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When QE Leads To Deflation: A Look At The "Confounding" Global Supply Glut
On Saturday we once again explored the question of whether central banks are creating deflation. The idea that post-crisis DM monetary policy may be causing disinflationary pressures to build is somewhat counterintuitive on its face but in fact makes quite a lot of sense. Here’s how we explained it:
The premise is simple. By keeping rates artificially suppressed, the central banks of the world effectively make it impossible for the market to purge itself of inefficient actors and loss-making enterprises. As a result, otherwise insolvent companies are permitted to remain operational, contributing to oversupply and making it difficult for the market to reach equilibrium. The textbook example of this dynamic is the highly leveraged US shale complex which, by virtue of both artificially low borrowing costs and the Fed-driven hunt for yield, has retained access to capital markets in the midst of the oil slump and has thus continued to drill contributing to the very same price declines that put the entire space in jeopardy in the first place.
Expanding upon that a bit, we might say this: those who have access to easy money overproduce but unfortunately, they do not witness a comparable increase in demand from those to whom the direct benefits of ultra accommodative policies do not immediately accrue. Meanwhile, as WSJ notes, governments are reluctant to spend in the face of heavy debt burdens and increased scrutiny on fiscal policy in the wake of the European debt crisis while China, that all important source of voracious demand, is in the midst of executing the dreaded “hard landing.” Here’s more:
The global economy is awash as never before in commodities like oil, cotton and iron ore, but also with capital and labor—a glut that presents several challenges as policy makers struggle to stoke demand.
“What we’re looking at is a low-growth, low-inflation, low-rate environment,” said Megan Greene, chief economist of John Hancock Asset Management, who added that the global economy could spend the next decade “working this off.”
The current state of plenty is confounding on many fronts. The surfeit of commodities depresses prices and stokes concerns of deflation…
Meanwhile, public indebtedness in the U.S., Japan and Europe limits governments’ capacity to fuel growth through public expenditure. That leaves central banks to supply economies with as much liquidity as possible, even though recent rounds of easing haven’t returned these economies anywhere close to their previous growth paths.
“The classic notion is that you cannot have a condition of oversupply,” said Daniel Alpert,an investment banker and author of a book, “The Age of Oversupply,” on what all this abundance means. “The science of economics is all based on shortages.”
But as we first highlighted early last month, signs that continued access to capital markets were triggering overproduction and oversupply in the oil market were readily apparent, as the US looks set to run out of oil storage capacity in just a few months' time.
At Cushing, Okla., one of the biggest oil-storage hubs in the U.S., crude oil is filling tanks to the brim. Last week, crude-oil inventories in the U.S. rose to 489 million barrels, an all-time high in records going back to 1982.
And it’s not just oil:
Around the world, about 110 million bales of cotton are estimated to be sitting idle at textile mills or state warehouses at the end of this season, a record high since 1973 when the U.S. began to publish data on cotton stockpiles.
Huge surpluses are also seen in many finished-goods markets as the glut moves down the supply chain. In February, total inventories of manufactured durable goods in the U.S. rose to $413 billion, the highest level since 1992 when the Census Bureau began to publish the data.
And as we recently discussed in “Chinese Economic Outlook ‘Skewed Heavily’ To The Downside” and in “Chinese Economy ‘A Lot Worse Than You Think’”, China's appetite for metals has abated as demand for steel is now below levels last seen in 2008 which has in turn had a devastating effect on an iron ore market which had come to depend on Chinese demand:
Central to the problem is a cooling Chinese economy combined with tepid demand among many developed countries. As China moves away from its reliance on commodity-intensive industries such as steelmaking and textiles, its demand for many materials has slowed down and, in some cases, even contracted…
For nearly a decade, producers struggled to keep up with the robust demand from China. But with Chinese output now slowing—its gross domestic product is expected to rise 7% this year, down from 10.4% five years ago—no economy has emerged to take up the slack.
In the end, central banks continue to keep conditions loose, seemingly oblivious (or perhaps willfully ignorant) to the fact that low rates and booming equity markets are contributing to the supply glut without effectuating a concomitant increase in demand. Meanwhile, producers — such as heavily indebted US shale companies — are forced to keep producing in order to keep what little revenue is still coming in flowing, a dynamic which is exacerbated when companies take on debt (and thus more interest expense) to stay alive:
Even if governments have the capacity for more fiscal stimulus, few have the political will to unleash it. That has left central banks to step into the void. The Federal Reserve and Bank of England have both expanded their balance sheets to nearly 25% of annual gross domestic product from around 6% in 2008. The European Central Bank’s has climbed to 23% from 14% and the Bank of Japan to nearly 66% from 22%...
