Deflation are equally destructive to the Stock and Flow of an economy.
It ultimately doesn't matter whether everyone keeps their money in a mattress, preventing loans from creating new businesses, or whether everyone's money devalues so fast, and the money is distributed so much to the connected as opposed to the competent that no new businesses can be created. In either case no new businesses can be created, no new products or ventures produced.
Relative to one another inflation and deflation are neutral to Stock and Flow. They both interrupt it. They simply interupt it at different points.
Deflation interrupts it at the bank where ventures are funded. Inflation interrupts it where the would-be entrepreneur evaluates whether to begin a project. In either case the flow is interrupted because the monetary flow is diverted inappropriately.
Deflation diverts money from risk to savings. People will prefer money to real goods under deflation. Inflation diverts money from savings and production to real goods - because if you can make more wealth gambling on inflation-driven markets than in producing widgets, that is what you do.
And in point of fact, both the US and UK have inflated away their economies and have become inflationary gambling houses.
There is no capitalist system today.
przejrzec
biede
There are two fringes of poorness.
One is that you borrow until you hit the wall.
There is no more way that you will serve your debt.
In order to satisfy your lenders someone has to step in...
and print the money
[INFLATION]
The other is that you stop buying.
You do not buy.
There is no need to buy.
(Placisz i tracisz :)
(trans. you buy and you die)
They try to lure you...
lower the price
but your burden
is getting heavier
with each
incomming
year
so
you
dont
do
it
/DEFLATION/
They are tried everything ................ but .putting free money in our pockets. (the most obvious solution is of course to return purchasing power to people rather then dark corporate entities who use us as conduit non persons in their great efforts to accumulate claims.)
As a banking shill Stockman thinks money has a time value.
That this idea of money cannot be free.
It is a thing to hoard rather then a mechanism to distribute purchasing power in his narrow shitty eyes.
All right - will that zero hedge Austrian prick who gave me a negative please show hinself.
I would like to see the little shit Defend the Indefensible.
Hey Tyler, when it's another piece by Stockman can you hilite it or something?
Deflation is a double-scam because real inflation is more like 5% not the govmint's 1.7%.
Deflation is the steady reduction in average salaries over the past 20 years but especially since 2008 and the Obamanation, take the statistics and mask off the top 1% and it's really gross.
Given these facts it's astonishing things have not fallen apart already, I mean economically as opposed to medically. Of course adding the entire population of Central America at basically zero reported wages, is not going to help the averages, either.
At least those jihadis sneaking in over the southern border may now depart the same way, before they catch that loathsome American virus.
Thus ,during the most recent twelve months, core inflation in the euro area has risen by 0.7% and that is virtually the same rate as the prior year. Going back to the pre-crisis peak in September 2007, the average core inflation rate has been 1.1% for seven years running. Again, there is no step-wide plunge in the consumer inflation trend—-just a reasonable approximation of price stability.
Price stability.
I remember that crook Jean claude talk about that back in the day..
Again ........this is tiresome I know and very obvious to even a child but to use the banking metric of inflation is of course wildly false.
People don't have a stock of millions of euros in the main.
They have a wage or income.
You therefore don't fucking compare a euro to a basket of goods to understand the concept of purchasing power.
Exactly
Using official figures to analyze the problems these days is as useless as technicals in a rigged market.
“The worst part of Communism,” wrote Solzhenitsyn, “is being forced to live a lie.” ...
Stockman had me at "Fractional emission"..... +10 if he means Yellen.
I think he's really saying it's a structural problem, not a liquidity problem. Got it. Again.
Current system has to crash to reset and that is too painful so we all have to die while the bankers keep fiddling with the control knob pretending they can get it right while the ghosts of deflation and inflation just let the big 5 strip mine moar every turn of the screw.
And I think he's right about the inflation, except it's more than the CPI numbers and wish they all would not rely on them so much and at least throw in some real data from Shadowfacts to underscore their points. 'Official' unemplyment and inflation numbers are jokes.
Inflation creation is a con. This is, has been, and always will be restoring the value of the assets of the con-artists on Wall Street, the parasites who contrubute nothing of real value to America - doing whatever it takes to enrich themselves. The Fed is in cahoots with the, but then, they are government employees, as is the congress, supposedly representing "the American people" - mostly the 1% who own them, and the 50% that pay no taxes who they bribe for votes!
Already, with the market trying to get back to reality ... they are talking of tapering the taper .. and putting it in reverse!
this is how they keep the ponzi scheme going...the housing market is the biggest part of the scheme...americans need to start building their own houses again...my dad built two by the time he was 35 and another when he was in his 50s. Bought the land and built the house.
Debt is what they want. Mortgage debt, student loan debt, car debt.
