Things That Make You Go Hmmm - Such As The Global Central Planning Groundhog Day

Tyler Durden's picture

Grant Williams submits his latest weekly thoughts on the big picture.

February 2012 finds the world in its own timeloop as we remain trapped in our very own Groundhog Day watching politicians try endless new and inventive ways to ‘fix’ a simple problem of way, WAY too much debt. It isn’t complicated. The world grew fat and happy on the sugar rush provided by a decades-long injection of cheap and easy credit and now it’s time for the crash diet. Trying to avoid the ‘crash’ seems to be uppermost in everybody’s mind.


Since 2008 and the bursting of the great credit bubble, central banks have been printing money hand over fist in a desperate attempt to generate the inflation they feel is necessary to drag the world out of a perceived deflationary spiral. The chart (left) shows the growth in ‘assets’ of G-3 Central Banks over the last 17 months alone, during which time, they have increased by 32%.

To date, the level of the various benchmark CPI indicators would suggest there have been no deleterious effects, but just because the results aren’t showing up where those in charge of measuring them are LOOKING, doesn’t  mean they aren’t showing up at all.

Look at food prices across Asia. Look at housing prices in Hong Kong. Look at fuel prices in Nigeria. Look at heating costs in the UK.

Look at gold.

Targeting inflation is a dangerous game to play because - well, because it is impossible. You cannot target ‘inflation’ per se, only a specific measure of a specific collection of items, and the wider that collection of items is, the harder you make it for yourself. But despite what seems fairly obvious to many - namely that ‘inflation’ cannot be finely controlled by setting interest rates (though, if caught in time and tackled aggressively enough it can sometimes betamed as Paul Volcker demonstrated), the minds in charge of setting policy have a peculiar attitude towards something that is so imprecise and so multi-faceted. The general level of certainty surrounding interest rate policy, quantitative easing and inflation amongst Central Bankers is a constant source of amazement to me.

The playbook for the game we are playing now was drawn up a long time ago and we can’t say we weren’t shown what lay between the covers.

As far back as November 2002, when Bailabankout Ben made his seminal speech to the National Economists’ Club, we were told how this was going to play out.

Firstly, the title:

Deflation: Making Sure “It” Doesn’t Happen Here

‘Sure’? Hard to see how you can be ‘sure’ Ben, but OK.

Secondly, this famous nugget with which most of you are no doubt familiar:

“The conclusion that deflation is always reversible under a fiat money system follows from basic economic reasoning.”

‘Always’. ‘Basic economic reasoning’.

Thirdly, the big one:

...the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation...

And finally, this little nugget

If we do fall into deflation, however, we can take comfort that the logic of the printing press example must assert itself, and sufficient injections of money will ultimately always reverse a deflation.

Three quotes. Three uses of the word ‘always’.

If something is ‘always’ guaranteed to work, you just keep doing it until you get the result you expected, right.


The inflation warning light that is built into the gold price has been flashing non-stop for eleven straight years and, after the short-lived and, yes I’ll say it, somewhat suspicious-looking correction in December, gold has resumed its inexorable march higher this year amidst a wave of predictions for both high and higher prices and further inflationary action by the ECB in the form of the LTRO along with consistent and concerted talk of the need to generate inflation by the world’s other Central Banks.

(Incidentally, the recent announcement by the FOMC that they would keep their low rate policy for ANOTHER year - out to 2014 - struck me as incredibly strange. The only possible reason for doing that, in my mind at least, would be to fire a shot across the bow of other Central Banks hell-bent on debasing their currencies in the face of a strengthening dollar. That is NOT something Bailabankout Ben is about to sit quietly and let happen. In fact, a case could be quite easily made for QE3 being not necessarily triggered by poor economic numbers, but by a strengthening dollar - but more of that another time).

Gold is most certainly NOT signalling a nice 2% rise in inflation as its gains since 2000 demonstrate.

Full latest TTMYGH report below (pdf):


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SGS's picture

Gold who? That relic metal?

Michael's picture

The words "Bag Holders" comes to mind.

akak's picture

Shhhhh, don't tell Trav --- apparently, in his universe, the word "bagholder" can only possibly relate to those who hold silver (and somehow, regardless of when or at what price they purchased it).

