Guest Post: Forget Gold—What Matters Is Copper

Tyler Durden's picture

Submitted by Gonzalo Lira

Forget Gold—What Matters Is Copper

People are freaking out that gold has fallen to $1,650, from its lofty highs above $1,800—they are freaking out something awful. “Gold has fallen 10%! The world is coming to an end!!!” I myself took a shellacking in gold—

—but copper is what has me worried.

Copper fell from $4.20 to $3.25—close to 25%—in about three weeks. Most of that tumble has happened in the last ten days, and what’s worrisome is that, as I write these words over the weekend, there is every indication that copper will continue its free fall come Monday.

From the numbers that I’m seeing—and from the historical fact that copper tends to fall roughly 40% from peak to trough during an American recession—there is every indication that copper could reach $2.67 in short order. And even bottom out below that—say at $2.20—before stabilizing around the $2.67 level.

But we’ll see. The price of copper is not the point of this discussion. The point of this discussion is what the price of copper means.

What it means for monetary policy.

We all know the old saying: “Copper is the only commodity with a Ph.D. in economics”, or words to the effect.

The ongoing price collapse of copper signals that the markets have collectively decided that there is going to be no resurgence of the global economies—at least not for the next 9 to 18 months. Up until now, the economic data that has been coming out over the last couple of weeks seemed to indicate that there’s going to be a double-dip—but in my mind, this fall in the price of copper confirms this notion that the general economy is going down.

And remember: Market sentiment can not only be a predictor of future economic performance, but its determinant. If today the markets feel that the economy is going to suck tomorrow, often that very sentiment is what makes the economy suck canal water.

So if copper is falling like a mo-fo—which both signals and convinces the market that the economy is gonna suck—what does this mean for monetary policy?

Prima facie, the fall in the price of copper is deflationary: Less demand means that the prices fall—meaning the dollar acquires purchasing power.

What does it mean for monetary policy that copper has fallen so low?

It means that Bernanke will carry out more “non-traditional” Federal Reserve stimulus.

Ben Bernanke is famous for being terrified of deflation—and to his particular mindset, this is a reasonable fear. More to the point, Bernanke’s deflation-phobia actually matters—because after all, he is the Chairman of the Federal Reserve. He controls U.S. monetary policy.

Deflation is supposed to be bad because it shrinks an economy. (Personally, I am more afraid of inflation than deflation: The latter is self-correcting, while the former spirals out of control and into social chaos. But that’s for some other post.)

According to the deflationary world view, falling prices oblige producers to cut back on production—which means firing workers. These fired workers—husbanding their resources during their unemployment—spend less, further contracting demand, thus putting more downward pressure on prices, forcing more producers to cut back and fire even more workers, who thus spend less—

—you get the picture: A “deflationary death spiral”, in the Deflationistas’ parlance.

This is Bernanke’s fear—and he will do anything to alleviate it. Notice: It’s not that Bernanke will do anything to alleviate deflation—he will do anything to alleviate his fear of deflation.

As copper prices continue to tumble, signaling further economic contraction, there is no question in my mind that Ben Bernanke and his Fools of the Fed will view this as evidence of looming dollar deflation.

They will do everything to stop this looming deflation. But since the “traditional” Federal Reserve tools have been used up—that is, the Fed has its rate at zero, and for all intents and purposes all of its liquidity windows open—Bernanke will have no choice but to announce some new “non-traditional” liquidity injection scheme shortly.

Thus I expect some Banana Republic money-printing scheme to be announced by the Bernankster before the end of the year—perhaps as early as this coming October. The fall in the price of copper—more than anything else—is what Benny and his Fools will be looking at, to justify this new scheme.

And my bet is, this scheme they announce will be as big—and as controversial—as QE-II.

I am giving my people at The Strategic Planning Group a detailed analysis of what has happened over the past week, and what we can expect to happen in the markets over the coming weeks. You’ll have to pay to play for that.

