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Deflation Is Winning (And Central Banks Are Running Scared)

Tyler Durden's picture




 

Submitted by Brian Petti via Peak Prosperity,

Remember in the early part of the last decade, long before he was appointed the Chairman of the Federal Reserve, Ben Bernanke penned an article that caught widespread public attention entitled, “Deflation: It Can’t Happen Here” ?

Bernanke was referring to the deflationary pressures Japan had been dealing with for more than a decade. In the article, Bernanke laid out a game plan for how the Fed would respond if the US ever faced deflationary pressures. His miracle antidote for battling deflation? Printing money. Lots of it.

Little did anyone know at the time that this game plan would become the Fed’s exact response to the credit market crisis and deflationary impulse that erupted in 2008 and 2009.

Moreover, this game plan of printing money was ultimately adopted by every major world central bank in the wake of the meaningful downturn of that period.  We continue to live through this grand and unprecedented global experiment.

Huffing & Puffing

Fast forward six years to the present. Since early 2009, central banks globally have printed more than $13 trillion. In addition, governments across the planet have increased their borrowings at historic proportions (the US just crossed $18T – another new high!), all in an effort to stimulate economies and avoid deflationary pressures. Total US Federal debt has more than doubled in five years, an increase of $9.5 trillion and counting. The objective? Generate inflation.

In addition, central bankers have not been bashful about explicitly targeting inflation rates they would like to achieve in their respective countries.  We know that in the prior cycle, the attempted reconciliation of credit excesses in the private sector was a key reason the US and global economies experienced a deflationary impulse.  Academically, an increase in inflation allows debtors to pay down debt with “inflated dollars” (assuming wages rise), clearly a motivating factor in global central bank decision making over the last half decade. And certainly “inflated dollars” would also allow governments to ease their own ever-accelerating debt burdens. Please remember depreciated currency allows the perception of inflation and “inflated dollars”.

So where do we find ourselves today?

Have the global central banks vanquished the deflationary demon? Have they “created” enough inflation via money printing to allow debt burdens to melt away? Has the Bernanke deflationary antidote been a success for the Fed and their global central banking brethren?

But Where's The Inflation?

We can start with a very simple look at the year-over-year change in the US consumer price index. What we see is that the current level of rate of change in consumer prices is pushing the lows of the current cycle from 2009 to present.  We are not seeing any meaningful inflationary pressures in consumer prices.  Yes, selective consumer goods such as food and health care costs have risen, but we have seen deflationary pressures in electronics prices and in non-essential areas of consumer spending.  We’re now seeing it in energy prices.  On balance, inflationary pressures are modest at best at the headline level.

It just so happens that the favorite inflation gauge of the Fed itself is what's called the personal consumption expenditures price deflator.  Remember that personal consumption drives roughly 70% of US GDP.  Moreover in the current cycle, the Fed professed to believe in the “wealth effect.”  If the Fed could engineer higher household balance sheet values (stock prices and real estate values), their belief was that consumers would feel wealthier and would increase consumption.  Unfortunately this has not come to pass.  Isn’t this clearly the reason the Fed ended Quantitative Easing?

The lack of inflationary pressures in the personal consumption expenditures deflator is clear in this next chart. The message is similar to that of the CPI.  Despite unprecedented money printing (academically thought to be very inflationary) by global central banks, the consumer expenditures price inflation needle has barely moved. Rather, it's pushing multi-decade lows and is an outcome anything but desired by the Fed.

The simple message: Quantitative Easing has failed to generate inflation. Stated alternatively: QE has not been able to overcome still extant deflationary pressures.

One last data point that's very important in terms of the message of the financial markets themselves: You may remember that a few decades ago, the US began issuing inflation-protected Treasury bonds. One would receive coupon income and the CPI rate for the year as a potential total investment return from these bonds.  The securities are known as TIPS – Treasury Inflation Protected Securities.  There's a calculation in the financial markets that has come to be known as the “TIPS inflation breakeven rate”.  This is calculated by taking the yield on a non-inflation protected Treasury bond and subtracting from it the like maturity TIPS coupon yield, leaving us the implied forward inflationary expectations of the financial market. 

In the next chart we are looking at the 5 year inflation expectations rate that is derived by subtracting the yield on a 5-year US Treasury bond from the yield on a 5-year TIPS bond. Once again, the message is strikingly similar to the CPI and personal consumption inflation numbers: the financial market’s expectations for forward inflation is pushing multi-year lows at 1.4% in recent months.

What's important to note is that over the current cycle, inflation expectations in the US (as measured by the TIPS inflation break-even rate) have spiked up temporarily five times, only to turn back down each time. Again, this has occurred while the Fed has printed close to $4 trillion and US Federal debt has simultaneously more than doubled.

Although I won't drag you through a detailed analysis, each time inflation expectations have fallen to current lows, the Fed restarted QE. These restarts also came on the heels of 10% and 20% stock market corrections.  But as we stand here today, current financial market expectations of forward inflation are no higher than they were in late 2009!

Deflation Is Winning & Central Banks Are Running Scared

Just what does all of this tell us?  It tells us that global central banker actions in printing over $13 trillion of new money over the last 6 years have been insufficient to surmount still existing deflationary forces.  It tells us the probability of further global deflationary impulses are very real.  This has direct implications for any sector of the economy or financial markets whose fundamentals are negatively leveraged to deflationary pressures (think banks, real estate, etc.)  Be assured the central bankers are more than fully aware of this.

 

During October, the US stock market experienced close to an 8% correction, before recovering all of the losses in less than ten trading days.  Foreign markets corrected and recovered in tandem.  On the exact day of the stock market bottom, three important global central banker actions occurred:

  • The European central bank stated they would begin printing money and buying assets within days.
  • The People’s Bank of China delivered a one-time $32 billion immediate stimulus package (after announcing a one-time $100 billion package literally one month prior), and
  • a US Fed member publicly suggested that “if needed, the Fed could do QE4.”

The stock market had not even corrected a historically normal 10% before global central bankers were on the scene to promise ever more printed money.  Moreover, the Fed had not even concluded QE3!  Why would something like this occur unless deflationary pressures were still a significant concern of central banks globally?  They could not even allow the equity market to correct at a normal level without yet another intervention, verbal or otherwise.

As a final anecdote of current central banker deflationary concern: on the last day of October, global financial markets were greatly surprised by the Bank of Japan.  Japan has been engaging in money printing really for decades now, all to no avail in terms of turning their economy.  The money printing heat was turned up significantly in late 2012 when Shinzo Abe was elected prime minister.  Since then, the value of the Yen has declined by 35%.  Despite all of this turbo-charged money printing, the two negative GDP reads over the last two quarters place Japan in academic recession.  Forget growth, unprecedented money printing could not even prevent perceptual recession!