Producers have their own share of the blame. In a lower commodity price environment, producers typically are reluctant to cut production in an effort to maintain their market shares.
In some cases, producers even increase their output to make up for the revenue losses due to lower prices, exacerbating the problem of oversupply.
Here is the vicious cycle visualized:
* * *
For those wondering how this will play out, consider that sooner or later, in order to avoid liquidation and stave off severe disinflationary pressures, someone will have to call in "Helicopter Janet" and once the cash paradropping begins well, we'll see you in the Weimar Republic.
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All the Government entitlement programs have caused deflationary indexes. Cry me a river of tears.
Overproduction is a term that implies increased rates of production. Is that really the case? Or is it more a case of job destruction leading to demand destruction and wage destruction leading to consumption destruction. If the rates of production for commodities are kept constant during that consumption destruction, then the shelves fill, the strategic oil reserve fills, etc. When there is no more room on the shelves for new product, that will tend to force production slowdowns and then a new equilibrium of input and output will be seeked.
And policy does seem to be trading off reduced consumption by the middle/lower classes for continued or increased consumption for the 1%"ers". This can be done, even with a net drop in consumption on the overall.
Yes, it really is the case (hence putting "Confounding" in quotes). All of the excess jobs that were destroyed in the oil/gas sector for instance, existed only due to the sector becoming financialized, which occurs when capital starts running out of places to achieve positive ROI, so they move further out on the risk curve, trying to get a quick buck while they can. Eventually, these bubbles can no longer command fresh financing as their returns disappear destroying any valuations that supported initial investment. So, they pop and jobs are destroyed. Thing is, it isn't a gradual slowdown as you suggest, and it isn't driven by inventory piling up, but by ability to remain solvent and keep producing in order to service the debt underlying it.
All of which ends up as irrecoverable, sunk-cost. Millions of excess houses. Millions of excess autos. Thousands of excess properties (warehouses/retail outlets) along their supply chains.
All existing only due to ZIRP monetizing ever increasing amounts of government debt.
Job destruction is an effect in this system, and the idiocy of Keynes is put on full display as it becomes obvious that half a world full of hole-diggers followed by half a world of hole-fillers cannot generate true wealth merely by being a means for Wall St. to shuffle paper. All they are doing is wasting scarce resources producing things that have no demand at current price levels.
Sure, Keynes was right that an economy can be spurred. Problem is, that's the last thing it needs. Imbalances have to be allowed to correct, not papered over to save the financial system that created them. This is the policy that you refer to, as all they know how to do is to save their own skins.
"Thing is, it isn't a gradual slowdown as you suggest, and it isn't driven by inventory piling up, but by ability to remain solvent and keep producing in order to service the debt underlying it."
Bingo! Its not a gradual slowdown, its not even a slowdown. Increased producion is needed to amass the same number of dollars now that their product's selling prices have dropped. Otherwise, they do not remain solvent. You are so right! Let's keep an eye on this dynamic, as there should be no slowing of production in shale oil, any oil really, cotton, iron ore, all the above mentioned items. Let bernanke's "experiment" play out.
There is another force at play here:
ZIRP pulled future demand forward.
When borrowing costs nothing, consumers will buy today what they they would have bought tomorrow.
Now, all that remains is the debt. With consumers loaded to the gills with debt, they have hit the borrowing 'wall.' Lower interest rates and continued QE will have no affect on consumers who either can't or won't borrow.
The equation is simple: Increased production + decreased demand = Deflation.
This is why Krugman and the Keynesian Klowns scream: "Borrow and Spend!" They know that once the credit Ponzi stops; the system collapses...
Problem is, easy money leads to malinvestment. We increased production of the things we didn't really need (McMansions, college graduates in certain fields), all while consuming otherwise scarce resources, which saw their production increase to meet the 'demand'. Now that the demand has collapsed, as malinvestments do, all we have is the high production of raw materials, for which there is no longer demand.
Yeah but, ZIRP isn't for Consumers. They still pay 18%+. The only thing people are borrowing is for the payment on the OTHER card....