But insofar as my overall view of the situation is concerned, this is what I think:

Bernanke will drive a schoolbus over small children, in order to prevent his notion of deflation from coming true. This fall in the price of copper is much more relevant to his course of action as Fed Chairman than the fall in the price of gold (which was just a combination of options expiration coming up, and gold positions being sold to cover losses in other asset classes).

This dramatic fall in the price of copper signals that the markets do not believe reactivation is anywhere near eminent—not for at least 9 to 18 months.

To the traditional twin Federal Reserve mandates of price stability and full employment, Bernanke has added a third mission: That of “growing the economy”—whatever it takes, however unorthodox or reckless the measures.

Therefore, it is my estimation that very soon now—end of this year at the latest—we will have QE-infinity—and beyond!

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
no2foreclosures's picture

Gonzilla has got to worry as he is a Chilean and copper is one of Chile's biggest exports and sources of income.  What this means for the Yanks is that the thieves won't be ripping out copper wiring from abandoned homes anymore.

BTW, the only "mission" of the Bernank and the Fed is to save and enrich the banksters.  If they can appear to be doing something concurrently for the common man, well that's just an added, incidental bonus (price stability, full employment, and healthy economy).

OldTrooper's picture

What this means for the Yanks is that the thieves won't be ripping out copper wiring from abandoned homes anymore.

I beg to differ.  Let's face it - the fellows doing this aren't the sharpest tools in the shed to start with.  Do you really think these rocket scientists keep up on the price of copper?  I bet these fools will be stealing (or trying to steal) copper even if the price drops to $1.20.

http://www.youtube.com/watch?v=34gGBtkgIEQ

(Oh yeah, there are many more like this - some too graphic though)

jdrose1985's picture

They are keenly aware of the prices when they're going to the scrap yard every day.

Kinda makes sense now, right?

JW n FL's picture

 

 

Anyone! who is out creeping around a Power Sub Station in the Fucking DARK! trying to steal cooper to scrap some money together should be prayed for..

and I will tell you fucking scumbags something.. I have more tolerence of someone like that.. that you calous mother fuckers who dont have any feelings for someone that bad off.

and when the day comes.. I am NOT Hunting them! I am hunting YOU and I will give them YOUR HOUSE AND YOUR SHIT! You Fucking Spinless, Feelingless Cowards!

You deserve to get your balls cut off and fed to ya with a sledgehammer, bottom feeding gentic trash that you are.

theotheri's picture

Not from me, I'm quoting a blog poster elsewhere:

 

Gold is not a staple nor an economic necessity. “Investing” in gold is not significantly different than buying art or many types of real estate. Its success as a money-making strategy depends simply on a subsequent buyer paying more for it, with no value added, and this is what makes it a purely speculative play.
When you own a typical business, you truly own a piece of the economy because business has the capacity to genuinely create wealth i.e. labour and innovation being converted to capital. For those of us deficient in the gifts of prognostication, who cannot foresee the best times to jump in and out of speculative plays, business ownership is the safest long-term route to protecting our interests in the economy. In other words, say, if you owned shares in a broad selection of companies which provide utiltities, resources, consumer staples, and other necessities, over time your ownership of that chunk of the “economy” would not proportionally go up or down. The liquidation price for that portion of the economy, in dollars or gold or anything thing else, may fluctuate, but your fundamental proportional ownership does not. There are still risks; the goods and services which some businesses produce are more discretionary than others, and therefore more sensitive to consumer strength. By way of example, one might prioritize the average consumer’s spending in the following order: 1. Oil and toilet paper 2. Electronics 3. Gold. In other words, people will continue to spend money on oil products and toilet paper long after they don’t have any money to “invest” in gold or buy jewelery.
The capacity to create wealth through the provision of goods and services is the only benchmark of true lasting value. If you believe that you can escape the economy into gold, or that the ownership of gold can fundamentally outperform the ownership of the economy in the long term, you’re kidding yourself. And those who keep harping on about the “fiat currency Ponzi scheme” are either assuming that the only choice is between owning gold and owning dollars, or else don’t understand what an economy really is.

