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Guest Post: Fed Trapped By Inflation
Submitted by Lance Roberts of Street Talk Advisors
Fed Trapped By Inflation
There will be NO announcement of QE 3 tomorrow. Why? Because the Fed has trapped itself into a corner. The first two rounds of Quantitative Easing (QE1 and 2) were viable for the Fed as inflation was running at deflationary levels in 2009 and at the bottom of their target range of 1-3% in 2010.
In both instances the implementation of asset purchase programs, which immediately juiced liquidity in the financial markets, had an immediate and pronounced effect on the level of inflation.
Today, with inflation currently approaching 4% on a year-over-year basis the Fed is not only outside its inflation mandate of 1-3% but any further cost pressures on the consumer is going to drive the economy into a recession. As we showed recently in our post on 3rd quarter GDP with food and energy consumer more than 23% of wages and salaries there is very little wiggle room for the average American.
Without access to credit, declining incomes on a year-over-year basis and uncertainty about employment there is tremendous strain on the consumer to make ends meet. The Fed knows this. They also know that without help from somewhere the economy is in trouble. The hope is that they can "talk" the markets along.
Therefore, expect no announcement of QE 3 tomorrow but lots of talk about policy tools, potential for further action and another punt to current Administration. However, with that there is a bigger problem brewing, and one that has been set aside due to the issues with Greece, the "Super Committee" only has 22 days left to announce the spending reduction plans before the automatic cuts take hold. This won't be good.
Unfortunately for Ben and the Fed they are trapped between the need to "do something" to boost the financial markets and support the economy but are constrained by their mandates to keep inflationary pressures under control. There is no help coming from a deeply divided Administration that can find no middle ground to compromise on and the automatic spending cuts are going to sap a portion of the 23% of personal incomes that are made up by government transfers. The consumer is tapped out, the economy is much weaker than the headline numbers suggest and without liquidity assistance from the Fed you can expect the recession to take hold in 2012.
However, we might get surprised by the Fed as they have done it before. The real question is even if they do something will it be enough to offset the damage that has already been done.
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Come on Ben, when in doubt, whip it (QE) out!!!
You legacy is shit anyway so might as well go for worst Fed chairman ever...you can overtake Greenspan if you just try keep it up!
Instead of using the word inflation, the phrase that should be used is "currency devaluation". For the Federal Reserve seeks to devalue the buying power of the currency by 2% annually, or ~21% in a decade, or worse still ~43% every 20 years. Thus the Federal Reserve Debt Note (a.k.a. US Dollar) currency loses 43% of its value (buying power) in only 20 years.
bi-mandate of the fed:
1. increase inflation, increase unemployment and enslave the masses in fiat debt.
2. bailout financial criminals and the 1%
with very high inflation we would likley see high employment
deflation is what causes unemployment
but yes, agree, their mandate is financial slavery :)
Yeah, like that vicious deflation that accompanied the high unemployment of the mid and late 1970s.
(/sarc)
Zimbabwe had an inflation rate in which prices would double in but 24.7 hours (http://www.cato.org/zimbabwe), and their unemployment rate was about 95% (http://www.indexmundi.com/zimbabwe/unemployment_rate.html).
Clearly, this has all the signs of deflation. <sarc>
OT but related:
Anyone like the article about peanut butter going up 40%?
(http://www.wpri.com/dpp/news/12_for_action/call12-peanut-butter-prices-g...)
I don't want to laugh since the consequences to innocents will be painful to say the least, but, this is naive.
The Fed will find a way to print, especially with Bernanke at the helm - it is his academic speciality, if you read any of his papers, and he already has copious form.
Also, inflation targetting hasn't stopped Mervin King, the governer of the Bank of England, from grossly overshooting the UK's official inflation target with multiple QE programmes. Yet he does not even have a dual mandate!
Betting on Bernanke NOT printing would be like betting a full 5yr old can hold it in for an intercontinental flight!
any further cost pressures on the consumer is going to drive the economy into a recession.
Well, we wouldnt want the economy driven into a recession now, would we?
Which way causes the most mass casualties, meyhem, and loss of human life? Which ever way that is, that is the way they will go because that is their purpose to rid this world of the cancer of human beings. So.... can they kill people by hyperdeflation where there IS NO MONEY (only "stuff"), or can they kill people by hyperinflation where there IS ONLY MONEY (and nothing else)? Which way is the best way to kill 6 billion people? Keep in mind they also want to rid the world of chinky-eyed communist Chinese just as much as they want to kill blue cow-eyed "Euro/Ameri-peans"...
Brzezinski: "Its easier to kill a million people...than it is to control them"http://www.youtube.com/watch?v=wKzEpQc-yo8
'incontinental' flight.
This is not 1933.
The Bernank should shove his self-proclaimed expertise on The Great Depression, which took place on a stage vastly different than our global economic and political stage now, up his ass.
Each time The Bernank juices the prices of commodities, creates artificial bubbles and malinvestment/misinvestment and distorts the normal price/demand curve (to a massive degree, I might add), he not only adds more fog to what's already a very opaque environment, which Mr. Market despises, but he destroys organic purchasing power by businesses and consumers.