They are evil.
Zero nominal interest rates + Positive consumer price inflation rates = DEflation because the implied real rate is negative. And the more positive price inflation the Feds generate, the more negative the real rate becomes and the more DEflation there is.
Negative real rates increase the real burden of debt to borrowers at the same time they discourage savers from saving. In short, negative rates destroy financial capital. Welcome to the looking glass world of negative real rates where up is down and down is up.
The Federal Reserve is literally destroying the world w/its ill-advised policy.
"John Exter predicts the excess money / debt creation leading to a deflationary collapse followed finally by currency failure (hyperinflation)"
Count on it.
Yellen, Williams, Evans and Dudley all going to make it happen. Then they'll blame it on something else. "We never saw it coming". They knew all along what they are creating.
bag of fucking doritos shrunk in size from 16oz per bag to 10 oz per bag while price rose from $1.29 to $4.99 (at least the price stamped on the fucking bag) in less than fucking 6 years ... if anybody even whispers word "deflation" I'll fucking smash that fucking bag of dorito in his/her fucking asshole.
Talk to the people growing the corn, making the doritos, and selling the bags.
Record corporate profits grow from layoffs, attrition, and hiring illegals for half or less.
Not to mention all of the mergers and acquisitions over the years. Oligopolies and collusion out the wazoo I would presume. There are fewer and fewer companies reducing competition and increasing the opportunity to fuck the little guy? Crony capitalism perhaps?
Deflation is beneficial if there are enough different currencies .
(Theory of Relative Advantage)
Waiting for the third shoe to drop : see
https://www.academia.edu/8816411/Rogue_Swan_EU_disintegration
Is stockman familiar with this widely known concept ????
http://en.wikipedia.org/wiki/Stock_and_flow
I am sure he is because
HE IS A FUCKING CROOK.
money is a mechanism (it is not a thing) that interacts with the real physical economy.
In the Irish deflation petri dish we have a wierd (or maybe not so wierd) symbiotic relationshio between corporate deflationists and fabian socialists.
It goes something like this.
Housing is the most abundant object in that once green and pleasant land.
Yet it cannot be bought by most (without credit) as the price of houses and land is inflated relative to domestic wage and income.
The price of the object should not be important in a rational economy - it is how it is valued against fucking income.
So its about the true cost of the item and not the price.
Heres where it gets interesting.
People cannot afford to buy the stuff (how is this even possible when the good has already been produced ?)
In steps the fabian socialist............and I am not kidding now - he states we must build more houses ( more overcapacity)
As the cost is socialized on us all this further build or "growth" reduces out ability to buy the stuff even more.
(houses built may be almost worthless but houses yet to be built require expensive inputs)
And so it goes on - this pointless and souless "capital" expansion
Stockman deflation fettish in fact requires massive resources.
Restoring purchasing power requires much less.
It appears to me that as the FED has been buying stocks at all time highs, insiders and big money has been selling and continues to sell, leaving only the FED owning stocks and the US citizen soon to be left holding the bag.
The Fed admits they never saw the financial crisis coming. They even admit they still don’t entirely understand what happened. But, somehow they can now see deflation like a freight train coming down the tracks a mile away.
??????
They really do take us for ignorant fools, and with the exception of a small percentage of people (like the ones who frequent and post on this website), that’s the one thing they are probably right about.
Stockman has many good articles but what I do not like is his steady ignorance of elementary facts:
Here he suggests that in this system debts could be reduced. I think Stockman is intelligent enough to know how this monetary regime works: all money is only created as debt. Debt repayment means the money vanishes.
And he also does never touch the fact that there is always more debt than money because of compound interest.
Stockman blames the Keynesians, but by doing so he is hiding the mathematical facts this regime is based on. And this is classical disinformation. Reminds me somehow of the bipartisan game. Or good-cop, bad cop.
Can't we get a class action law suit going against the Fed?
Of course - you just need to shop for a judge that doesn't directly benefit from the money directly created by the Fed.
Easy as pie.
THere's the CPI, then the WCPI
It's the WCPI the Fed really concerns itself with when considering QE
The Wealthy Consumer Price Index is a 5 day rolling average of prices of real estate, stocks, art, Monaco villa rates etc.
All of these bankers knew from the get go that the only way to survive this thing was a controlled deflation. Instead they chose to continue printing and banking massively the way that got us here in the first place. Now we're 10 trillion later, with the derivatives wagging the dog (GDP) and demand is circling the drain. Who da thunk it.. Figure it out dumbshits you printed way above the average persons ability to purchase, the whole fucking thing will eventually topple. Jeezus what idiots.