On the last day of October the Bank of Japan (BOJ) announced they would increase their money printing from $70 billion monthly to $90 billion.  At this rate, the BOJ will essentially buy all newly issued Japanese government debt looking out over the foreseeable future using money printed out of thin air.  There is no precedent for this across history.  Once again, global stock markets went vertical with the news of yet another central bank driven liquidity tsunami to come. 

What's Coming Next            

So, if central bankers are obviously still very worried about deflation, should we as investors worry?

Or will even more money printing in Japan, and elsewhere around the world, eventually be the solution? 

We need to watch the global inflation numbers very closely as we move ahead.  We need to remember that the major global central banks (US Fed, Bank of Japan, European Central Bank and the People’s Bank of China) have already pushed interest rates to or near zero.  As such, the efficiency of their policies now rests virtually entirely on their supposed ability to generate inflation.  An ability that has proven elusive for six years now.

In Part 2: What Deflation Means For Investors, we examine the receding level of global liquidity and explore what will happen to all the asset classes so dependent on that -- up until now -- ever-rising tide. The global financial system is now completely tuned for a world of more liquidity, more credit. It's not prepared, and perhaps not able, to deal with the new set of rules deflation is poised to usher in.

Click here to access Part 2 of this report (free executive summary; enrollment required for full access)

 

 

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Wed, 12/10/2014 - 19:29 | 5538503 TheAnalOG
TheAnalOG's picture

Shit is getting real!

Wed, 12/10/2014 - 19:31 | 5538505 localsavage
localsavage's picture

Wait until they raise rates and house prices start to fall and the markets shit the bed...thats when the shit will get real

Wed, 12/10/2014 - 19:38 | 5538531 johngaltfla
johngaltfla's picture

The bigger number is M2 Velocity which is at historic, as in 50+year lows since records have been kept.

The Fed is crapping themselves because labor participation, quality of job creation, and net wages are not just stagnant, but declining.

The economy is gonig to turn hard on the upcoming US Housing Crash Redux (v2.1) which will put the baby boomers and very young into bankruptcy along with wiping out any pretense of a social safety net. This is going to be surreal to watch the collapse then recovery several years from now.

Wed, 12/10/2014 - 19:44 | 5538556 Transformer
Transformer's picture

You gotta be kidding, right?  The inflation numbers have no connection with reality.  No sense worrying about it in the least.

 

Wed, 12/10/2014 - 19:55 | 5538621 johngaltfla
johngaltfla's picture

Speaking of deflation, via a tweet from FXMacro just received:

6:50:11 PM DJN - DJ JAPAN OCT CORE MACHINERY ORDERS -6.4% ON MO; EXPECTED -2.1%

Boom goes the dynamite!

Wed, 12/10/2014 - 19:59 | 5538634 Pool Shark
Pool Shark's picture

 

 

Yep:

http://www.forexfactory.com/

Well, Duh!

Japan has been trying QE for a whole 25 years; a quarter of a century, and it hasn't worked.

What makes anyone still think QE will work???!!!

 

Wed, 12/10/2014 - 20:01 | 5538646 kowalli
kowalli's picture

Krugman

Wed, 12/10/2014 - 20:29 | 5538732 philipat
philipat's picture

So we can expect a Bullard2 followed by QE4? Why can't these Central Bankers see that the newly printed money is going only into Bank reserves parked at The Fed and the equity bubble? Maybe they can and they don't care because the TBTF Banks can be forced to use some of the excess reserves to buy Treasuries that nobody else wants and keep the Government afloat? Stimulating the REAL economy would require real reforms and restructuring, which are permanently in the "Too difficult" tray.

Wed, 12/10/2014 - 21:02 | 5538820 BringOnTheAsteroid
BringOnTheAsteroid's picture

You guys . . . . . . . . . REALLY.

QE is supposed to do nothing more than make the rich get richer. You guys are so old school thinking the Fed or any centarl bank gives a flying fuck about making anything better other than their own personal fortunes.

Since when has anything been different, EVER.

Of course the Jap CB's know QE doesn't work. For fucks sake, does anyone think for a single second they don't. They are getting rich by pumping up the share market, and will get richer when it collapses. They know when they are going to pull the rug in terms of QE. Thgey will trade this information accordingly.

Pump the market - make gargantuan returns.

Allow market to collapse when short positions are in place and levered to to the hilt - make gargantuan-er returns.

Wait for asset to prices to bottom and buy everything.

Greatest wealth transfer in the history of the world now complete.

Get long positions back in place, pump the market now with explosive QE - make astronomical-er-er-er returns.

Keep this short-lived and get short positions back in place, this time levered to the wahzoo.

Let it collapse.

With the now virtually the entire wealth of the world vacuumed up funding private armies to protect what has been stolen becomes a non-issue.

Many people starve, many people die of Ebola, many people die of previously treatable disease.

The world is theirs.

Wed, 12/10/2014 - 22:45 | 5539132 Implied Violins
Implied Violins's picture

We're going to need more than one asteroid...

Thu, 12/11/2014 - 05:40 | 5539631 Harbanger
Harbanger's picture

Don't worry, after it collapses it will still be "theirs".  Just a little more so.

Thu, 12/11/2014 - 05:56 | 5539643 johngaltfla
johngaltfla's picture

THIS TIME, er, next time, QE will be different. The Fed will authorize the purchase of preferreds and all corporate bonds with that handy dandy trusted rating of C+ or higher and the big one:

Munis.

Wed, 12/10/2014 - 21:31 | 5538901 rbg81
rbg81's picture

At this point they realize it isn't working.  But they're afraid of letting the System die and the resultant chaos.  So, they're trying to keep the illusion going for as long as possible.

Wed, 12/10/2014 - 23:03 | 5539182 daveO
daveO's picture

The system died in '08. They can keep it going until NIRP sucks (scares) most deposits out of the banks. Barter will, necessarily, make a comeback.

Wed, 12/10/2014 - 19:44 | 5538559 duncecap rack
duncecap rack's picture

I have never understood how central bankers, with a printing press, could purport to want inflation and not be able to get it. If I had a printing press and wanted inflation I would just send every citizen $1000. Bingo instant inflation. Not a great idea but you would get inflation.

Wed, 12/10/2014 - 19:58 | 5538636 Beltain
Beltain's picture

I have always thought that too but in the end that would only produce consumer inflation which central bankers are always trying to under report. The only way they can get the type of inflation they want is to keep the money locked into the investment classes and banks. Trouble is those types can see whats coming and refuse to lend or invest the money in real assets. They may have ridden this horse as far as they can now.