The Bernank's obsession with stemming deflation at a time when real wages are stagnating or falling for the majority of the population, unemployment and underemployment are at least twice the officially proclaimed rates using more accurate measuring methodologies than the antiquated BLS implements, and at a time when we the causes of our economic malaise are structural, rather than cyclical, is one of the most dangerous and misplaced obsessions that any central banker has ever held.
A compelling argument can be made that deflation would SPUR consumption and additional demand for goods and services, even given that further deflationary expectations may take hold, as real purchasing power would sustain a significant boost (and consumer psychology would be buoyed by the fact that instead of seeing what they own or are on the hook for deflate or stagnate, while prices for necessities of daily living rise, they'd at least catch a significant break on the cost of living, which would spur more discretionary purchases, leading to labor demand and higher demand for goods and services).
.....so you are saying if people see prices of goods declining they will be incentivized to buy? They will be incentivized to sit on their hands. Of course most of what is purchased is made abroad, so maybe the Chinese would be hurt the most in that sort of environment.
I am saying that if deflation allows consumers to purchase more of what they need to live in terms of inflexible goods/services (e.g. food, energy, medical care, etc.), it frees up more purchasing power for the purchase of broader baskets of goods and services, while giving them a psychological boost in terms of relieving the choke point of laboring under the belief that they need to white knuckle each and every penny in preparing for higher living costs tomorrow and next year (as they now fear).
Why is this the case? Because real wages are either stagnant or deflating for the majority of Americans (in fact, Americans have 'delevered' their consumption by an average annual rate of $7,300 since 2007).
Additionally, and equally as important, given that labor is cheap and getting cheaper (while commodities and capex expenditures have either risen or stayed flat - they certainly haven't declined), businesses will see a significant boost in margins via deflation in the price of what they need to purchase to produce goods and services, which will incentivize hiring and expansion (as demand for their now more affordable goods and services picks up).
The general assumption that deflation is net negative, and that it leads to the postponement of purchases is a great fallacy, as a good chunk of what is purchased right now, and what has risen the most in terms of real cost (due in large part to The Bernank's idiotic goosing of the money supply and monetary easing generally speaking) is eating up a greater amounts of disposable incomes, allowing for less purchasing power across the broader spectrum of goods and services.
The Bernank's inflationary policies are crowding out both consumers' propensity to spend, instilling a very nervouse consumer mentality, and putting tremendous pressure on providers of goods and services, while discouraging many business segments from investing in expansion or hiring.
Finally, the inflation that Bernanke has sewn has created an atmosphere, at this juncture, which is creating the very conditions which allow for his very argument that banks and the financial sector of the economy are particularly vulnerable (and they are, as their is a great deal of insolvency in the banking sector) that warrants his policies that transfer taxpayer dollars (and consumer dollars, as dollars are fungible - whether via taxes or inflation) to the banking/financial sector of the economy in the form of subsidization (QE/TARP/ZIRP).
A dollar taken from consumers/businesses via inflation or monetary policies, and transferred to financial firms and the banking sector is a dollar that can't be spent elsewhere in the economy.
Yes, but in a deflationary environment, it is much harder for the Bernank to keep kicking the can down the road on a $210 trillion fiscal debt (according to the numbers of Professor Kotlikoff).
They'll just keep playing hot potato with the other central banks. Notice we didn't do QE3, we did the twist, but shortly there after the UK did QE. So its just a matter of time before the potatoe comes back to our shores.
Idiot.
Lol, go ahead and explain why inflation creates employment.
Who let the macro 101 student out of their cage...
I think that would be 48% over 20 years assuming inflation runs at 2%:
1.02 to the power of 20 = 1.4859474however, as real inflation is probably running at around 7%, that would be almost 100% inflation in ten years!
1.07 to the power of 10 = 1.96715136and therefore, prices would quadrouple over 20 year
good grief
Ok budy give me your keys
Ben has already started quantitative easing .. stimulus measure dubbed "Operation Twist
changing the composition of the government bonds . also fed funds rate will remain between 0% and 0.25%,
Got stimulus
The original poster was talking about <b>currency devaluation</b> as opposed to <b>inflation</b>.
2% currency devaluation per year => 33% currency devaluation in 20 years.
So at that rate, if you get 100kg of rice for $100, then in 20 years you will only get 67kg for $100.
But inflation is a better way of looking at it as it makes more sense to think of how much money you will require to buy the things you need, rather than what you will be able to buy with the money that you have (though unfortunately that may be how it pans out).
Much easier to figure out using ye olde "Rule of 70" that I learned in (gasp) public high school.
Foreseter, you obviously cut that econ class and improperly copied someone's notes, incorrectly, if they refered to the "rule of 72".
deflation?
Actually, skepticCarl ... I took two seconds to look it up on google.
There is a rule of 69, 70, AND 72.
Google is your friend.
Instead of inflation they should use something more positive - like "appreciation".
Example: "Appreciation is running at 3.4% this month".
Ah, that's much better.
Yes..."Boy am I glad I "invested" in that case of peanut butter last month....look at its appreciation"
This is far better than using terms like "inflation" or "devaluation" which carry such a negative emotional charge with them.
You should have a great future in D.C.
inflation, as measured by the CPI is 0%, if you strip everything out of it. I read there is deflation now, because the CPI has only my old TV in it
Mmmm Bernanke is waiting for the comment of Greenspan saying that "Europe is the problem, in USA all financials are undercontrol"
oh yes, say it Alan, say it pleasssssssssssssssssssssseeee!!