Dick Fitz's picture

Unfortunately fiat money distorts the economy so radically that investing in a productive business becomes speculation, no matter how in depth the due diligence. A company that looks great in one way looks shitty if inflation (which is solely a monetary phenomena- aka money printing) surges. Gold returns no interest, but if/when inflation surges, it protects cash that has been converted.

If fiat wasn't so prone to political gyration, then owning gold would be foolish. In the climate today, it is prudent to lock up capital in a value medium that will outperform any other asset or equity class, and that's gold.

Can you understand that?

FeralSerf's picture

<<If you believe that you can escape the economy into gold, or that the ownership of gold can fundamentally outperform the ownership of the economy in the long term, you’re kidding yourself.>>

In the long term, you are dead.  On a more contemporary scale, gold certainly can outperform a falling economy as a place of refuge for one's assets.   In a rising economy (which doesn't look to be likely in the near term), not so much.

Gold is capital waiting to be deployed.

My Days Are Getting Fewer's picture

Agreed.  I own much gold and am waiting to deploy the capital.

 

Please give me a couple of examples of great businesses I should build.  I am not talking about securities or drugs or washing money or running a pawn shop.

My problem is that I don't know of any.

FeralSerf's picture

If you don't mind the weather, how about furnishing services in the Bakken Williston Basin oil areas? They need lots of the ordinary stuff. I hear single wides are renting for lots. Good restaurants and recreational possibilities might be winners too. Like the Cal gold rush, sell pick axes and Hangtown fries.

lunaticfringe's picture

I am from there. The weather is nasty. The terrain not any better. But there is tons of money to be made there...any biz would work...catering to drilling rigs would be a gold mine.

Tompooz's picture

Medical Tourism is a sure winner. The overpriced specialists and hospitals in the US  are pricing themselves out of the market. Dental work for 1/10th of the US cost in the Philippines.  Combine with holidays and new wife and get some of that gold out of Uncle Sam's grasp all at once. 

agent default's picture

"Gold is not a staple nor an economic necessity."

Money is a unit of account, a medium of exchange and a medium for storing value. 

Unfortunately none of these three criteria will be met in the long run when the printing presses start rolling for real in order to inflate away the debt.  Or when the currency is devalued in order to pay down the debt.  Have no illusion about how all this debt will finally be settled.  Either they will default on the debt or default on the currency.

In a fiat currency system these two actions are essentially the same BTW.  As far a investing in gold is concerned, nobody is investing in gold in the sense you invest in equities.  It is viewed as a means to preserve value, and possibly along with silver as a medium of exchange when it all goes to shit. People are just looking for a convenient price range to buy that's all.  Why do you think the governments go after precious metals with a vengeance when things turn ugly?  Because they can substitute their paper, effectively establishing an alternative means of exchange  (bartering?) and store of value, but at the same time locking government monetary and other policies out of the real economic cycle.

Remember: If you stop using their paper you don't go bankrupt.  They do.

PS: The US already defaulted on its currency when it got off the gold standard. Everything else is an aftershock.

CapitalistRock's picture

That's not true. I don't need anyone to ever buy my gold for more than I paid. Not in real terms. In nominal terms they certainly will.

Some think you own gold to get rich. Maybe. I'll take some real added value but that isn't why people usually buy gold. You by gold to protect wealth. In real terms. Not the silly nominal terms you are confusing yourself with. Art or real estate often work just as well as gold, which is why I own some of those too.

Withdrawn Sanction's picture

"Gold is not a staple nor an economic necessity. “Investing” in gold is not significantly different than buying art or many types of real estate. Its success as a money-making strategy depends simply on a subsequent buyer paying more for it, with no value added, and this is what makes it a purely speculative play."

First of all, every investment has these attributes. As to whether there was value-added is in the eyes of the buyer. The value add may be as simple as you happen to have gold oz ready for sale at the moment I want to buy it.

But more importantly, I think a great number of people buy gold not as a pure investment play per se, but rather in the same vein as they buy fire insurance on their house. It is for protection from the tail events. Just as fire insurance protects from a loss that would be insurmountable from ordinary income, so gold protects from losses that occur when paper assets burn.