 

Wed, 12/10/2014 - 21:00 | 5538816 Mike in GA
Mike in GA's picture

Keynesian end point, I think it's been termed.  

If the Fed has only two main tools - interest rates and money supply - and interest rates are off the table, then they have no choice but to do a Krugman-size QE at this point, right?  Is that when the inflation comes in, when they do a multi trillion QE out of desperation?  

Wed, 12/10/2014 - 22:05 | 5538986 PieEconomics
PieEconomics's picture

Why is it off the table to lower interest rates? Isn't zero percent just an arbitrary number? Start taxing cash and (1) people will invest in real assets, and (2) deficits can be somewhat paid down. Taxing cash is really just a form of inflation... to mimic inflation completely, the tax would also have to apply to all fixed income investments.

Wed, 12/10/2014 - 22:08 | 5539017 FredFlintstone
FredFlintstone's picture

Don't givem any ideas.

Thu, 12/11/2014 - 00:23 | 5539375 Coopster
Coopster's picture

What real assets will people invest in?  Most of the big companies are using their cash to buy back their own stock.  If people invested in Caterpillar, would they sell more machinery?  

Thu, 12/11/2014 - 02:12 | 5539518 PieEconomics
PieEconomics's picture

You are correct. Expanding the tax to cover all asset classes... a net worth tax... would kick-start massive consumption, and help wealth distribution levels revert back to what they were fifty years ago 

Thu, 12/11/2014 - 05:50 | 5539639 Harbanger
Harbanger's picture

You're not slicing the pie the right way.  If we tax the bread and circus industry just 50% of their net worth, which is very fair, there's more than enough to feed everyone on the planet for 100 years.

Wed, 12/10/2014 - 20:07 | 5538677 Winston Churchill
Winston Churchill's picture

Just like the porridge,it has too be just right. Too much hurts banks as well as too little.

Wed, 12/10/2014 - 21:08 | 5538831 JohnG
JohnG's picture

 

 

Problem is....

In a fully financialized economy like we have in the west, there is no JUST RIGHT.  The economy either grows exponentially or collapses.  There is no in between in a debt fueled ponzi.

Smart folk are thinking about how to provide for thier basic needs WHEN it collapses because the entire world is debt saturated.

Smarter folk are well on thier way to doing just that.

The rest, well.....we starved/froze/shot some folks in the chaos.

Wed, 12/10/2014 - 20:01 | 5538650 QQQBall
QQQBall's picture

money velocity is low b/c risk/reward are out of whack due to low yields caused by...

Wed, 12/10/2014 - 22:58 | 5539173 daveO
daveO's picture

Right. No reset, no velocity.

Wed, 12/10/2014 - 23:28 | 5539265 noben
noben's picture

"The bigger number is M2 Velocity which is at historic, as in 50+year lows since records have been kept.

The Fed is crapping themselves because labor participation, quality of job creation, and net wages are not just stagnant, but declining."

REWARDS DICTATE BEHAVIORS.

If they wanted different Behaviors, they should've used different Rewards. What goes around...

Wed, 12/10/2014 - 19:47 | 5538563 RaceToTheBottom
RaceToTheBottom's picture

Getting really hard to get up in the morning.

Now I only do so to see which battles the Banksters have won overnight.

Funny how some people think that we are at war with Russia...

Wed, 12/10/2014 - 20:00 | 5538640 Drummond
Drummond's picture

They won't raise rates. Ever. Never ever ever. Ever.

Wed, 12/10/2014 - 21:34 | 5538908 rbg81
rbg81's picture

Concur, I've been saying that for years.  The "vigilante" bond market is the biggest piece of horseshit hype I've ever heard.

Wed, 12/10/2014 - 21:46 | 5538941 bbq on whitehou...
bbq on whitehouse lawn's picture

Wait for the token .25 rate hike. Thats the last trick they can pull before it drops to negitive rates and stays there. Or just imploads like a black hole.

Wed, 12/10/2014 - 22:56 | 5539167 daveO
daveO's picture

Raise rates? Haha. Raise a cup of cheer for more QE, NIRP and debt slavery for us all! Happy New Year debt slaves. 

Wed, 12/10/2014 - 19:37 | 5538530 G.O.O.D
G.O.O.D's picture

Deflation? Hamburger is 5 bux a pound, not what I consider deflation.

 

 

 

 

Wed, 12/10/2014 - 19:38 | 5538535 post turtle saver
post turtle saver's picture

Deflation for the things you want, Inflation for the things you need

Wed, 12/10/2014 - 19:46 | 5538557 G.O.O.D
G.O.O.D's picture

I want a fvkin hamburger!

Wed, 12/10/2014 - 22:06 | 5539009 bunzbunzbunz
bunzbunzbunz's picture

Top sirloin is often also 5 a lb.....so maybe you should look around at other products when trying to figure out inflation/deflation. The stupid people in the US eat ground beef. And the stupid people are on food stamps. And the stupid people can't remember how much something costs at another store, so they just pay whatever walmart tells them to.

Also....have you ever heard of buying things when they are on sale?!?!?!??!?!?!?! Maybe buy extra?!?!?!@?# Holy shit, what a concept.

Wed, 12/10/2014 - 19:50 | 5538599 spinone
spinone's picture

Stagflation:  Inflation for the rich, deflation for the poor.

Wed, 12/10/2014 - 23:31 | 5539269 noben
noben's picture

"Deflation for the things you want, Inflation for the things you need"

Let's see: I want gold, and I need food and health care. Yup, sounds about right.

Wed, 12/10/2014 - 19:44 | 5538558 Hohum
Hohum's picture

If meat production weren't subsidized, it'd be $10.  Free markets unless it affects our stomachs.

Wed, 12/10/2014 - 19:52 | 5538604 spinone
spinone's picture

CORN!!!!

Wed, 12/10/2014 - 20:01 | 5538655 db51
db51's picture

Corn is currently about $ 3.30/bushel.....about $ 2.00/bushel below Cost of Production.   W T F are you talking about?

Wed, 12/10/2014 - 20:06 | 5538671 db51
db51's picture

Beef production isn't subisdized.   Only Dairy.  With corn at  $ 3.30/bushel, your hamburger should now be half price.  Fall corn prices were $ 2.60/bushel.   Locations north of I-80 into Wisconsin and Dakotoas was less than $ 2.00 during harvest.   Old McDonald isn't fucking you on your hamburger, but Ronald McDonald is.

Thu, 12/11/2014 - 00:45 | 5539409 Serenity Now
Serenity Now's picture

G.O.O.D.,

Deflation is a decrease in the money supply.  This generally leads to lower demand, which generally leads to lower prices in the economy.  ALL OTHER THINGS BEING EQUAL.  (You have to say that phrase to even begin to understand economics or analyze it.)  The reason is that all other things are usually not equal.