Thomas's picture

Well ya can't eat it.

ChrisFromMorningside's picture

You can but you'll turn a nice shade of blue-grey.

DoChenRollingBearing's picture

And it only costs $5.00 / oz to get it out of the ground.  Or was that gold?

ike's picture

I have one email account that I use JUST to register to Peter Schiff mailing list!

And I got email from Rick Santorum. So Peter is supporting Rick

i-dog's picture

It doesn't surprise me at all. From the way Schiff behaved during his recent senate campaign, I don't trust him one inch any more. He's only in it for the money (though he does make many valid points in general).

Sam Clemons's picture

Met him once.  Could not agree more.  On point for ideas, but his personality leaves something to be desired.

Davalicious's picture

Peter Schiff is Jewish. Jews will naturally want to have a foot hold in all camps, so there will be those fighting for and, apparently, against the status quo. When the dust settles there will be plenty of Jews in the winning camp, and they will open the door to the rest.

Vlad Tepid's picture

Not that my comment is worth any more than yours but I met him once too (at a hard money conference a few years back) and I found him to be engaging, friendly and informative.  So there you go.  Every one is entitled to off days.

Mr Lennon Hendrix's picture

Inflating gold, it's tradition, bitchez!

akak's picture


Gold is most certainly NOT signalling a nice 2% rise in inflation as its gains since 2000 demonstrate.

Need more be said than this?

Apparently, to the clueless deflationary flat-earthers, there is --- but that is, and will be, their problem, NOT mine.  Let them sit in vain waiting for their magical appreciating fiat currency, nervously biting their nails as gold, silver, food and petroleum all continue relentlessly rising in price, and the dollar (and every other fiat currency) continues to lose purchasing power.

I can just hear them now: "Next year in (deflationary) Jerusalem!"

And next year, and the year after that, and the year after that .....

seek's picture

I ran across this link recently, which is pretty clearly anti-deflation:

Basically the fellow has a stock list for a one-year supply of long-shelf-life food, every year he gets new pricing info, make adjustments for calories and package size changes, and documents every single detail. The cost of feeding an adult with very basic foods is up 33% in four years. So not the same rise as gold has seen, but the cumulative CPI over the past four years is nowhere near 33%, even though we all know both food and gas has gone up by massive amounts. I think it's just that gold is an immediate leading indicator and the food pricing follows with a delay, which suggests things will be ugly a year from now.

This is obviously by intent, saving banks by hiding inflation. Clearly cost-push, rather than demand-pull inflation, and caused by dollar devaluation.

There's lots of interesting tidbits from the link -- like tomato sauce suddenly losing 160 calories per same-sized can, and going from thick sauce to water as the producer dilutes it while maintaining the same price.

Matt's picture

Deflation is occuring in all sorts of places. $5 toaster, $8 coffee maker, $2000 houses. Automobiles seem to be quite a bit more affordable than in 2007.

Food and Energy relentlessly march onwards to higher prices, but there's a few things to look at there. Food is essentially a derivative of oil, since oil is used to make the fertilizers, transport them, to sow the seeds, to dispense the pesticides, to harvest, refrigerate, transport the food to market.

Rising oil prices are affected by several factors, including currency depreciation (the money printing), the desire for oil producing countries to have higher prices, and possible declines in supply, as well as security and geopolitical issues.

Outside of food, oil, silver and gold, what else is getting more expensive?   

Thomas's picture

Don't be faked out by the reduction in quality. Accelerated depreciation rates have to be factored into price. A toaster that lasts 20% the life expectancy of its predecessors requires a fivefold multiplier on its price (per unit of usage). 

seek's picture

Exactly, producers are cutting whereever they can. Interestingly, many don't actually want to do so, but are forced into quality cuts by the stores, notably Walmart. This story from last year presents the issue pretty well:

It cites a study that basically shows how killing quality results in lower costs, but also competitively enables Walmart because of how the economies of scale work against stores that actually want to sell quality goods, dragging everything down.


Sam Clemons's picture

College and bailout costs.