Bernanke is with the finger ready in the button of the PRINTER !!!
SAY IT ALAN, SAY IT .... MARKET NEEDS MORE DRUGS, TWIST IS NOT ENOUGH TO GO ABOVE 1300 IN SP... WE NEED MORE "AIR" TO INFLATE STOCKS PREPARING THE GREAT IMPLOSION...THAT ALL BEARS ARE WAITING FOR !!
print, print, print
you have no choice or the BEARS Win
lmfao
If this little prick didn't have his Heidelberg set to "Turbo Speed" this game would already look like the Bears-Patriots Super Bowl. Fridge Perry would be going in for his 11th touchdown right now.
Bernanke licks the sweat off a dead man's balls (credit "Good Morning Vietnam" for that line).
The Fed care about the average American?????????????
Sorry I just fell backwards off my chair and have done myself a serious injury!
What is the problem? Why can't you believe that? Of course The Fed cares about the average American. They care how much blood they can extract from every average American there is.
They only care about themselves. When you have nothing, you have nothing to lose, and there are a lot of people about to lose it. Never corner an animal, especially when a lot of the "animals" have had military training and a lot of weapons.
Either default on the debt or on the currency Ben. Your choice.
"The two greatest words in the English language, De-Fault."
- Homer Simpson
Excuse me, I am misquoted. I think the two greatest words are "Do-Nut." Or "Duff Beer."
No, WestVillageIdiot was correct - it's: "de-fault!"
That's because it's present ANYWHERE there's lending."Do-Nut" and "Duff Beer" are regional.
You know more printing is coming. There is no other way for the status quo to continue in power unless the printing commences. Ben warming up the choppers and about to play the ride of the valkyries while the shorts are humming the Bruce Cockburn song- "If I had a rocket launcher." These are interesting times. I wish some of our leaders would just admit things have failed. Let the debt bubble burst so that prices and values can come down and then we can be on our way again. A little deflation is probably a good thing right now.
Keep in mind that those with cash in a safe place do extremely well under deflation. When the time is right we will get deflation because they can do this in a heartbeat by merely tightening up on credit. They just want to make sure they are positioned right before flipping the switch.
When "If I had a rocket launcher" comes to mind, my first thought is who or what is on the #1 playing card.
Fight Club, bitchez.
WASHINGTON | Tue Nov 1, 2011 6:54pm EDT
(Reuters) - The Federal Reserve looks set to take a breather from monetary stimulus measures on Wednesday, even if financial market turbulence heightens the chances of action later.
"A little deflation is probably a good thing right now."
Ah, so you did not buy your pm's like everyone else here?
My boat is loaded with pm mining stocks and IMHO, a great deal of inflation sounds promising.
"Inflation?...sniff.....sniff........I DON'T SMELL NO STINKING INFLATION!"
-Ben Bernanke, Chairman, Federal Reserve of the United States of America
He couldn't smell an inflating rotting corpse laden with a megaton of exploding stinkbombs stuck up his nose
On one hand you have a nation full of citizens with the right to bear arms to fight against threats to their liberty, both foreign and domestic...
... and on the other hand, you have the mass genocidal maniac, Ben Bernank announcing where he will physically be on the planet once a quarter.
Hmmmm...
I stopped reading at "...is going to drive the economy into a recession."
How about if we change that to, "drive the real economy deeper into the current recession plaguing middle America"? Better?
Sorry, but accuracy is important here.
Change that to, "Come out of the recession ditch and land squarely in the muddy field of depression on the other side."
...let's do a 'find' & 'replace'....replace recession with depression wherever you see it....you might also find it useful to use terms such as The Greater Depression as compared to The Great Depression...just for clarity.
Also, this guy's credibility was shot when he implicitly accepts the government's laughably lowballed CPI figures as the "real" rate of inflation, i.e., currency depreciation. Everyone with a smidgen of honesty knows, and will admit, that it is MUCH higher than that.
That never stopped the Bank of England.....
When the Stock Market drops 25% or more and is headed further down.. the printing will begin.. or purchases.. or wait! they still are purchasing! LOL!! never mind!
which is my way of saying they are already / still printing..
gold doesnt buy itself down! LOL!!
The Morgue says! that inflation is moderate! now!!
http://www.youtube.com/watch?v=IxHzC5dPE5c&feature=feedu
http://www.indexmundi.com/commodities/?commodity=sugar&months=60
I could go on but it would be a waste in server space for Tyler.
Published: Tuesday, 1 Nov 2011 | 2:41 PM ET
Ugly Truth for the Fed: Inflation Pressures Here to StayWhen headlines like this come out of CNBC you know it's time to grab the K-Y...
One might say, inflatio iacta est.
Yea I don't get it, isn't the market almost flat for the year? What would be the justification. The stock market which is the barometer for the economy is doing fine, sure its not off to the races but the world does have a few little problems right now so that's alright. Prices have skyrocketed, mortgage rates are low assuming you can get one, where is the need for QE?