For example, there is a beef shortage due to drought.  So that is a supply issue, meaning that if demand goes down in general b/c people have less money/credit , but if the supply of beef goes down more, then prices go up.

The other reason for food prices staying high is food stamps.  Food stamps are their own version of an increase in the money supply (inflation).  So, demand stays high and prices stay high.  Food stamps are another bubble.  Get rid of them and prices will plummet.

Anyway, sorry about your burger.  :)  Hope this explanation helps.

Wed, 12/10/2014 - 21:33 | 5538891 stocktivity
stocktivity's picture

Wait until all the crap that's sitting on the store shelves now is still sitting there after Christmas. Went to Walmart a couple days ago and no lines at the registers

Wed, 12/10/2014 - 19:30 | 5538508 Drummond
Drummond's picture

Where's the fucking bonus chart?

Wed, 12/10/2014 - 19:33 | 5538511 LawsofPhysics
LawsofPhysics's picture

Running scared?  Bullshit.  Folks in the financial sector have never had it so good.  what the fuck?

 

Give me just one billion at 0.25% interest and I will guarranty you that I (or anyone on this website) will be a very successful "limited liability" company.

When these fuckers start losing their fucking heads, they might have some concern.

Wed, 12/10/2014 - 19:53 | 5538609 spinone
spinone's picture

Or even going to jail when they break the law.

Wed, 12/10/2014 - 23:28 | 5539264 SDShack
SDShack's picture

LMFAO - says John Corzine.

Wed, 12/10/2014 - 19:33 | 5538513 JustObserving
JustObserving's picture

If you did not want deflation, you should not have ordered your minions in Saudi Arabia to sharply reduce the price of oil to attack Russia and Iran and Venezuela.  Now China and India and some European countries are unequivocal winners while oil and energy producing countries are losers.  Bankruptcies and defaults by energy companies could strain the banking system for months and will sharply increase volatility.

War always has unintended consequences.

Wed, 12/10/2014 - 19:35 | 5538524 nmewn
nmewn's picture

What we need is moar hedonics, tax credits, ObamaFones and EBT!!!

Print you Keynesian bitchez, you're doing a marvelous job ;-)

Wed, 12/10/2014 - 19:43 | 5538551 G.O.O.D
G.O.O.D's picture

The dumb fvkx cant figure out that the only way to get money into circulation is through a series of loans that sooner or later people are going to be tapped out from interest. Or are they really that stupid, or did they think we would trade our guns for food? these central bank assholes and their minions damn well better be worried as they are about to face a lead wall.

 

 

Wed, 12/10/2014 - 20:05 | 5538674 nmewn
nmewn's picture

Rejoice!

The jig is almost up, then we can have our fun ;-)

Wed, 12/10/2014 - 19:34 | 5538525 kowalli
kowalli's picture

ZIRP NEXT

Wed, 12/10/2014 - 19:37 | 5538533 LawsofPhysics
LawsofPhysics's picture

"NIRP next" - fixed (in nominal terms), honestly NIRP has been here for a while.

Wed, 12/10/2014 - 19:59 | 5538638 kowalli
kowalli's picture

i forgot to type sacr(

Wed, 12/10/2014 - 20:03 | 5538659 LawsofPhysics
LawsofPhysics's picture

that is some pretty sharp cheddar.  my bad.

Wed, 12/10/2014 - 19:38 | 5538534 buzzsaw99
buzzsaw99's picture

WHAT WE NEED IS A FEW MOAR BILLIONAIRES. [/S]

Wed, 12/10/2014 - 19:39 | 5538538 disabledvet
disabledvet's picture

When the Yen "corrects" to 240 then I might have a doubt or two about "the bugaboo."

Until then I simply refuse to believe that anyone wants a stronger dollar or lower yields in treasuries. This is not to say you won't get a stronger dollar (already have) or lower yields (yep, got that too.). Just saying that no one really "wants" that.

It is refreshing to see Mr Market not Pander to Power though.

Funny how everyone purports to believe in that thing...

Wed, 12/10/2014 - 19:39 | 5538540 no more banksters
no more banksters's picture

"Quantitative Easing has failed to generate inflation." Naturally:

"Banksters : ... if more money were going to the market, then they would lose much of their value and we would lose profits because we are the ones who print money! That's why we invented inflation, to keep governments in fear and directing money back to us through the so-called Quantitative Easing Policies. [...] When money start to spread in the society 'above acceptable limits', we create financial crises to take them back. We dictate governments to take measures and apply austerity policies directing money back to us. We keep money valuable to everyone and secure our profits."

http://failedevolution.blogspot.gr/2013/12/an-imaginary-dialogue-between...

Thu, 12/11/2014 - 04:29 | 5539600 hedgiex
hedgiex's picture

Yes. Succint. That's why QE tapers  may just go ahead whatever the data may persuade against it. The Predators are not interested in all these meaningless spns of inflation/deflation but the basics.

Looks like the containment of global market fear on the fiat US$ is taking precedence in their directions to the Fed.  The Predators are likely to win in the absence of an unanticpated mass rebellions.

 

Wed, 12/10/2014 - 19:39 | 5538546 SheepDog-One
SheepDog-One's picture

'All in an effort to stimulate economies'....oh horse shit. All in an effort to bring about 1 world-bank using 1 global currency so that all the 'chosen few' will ever have to do again is sit back and collect the profits from the global slave plantation. Big-picture people.

Wed, 12/10/2014 - 19:53 | 5538606 AdvancingTime
AdvancingTime's picture

Many of us agree with what you are saying. Contagion lurks as a problem because we  are all interconnected for better or worse. Some people have been calling for a "world currency" for years. the saying "one should never let a good crisis go to waste" means a meltdown with high levels of fear would present a perfect opportunity and catalyst to advance this agenda down the field.

Remember many people with agendas have a lot to gain when a major shift in the currency markets takes place. Even with some countries not participating in such a currency dislodging the American dollar as the world reserve currency represents such a shift. Calls for a new world currency may grow over the coming years, if the world stumbles into an economic hell the noise could become deafening because people and their leaders tend to look for easy answers. More about how chaos in the currencies might bring about a new world wide currency in the article below.

http://brucewilds.blogspot.com/2014/02/contagion-may-lead-to-new-world-currency.html

Wed, 12/10/2014 - 20:12 | 5538698 The Joker
The Joker's picture

Ordo ab chao

 

Wed, 12/10/2014 - 22:02 | 5538997 bbq on whitehou...
bbq on whitehouse lawn's picture

They had a world currency it was the US dollar, that world currency is going to default or hyper-inflate away. So ask yourself what will i have my paycheck denominated in. Who will want what you have in trade. Yuan for Asia, Euro the western worlds because its faster to trade out of the US dollar for Euros then it is to trade out of the US dollar for the Yuan.
The Yuan may still win out in the end but if the Euro doesnt implode then it will be the failsafe for the US dollar.