Manthong's picture

"Outside of food, oil, silver and gold, what else is getting more expensive? "

The most expendable item.. government.

ChrisFromMorningside's picture

The welfare state. America's military and the global empire it supports. The public sector in general. Education. Housing costs have remained remarkably static in many metro areas (not including Las Vegas, Phoenix and a few other epicenters) despite a huge overstock.


Strike Back's picture

Anything that the government has a hand in.  Medicine and war come to mind. 

Sandmann's picture

Outside of food, oil, silver and gold, what else is getting more expensive?  

Lawyers Fees. Medical bills. Taxes. Car Repairs. Paper. Hard Drives. Bank Loans. Prime Real Estate. DVDs. Fencing Panels. Wood. Property Taxes.

akak's picture

Outside of houses and increasingly low-quality Chinese-made crap, what is getting cheaper?


(Aside from the idiotic rhetoric of the clueless and/or disingenuous deflationists, that is.)

AnAnonymous's picture

$2000 houses.


Going for the jugular. Tough.

So as the RE bubble was meant to increase the housing inventory and keep US citizens in their way of life, meaning that hardwork should allow you to buy a house later in life, so what, it means that the US elite has well served the base with what the base desires?

Come on, it is well known that in US citizenism, the elite does not work hand in hand with the base but wants to destroy it.

US citizens always tell there is conspirational elites everywhere wanting to kill them.

akak's picture

Make me laugh!

Here once again we have the Chinese citizen troll, spreading the anti-American propaganda of nose-picking, roadside-shitting Chinese citizenism.

Not content with invading, conquering and raping Tibet, Chinese citizens and their running dog imperialism now look with greedy eyes at the independent republic of Taiwan, and eventually to the entire rest of the world.

Chinese citizens are always invading, conquering, exploiting, destroying and blobbing up.

Destroying their own environment is not enough for Chinese citizens, as Chinese citizenism demands that their toxic environmental destruction be spread and blob up the entire earth, all to build empty ghost cities to celebrate the perversion of Chinese citizenism.

It is the eternal nature of Chinese citizens to spit, pick their noses and blob up.


PS: Shouldn't you be working on the sequel to your "Little Red Book", Chairman Maose?  Or does Chinese citizenism spamming simply take up too much of your time?

AnAnonymous's picture

Tibet is 1950.

Justifying every US citizen move thanks to Tibet is childish and dangerous.

Consider, US citizenism is conquering China. Just like the rest of the world.

As the current strand of US citizens indulge itself in justifying everything through Tibet, the potential for the US citizen newcomers grows geometrically.

Same stuff as usual. US citizens behave the same, correction is situational.

In banking, they call it fractional reserve.

In war, they will call it what they call.

Same method.

US citizenism all the way.

akak's picture

Chinese sanitation and hygiene is 1350.

As the current strand of running dog Chinese citizenism attempts to justify itself, and deny its own existence, it continues to encourage animal-like, rabbit-breeding Chinese citizens to spit in public, pick their noses and shit on the roadsides. 

Such is the 'advanced" and "cultured" nature of Chinese citizenism.

Even as dozens of empty ghost cities rise to the skies, and the formerly free people of Tibet are genocided into extinction and their land colonized by Chinese citizenism blobbing up, Chinese citizens continue to spit, pick their noses and shit on the roadsides.

This is called barbarism.

Barbarism and blobbing up are synonymous with Chinese citizenism.

AnAnonymous's picture

formerly free people of Tibet


Free people of Tibet? US citizenism way then.

Tibetans maintained a system of slavery. Slavery is not freedom, contrary to US citizenism cheap propaganda.

They also had an extended network of children abduction to feed the monasteries.

A system that China curbed without eliminating since abduction keeps going on in Tibet for the same reasons.

Only a US citizen can see freedom in Tibet.

Hey, usually, US citizens of A has no issue when referring to their country back in the eighteenth, 19th century as a free country while being obviously a slaver country.

US citizenism is as US citizen does.

akak's picture

Make me laugh, chinese troll!

More lies from the Chinese citizenism troll.