The answer is in your question. The reason you have had a stable stock market is because of the previous QEs. Take away the QEs = market crash. The effects (low interest rates) are waning. We have yet another 1.5 trillion debt coming up, along with rolling over current debt. Who's gonna buy those treasuries????? At 1%???? You guessed it.....YOU, via the Fed. No QE = rising interest rates with accompanying deflation due to strangling the economy. The Fed is backed into a corner. They know it. And gold and silver know it. INFLATE OR DIE. Or go thru deflation, and even the rich suffer. Inflation protects the 1% as they have nomially "appreciating" assets. The 99% get fucked either way.
START PRINTING NOW !!!!!!!!! OKAY!?
STOCKS NEED MORE DRUGS....NOT ENOUGH WITH TWIST, EVERY SINGLE FUCKING NEWS FROM GREECE IS AN HECATOMB... SOOOOOOOO....PRINT PRINT PRINT
DRUG DRUG DRUG FOR "FREE" STOCK MARKET.... HA HA HA
if not...that's means...SP1300 is the TOP ?? so...where is the BOTTOM ???
fed will not print before elections. get over it.
Willing to make it interesting? (He asks as he thumbs a large wad of $100 bills)
You might want to stroke a bar of gold. You're on the wrong side of that bet as is, if they print and you win you get inflated currency, if they don't you pay in current dollars.
comment deleted
Kito - huh???
Lets review -
August - 0% at least through mid 2013...recovery cosiderably slower than expected.
Sept - Twist
October - ???
So, Fed won't do anything in front of an election??? Looks like they'll throw the kitchen sink at it, particularly due to the political paralysis in the Congress.
Ben's been praying Europre blew up the last few days, to give him the groundcover to launch a $2 trillion MBS QE program, but it's just about held together. He may still go for it, but more likely wait.
Do you actually think that Dr. Faust is bounded by some irrelevant core inflation once he'd be trapped by a spiraling debt and bonus deflation?
You can tell who went in debt to buy PMs and is praying like crazy that he indeed prints.....
The top sign Banksters are failing:
Kim Kardashian's marriage lasts 30 times longer than their latest bailout.
I've said it often:
This is the Kim Kardashian economy; completely fake.
"Inflation, We don't care about no stink'n Inflation!" (spoken with a Mexican accent)
Inflation will not stop the Fed from Moving forward with QE3. Consider that as liquidity dries up, it will provide ample room for the Fed to print more. Inflation will fall as liquidity falls\plummets. Of course all that new printed money will end up in commodities, driving up food and energy costs. But the <sarcasm>Good news</sarcasm> Big screen TVs, and plastic pumkins will get cheaper!. Just what every cold and hungry american needs... Another big screen TV to escape their nightmare of hunger and frostbite!
Yes, Regardless of the stated "target", they need fairly strong inflation... 2% will not do it...
Lance Roberts, you must have missed the Kool-Aid section in the Hopium department of your local grocery.
Ben Bernanke can fix this all in 15 minutes.
The consumer has been "tapped out" fro 20 years. WIth a 5% savings rate, this is hardly true FWIW. Now, I realzie your point and all......but i'm so tired of the cliche "tapped out."
A recession in 2012? Need to correct the typo, this is a depression and the only ones who are not affected are the clown and his family in the White House, the Wall Steet crime circus, and these pathetic politicians. Oh, and Bernanke and Geithner all is well as they have raided America! In fact, I think Michelle is overdue for another $500,000 vacation, its not easy selling slimfast when you look like her.
MFL8240
this is a depression and the only ones who are not affected are the clown and his family in the White House, the Wall Street crime circus, and these pathetic politicians.
True, but it gets worse.
Most recent stats:
D.C. has the avg highest per capita income in the USA, $ a tad over $75k,and the lowest UE Rate.
Now tell me Unca Suga do not take cah ah his own.(ALL Gvt workers), producing nothing, living the best, and not helping the avg J6P one iota.
All that QE/Tarp/Etc,etc,etc, has done no one any good (save the UE checks keep coming/Welfare/Food Stamps),instead it sits in the banks, waiting for someone to loan it to.
Or bailing out European banks, and God only knows who else.
Seriously,if they wanted to get the econ rolling FAST send out that cash to taxpayers,in chunks large enough that they hit the malls right here before TG, and Xmas,THEY WILL SPEND it.
Would be a 4-6 month jump, but it would deplete inventories and MAYBE cause some rehiring, and new jobs, for real.
That is IF that was their goal(and we know its not).
They will eventually move the inflation target or target something other than inflation. Governments throughout history and around the world have done just that. People go right along with it. The Huffington Post has already run articles belittling inflation worries when the fed can print money to create employment. The stupid masses slurp it right up.
Like the printing ever stopped after QE2. The only reason he would officially announce QE3 is to calm the debt slaves. I really don't care what he says because it ain't the truth anyway. Peace
CRB Index still in a downturn
Los Angeles gas prices keep going down
There's no inflation.
John Williams might as well retire.
Unless the PPT shows up and starts buying ES futures with brute force......
Robotroll, don't you ever tire of posting this shit one here?
Try looking at a ten-year chart instead of inevitably looking at a ten-minute one, RobotFedAssLicker.
But like most infants and children (and increasingly, most adult Americans), you live in a perpetual "now", devoid of all long-term or big-picture perspective. This will be your financial undoing --- and it couldn't happen to a better troll.