Otherwise its to the lifeboats of barter as the west hyperinflates, all one big happy club.

Wed, 12/10/2014 - 21:47 | 5538853 essence
essence's picture

Big Picture?

The Big Picture is that the world has a fractional reserve banking system that is based on using DEBT as money. The key point is that INTEREST (compound interest, i.e.  the-worst-type if one is a borrower) is a fundamental part of the system. In order for the interest bearing debt to be paid, the system MUST expand (this has major ramifications on a planet with dwindling resources if technological advances can't supplant). Get that? The system doesn't even handle steady-state gracefully. Depression is outright toxic.

That in a nutshell is why the mandarins in Central Banks are deathly afraid of 'deflation' and so fond of 'inflation'. Deflation means debt money is defaulted on, inflation greases the wheels of the status quo.

Very few realize the Big Picture and are inclined to consider/debate alternatives.

Wed, 12/10/2014 - 19:42 | 5538547 kchrisc
kchrisc's picture

"Deflation Is Winning (And Central Banks Are Running Scared)"

I don't know about "deflation," but wait until they see my guillotine. That will have them running. Well, "returning," fleeing, that is.

An American, not US subject.

 

"What do you call a guillotine on wheels? A Port-A-Justice. Bada-bing."

Wed, 12/10/2014 - 19:41 | 5538548 surf0766
surf0766's picture

They cannot generate inflation because they supressesed rate for 20+ years down to 0. If they had let the real inflation rate come out ... a small bumpdown in real interest rates would allow for some inflation...

You can't pull blood from a stone

Wed, 12/10/2014 - 19:49 | 5538585 G.O.O.D
G.O.O.D's picture

 

 

I saw some stone blood on the desk of an IRS agent.

Wed, 12/10/2014 - 19:43 | 5538550 starman
starman's picture

"Greenastrophe" "Berniegeddon" "Yellenression"

Wed, 12/10/2014 - 19:43 | 5538552 Spanky
Spanky's picture

Moar deflation...

The congressional proposal to deal with a supposed crisis in worker pensions by allowing trustees to slash the benefits of already retired workers to shreds is heading toward enactment. 

We reported on this plan last week, observing that its details were secret. They still are. Reps. John Kline  (R-Minn.) and George Miller (D-Martinez), the chairman and ranking Democrat on the House Committee on Education and the Workforce, told reporters on a conference call late Tuesday that the measure is being passed over to the House Rules Committee, which will move it as an amendment to an omnibus spending bill, as early as Wednesday. Senate action will follow, presumably no later than Thursday, when Congress departs for vacation.

http://touch.latimes.com/#section/-1/article/p2p-8223

Wed, 12/10/2014 - 20:41 | 5538774 nmewn
nmewn's picture

Saw that elsewhere:

"Also driving the talks was concern over the financial fate of the fund that assures multi-employer pensions at the government's Pension Benefit Guaranty Corp. The agency said in its most recent annual report that the fund's deficit rose to $42.2 billion in the fiscal year ending Sept, 30, up from $8.3 billion the previous year, and that the likelihood of its bankruptcy is 90 percent by 2025."

If everyone will recall, the Pension Benefit Guaranty Corp. (we were told by, ahem, certain parties) was as good as gold, completely solvent backed by the "full faith & credit" of a bankrupt nation...lol.

But wait, there's moar!

"Agency figures show as many as 1.5 million retirees could be affected by any change in law to permit a reduction. An estimated 400,000 of them receive benefits from the Teamsters' Central States Pension Fund."

And...it begins anew ;-)

 

Wed, 12/10/2014 - 19:48 | 5538568 AdvancingTime
AdvancingTime's picture

 For a while I was one of the people concerned we would see the world tumble into a massive deflationary cycle as debts went unpaided and credit collapsed. Now I have come to think inflation is getting closer every day.

This would mean the "major deflationary period" is mostly behind us and it has not been disinflation as much as inflation being kept in check because of several factors, including where the money flowed, weak demand, dropping velocity of money, and the onetime benefit of lower interest rates. Before you discount the possibility that we will move directly from where we are into stagflation then hyperinflation please consider that hyperinflation paves the way for governments and those in power to make a transition to a replacement currency and a reset of the whole system.

 http://brucewilds.blogspot.com/2014/11/deflation-i-think-not.html

Thu, 12/11/2014 - 00:51 | 5539421 Serenity Now
Serenity Now's picture

You need to go back to your original premise.  The deflation has barely begun.

Wed, 12/10/2014 - 19:49 | 5538578 nuubee
nuubee's picture

That chart seems to indicate that socialism is spreading like a plague... all those currencies with horrific fiscal policies attached to them... Sticky wages are likely a planet-wide cancer at this point.

Wed, 12/10/2014 - 19:54 | 5538612 db51
db51's picture

No Inflation?  Fuck Me!   Every damn inpuit I have to purchase for my farming operation has been going up at a rate of about 15%/year.   And to top it off, a Reese's Peanut Butter cup is now about the size of a fucking M & M....but the price is only about 10% higher than it was a year ago.

Wed, 12/10/2014 - 22:10 | 5539024 bunzbunzbunz
bunzbunzbunz's picture

Can you calculate an average?

Wed, 12/10/2014 - 23:54 | 5539237 essence
essence's picture

Don't confuse rising prices with expanding credit money/debt.

There seems to be two definitions of inflation among society. 
Now of course, I understand where you are coming from with your observation that prices for goods are rising. Do realize though that financial types tend to define Inflation as expanding money credit/debt and NOT as rising prices (credit money inflation has in the past led to rising prices, but currently things seem to be imploding (deflating) at such degree so that price inflation is somewhat held in check).

Your rising prices are more likely to come from speculation coming from the few, powerful insiders who have access to the credit money the Fed creates with Q.E. or possibly it is related to the economy turning down and firms/businesses producing less (rising prices due to less output).

Things aren't so simple. TBTF bank reserves have increased while mainstreet has generally withdrawn (excluding student & auto loans). Wages aren't increasing yet government mandates (e.g. ObamaCare) create added costs for business and consumer.  There's competing/conflicting forces in play.

Thu, 12/11/2014 - 00:53 | 5539423 Serenity Now
Serenity Now's picture

Thank goodness someone else understands the real definition of inflation/deflation.  I've tried to explain it so many times, but the media uses the words incorrectly (to define prices or interest rates depending on the day), so it's no use.   Most people have no idea what they are talking about or describing.