QE and all the other magic money was never really aimed at the economy but at a small handful of special interests. It has all disappeared into the pockets of the elite class and main street has been bent over. The market levitation and bond market casino's have just about run out of other peoples money and the crash will be very bad. And don't forget to add n the welfare prostitutes when the bread and circuses end. Baltimore is the warm up act for civilizational collapse....
The Elites who were the receipients of the QE largess since 2008 will never make up for the lack of consumption by the cash starved, debt laden middle class. After all, how many houses, yachts, private jets can one own? In the old days, the Elites used to at least have big families. Now, a days, they are either a) gay, b) playboys, c) married, but childless. If they do have a child, its a single trophy child.
All the middle class I know are spending nothing and saving everything. Why? Retirement looms and there is no return on investment thanks to ZIRP.
The economies need to keep growing despite the limitations of the gobal capacity. Thats because the dollar and all debt based fiat need constant expansion to pay the ever growing intrest payments on that debt. When the growth stops because we hit the wall so to speak and politicians, and bankers cannot bullshit their way out of it anymore we end up here. Why cannot we just have stability? Because the keynesian model will not allow it. But we will hit the wall and in a lot of industries it looks to me that we have done that. Now either the bubble pops or it deflates slowly. Either way the debt based fiat cannot survive.
Like a shark through water, motion needs to be maintained to survive. Just keeping up is actually falling behind.
Due to friction imposed by the parasites.
I'm of the opinion that in a healthy economy, sustainable production (governed by ROI) doesn't necessarily need constant expansion in order to service debt, as return on capital should be greater than it's cost (otherwise capital would be invested in a more productive venture instead). The idea that it's mathematically impossible to avoid ignores the function of the fact that we produce greater wealth over the loan period. Where the problem arises is when the natural signal for the cost of time (interest rate) is destroyed by the unnatural adoption of it as an aggregate tool of control of the economy.
Now, this is not in any way a defense of fractional-reserve, debt-based fiat currency, as each of these labels also alter the natural interest rate.
I believe the main reason your statement, 'constant growth is required' is "truthy" in the current scheme, is because constant expansion is the only thing that prevents interest rates from correcting (the dreaded crash). Which in turn provides the banksters with the cash-flow that they parasitically skim off of. So, it isn't so much as math that's the issue here, as it is support of the parasites.
Of course, without a fractional-reserve, debt-based fiat currency system, they would have no tools at their disposal to effect this scheme.
Or is it more a case of job destruction leading to demand destruction and wage destruction leading to consumption destruction.
exactly. this is the unintended (hopefully) consequence of impoverishing and essentially killing-off the customer. the banking that is behind this couldn't care less because they have no real customers: just investors they hold in contempt, and these leeches produce no commodity or finished goods whatsoever.
I pointed this out last year, wondering why those who do produce goods and commodities don't do something about this. Then I got the answer. At the head of these corporations sit those of the same ilk who also play investment games with capital, most clearly evidenced by the stock buy-back schemes so prevalent today.
Honest producers get squeezed out by those with access to 'free money,' leaving only parasites in their place. When corps have no better options than to "invest' in stock buy-backs via selling bonds, rather than investing in capex to increase their own productivity in their core business, the whole world is FUCKED!
"leaving only parasties in their place"
And the free money tends to choose crony parasites, and what was once fair and balanced becomes less so.
Maybe just a case of baby boomers retiring and not buying or needing "stuff" anymore. Many are selling their "stuff" and down sizing. That's a huge void to fill. I don't read anyone bringing this up yet but it makes sense to me. Went on Craigs List cause I needed a lawnmower. Over 100 just in my area alone. Why pay full price? "Stuff" is being dumped by baby boomers.
The cheap money was supposed to create "good" collateral to underpin the worlds' debt markets.
Part of "the problem" is that cheap money prevents the large major inefficient debt burdened 20th century monopolies and govopolies from being flushed-which is what a market priced to reality would do.
They wind up sucking up all the "good" new collateral -which keeps things from going forward.
don't worry about the maggots, the fed will make sure they always get richer.
Go fuck yourself Central Planners
The Venus Project - Future By Design - Full documentaryhttp://m.youtube.com/watch?v=5zn8MRKOskw
Well, the banky-poos want all the prices and profits to keep J-curving ever upwards, especially for utilities, commodities, and housing prices, but that just makes everything more expensive and as a result more and more people have less and less money to spend on all the various goods and services that are available. Basically, rents/mortgages should be limited so consumers have money to spend on other things besides utilities, rents/mortgage payment, and debt bills. Otherwise, the consumer is on a need to buy basis only...buying only essentials.