As to this last point:

"And those who keep harping on about the “fiat currency Ponzi scheme” are either assuming that the only choice is between owning gold and owning dollars, or else don’t understand what an economy really is."

Nice strawman/false dichotomy duo. While it is true that the "capacity to create wealth through the provision of goods and services is the only benchmark of true lasting value[,]" the ability to produce in an advanced division of labor economy depends critically on the presence of money--i.e., on a stable unit of account, and generally accepted medium of exchange. The less stable is the monetary medium the lower the degree of specialization that will pay.

IOW, "The division of labor is limited by the extent of the market." (Smith) The extent of the market is limited by the degree to which people can rely on trade to furnish them with the things they do NOT produce.

The extent to which people can rely on trade in turn depends crucially on the monetary system being used. A sound and stable monetary system greatly expands the temporal and spatial aspects of trade and thereby enhances economic well-being b/c people can spend time producing and trading rather than worrying about the monetary system. However, a weak and abused monetary system does the opposite.

pasttense's picture

ZH regularly runs articles on the insider selling vs insider buying--and insider selling is several hundred times as great as insider buying. This shows stocks are vastly overpriced.

Shirley Wilfahrt's picture

The Pigmen don't want the serfs creating true wealth. The "wealth" of this nation has been disassembled and shipped overseas. The pool of talent that used to run those machines is dwindling by the day.

Between the EPA, IRS, DOT, OSHA, ....WTF should anyone be surprised?

USA's biggest export....other than death/destruction/dollars....is fucking waste paper. We have become a nation of fat, lazy, stupid sheep.....just what is wanted by the Pigmen.

We are Jack's Sucking Chest Wound.

Cheers.

Bitchez.

NoClueSneaker's picture

Dunno, me thinks Americans still able to provide wonders - unfortunately all the gear stolen by pigmen.

Hunderts of thousands of square miles paved with highend mainframe computers doing two things: detonatig simulated nukes and cheatin & robbing witth HFT :-P

Somehow very communist ...

 

Putting some of mini nukes at the right places would solve the probs. Lloyds & Jamies r eager to get penetrated.

 

 

Stoploss's picture

Q:  If you purchased 10K of  gold in 2000, how much would it be worth today, 24 Sep 2011??

A:   60K

Q:  If you purchased 10K of dow componets in 2000, how much would they be worth today, 24 Sep 2011??

A:   10K

 

Yall have a nice evening now.

JW n FL's picture

 

 

You are a fucking Dumbass.. Try to pay attention and learn something.

Q. "Its success as a money-making strategy depends simply on a subsequent buyer paying more for it,"

A. Yes! Buy Low, Sell High!! just like everything else in the World. Farming, Drilling for Oil and so fucking on!

 

 Q. "with no value added,"

A. You are correct that the Holder of the Metal (if no improvemens are made, Bullion to Jewelry and / or other) makes no changes or improvements the Value should stay close to the purchase price in the short term.

BUT!! and there always is. It is NOT! the Holder of the Metal effecting / affecting the Price. Monetary Policy changes the Price. The Federal Reserve Printing More and More and More and More and More and More MONEY!! is what causes the Paper (fiat) price to increase. The Gold does Nothing. The FED Printing more paper and thusly de-valuing the paper thru expansion or growing the size of the float is what Drives the Price of Gold or PM's.

*** Note: Silver has outperformed Gold and will continue too, it is more scarce and the above ground supply would take a 100 years to catch up and be even with Gold.. and the uses are FAR! more wide spread.

 

Q. "and this is what makes it a purely speculative play."

A. When you take you fat ugly wife that has a Porn-Stash to dinner it is a speculative play.

 

 

CD's picture

Being right for the wrong reason is just as bad as being utterly wrong. 

"This fall in the price of copper is much more relevant to his course of action as Fed Chairman than the fall in the price of gold (which was just a combination of options expiration coming up, and gold positions being sold to cover losses in other asset classes)."

Yes, BSB will print. Yes, deflation or even the fear of it is to be avoided at all costs in his book. But GL really needs to take his head out of his ass, if only briefly. 