Thu, 12/11/2014 - 02:53 | 5539549 UselessEater
UselessEater's picture

I kinda figured CBs were talking 'asset' inflation not mom and pop cost of living increases (heck a guy nearby just got a 450% home insurance price hike, after 18yrs of insuring without a claim he thought $14,400 to insure his home in 2015 a tad excessive after paying around $3K p.a.).

Stated above:

Do realize though that financial types tend to define Inflation as expanding money credit/debt

However this still puzzles me because money/credit has expanded dramatically for sucker a.k.a. 'sovereign' debt & corp debt and so stock and housing assets have risen (albeit one has risen more than the other) while the real economy has tanked but this 'rise' is not sufficient inflation? I'm still a bit confused.... what is it they are measuring in their version of inflation?


Thu, 12/11/2014 - 03:31 | 5539573 Serenity Now
Serenity Now's picture

UselessEater,

I've wondered that myself....what does the Federal Reserve mean when they use the word inflation?  I think they mean it in its true definition....an increase in the money supply.  But the problem with that is they continually violate their own mandate of 2% inflation (or whatever it is) and blow massive bubbles.

I have an ongoing theory that the Fed is not nearly as powerful as people believe.  In fact, I don't think they control much at all.  But I don't have any evidence or the ability to flesh out my theory more than that.  

Thu, 12/11/2014 - 04:05 | 5539588 UselessEater
UselessEater's picture

I get that CBs are working together via the BIS.... so different nations are at different stages of global policy hell and obviously they need different QE and 'accounting' measures so inflation is unfathomable and therefore QE is seen as a reasonable policy by the masses while stocks rise in some places and crash in others (theater its all the same centrally planned bull dust). So the Fed is one instrument in an orchestra.

Makes me wonder how they will use accounting standards to "reset" debt per nation and who will be favored nations. The BRICS report to the same BIS... not really an alternative, but an excuse to 'reset' on obscure measures far more freaky than the ctrl p game we've witnessed globally. Our various nations do not have Presidents/Prime Ministers IMO they have heads of "national" CBs.

Thu, 12/11/2014 - 05:58 | 5539589 UselessEater
UselessEater's picture

duplicate sorry

Wed, 12/10/2014 - 19:57 | 5538626 Yen Cross
Yen Cross's picture

  Look at these just released foreign bonds/stocks buying numbers for Japan. What a joke! Lopsided much?

 18:50       JPY         Foreign Bonds Buying                                                  -852.2B           0.1B    
18:50       JPY         Foreign Investments in Japanese Stocks                       481.9B           -53.0B     

Wed, 12/10/2014 - 19:57 | 5538632 moneybots
moneybots's picture

"Deflation Is Winning (And Central Banks Are Running Scared)"

 

How can deflation be winning?  Bernanke was supposed to know how to make sure it wouldn't happen.

Wed, 12/10/2014 - 20:05 | 5538666 LawsofPhysics
LawsofPhysics's picture

Exactly, I am looking forward to a refund and retribution.

Wed, 12/10/2014 - 20:07 | 5538675 Duc888
Duc888's picture

 

 

 

This is great.  This will sus out the survivors from the shit bags.

Produce or die.

If you push fiat paper for a living, you're not long for this world.

This is the productive organism shaking off the parasites.

 

Wed, 12/10/2014 - 20:10 | 5538681 Sean7k
Sean7k's picture

Writer is a moron or a propagandist. Listen up kids: this what happens in a communistic, centrally planned economy. There is no price discovery (markets are controlled), there is no incentive to produce (it will be confiscated), the cream is skimmed off the top for the leaders. The economy is hollowed out. The people are repressed through police state tactics and their information flow is controlled. 

Sound familiar? Inflation? Deflation? Can any HONEST economist make sense of this economy? Where else can you print this much paper, throw in a quadrillion in deriatives, contine to cut production while increasing entitlements and expect stable economies? THEY OWN THE SYSTEM. This is why inflation and deflation have become meaningless terms (well, that and hedonistic value fantasies). 

If you play along (and it gets really difficult for most people if you don't) they will just continue the slow spiral of impoverishment, culling through war and disease, increasing taxation and building a protective wall between them and us. 

Enjoy the tyranny...

Wed, 12/10/2014 - 20:15 | 5538703 LawsofPhysics
LawsofPhysics's picture

Yep.  Regarding your "culling through war" hypothesis...

Big FAIL on that front.   How long before we can expect constription to be re-instated?

Do tell.

Wed, 12/10/2014 - 20:14 | 5538701 moneybots
moneybots's picture

"Just what does all of this tell us?  It tells us that global central banker actions in printing over $13 trillion of new money over the last 6 years have been insufficient to surmount still existing deflationary forces."

 

That is because money is created out of debt.  The debt bubble has grown ever larger.  A burst debt bubble is deflationary.  The global central bankers continue to fuel deflation.  The central bankers should have let the credit bubble deflate in 2008.

Wed, 12/10/2014 - 20:17 | 5538717 MrTouchdown
MrTouchdown's picture

Oh goody. Let's compare a gov't manufactured number (CPI) with gov't manufactured bond yields and then pretend they mean something in the real world with non-gov't manufactured people. That's the ticket!

This article is bunk. If there is deflation, it will not be for any of the reasons mentioned here. Boo

Wed, 12/10/2014 - 20:22 | 5538730 moneybots
moneybots's picture

"Bernanke laid out a game plan for how the Fed would respond if the US ever faced deflationary pressures. His miracle antidote for battling deflation? Printing money. Lots of it."

 

It didn't work, as printing blew the credit bubble larger.  As burst bubbles are deflationary, Bernanke actually set about fueling deflation.

But Bernanke is now out of office, so it will be Yellen's problem, just as Greenspan's housing bubble became Bernanke's problem.  Bernanke will then make excuses, just as Greenspan did.

 

Wed, 12/10/2014 - 23:43 | 5539295 khakuda
khakuda's picture

Exactly. Inflating bubbles which ultimately pop results in deflation. Starving bond and savings account investors of income is like cutting their wages and ends in deflation. Central bank policies are deflationary because they seek to inflate bubbles in asset prices and reduce income to the population.

How is forcing more homes to be built than needed via artificially low interest-rates, more fiber optic cable to be laid than needed via artificially low interest-rates or other unnecessary investments to be made because those investments appear attractive due to the artificially low cost of capital ultimately anything but deflationary? By definition, the Feds goal is to force more production than is required by underlying demand. They would say they're trying to increase demand. Increasing the cost of living does not increase demand. Decreasing the cost of living relative to income increases demand.