It looks to me like the way this works is the central bank creates loans to the taxpayers, which are given to the oligarchs (QE). Income streams are diverted up the food chain to enhance the GDP/S&P. Deflation results as the taxpayer goes deeper and deeper in debt with nothing to show for it and has lost his income. "We must fight deflation!" the oligarchs scream, so we get more loans to the taxpayers which are given to the oligarchs (QE2 etc), etc. ad infinitum. The oligarchs have/will have ALL THE MONEY in the world to buy EVERYTHING in the world when they decide to do so. The public will have nothing.
The ebola scare appears to be created for the public to demand martial law, which the oligarchs will be only too happy to provide. What better way to protect the oligarchs from the common people?
Stackers.... that would be the BOE Mervyn King's divorced currency model. And how is it implemented and means tested? That would be Bitcoin and if I had to guess you knew that already. www.tradewithdave.com
Bankers speak with from both sides of their mouths.
When speaking publicly, they underscore that the terms "inflation" and "deflation" refer to price levels. And in the public venue they vehemently, VEHEMENTLY, deny the Austrian definition in which inflation and deflation exclusively describe the Money Supply.
When speaking to each other they clearly and openly admit it's about the money supply.
What does this mean?
It means seveal things. Firstly it means that they are looking at the probability of debt contagion due to fractional reserve collapse. Let me explain:
See, when you deposit ten dollars in a bank the bank loans out $9, but still pretends it can deliver all $10 to you. So you and the loan recipient both are claiming the same $9. But it gets worse. The guy with the loan willl either spend it or deposit it. In either case it will become a new bank deposit. The new bank doesn't know this is imaginary loan money. So they loan out 90% of the $9, after which it gets deposited again, and loaned out again, and so on. At the end of the day your $10 of deposits end up generating about $140 of debt, and over a dozen people will have a clear title to the same $9 from the original deposit. So, what happens when the last guy in the loan chain loses his job and defaults on that loan? All of those loans become upayable. And the whole chain of debt comes crashing down, such that when you go back to the bank to pull out your $10, you can't get all $10. That is with a 10% reserve requirement, as required by US law. In europe banks can lend out a much greater percentage, maybe loan out $9.99 rather than $10.
That is what bankers mean when they use the word 'deflation'. And that is the first thing this means. It means that they believe that precarious tower of imaginary debt-money stacked on top of real deposits like an inverted pyramid is falling over - collapsing. That is what they mean when they say 'Deflation'. It means they puffed up $10 of deposits into over $100 dollars of interest-generating loans that can't be repaid.
Secondly, when that deflation happens, what do bankers do about it? They get a loan from some other bank, if they can. Central Banks exist to ensure that such a bank exists. If the bank can't make good to its depositers (because your deposit, is someone else's loan), then it looks for another bank to lend it the money. If none will, then it looks to the Central Bank to give it a loan.
What did you think all those excess reserves were?
And that is the second thing this means. It means that there are no banks that have enough reserves to cover the loan-losses from other banks. It means that the only bank left to make good is the Central Bank. That is the second thing this means.
Thirdly, how do central banks make these loans to insolvent banks? They print money. Central Banks print new money incessantly - and openly declare that they WANT 2% expanded money yearly - simply to make the collapse of that inverted pyramid less likely. Why does it make it less likely? Because when they print money it makes money cheaper in terms of all the things money pays for. It takes more money to buy just about everything. The flip side of that is that it takes less of just about everything to buy money. And that means that those people they gave loans to have to pay back less than they borrowed in terms of real stuff. So long as the Central Bank prints money - which makes it easier for them to pay the loan.
And that is the third thing this means. It means they will print money FASTER.
Fourthly, when you work to earn your money, you sacrifice a part of your life to make a good or service that you trade for the goods and services you need to live. I don't work for money. I work because I want a shelter, food, clothing, and some entertainment. You work to make some product so that you can consume some other product. They pay you money only because you can trade it for those other products. And what does it mean the Central Bank prints money to make money less valuable, to make loans easier to repay, to keep the inverted debt pyramid from collapsing? If means the longer you keep that money after being paid, the less it will buy. It means that a part of the product you get paid for working, gets transferred without your knowledge or consent to the guy with the loan, and all the banks making those loans. This happens because you are using that Central Bank money that they can print.
And that is the fourth thing this means. It means these bankers intend to rob you - EVEN MORE THAN THEY DO TODAY - at an increased rate.
Now do you understand why bankers fear deflation? Now do you understand why they define 'inflation' and 'deflation' one way in public and a different way in private?
Yes deflation will be good for western countries.
It will start to make us more competive with Asia.
But"d like to see some drop in prices of things you have to have.
Like rent, hosuing costs, local utility prices (rates) power, petril, insurance premiums.