"there is going to be no resurgence of the global economies—at least not for the next 9 to 18 months. Up until now, the economic data that has been coming out over the last couple of weeks seemed to indicate that there’s going to be a double-dip—but in my mind, this fall in the price of copper confirms this notion that the general economy is goingdown."

You acknowledge that as the head of the FRB, BSB is in control? (Very wrong assumption on many levels, but let's get past that for now). Given that assumption, do you really think he does not KNOW the above, and didn't know until he saw the price in USD of copper decline so much? I'm sorry dude, but that's just plain silly. GL with your SPG.

FeralSerf's picture

<<Being right for the wrong reason is just as bad as being utterly wrong. >>

 

Not necessarily so -- it's often cheaper!

Libertarian777's picture

I find it interesting that Keynsian economists and others always talk about the 'death spiral' when talking about deflationary forces, yet for our ENTIRE history, technology has been the greatest deflationary force out there (a slowdown in population growth in developed countries being the other).

I fail to see how the fact that fewer people can farm and thus food costs < 10% of the average wage vs > 40% a few decades ago, is BAD

And therein lies the truth.

With a (naturally) deflationary economy (technological progression), DEBT is not necessary, but in a debt-free world, there is no ability for a central economic planning council (central bank / government or whatever else) being able to insidiously tax people through debasement of the currency, and in fact will require visible taxation. Hence, as Bernake had mentioned in a prior testimony to congress, without debt, there would be no 'money' (as he understands it).

Think about deflation from an average 'normal' person's point of view. Money you save today, even if you earn zero interest, is worth more tomorrow. It won't stop you from buying necessities, but it will make you think twice about buying crap from China. People will still buy iPads now even though cheaper versions will come out later.

Now think from a wage point of view, in a deflationary environment, my wage never goes up, but my purchasing power does. However progressive taxes don't work in a deflationary environment, and neither do capital gains taxes or taxes on real assets.

So deflation is, for main street, the best thing since the industrial revolution, for wall street and the central economic planners, deflation equates to loss of control.

Dick Fitz's picture

Excellent point, Lib7777

In a non-fiat world, interest rates (set by the market) would be low, but steady deflation would result in a gradual rise in living standards for all.
Gold "hoarding" would be a rare phenom, and productive capital would put to use more efficiently.

dalkrin's picture

Ah, to be able to return to a smurf-like medieval society where the pressures of modern inflation, forcing us to work, constantly stressed about the rat race, would be non-existent.  Everyone would be in a state of contentment, there would be no want, or poverty.  Now that was the Garden of Eden.

chirobliss's picture

+10. An articulate, thinking libertarian. Whodda thunk.

MiloKhan's picture

Exactly. People often say that deflation is terrible for debtors, but the opposite is true in that inflation is very bad for net creditors (and anyone who saves). Inflation is a giant transfer of wealth from those who have money to those who don't.

I seriously do not understand how, say, a 1% annual rate of deflation can be so catastrophic. Yes, it may result in less investment in some areas because rates of return need to be higher for an investment to be worth making, but that is not a bad thing. People have gotten so used to money flowing freely that a lot of it ends up going to shitty investments, and when those go bad much wealth is destroyed.

On a related note: one big reason why so many things are financed through debt also has to do with the favorable treatment it gets in our tax code as opposed to equity financing. If this advantage was neutralized, a lot more investments would be financed by equity rather than by debt. I say change the tax code so that there is no longer a bias in favor of borrowing money for everything; we really should not be subsidizing that.

Sure, it changes the way a lot of business investments are done, but you simply would have to share future profits rather than promise interest, and if equity based income was taxed much less than it is now it would be a lot more appealing for investors as well. Yes, people would have to do more due diligence and use their common sense and brains to figure out if an investment is good, but that's not too much to expect, is it?

dalkrin's picture

Much notice has gone to the 20 year now "Lost Decade" experienced by Japan, among which woes are deflation.  Yet in terms of living standards, have they really decreased?  In terms of technology, I am sure the present is immeasurably better than that surveyed in 1990.  So what is the problem?  In truth, there is not one Japan, but 120 million individual Japans being experienced.