Wed, 12/10/2014 - 20:35 | 5538757 exartizo
exartizo's picture

VERY nice exposition.

looking forward to reading the second part.

Wed, 12/10/2014 - 20:50 | 5538793 TinF0ilHat
TinF0ilHat's picture

I am just waiting for the Fed Debt jubilee or the helicopter money.  

Wed, 12/10/2014 - 21:41 | 5538925 kelley805
Wed, 12/10/2014 - 22:16 | 5539043 PermaBug
PermaBug's picture

Deflation does not necessarily mean prices are falling, either generally or in some cases. Deflation means the credit bubble has burst and the supply of money and credit is deflating.

If the bubble has really burst, we have deflation, by definition. The results of deflation are not always the same as they have been in prior cases.

CBs are trying to pump up the money supply, which has staved off a total deflationary collapse, but they might not be able to do it forever.

We might just follow in Japan's footsteps, stagnation for decades, or maybe we'll see a worse crash than ever before. I dunno, but my bet is the Japan scenario, just because they showed it's what happens when you force rates to 0 and crank up the presses.

Thu, 12/11/2014 - 01:00 | 5539432 Serenity Now
Serenity Now's picture

Another person who understands the definition of inflation/deflation!  That makes three of us in one thread.  There may be hope after all.  :)

Deflation = Decrease in money supply.  

I agree with the Japan scenario, by the way.

Wed, 12/10/2014 - 23:09 | 5539208 acetinker
acetinker's picture

Uhhh, boys and girls this post is based upon bullshit stats and is therefore, bullshit.  The Fed was trying to supplant the 'growth' that was previously provided by consumerism.  Notice I said was.

The US consumer is tapped out.  Fed knows this now.

Fed liquidity went straight into equities- which are absolutely inflated, and equally fake.

Fed is neither stupid or evil- It merely attempted to sustain itself within an unsustainable model. (Remember, Fed is comprised of member banks)

Fed used to believe it was the center of the Universe, and in that mode it fucked up the entire global economy.

When Fed quit QE, it signalled an SOS of sorts.

We can breathe now.

Wed, 12/10/2014 - 23:12 | 5539222 lordbyroniv
lordbyroniv's picture

If they are not evil....than why do they not mind starting wars in which people die...and committing false flags like 911???

 

UH??

 

 

UH???

Thu, 12/11/2014 - 00:12 | 5539357 acetinker
acetinker's picture

Which war did Fed start, lord?  If, by this time you don't know that the Vatican claims ownership via taxation of all commerce of 'persons' on this earth, including Fed, including you, including each and every member of of any Congress or Parliament while you struggle under their yoke, no matter your creed, you might be an idiot.

Fed is really a lot like Frankenstein, it didn't create itself.

Still, it is a monster we can't allow to live.

So it is with the Vatican.

Thu, 12/11/2014 - 21:50 | 5542507 acetinker
acetinker's picture

Cat got your tongue?,

While wisdom is finite, idiocy knows no bounds.  Fed knew nothing of 9/11.  Fed actually lost people there.

C'mon let's go for a ride.

http://www.zeitgeistmovie.com/

It is far from comprehensive, but it's a pretty fair starting point.  You're welcome.

Wed, 12/10/2014 - 23:12 | 5539215 lordbyroniv
lordbyroniv's picture

BUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUT............................

 

"In a fiat or paper currency regime....you can ALWAYS generate positive levels of inflation" - THE BERNANK

 

I thought he knew what he was talking about  :(

Thu, 12/11/2014 - 01:02 | 5539439 Serenity Now
Serenity Now's picture

His premise was based on a childish belief that we have infinite resources.

Thu, 12/11/2014 - 00:16 | 5539325 earleflorida
earleflorida's picture

Gold has always kept inflation/ deflation checked! It was very simple. Why did Nixon, shock the world in 1971, dissolving the Gold Standard?

The U.S. National debt in 1971 [1971- 2014  ~45 years later is  $18+/+ Trillion as Tyler posted ] was ~$303 billion and nine years later it was ~ $930 billion  [   http://www.usdebtclock.org/1980.html    ] in 1980!?! But since 1980 til [35 yrs.] 2014 it is now $18 trillion.

What was it about the 80's? Any wild guesses... [?]!

This is the correlation posit:  before WWI got started-- it was an absolute-happening as far as a done deal. But... the operative word was when.  The Ottoman Empire was the 'Sick Man' of Eurasia { Russia was a mess politically with rebellion upon rebellion and teetering on the precipice of extinction? China was about to implode with the Qing dynasty also on the threshold of collapse brought about by nepotism and despotic rulers with GOD'like birthing rights} ,thus the entire Eurasia was about to meet the western new [unbelievable to camel herders] technology at the dawn of the 20th century. The 'capitulation's' that the Ottoman's had given to the Western powers on a golden-platter were coming home to roost! The poor Sultan not knowing it was soon to be his/their demise?!? By 1881 (~25 [1914] years... it festering already in 1906?) to the Great War beginnings all sides were planning/laying foundations for their partners-n-crime, regarding the "GAME" ahead in a financial armageddon ambush.

By 1881 the Ottoman Empire public debt was [drum roll please], 100 million Gold Pounds [16oz/ lbs.!] ! The western capitulation banker's/ governments had a field day, drawing revenues on the entire state. But, here's the point? The German's whom by the way were always friendly with the Ottoman's offered the Sultan and his defunct gov't as much credit that they needed. Otto Bismarck felt empathy especially after the Russo-Turkish War, but unfortunately fell out of favor of the Kaiser in the late 80's... what followed next was the grand prize of dividing-up the OIL-Rich Middle East [England already was the protectorate of Egypt] entire, and thus shortly after the war breaks out.

It was a war that couldn't be postponed and wasn't finnished until [VE Day] May/1945. The Versailles Treaty was moar harsher on the Ottoman's than the German's? Afterall the war was all about dividing up the Russian Empire and the Ottoman Empire. China never fit into the eqation because there was to much fat on the table for the world powers to digest.

Now, back to the correlation finale:  America is the 'Sick Man' and with the EU about to implode without firing a shot, but only suffocation from debt... again a gift from the Keynesian's via Nixon!

And yet... Nixon gave us China where the USSA offers unrepenting 'Capitulation'?

Sounding ironically familiar[?] with an irenic twist of fait`{fading} accompli?,... where America goes into a funky-kind of civil war when they can't blame the communist anymoar?

jmo

Gold, Gold, and moar Gold is the only currency during war???

again JMO '

thankyou, Tyler

Thu, 12/11/2014 - 00:57 | 5539424 honestann
honestann's picture

Many people miss one aspect of the plan called "print money".  For every dollar they "print", they also create one dollar of debt that "must" be paid back eventually.  So sure, when they LEND someone $100,000 fiat dollars they just printed, and the borrower goes out and spends that fiat, that borrower has a richer NOW, and the general economy gains $100,000 of immediate "cash flow"...