The scarier thing is that there are peeps out there that entrust money to him.. *shudders*
Well, you know that old saying: a fool and his money are soon parted by a RoboTard. Or, a RoboTard in the hand is worth even less than a Bush. Or, a penny saved by RoboTard is a penny leveraged. Or, better to be thought a RoboTard, than to open your mouth and remove all doubt. Or, he who laughs last, laughs at RoboTard. Or, I thought I was poor because I had no hair, until I met a RoboTard who had no brain. Or, fool him once, shame on Ben; fool him many times, shame on RoboTard.
I like "a fool and his money are popular everywhere".
Tell that to college kids and seniors....they are both on fixed income. With all this "deflation", I'm sure they all have enough money now to go out and buy some new dentures or tattoos.
And it probably won't be called QE3 either because of all the bad pub the Fed has been getting. More and more sheeple have realized that is just a clever term for counterfeiting.
They'll just change QE to WW....
I agree with the original post. The Fed wants to print, but they can't. Republicans are using it (effectively) against the Democrats. That will become easier as inflation hits 8% (i.e. after QE3). If Bernanke prints again Obama might as well not even run.
You could make the argument that Obama is done unless the Dow hovers above 10k. Probably. But they can use language/teasers to hover around that point until after elections (when the market will finally tank).
How is the fed trapped by a measure they control. And who's going to bail out the insolvent banking system if the Fed doesn't print now that foreigners are quietly exiting the market.
General Jim sounds a warning
Be careful equity bears....
"What is good for gold (QE) is also good for general equities so be careful on those that see doom everywhere."
Dow 15,000 = Gold $2,000
Dow 10,000 = Gold $1,500
Dow 8,000 = Gold $1,100
That is not necessarily true. Gold was close to $2,000 in August, and the Dow wasn't close to 15,000. But, even if your supposition were true, it would only matter to people who plan to resell their gold. Those people bought gold for the wrong reason to begin with...
By nature I'm neither an equity bear or bull. I'd buy them if discounted and sell them if overpriced. I'm not buying Europhoria inflated stocks, though. It's all about discipline right now.
That's it robo...keep looking at gold as a security like every other "asset" (snicker). Once yer paper price finishes in a fiery crash, what then?
In 2000, the Dow:Gold ratio was 43. Today it's 6.9. Take that vector and the two will meet in the middle at say...6,000?
"But, but, the gods of the market on CNBS were saying gold is no longer a safe haven because it was down almost a full percent at one time today...."
/s
Yeah, I guess that is why the Gold:Dow ratio has fallen from over 40:1 in 2001 to around 7 today, eh RoboTard?
(Sorry for stepping on your metaphorical toes, Mayhem --- I started writing my comment before seeing yours.)
Plus gold was near 2k a few months ago and the Dow wasn't anywhere near 15k. Just a bad overall comment.
No problemo. "Metaphorical toes" - I like that. :)
Meh, anyone with half a brain is equally hedged both for inflation and deflation.
This is only true in a retard world of crony-capitalism and fed market manipulation. When free markets regain control, the dow/gold ratio will be 1:1; more like Dow 5000/gold 5000. Fascists like RoboTard and his communist brothers at the Fed and most bulltards in general will reap the rewards of their conformist status quo illusion and not only be trampled in their investments but likely will end up hanging from a lamppost in the center of town.
Deflation is deflation ... equities and gold both go down
Inflation is inflation ... equities and gold both go up
Recently Dow and Gold locked in 1:1 correlation
Stocks didn't exactly explode to the upside in the late 1970s when price inflation hit double digits. If inflation is high then there are probably better investments than stocks, absent manipulation. CDs (not CDS) were paying double digits for a while back then. Of course financial manipulation to boost equities or suppress PM valuations was either minimal or totally nonexistent.
Going Down....Ha! Like under $4/gallon? We're saved! I roll into the gas station and regular is under 4 bucks a gallon and my first thought is also that gasoline prices have dropped. Then I catch myself - used to be like $15 for a fill-up and now its over $50. I laugh when I see people with Expeditions putting 5 or 6 bucks in the tank.
Wednesday nov 2nd 2011, from Bloomtard TV:
"No Printing, No Printing at this time, FEDsters have decided not to print at this time, everything is fine, stable and a ok, but we are ready to DO IT, if and when it becomes necessary, maybe next month, eh?!"
If like previous post-FOMC statements, the markets move upwards in anticipation of good news (more money printing to pump the markets) only to drop back down like a rock in disappointment after Bernanke speaks?
OK, let's re-calibrate the article and comments based on the REAL inflation rate of 8-10%.
What's been the change in M3 since, say, 2005? Lots more than 2% per year.
What's been the change in M3 since, say, 2005? Lots more than 2% per year.
********************
M3 is totally useless for measuring Inflation-
How does the actions of the MZM component have anything to do with money supply?
Thank you!
Nothing has changed in the Mises Institute dollar chart from 1800 to 2005 except that inflation -- the unauthorized and deliberate counterfeiting of the dollar by the central bank to debase its honest weight and purity as sound money -- is now at an even higher screaming pitch to the tune of countless and unaccountable trillions in less than just three years.
The Ludwig von Misses Institute chart shows that the value of a dollar issued in 1800 went below its original purchasing power just once in 113 years, and that was to $.93. When the Federal Reserve took over control of the U.S. monetary system in 1913, the value of that 1800 dollar’s purchasing power was an astounding $2.04!! With the Fed at the helm, by 2005 the dollar’s 1913 purchasing power of $2.04 had dropped to $0.08.