Tibet was completely free, and did NOT practice slavery, before the cruel, unjustified and monstrous Chinese citizens invasion of 1950.

Tibet was an independent nation for centuries, living in harmony and utterly unwarlike, until the Chinese crypto-fascists under Mousy Tongue invaded their peace-loving nation and proceeded to colonize, exploit, rape, destroy the environment, kill the Tibetans and otherwise blob up.

The entire world condemned the crypto-fascist running dog Chinese imperialists for their criminal invasion of Tibet, but to no avail --- Chinese citizenism recognizes nothing but its own short-sighted greed.

Like the Old Prussians under the cruel Teutonic Knights, the racially arrogant Chinese will one day appropriate the name "Tibetans" even as they kill off the last real such people.  Such is the nature of rapacious Chinese citizenism.

But one day, the world will turn against Chinese citizenism, and they will pay for their crimes, and for shitting on the roadsides too.

akak's picture

I do not have the time to wait for your reply, Chinese citizenism citizen, as I know that your spitting and nose-picking will take some time before you can respond.  For all I know, you are looking for a roadside to shit on as well.

But be aware that we all recognize you for what you are, an evil and disingenuous Chinese citizenism citizen, and nobody believes your bigoted lies about Tibet, your anti-Americanism, or your untruthful blobbing up.

We are free of you and your crypto-fascist running dog imperialist masters in Beijing.  Chinese citizenism will be defeated and wiped out, much as you defeated and are wiping out the poor innocent Tibetans in your Chinese citizenism greed.

We shall overcome Chinese citizenism.

jimmyjames's picture

Gold is most certainly NOT signalling a nice 2% rise in inflation as its gains since 2000 demonstrate.

Need more be said than this?

Apparently, to the clueless deflationary flat-earthers, there is --- but that is, and will be, their problem, NOT mine.


Obviously gold is not signalling inflation-otherwise it would be going down-not up-

Gold is signalling the same thing now as it was in 2001-

Credit risk ie: Deflation risk-

Here's what gold does during inflation-unless you think we had deflation from 1980-2001-

I think you have it completely assbackwards and if you care to show me wrong with some data that proves it-fine-otherwise you're just theorizing -

j.darkness's picture

Akak, please help me to understand, because while I agree that there is plenty of inflation going around, I also think that the credit bubble is being artificially inflated even though it has been burst.  At some point CB techniques will fail to blow hot air into the bubble and/or the hole will enlarge and no amount of hot air can sustain it.  At that point doesn't all credit disentigrate and we have massive deflationiary death spiral?  I feel that at some point the global ponzie will collapse under its own complexity and we will be left with whatever is in the near field grasp.  Do you think that before we get to the collapse we will hyperinflate?  Will it then collapse?  Either way we are screwed but the preparations are different and I am trying to best prepare.  Thanks in advance for any insight. -j.d

kill switch's picture

ZH is highlighted in this incredible video!!! Fold up the tents,,,time to get out of town!!!

Dapper Dan's picture

That G3 chart looks like K2, were gonna need more oxygen,

On second thought it looks like a ten year Gold chart !!!


Mr Lennon Hendrix's picture

Huh, I wonder why that is?


mariner22's picture

Clint Eastwood making commercials about hardships in the motor city for a company bailed out with billions of US taxpayer funds to help FIAT shareholders beat Ford. Is nothing sacred?

Alea Iactaest's picture

Certainly not if you were a GM bond holder.

oldman's picture

What a great idea!!!!

Clint for president!!!!


What will I think of next?????


or bill clinton?                       om

don't say that---you know I don't vote!

Mike North's picture

Bill had his turn. It's Hillary next then Jeb then Chelsea then I guess the first twin presidents.

economics1996's picture

Mochella Obama for President.

economics1996's picture

Whoever voted me down it was a bad joke.

Mike North's picture

Wasn't me. I'm not American so I think it would be funny as hell if she was president. Ross Perot level of funny. Just think of the state of the union speech.

UP Forester's picture

Would she make a "Giant Sucking Sound," or just suck?

Transformer's picture

Everything Ross Perot predicted, has now come true.

Theta_Burn's picture

Thanks for typing that for me