This one of the reasons why I think the iWatch (sic) won't do as well as crApple hopes. Yes, it'll sell, but most people now are maxed out and seem (to me at least) reaching the point of 'Do I really NEED this?'. There are, again, certainly people who still need the crack high of having the latest thing just because it's there but we must be nearing saturation if we haven't already.
It's worth also bearing in mind the lowered earnings forecasts going into earnings season (yes, they get beat BECAUSE they've been lowered) and the number of tricks employed to keep things going (share buybacks anyone?).
Not good.
DavidC
This may be a better illustration of the above feedback loop.
http://invisibleman.com/wsj_whirlpool.jpg
All it needs is a black-hole at it's center to complete the illustration of ZIRP, as infinite debt service (mass) requries zero costs (space) in order to keep the math in check. Otherwise, they run into the same problem I do when trying to pay off the old credit card with a new one.
Here's your fucking black hole
http://new.euro-med.dk/wp-content/uploads/Nathan-Rothschild-and-famed-qu...
"fucking black hole"
<<making attempt at humor>> Who's the black hole fucking?
<<looks at linked image>>
Oh, all of us.
<<not so funny after all>>
U.S. oil producers drilled more than 35,000 wells and 297 million feet of hole compared to 399 wells and 3 million feet of hole for Saudi Arabia. Russia drilled 8,688 wells for equivalent production. U.S. companies drilled almost 100 times more wells to reach the same daily production as Saudi Aramco. Strident claims of increased efficiency by tight oil producers sound absurd in this context. absent ZIRP for capital long term marketshare is going elsewhere
Now picture this alongside the possibility of abiotic oil. If true, the ME will be center of the world for some time to come, especially once drilling costs are factored in (poking a hole through a few hundred feel of sand vs high-tech/cost drilling in shale).
All of which is convienently being made uninhabitable thanks to war.
What we are experiencing to a large extent is a reverse baby boom. In the main, 'old folks' everywhere retire from their peak spending years and snap their wallets shut resulting in much lower demand for just about everything except nursing homes and medical care. Working this phenomenon off will take until they are gone and something (WW3?) creates another baby boom of consumers. The Fed's actions are definitely not helping here.
One idea to jumpstart consumption given all the surpluses....WAR !
War = Population Control & how the elite turn lead into gold (because they use bullets to steal gold...)
Consuption is down because people are BROKE & untrusting the elite to give them a break (They won't), hell they are even attacking deposits!
So QE is nothing more than a smoke screen by the elite, so they can print more money, buy up assets for pennies on the dollar, and then leave countries to pay exuberant interest payments & rising cost of living (Food, rent, gas, water, etc...) due to inflation of their failing currencies because of extensive debt... (Same sh!t different era folks)
Modernization is the enemy of Mankind, War is the product of Greed, and everything you see happening to day are engineered anomalies of a system that is FAILING...
(Because the insane greed cannot continue for ever, WAKE UP!)
Conversely, when the CBs are caught up in raising rates then marginal producers cease to produce, supplies diminish, and prices rise. Attempting to stave off rising prices, the CBs raise rates again. This diminishes supplies further and causes prices to rise higher.
The most counter intuitive thing is that wanna-be-free people allow governments to monopolize the business of banking. The only rational application of the anti-trust code applies to the government's monopolies.
QE, along with just about every other financial manipulation of traditional 'markets', is inherently deflationary. It does nothing to encourage the production economy. These are financial tools to encourage the financial sector. Finance is a utility function to the general economy that has taken over. Like a parasite that kills the host, finance only wants more.
"For those wondering how this will play out, consider that sooner or later, in order to avoid liquidation and stave off severe disinflationary pressures, someone will have to call in "Helicopter Janet" and once the cash paradropping begins well, we'll see you in the Weimar Republic."
You've just written an entire article outlining how all the loose monetary policy, cash printing, ZIRP, NIRP, etc. is leading to deflation. Then you finish the article with this amazing non-sequitir! How in God's name can you pursue a policy of deflation and then have it magically produce hyperinflation?! You financial types have been predicting hyperinflation since 2008. And still waiting for it. Meanwhile, deflation is emerging as the real threat to the global economy. Yet you STILL call for hyperinflation! Am I the only one in the world who remembers Econ 101?!