(See The Rise and Fall of the Dollar: 1800 to 2009, Ludwig von Misses Institute)
http://blog.mises.org/10553/the-rise-and-fall-of-the-dollar-1800-2009/
What's been the change in M3 since, say, 2005? Lots more than 2% per year.
********************
What is it about M3 that everyone seems to use for an indicator of money supply-
Geezuzz-do you even know what M3 is?
Tell me how MMMF's/savings accounts/time deposits etc. have anything to do with a change in money supply
Here are your M3 components-the same ones Williams used to rebuild M3-
http://research.stlouisfed.org/fred2/categories/28
Printing is useless when the money sits idle-
No Inflation has occurred in the broad economy since 08-
The only Inflation that has taken place as to the true meaning of the word sits on the Fed balance sheets-
Currency debasement is all that the printing has accomplished-
http://research.stlouisfed.org/fred2/series/EXCRESNS
http://research.stlouisfed.org/fred2/series/MULT
John Williams of Shadowstats shows that annual consumer inflation, calculated in the same way it was in 1990, currently is running at more than 11%.
Food prices are up 34% in the last year, according to The Economist.
I must admit, while I greet the BLBS' laughably manipulated and lowballed CPI numbers with nothing but contempt and derision, I do believe that John Williams' Shadowstats figures, while closer to the truth, are consistenly somewhat exaggerated and err on the high side. My best guess is that today, the true rate of "inflation" would be around 6-7%.
John Williams of Shadowstats shows that annual consumer inflation, calculated in the same way it was in 1990, currently is running at more than 11%.
**********
Sure-food prices are up but that's not Inflation and prices are not a component of M3-
If you gauge Inflation that way-you are falling into the Keynesian trap that the Fed wants everyone to watch-
Money and Credit must circulate at an increasing rate to have constant Inflation and if it isn;t-it is Deflation
The market price of gold is in the stratosphere because it reflects the ultimate lack of confidence in the dollar. Paper has proven once again an inadequate substitute for the real thing in the hands of central bankers. That's "inflation" for you.
Because, as Ron Paul says, ”First, efficient central bankers will never replace the invisible hand of a commodity monetary standard. Second, using government price indexes to measure the success of a managed fiat currency should not be reassuring. These indexes can be arbitrarily altered to imply a successful monetary policy. Also, price increases of consumer goods are not a litmus test for measuring the harm done by the money managers at the Fed. The development of overcapacity, excessive debt, and speculation still occur, even when prices happen to remain reasonably stable (which they haven’t) due to increases in productivity and technology.”
And, let me remind you just how destructive the Greenspan-Bernanke-designed financial crisis has been. The investment bankers’ quadrillion dollar derivatives time bomb, 20 times the size of the U.S. economy, coupled with the derivatives-driven subprime mortgage global disaster, not only blew Greece in 2009, it’s blown up the entire bloomin’ globe.
As S&L fraud investigator, Economist William Black, said yesterday: "If you want to fix the problem you’ve got to start, always, by fixing the regulators. You can’t fire Bernanke… The President doesn’t have that power, but he can ask for his resignation. And you’ve got to fire Geithner and Holder… Bernanke and Geithner were promoted or re upped because they were failures as financial regulators and, indeed, they were the most abject failures in the history of regulators."
It was Ben Bernanke who, with Alan Greenspan, oversaw the derivatives time bomb that has turned into this worldwide financial weapon of destruction. All done behind closed doors by a few powerful men.
And, now, the Fed is trapped by 4% inflation?
Q1 - What did Paulson/Congress/Washington do when faced with a complete market meltdown in 2008?
A1 - They changed their initial course and passed TARP to bailout the big banks & their bonuses over the objections of Americans, most of whom were opposed to the bailouts.
Q2. - What will Washington do when the Fed tells them they are faced with either a destructive deflationary spiral which will devolve into default, a devastating depression and an enduring deep despair, or QEn, which will kick the can down the road, cause a little (maybe a lot) of inflation, and buy some more time?
A2. - Washington will choose to do what their campaign contributors pay/tell them to do...i.e., QEn.
You really underestimated the idiocy level of Ben Bernanke.
Shouldn't we just start printing $1000, 10,000, 100K, 1M, bills and get it over with?
Not until they figger out whose face is going to don each. :D
First deflation, then inflation. Simple, and so easy for the people in charge to engineer.
I believe in precious metals to protect your wealth in uncertain times, but our commitment will be tested when they pull the deflation lever (i.e. tighten credit).
Gold will not fall because of Deflation-it will fall if they're successful in creating Inflation-which they wont be-
If you think Gold falls in Deflation-then we must have had Deflation from 1980-2001-
I get a laugh out of the Hyper-inflationist bent here-but guess what?
You missed it-it already happened in 2001-2008-but in order to see it-you need to understand that Credit is "money" in expansion which is Inflation and when Credit contracts-it is Deflation-
You, sir, are not only entirely wrong, but deeply confused about the true nature and definition of money.
For the last fucking time: CREDIT IS NOT MONEY!
You, sir, are not only entirely wrong, but deeply confused about the true nature and definition of money.
For the last fucking time: CREDIT IS NOT MONEY!
