Purchasing Power

smartknowledgeu's picture

Governments Worldwide are Implementing Orwellian Gold Confiscation Today. You Just Haven’t Realized it Yet.





Bankers have turned the paradigm of monetary truth upside down. People believe in fiat paper & digital money that is counterfeit and have always ended up in massive collapse to their intrinsic value of zero, and have zero belief in real money, like physical gold and silver, that has served civilizations as money and kept price indexes constant and stable for over 5,000 years.

 
Tyler Durden's picture

Guest Post: The Number 1 Problem When Owning Gold





In official testimony before Congress in December 1912, just three months before his death, J.P. Morgan stated quite plainly: "[Credit] is not the money itself. Money is gold, and nothing else." Of course, this testimony came only 253 days before H.R. 7837, better known as the Federal Reserve Act, was introduced on the floor of Congress. The Federal Reserve Act went on to become law and pave the way for the perpetual fraud of fiat currency which underpins our modern financial system. And if unbacked paper currency isn't bad enough, we award dictatorial control of the money supply to a tiny handful of people, and then simply trust them to be good guys. Owning gold is the same as voting against this system, turning your paper currency into something that they cannot inflate or conjure out of thin air. Yet there's one problem.

 
Tyler Durden's picture

Chart Of The Day: The Minimum-Wage (Non) Recovery





Yesterday we showed all those key economic criteria (that get so little airtime for obvious reasons), which were prevalent the last time the Dow Jones Industrial Average hit an all time high, back in 2007, all of which reflected a far more vibrant economy, and more importantly, an economy, and market, not propped up by a $14 trillion global central bank liquidity tsunami. Today, our chart of the day comes from BloombergBrief, which shows yet another aspect of the "low wage" recovery, namely that while the bulk of the jobs lost heading into the "recovery" were of middle and higher paying jobs, the offset have been part-time and other low-paying jobs, which explains also why the purchasing power of the average American, in real terms, declines with every passing day.

 
Tyler Durden's picture

Guest Post: The Hollowing Out Of Private-Sector Employment





The following five charts reflect the hollowing out of the private-sector employment. This has profound implications for education, taxes, housing and inequality. What no one dares admit is that the U.S. economy is burdened by overcapacity (too many malls, restaurants, MRI machines, etc.) and too much debt, much of which was taken on to fund mal-investments. We suffer from a systemic failure of imagination. The financial and political Aristocracy that rules the neofeudal, financialized economy have no other model other than debt-based misallocation of capital and endless growth of debt-based consumption. That this model is broken and cannot possibly get us where we need to go does not matter; they will continue to do more of what's failed because they have no alternative model that leaves their power and wealth intact.

 
Tyler Durden's picture

Guest Post: Understanding Failed Policies: Wealth Effect, Wage Effect, Poverty Effect





Central bankers have been counting on "the wealth effect" to lift their economies out of the post-2009 global meltdown slump. The wealth effect concept is simple: flooding the economy with credit and zero-interest money boosts the value of assets such as housing, stocks and bonds. Those owning the assets feel wealthier, and thus more inclined to borrow and spend more money. This new spending creates more demand which then leads employers to hire more employees. Unfortunately for the bottom 90% who don't own enough stocks to feel any wealth effect, the central bankers got it wrong: wages don't rise as a result of the wealth effect, they rise from an increased production of goods and services. Despite unprecedented money-printing, zero interest rates and vast credit expansion, real wages have declined.

 
Tyler Durden's picture

Guest Post: Playing Financial Chicken In Your Golden Years





My generation, born during or near post World War II, has been quite fortunate. Those of us lucky to have been born in the US during this period hit a sweet spot of both place and history. The economy thrived, standards of living soared and many avoided the numerous wars that dominated the Twentieth Century. Today, the future does not look so bright. Economies are stagnant, standards of living are declining and the threats of war increase. Younger generations will have more difficult lives than my generation. Life has its own ways of ensuring that TANSTAAFL (“There ain’t no such thing as a free lunch”) is enforced. My twilight years now present major challenges. Because high inflation and a market collapse are real possibilities, I (and millions of others who believe similarly) am forced into playing the wildly dangerous game of financial chicken. When we should be enjoying our retirement and grandchildren, government has forced us to take risks that even wild teenagers likely would avoid.

 
Tyler Durden's picture

Guest Post: 16 Signs That The Middle Class Is Running Out Of Money





Is "discretionary income" rapidly becoming a thing of the past for most American families?  Right now, there are a lot of signs that we are on the verge of a nightmarish consumer spending drought.  Incomes are down, taxes are up, many large retail chains are deeply struggling because of the lack of customers, and at this point nearly a quarter of all Americans have more credit card debt than money in the bank.  Considering the fact that consumer spending is such a large percentage of the U.S. economy, that is very bad news.  How will we ever have a sustained economic recovery if consumers don't have much money to spend?  Well, the truth is that we aren't ever going to have a sustained economic recovery.  In fact, this debt-fueled bubble of false hope that we are experiencing right now is as good as things are going to get.  Things are going to go downhill from here, and if you think that consumer spending is bad now, just wait until you see what happens over the next several years. The following are 16 signs that the middle class is rapidly running out of money...