When you jokers do some real research, you'll realize that hyperinflation most often occurs in the context of a speculative currency attack by bankers and forex traders. In other words, hyperinflation is ENGINEERED! That can only be done using a relatively strong currency. The dollar is the strongest currency around, so there's no way to have hyperinflation in the US dollar. Would you please stop parroting stupid nonsense and do some real investigation for a change?
You've been here for 42 weeks and you still don't get it? Snapback is a bitch. (Un)intented consequences are the way of the world. Helicopter money will drive up demand and thus prices. Dedollarization will bring more foreign dollars back home. There are a lot of other things that can and probably will happen to contribute to this. Anyway, first we have deflation and then inflation. Think of it like using Roundup in the garden. It kills the weeds and allows you to pick a greater harvest. The follow on consequence is that over time you take in carcinogens, get cancer, and die. Then the weeds take over and no food is produced. Granted that is a longer timeline but the concept is the same. Too much of something is bad for you, especially if that something is bad for you.
It's going to be painful but then again, it could hurt a lot too.
Mild deflationary pressures over the long term are normal and beneficial to the economy and the consumer alike, it is only the banksters and debt ridden governments that suffer.
If all the 'printed' money evrer gets to the people who actually need it, through helicopter drops or some other method, the deflation will vanish like a fog in July. If the foreign USD also come home then the inflation will be beyond the ability of the Fed stem. The reset will truly be under way then. Can't wait....
You're gonna wait. The LAST thing the CBs want is moola in the sheeple's hands.
It's going to go to whoever packages up and sells all of the worthless debt to the Fed, just like every other asset bubble this century.
That's trickledown economics, where by the time the sheep actually get the moola, it will be worth a fraction of what the elite got to use it for... (e.g. to purchase assets & products, for fire sale prices during the recession/depression)
Commodities glut? Global deflation? Supply and demand? What are these idiots talking about? That is all old normal crap. All that matters now is the newest toy from Apple. Will it sell billions of units and make Apple the first Trillion dollar company? There are now massive gluts of smartphones, but they keep making new models and the fools keep buying them. It is apparent from all the articles out there the fate of the five largest economies now hinges solely on Apple success. “Stock market’s future depends upon Apple coming through!”, etc, etc.
This is all part of the New Normal and it is all so simple…it’s ridiculous. That the Fed will keep rates near zero forever, is a given. Then the fools can continue to use the cheap easy credit to buy the newest I-toys, SUVs, etc. Bears keep thinking it has to end someday…yes, maybe ten or twenty years from now with the Fed balance sheet at $12 Trillion and the U.S. debt at $50 Trillion. Failure to keep people feeling “wealthy” and borrowing and spending on useless crap, would bring on total collapse.
US debt is over $200T already.
Don't look at the debt, debt is not real, look at what will result from the debt, economic oppression like you never saw, and that's because well, the greedy bankers are all about profiteering!
When will the madness end? (Something tells me we've only just begun to understand the rising sun / heat...)
https://youtu.be/__VQX2Xn7tI
The FED knows what they are doing. Arrest them.
The solution to the problem ought to be simple. The world needs moar jews because they're really smart and know how to print money. Moar jews, moar money, for EVERYONE! How can anyone possibly disagree with that exquisite linear logic application based on known inputs?
So... are you really a confused person who thinks this statement serves your stated intentions? (when it actually undermines them, creating sympathy for you target)
Or are you a disingenuous person, seeking to create sympathy for your supposed target, all while really smearing ZH as a troll site? (by discrediting the level of communication that goes on here)
Why else would you make a statement that even if I agreed with, I would find to be damaging to its alleged purpose?
I'm really a confused person who just says shit because I'm disingenuous & am sometimes compelled to seek &/or create sympathy for no one in particular whilst accidentally smearing ZH as a troll site in your eyes by discrediting the level of communication that goes on here.
I only make statements like this so that people like yourself can be compelled to either agree or disagree with them, notwithstanding any potential damage to alleged purposes, imagined or otherwise.
I hope that answers your question.
bot.
Looks like the perfect time to start a large war to burn up the surplus and kill all those unemployed poor people.
Luckily there are now nuclear weapons.
The elites die as well as the poor and so war is no longer the answer for elites.