*************
The only one between the two of us that's clueless is you fuckhead-
Why would Bernanke be worried about Deflation if Credit had never "acted" as money?
Are you so stupid as to think "printed dollars" can actually be deflated?
How did the subprimers "buy" homes with no money?
Did Credit buy those homes?
Why yes it did-
Did the price drop in houses decrease peoples personal "money supply??
Why yes it did-
Did the CDO's that were leveraged on the real-estate $ value of Mortgages that are now worthless that sit in pension and MMF's all over the world show a balance sheet "loss" ie: decrease in "money supply"?
Get a clue fuckwit-
@" subprimers "buy" .."
the subprimers, in conjunction with the banking system,
created more private debt through the extension of credit
to the "subprimers" by the banks. this debt, iou note,
is accepted as "money" in that it becomes a deposit in the
account of the home seller, builder whathaveyou..
this party can then spend the credit as "money" so long
as someone is willing to accept it to satisfy a debt. that
is the law of legal tender that makes the debt notes currency.
the problem is the part about a reasonable "store of value" that
money should have, also the "unit of account" property is missing.
the word dollar has no qualitative aspect. it is merely a quantitative
measure. like an inch or a pound. but of what? used to be
a precious metal, no more. that was money. this today, federal reserve
note is a scam because it is treated as money, assumed to have the
stabilizing qualities, but does not have the necessary stuff!
it has no qualitative aspect, the fed and the bankers prerogative
and capacity for integrity,
aligned with the delusional marketing driven wanting of the population
and government is the qualitative core of the dollar. we saw how that
works/doesn't work. as a unit of account the federal reserve note
fails because the "notes" are not the units, merely claim checks for ...
the real thing....data entries in computers subject to alteration
and valuation shenanigans by the issuing authority, the fed.
so if the fed is the master and god of the economy then i suppose
as a slave to them i could believe that federal reserve notes are
money. otherwise it is not and they are not even if other people
accept them as payment for debts and the irs/local governments
demand them for perceived obligatory funding.
we live in the dark here ! i hear dead people !
but here is the best part. the subprimers buy the house, take
on the debt to be paid back in federal reserve notes with interest
that doesn't exist and is never created, but ... wait for it ...
the bank owns the house for creating debt out of nothing.
that, my friend, is MONEY. so i guess i agree with you for
the most part.
blindman-
absolutely agree with your definition of real "money" ie: gold-
also-you explained very well the definition of FRN's and Credit "acting" as a currency/money-
all of it is debt based-but you can use either to make purchases-but only FRN's can settle debt-(sort of)
finally-someone who knows what they talk about-rather than the loud one liners that make so much noise and no sense-
I see that you are one of the many gullible and hoodwinked sheep.
The truth of the matter is that the ChairSatan is NOT worried about deflation, because it is NOT a threat under the current fiat monetary paradigm, not in any way whatsoever (again, credit is NOT money!). He says that he is worried about deflation, of course, only as an excuse and as a rationalization for continued fiat money creation and currency depreciation, which is the reason d'etre of any central banker. All this absurd talk about the "threat of deflation" is just another smokescreen by the financial PTB to mislead the gullible masses (including JimmyJames) away from taking measures to protect their wealth and savings from the one REAL threat, that of so-called "inflation", i.e., dollar depreciation.
I think that they should tell the "job creators" to get out there and create some jobs - spend some money - stimulate the economy - y'know a rising tide lifts all boats - y'know - all the crap that has been fed to the sheeple - make it come true. Surely the almighty Oz committee can make this happen...
As the monetary rubber band keeps getting stretched out further and further then being allowed to snap back over and over again, it will eventually lose its elasticity and just snap. It will become increasingly impossible for any money, smart or dumb, to find a safe haven in this lunatic environment. Only the politically connected will be able to safeguard their assets.
That shit soup sandwich served up by chefs Ben, Janet and Bill at Chez Shalom is now a day old leftover. Cold, clotted and MF'ed
Yet another article of utter nonsense,particularly given the ZH belief in the only option left to Bernanke is to print itself,Tyler posts an article which says Bernanke can't print - WTF?
Bernanke is indeed trapped into a corner of his own making,but to say he can't print because inflation is above target is ridiculous. It certainly hasn't worried Mervyn King,he has been printing for over two years now,has devalued sterling by 30%,with inflation 3% over the Bank Of England target,he says further QE is likely and still maintains zero interest rates,his repeated statements that inflation is only "temporary" for the last two years are now simply farcical. It is obvious that the BAnk of England is not targetting inflation but economic growth,and also monetising the UK governments unsustainable budget defecit.
Bernanke will do exactly as King has done,print and print,inflation figures will be fiddled to hide the true extent of currency debasement,and the resulting inflation will be described as temporary,seven years of 10% inflation(reported as 3-4%) will halve the government debt,but also halve peoples savings and pensions,the fact people cannot afford to buy anything with what is left of their purchasing power doesn't matter to Bernanke at this stage,he is trying to maintain the banking system that has bled the people dry so that it is still in place to start the process all over again once the debt has mostly been paid off or inflated away,then he can explode the money supply to start the economy again.
What sickens me is that he is likely to get way with it.
Ben's whole career is based on his study of the Great Depression. He once said it could be stopped this time with the printing press. That, ultimately, money could be dropped from a helicopter. So far he's only dropped it on finanical institutions--maybe that's what he meant.