... BUT ...

Whenever debt is created, the buying that happens now is stolen from buying that would happen in the future.

And so, as a necessary consequence, the individual and overall economic activity in the future is REDUCED.

The never stated fact (by the mainstream) is that as debt levels get higher, the economic drag (from paying back debts) gets higher, until eventually depression is absolutely unavoidable absent debt jubilee.

But the only reason massive inflation doesn't happen now is the promise that "debts must be repaid, and therefore all that cash created out of nothing to lend to people is later removed from existence".  And so, once the first hint of anything like jubilee is seriously floated, fiat currency crashes and burns at a blazing rate.

Anyone who works out these forces has to realize the only "solution" acceptable to the predators-that-be everywhere on earth is... overt worldwide enslavement.  Because greed isn't the only goal of the current scam, enslavement (and then extermination) of mankind is their longer term goal (now unavoidable, absent global uprising).

Thu, 12/11/2014 - 13:19 | 5540653 OldBoy
OldBoy's picture

Honestann, Love your posts. What you said about a month ago "The endgame is, first and foremost, about the psyche of mankind and its mutation into something unrecognizable." reminds me of the Eckhart Tolle I've been practicing. Can I be a contact?

Thu, 12/11/2014 - 01:58 | 5539505 GoldIsMoney
GoldIsMoney's picture

I can not see any deflation if they do have printed 13  trillions. That's inflating the currency and a massive wealth transfer from saver to debtor. That's what has happened. The money has not "vanishes" but has concentrated in the hand of near the state organisations. But all a state can is consume. So there is much less left for the private sector. And so what I'd expect is a crowding out- And that might be, we do not know for anything what is contained in all the prices. Because prices have lost their ability so signal scarness. Just see how the "value" of stocks have gone up. So one can know where the money has gone.

Anyway the monex expansion just means credit expansion. And the problem world-wide is surely not to less debts.... We're heading for a hard landing and it will end any way with destroyed money and earlier destroyed trust. And no central bank of the world can print trust. If more and more loos their trust, you'll see what desparation really means in the end.

There are very good reasons for the diverse states to arm themselves more and more. Anyone with some mind knows there's trouble ahead. What we do not know what kind of trouble and how it will explode. Anyway I'd assume the Fergusson riots may get a taste to start with....

Thu, 12/11/2014 - 03:07 | 5539556 tok1
tok1's picture

if they really want to increase inflation they should cut tax and increase pension payments (and use QE to pay for the increased deficit) unless the cuts lead to more growth and higher tax take (and less deficit).

Right now rates are so low, any further reduction has no impact, so getting JGB from 0.6% to 0.4% is meaning less where as raising taxes slow the economy,  and the Govt spending last for a split second.

 

So they dont want inflation its all about the Gov maintaiing its ability to spend and thus control..And every time they increase private tax (income tax / consumption tax ect) people get poorer and Govt gets more control.

Cuts in corporate tax ... are again just favor for special interest (that again gives Govt more influence) depending on which sectors get the benifit..

If you want QE to work in the economy use it to give people lower taxs and higher pensions.. then they will spend more.. hello....

Thu, 12/11/2014 - 04:22 | 5539597 q99x2
q99x2's picture

Running scared doesn't do us a bit of good. They need to jump.

Thu, 12/11/2014 - 04:44 | 5539606 Ghordius
Ghordius's picture

"During October, the US stock market experienced close to an 8% correction, before recovering all of the losses in less than ten trading days.  Foreign markets corrected and recovered in tandem.  On the exact day of the stock market bottom, three important global central banker actions occurred:

  • The European central bank stated they would begin printing money and buying assets within days.
  • The People’s Bank of China delivered a one-time $32 billion immediate stimulus package (after announcing a one-time $100 billion package literally one month prior), and
  • a US Fed member publicly suggested that “if needed, the Fed could do QE4.”

The stock market had not even corrected a historically normal 10% before global central bankers were on the scene to promise ever more printed money.  Moreover, the Fed had not even concluded QE3!  Why would something like this occur unless deflationary pressures were still a significant concern of central banks globally?  They could not even allow the equity market to correct at a normal level without yet another intervention, verbal or otherwise. "

behold the power of the mighty US stock market. The centerpiece of the financial world. All other markets are secondary, and their prices might fall. But not "the center"

Thu, 12/11/2014 - 04:57 | 5539610 pndr4495
pndr4495's picture

No job = no wage = no consumption = deflation ( put the image of a balloon losing air in your mind ) . Good job = good wage = disposable income = consumption = production of more good jobs = more good wages = more disposable income = more consumption....... period. The answer is job creation but greed has sabotaged job creation - and technology is greed's hitman.

Thu, 12/11/2014 - 08:32 | 5539762 Dr. G
Dr. G's picture

Isn't "economic contraction" winning? This is not deflation if the money supply continues to grow.   Right now the collapse in economic activity is counter-balancing the inflationary printing of money.  Let's call it what it is folks, especially here on ZH!

Thu, 12/11/2014 - 09:25 | 5539843 gcjohns1971
gcjohns1971's picture

"It tells us that global central banker actions in printing over $13 trillion of new money over the last 6 years have been insufficient to surmount still existing deflationary forces. "

No it doesn't.

It means that $13 Trillion (current value) of currency was transferred from those who had it to those who received the newly printed money - mostly the finance industry through the primary dealers.

The author of this article, not necessarily the Central Bankers who announce it as their goal, believes that inflation is a synonym for growth.

But inflation is an entirely separate phenomenon from growth, and not tied to growth in any way.

Those who believe inflation means growth by definition cannot differentiate between growth and a bubble.

 

There is one thing, and only one thing, that governments can do to encourage growth:  Remove the burdens they have placed on growth through regulation.

 

The problem with economic controls is that their proponents believe that they are prohibiting undesireable growth in favor of more desireable growth.

But they're not. 

They're prohibiting growth in favor of a fantasy they have.

People will produce growth all on their own if you let them, but it will be the growth that people truly want, not that which people politically declare they want...and that is why it is growth.  Real growth involves value judgements - opportunity costs - that people don't like to make or admit.  

When you have no growth BY DEFINITION it is because the growth that people truly want is prohibited.

Thu, 12/11/2014 - 21:08 | 5542377 wayne_nguyen
wayne_nguyen's picture

The debt is just growing larger because money is being created out of the debt.

 

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