Trimmed Hedge's picture

"Much notice has gone to the 20 year now "Lost Decade" experienced by Japan, among which woes are deflation.  Yet in terms of living standards, have they really decreased?"

 

Yes.

Via Fukushima.

Vlad Tepid's picture

Had some whackjob jump on me on another thread the other day for pointing out the same thing.  It is a very important point and you make it well.  When my co-commentor makes a crack about Fukushima, the truth is the stardard of living has not been reduced below 1990s level except for the people living in the tsunami zone.  While fishermen may need to find work elsewhere, tsunami damage will soon be fully repaired.  The nuclear accident is an ongoing decades long tragedy but people will move out of the affected zones and resume their (high) standard of living in an area slightly removed from Fukushima's ground zero.

Your last sentence was a great one. I hope some will stop shouting (to themselves) that Japan will be a depopulated wasteland long enough to read your post.

duckhook's picture

It is  adisaster for the largest creditors >And who are the largest debtor.The USA 

Withdrawn Sanction's picture

"I fail to see how the fact that fewer people can farm and thus food costs < 10% of the average wage vs > 40% a few decades ago, is BAD"

It isn't bad, and it isn't deflation either. "Deflation" when the term is used properly, is reserved for a contraction of money and credit relative to goods and services such that prices fall (or money gains in purchasing power, take your pick). Such a process usually results from widespread bankruptcies and business failures.

The falling prices you allude to in the agricultural example, result from greater productivity (i.e., from an increase in supply). More stuff at lower prices = good.

In short, both INflation and DEflation are monetary phenomena. Price changes are their Effects not their causes.

DCFusor's picture

There is, however, an endgame, and some deflationary forces are taking us there.  It's near the point where full employment in value creating jobs is impossible.  It just doesn't take all of us working to make the amount of "stuff" we all want.  Under our semi-capitalist system, we don't have ways to handle those who can't justify their existance by doing productive work very well.  Yes, we hire marketing guys, lawyers, people to shuffle papers and get coffee when times are good, but when the rubber hits the road, like now - a lotta people find no one has any interest in some of those skills.  And those who do produce don't much like paying for the safety net for those that don't -- I'm one of them, but it seems cheaper (at least, less stressful and messy) than shooting people for trying to steal your food and so on.

We can't quite get there.  At the point the one big robotic factory makes everything everyone needs -- the capitalist motivation for building it disappears, because there's no way to reward the guy who builds that factory.  And we're bumping up against it now -- note all the lawsuits and M&A that don't increase the size of any pie, but just try to steal a bigger slice of the same one?  That's the symptom.  The Star Trek universe would be nice, but human nature prevents us getting there, sigh.

Been thinking about this a lot, and so have a lot of other smart people.  No answer yet that can't be picked apart in seconds by someone else smart, sad to say.  That pesky human nature can't be changed much if at all, despite what our "conditioners" think, and it gets in the way real bad at some point in every scheme that looks any good.

chindit13's picture

It just doesn't take all of us working to make the amount of "stuff" we all want.

Bingo!  Therein lies the intractable problem.  It also gets worse if we suddenly decide we no longer want what we want.  Perhaps the next Messiah will be an anti-Tom Peters and we will all praise inefficiency.  I often think the entire debt bubble was allowed merely to keep the game going, by creating demand for bigger houses filled with more "stuff".  Of course other than no arbitrageable labor, we moved everyone to China and India, creating in those countries dreams and expectations that cannot help but be dashed.

In the nation of my current residence, we embrace inefficiency with a cultural passion.  Most stores regularly have five times as many staff as customers.  It makes an Apple Store look as if they need to hang a "Help Wanted" sign.  A golf course where I like to practice my multi-lingual cussin' has hundreds of workers, some even weeding the greens by hand.  As a lad I spents summers as a greenskeeper on a regulation size course in the US.  We had a staff of eight.  Farming is done the old way, with an ox pulling a wood and steel plow.  Tilling an acre, with tea breaks and snake warnings, is a multi-day job.  Refurbished roads are tamped by an army of men carrying hand tampers, which is a bamboo pole attached to a flat piece of steel.  No steamrollers needed, and the work is so poorly done that there's pot holes aplenty to fill in two weeks' time.