Dow 10,000
Gold 10,000
Silver 500.00
The demand for gold is so LOW that its what? $250/oz less than it was just 90 days ago even though everything else (except paychecks and houses of course) is inflating.
Dow 10,000? maybe DOW 2000. As we clearly see, countries refuse to raw print money, therefore no hyperinflation, see above, etc.
Silver, see gold.
USD 10 for 1 reverse split. Post split
Gold 50/oz
Dow 500
Median House - $8500
Gasoline $.25
Median Pay - $4575.00/yr
TRAPPED!!! bitchez!
After reading the first paragraph (thusly wasting my time) I realized this person has no clue. Especially if he thinks the inflation numbers are what the propagandists tell us. Ben doesn't give a shit about inflation. He just needs the cover to print. A big October rally took away that cover. A November collapse opens that window for him.
The almighty,"Federal Reserve Banking System",... 1913 and counting has literally destroyed our country, yet we talk of it as some omnipotent entity that mysteriously saved our world!
What fools we have become,... a presidium of twelve elves answering to the head czar from the land of "OZ", that even the repressed chinese, and forelorn russian people would/ could see through if such nonsense, and twisted logic were fed to them. Yet we are the hubris, arrogant american's that find no fault for subtle opaque belligerence thrown about our lives as "God's Chosen Ancestry", not knowing who's asshole to crawl-up as the "OZ" lays waste our country! A total stranger, chosen by whom we do not question, with absolute power,... crafted, and molded for us by the Oligarchy born beneath Jekyll Island, with the full endorsement of ''Satan's Helpers" - which by the way through their MSM's, sprinkle ferry-dust ambiguity, seemingly laced with rhetorical poison enhancing our ubiquitous, xenophobia fears. Our lust for greed, wallows beneath our daily prayers for more nothingness, that beckons more of the same from the almighty "FED"!
What kind of a country have we turned into, when, "We the People" are incapable of making our own financial decisions - bringing back justice to our lost independent republic,... that has been hijacked from us. The lowly proletariat us,... now morphing into a shrinking subculture of serfdom. Ever so methodically, this metastasizing cancer we call the "FED" has delivered the near fatal and final atrophied blow of futility, once called "Freedom"!
In the first paragraph, the author states that the Fed has an "inflation mandate of 1-3%." Is this something new? I thought the Fed's mandate (by law) was price stability.
That was a point recognized by Paul Volker about 18 months ago. He was critical of that seemingly small amount of inflation proposed then and he was right to be so.
In the first paragraph, the author states that the Fed has an "inflation mandate of 1-3%." Is this something new? I thought the Fed's mandate (by law) was price stability.
I love the puzzlement. Fed, hedgies, portfolio managers, investors, politcians...all are baffled. How could MMT be failing? Why is the economy not playing by the rules? Wish I had an Eagle for every famous, high-profile investment advisor got it wrong on "inflation" or "deflation" over the last 3 years. I'd be very, very rich
The problem with the inflation analysis is the Fed does QE to support government spending. They can't stop. And they will keep giving free money to banks to prop up the system. They can't stop. They just won't tell you about it unless they want you jumping around like a kid at Christmas. Hyperinflation is unstoppable.
Federal Spending per Household Is Skyrocketing | The Heritage Foundation
…The federal government is spending more on a per-household basis than ever before. Since 1965, spending per household has grown by nearly 162 percent, from $11,431 in 1965 to $29,401 in 2010. From 2010 to 2021, it is projected to rise to $35,773, a 22 percent increase.
…U.S. Census and White House Office of Management and Budget charts show that while median household income grew 27% from 1970 to 2009 - $39,732 to $50,255 - total Federal spending grew ten times faster, or 299% - from $890 billion in 1970 to $3,551 billion in 2009.
I still can't believe people are still calling for another recession? We never left and we are now in a depression. GDP is fudged to the hilt due to funny money and ZIRP. Asset valuations are pure garbage in this manipulated and artificial environment.
Seems like the fed is already supporting market in some way? What else explains this huge rally.
Longer term the feds policies will really hurt the USD, but for now the fear in the markets will cause it to strengthen. USD strength continues. Here is an analysis of EURUSD and AUDUSD. Another push lower for both pairs before a retracement. http://bit.ly/shrytY
Fed may hibernate until spring
Just send a $600 check around tax time to every American again. That will stimulate things and shut everybody up *eyeroll*
No QE3 for sure tomorrow unless Oil down below 70. Bennana can only continue OT2, stirring Euro debt fears and SouthChinaSea conflicts.
If you mean Brent, the economy will have to be collapsing for that to happen....
The oil bears have been taken aback by the strength of the market, by all their historical metrics, oil should be plummeting, but it ain't..... and for good reason.
"However, we might get surprised by the Fed as they have done it before. The real question is even if they do something will it be enough to offset the damage that has already been done."
LOL
fed trapped? ...
Confessions of a Tooth Fairy written and performed by Kristen Wiig & Melinda Hill
http://www.youtube.com/watch?v=m72GNRrvc88
.
if the euro keeps putting off judgement day, it can't,
then the fed won't need qe 3 to weaken the dollar, it will.
imo.
.
The Deep White Space
http://www.youtube.com/watch?v=FJNnZUU1RV0&feature=related