And as much as the elite try to build or find hideaway places, a lack of attention on the SFPs, or lack of ability to service them or their cousins, due to any natural causes, be it Carrington, Richter, ash fallout, etc would almost surely reduce their empires to very local fiefdoms, with progeny facing biological hazards that might not guarantee a long line of successors that withstands the tests of even short term time. Stability should be valued more than profit at any expense. Make sense?
Tell that to the citizens of Japan.
Saw headline haven't read (busy listening to the predictive bot for clif hi & igor's new reports).
I believe now after seeing a chart Ham-Bone chart yesterday that this supply glut will lead to hyperinflation. That chart he put up was screaming future inflation as loud as a chart can scream to me. I feel less tossed on if we will flop over like Japan on the other side of this mess.
I'm just in part one of predictive bots first of three reports and the bot is screaming hyperinflation for the get go.....
And doing it well as from what happens here will lead to hyperinflation in the fall.
Okay running along now as I don't like distractions while I listen to the reports. Can't stop my mind from wondering on them though and have to rewind but.... Can't stop a wondering mind his reports trigger.
That ham~bone chart was a first post and he brings up Nixon in it. Thinks it's in a gold article or something to do with money.... Mind occupied with predictive bot at moment.. Don't wanna think too hard to see title of article... Is it the one with gold bars on it yesterday? Whatever predictive bot waiting...
The endgame of the madness called supply side economics.
The US and Western consumers used to be recognised as the engine of the global economy in saner times.
But the Western consumer was wiped out in the globalisation process killing demand.
The newly impoverished Western consumer kept consuming on credit until 2008 when they maxed out on debt.
The Western consumers were given the illusion of wealth with housing booms but all that now remains are the super sized mortgages.
The new Eastern consumers are poorly paid and with no welfare safety net have to save most of their wages for a rainy day.
The global economy now has chronic over supply due to a chronic demand shortage.
Demand always was the driver of the economy.
In times past the elites sent the poor to war and they divided up the spoils.
Perhaps it is now time the elites made some sacrifices.
If those 87 poeple who now own half the world's wealth are killed off and their wealth distributed demand will soon rise again.
Why has it taken this long for the smartest guys to figure out that QE and Zirp are not inflationary? They are not even purely deflationary. They are Biflationary.
Your cost of living, owning a home, going to work and staying at work, or starting or operating a business are all UP.
Meanwhile deflationary pressures build due to oversupply, overcapaciity, outsourcing and offshoring, warehousing, automation and wage and income stagnation.
On the deflationary side, it's the end result of "supply-side" economics as envisioned under the Reagan administration. It wasn't pure Keynesian policy aka pump-priming to stoke demand. The order of the day was favor the producers politically as well as economically not just to cut their costs, but also to allow concentration of capital...the exact opposite of the New Deal policies of redistribution.
Mission accomplished, supply-siders! We now live in a world where the rich have achieved escape velocity and control the political system entirely. All policies will result in more concentration of capital which ultimately runs up the cost of living and doing business through hoarding and warehousing. It also kills demand as capital no longer gets used to gamble on new productive enterprises which create jobs and demand, but gets placed into sure-thing sweetheart financialization deals guaranteed to reward big money with more money free from risk and work.
Well, get out your check book and make some political donations. Start on the local level.
Those silly central planners and 1 percenters, they thought perpetual growth would never end....and maybe it wouldn't have if they hadn't gotten greedy. But, they wanted 15-30% returns on their investments...instant gratification! So they industrialized the rest of the world, especially China, created new consumer markets,exported all of our manufacturing, jobs and growth, to take advantage of cheap labor and maximize profits, therefore killing our economy, but enriching the corporate pocketbook. Our chosen leaders gleefully helped them every step of the way, lining their own pockets with bribes and inside stock tips,
And now, it's over. Any business model shows that growth at 15-30% per year or more, becomes unsustainable over a period of time...and that is what "the hogs at the trough" have come to expect. Instead of being satisfied with a consistent model of growth, 4-8% per year, THEY WANT MOAR!!! They will do anything to keep the illusion of sustained growth.
Well, you readers here know "the rest of the story." They will ZIRP, NIRP, QE, bail-in, bail-out, confiscate, rig, manipulate, spoof, and steal us from us "useless eaters" right out of existence... until there is no more left to take from us.
You should write articles or do youtube videos. You're really good and entertaining when it comes to explaining things succinctly.