Maybe I am seeing the future by seeing our past, or their present here.

Saxxon's picture

"Hence, as Bernake had mentioned in a prior testimony to congress, without debt, there would be no 'money' (as he understands it)."

This just demonstrates yet again what people like the Bernank and his cartel are; a pit of blood-rasping vipers, seamlessly programmed without a human conscience.

superuser's picture

Why wouldn't wages also deflate along with prices? Doesn't seem like the math squares at the business level, let alone that this scenario flies in the face of capitalism as it is manifested today

LongBalls's picture

Education at its finest. You sir, are in danger of providing substance to society. Now try to put it on a bumper sticker so the sheep can understand.

bardian's picture

I fail to see how the fact that fewer people can farm and thus food costs < 10% of the average wage vs > 40% a few decades ago, is BAD

DING DING DING!!

I read your post before your name.  Thank you for correctly articulating the mechanism of economic progression, which, once understood, obligates one to libertarianism.

Economic progression IS increased real wealth.

Increasing real wealth IS decreased cost of living relative to wages.

How does this happen? Savings and investment leads to increased capital leads to increased productivity.

 


Fake Jim Quinn's picture

There are two types of deflations. Good deflation is when technology increases productivity and costs fall. Bad deflation is when shop owners are going broke and dumping goods on the market. I don't think the Fed distinguishes well enough between these two. They apply a "one-size-fits-all" approach. But that would not surprise any ZH reader. Until the Fed makes the difference, they'll keep printing

mjk0259's picture

"Now think from a wage point of view, in a deflationary environment, my wage never goes up, but my purchasing power does. However progressive taxes don't work in a deflationary environment, and neither do capital gains taxes or taxes on real assets."

 

Not so, wages go down in both nominal and real terms. When I started working at a real job, we had free medical, pension, and got paid for overtime.

Now, I have to work 60 hours a week but only get paid for 40. No pension. Medical costs me about as much as if I just paid it myself.  I'm still better off then at least 80% of country despite the constant threats to outsource my job to India.

knukles's picture

 

 

 

 

Print print print print Nothin has changed
Print print print print Cept getting worse
Print print print print Get us outa this mess
Print print print print Be like a nurse
Print print print print Make like good
Print print print print Make like adult
Print print print print Print lots of money
Print print print print So Greece don't default
Print print print print Protect the banks
Print print print print Politicians too
Print print print print It's Joe Public
Print print print print Whose gonna get screwed

Cognitive Dissonance's picture

Sorry. I don't think I understand. Are you suggesting that there might be some printing in our future? :>)

agent default's picture

In our grim dark future lies only ink.

PrintHammer 40K

MsCreant's picture

I saw the other version first. I was posting to let you know there was a koan in there.

What is printing? What does it mean to print? What are some of the ways we use the term? Can't decide if it is Zen or Post modern, both or neither, but something else.

Cultural reproduction. Petri dish, virus, you feeling my weird sick game here?

Print print print print 
Print print print print 
Print print print print 
Print print print print
Print print print print 
Print print print print 
Print print print print 
Print print print print 
Print print print print 
Print print print print 
Print print print print 
Print print print print 

subqtaneous's picture

just 4 u, mscreature: http://youtu.be/xOCceWqy76g

 

can't tell 'em apart --- ;-)

 

FeralSerf's picture

Isn't that a command in Fortran?

The PRINT statement writes the string in quotes to the standard output channel, e.g. the display terminal.

knukles's picture

Post-modern, pre-apocolyptic faux, early Filipino seashell enhanced collateral excess fiat printing.
That or Ben's beard trimmings.

jm's picture

How about everyone look at rising LIBOR as a signal of rising real interest rates.  Then look at Fed balance sheet expansion coming to an end for a while.  These two things tell the story of gold like Mayweather clocking Ortiz.