Becauset idiocy continues unabated
Oversupply = Great for people = Bad for insolvent banks
Shortage = Bad for people = Great for insolvent banks
Continue the idiocy please
It's SUPPLY SIDE ECONOMICS!
The fun additional side affect of over-producing for people making minimum wages, is that they stop buying because they get accostumed to low prices.
So not only is the vast majority of money being held by the 1% so the 99% don't spend, but the 99% realize there's no incentive to purchase something because it's cheaper now than before!
I guess giving rich people tax cuts and incentives to use cheap labor benefits no one.
Same going on in iron ore. Fortescue raise money at 10% allowing them to stay in business and keep supplying an already over supplied market. Without the global flood of liquidity and the subsequant dash for trash, they wouldnt be able to fund. These sort of companies should be going out of business, not staying in business able to keep pumping out more supply.
Where does the oversupply of $$$ end up going...?
The furnace to heat your home?
Billion Dollar spending programs while the border traffic by truck is dramatically dropping.It shows spending still out of control in Canada.The manufacturing sector in Quebec and Ontario is still suffering.Bank of Canada took out "insurance" as it just dropped interest rates.In other words,the rust belt syndrome is not just in Detroit or Cleveland.By the way,the Harper Government tacked on another 150 billion to the overall deficit while telling everyone they balanced the budget.Here's the real debt in the second link;
http://www.cbc.ca/news/politics/canada-u-s-border-congestion-negligible-...
http://www.davemanuel.com/canada-debt-clock.php
and yet easy money has not yet provided a supply of cheap housing in large metro areas....why? Excessive regulation etc prevent the construction of such cheap housing.
Another big reason: hoarding of housing stock in most metro areas by rich and big investors awash in cash and with access to zero cost capital.
Yeah I heard of Downward Sticky Prices and Downward Sticky Wages; Housing must be worst since like 60% of buyers or Regulators see Housing as an Investment or something to inflate and cause a bubble in (FED, Janet Yellen, TBTF Banks creating Tranches of Derivatives).
Ethos or Morals??
If a commodity is required for basic human needs maybe we should not institutionalize the Inflating of and Systemic Financialization of Housing and others like Food, Gasoline, Heating Oil, Heating Fuel, Electricity (Remember ENRON).
No one wants to lose money on the house they bought, apartment, condo, but if they are investors, banks, or Derivative Sellers... they can lobby to keep houses off the market, keep foreclosures in arears, and keep the housing supply manipulated to be low or tight.
Another Manipulated Market.
Is it just a question of time before we see the development of butter and milk- powder "mountains" ?
We haven't had any of those for a while.
Any reason why such commodities will not be subjected to the same market forces?
There is, after all, more than enough food currently to feed the world i.e. there is a surplus , however mis-allocated.
The butter and milk people have their present business of perennial profit extraction vis-a-vis ice cream and butter consumer prices in the summer.
Shit, with all the milk powder derivatives that get mixed in with the potato chips, instant, and "convenience foods" now adays, we don't even need such "strategic" planning anymore.
Whatever you do mark everything sold as soon as it is shipped from the manufacturer and never, ever quit manufacturing.
Ummm, we're gonna need a LOT more ishit ideas to sell shiny objects to the sheeple in order to keep this ponzi . . er i mean economy going.l
People, hyperinflation can never happen in the U.S. I know this because:
http://useconomy.about.com/od/inflationfaq/f/Hyperinflation.htm
You're welcome. /s
"QE" doesn't "lead to deflation", it merely POSTPONES the inevitable effect of deflation that accompanies ANY recession.
We have simply learned how to postpone and "pre-emptively" counter the results of our continued bad policy and decision making.
If only we could fix the bad decision making and cut out the rest of this bullshit.
...it merely POSTPONES the inevitable effect of deflation that accompanies ANY recession.
In reality it postpones AND exacerbates the effect of the deflation as it allows the oversupply problem to increase exponentially relative to the size of the QE implemented. Of course this is all dependent on the QE implemented. Consumer based QE could have mitigated some of the oversupply issues following 2008. Witness the success of the tax and home buyer credits of 2009/10. But that didn't last as QE for consumers = Bad, QE for specuvestors = Good.
One of the best ZH articles I've read in a while. Succinct explanation of how oversupply leads to deflation and how QE can only exacerbate the problem.
Wish more of the daily articles were like this...