 
Tyler Durden's picture

Guest Post: Programs That Should Be Cut - But Won’t Be Cut - From The Federal Budget





Washington is laying on the malaise pretty thick lately over automatic budget cuts set to take effect in March, with admonitions and partisan attacks galore.  Of course, those of us who are educated in the finer points of our corrupt puppet government are well aware that the public debate between Democrats and Republicans amounts to nothing more than a farcical battle of Rock’Em Sock’Em Robots with only one set of hands behind the controls.  The reality is, their decisions are scripted, their votes are purchased, and they knew months ago exactly how America’s fiscal cliff situation would progress.  The drama that now ensues on the hill is meant for OUR benefit and distraction, and no one else. There are plenty of irrelevant federal appendages out there that could be amputated, but probably won’t be, while other more useful programs will come under fire.  In the end, the budget cuts are not about saving money; they are about social maneuvering and political gain.  They will be used as an excuse for everything, and will produce nothing favorable, not because cuts are not needed, but because the people in charge of them are not trustworthy.

 
Tyler Durden's picture

Consumer Taps Out As Income Plunges By Most In 20 Years: Savings Rate Crashes To 2007 Levels





When the US income and spending figures for December came out, the punditry couldn't contain their exuberance following the massive surge in income which as we explained was merely a function of the pulled forward wages and bonuses in December due to fears of what the Fiscal Cliff and the expiration of the payroll tax cut would do to incomes in 2013 (nothing good), as well as a surge in stock dividends to avoid a dividend tax hike resulting in yet another boost in income. The spike in personal income without an offset in spending sent the savings rate to the highest in three years. Today it's payback time as moments ago we learned that the US consumer gave back all the December gains and then much following news that while spending did nothing, and came in as expected at 0.2%, personal income imploded by 3.6% on estimates of a modest 2.4% drop. This was the biggest drop in personal income in 20 years just as the US consumer's confidence was soaring at least according to such manipulated aggregators as UMich. What this also led to was that not only is the stock market back to 2007 levels, but so is the personal saving rate, which crashed from 6.4% to 2.4%, the lowest since November 2007, and leaving Americans with the least purchasing power just as the full impact of a government that is flirting with austerity is starting to be felt.  And just as bad was the material 4% pullback in real disposable personal income or adjusted for inflation.  "Consumers can’t spend what they don’t have, and they don’t much much,” summarized Bloomberg economist Rich Yamarone.

 
Tyler Durden's picture

A Century Of French And Italian Economic Decline





Europe's dual problems of low growth and weak profit margins combined with this week's vote in Italy are likely to usher in another period of European underperformance, but as JPMorgan's Michael Cembalest notes, that is the least of it as Italy overtook Japan with the worst real GDP growth of all advanced economies since 1991. In fact, other than wartime, the last few years in Italy have been the worst for growth since Italian unification in 1861. But, before the rest of Europe gloats that 'they are not Italy, or Greece', he reminds us that the slowness of French GDP growth in recent years is the slowest in over 80 years. As he warns, all things considered, from an investment standpoint, caution continues to be warranted as problems appear to be taking their toll on EU profitability.

 
Tyler Durden's picture

The Starbucks Index - Coffee Price Parity





Despite Abe's protestations, it would appear - from WSJ's index of Starbucks coffee prices around the world - that Japan's currency 'value' is similar to the US while it is Mr. Hollande (in France) that has more reason to hope for a currency devaluation in his country. With India and Mexico showing the lowest price for a grande latte (suggesting undervalued currencies), it appears Europeans (from Madrid to Paris to Athens) pay significantly more for a latte than even the New Yorkers. Forget the Big Mac Index, forget Purchasing Power Parity - the Scandinavians are suffering from over-priced currencies and significant divergence from Coffee Price Parity.

 
Tyler Durden's picture

"Central Banks Cannot Create Wealth, Only Liquidity"





In many Western industrialized nations, debt has overwhelmed or is about to overwhelm the economy's debt-servicing capacity. In the run-up to a debt crisis, bad debt tends to move to the next higher level and may ultimately accumulate in the central bank's balance sheet, provided the economy has its own currency. Many observers assume that, once bad debt is purchased by the central bank, the debt crisis is solved for good; that central banks have unlimited wealth at their disposal, or can print unlimited wealth into existence.

However, central banks can only create liquidity, not wealth. If printing money were equivalent to creating wealth, then mankind would not have to get up early on Monday morning. Only a solvent central bank can halt hyperinflation. The longer governments run large deficits, the longer central banks continue to monetize them, and the longer their balance sheets grow, the higher the potential for enormous losses and thus hyperinflation.

Necessary preconditions for hyperinflation are a quasi-bankrupt government whose debt is monetized by a central bank with insufficient assets. One way or another, owning physical gold is the safest and most effective way of insuring against hyperinflation.

 
Tyler Durden's picture

Memo To Japan: It Is Going To Be A Cold, Expensive Winter





While Abenomics has failed in spurring exports, while the rise in the Nikkei has benefited some 1-2% of the population, the most direct consequence of crushing the yen some 20% is that energy costs, virtually all of them imported, are if not surging, then about to soar to all time highs.  In other words, our sincerest condolences to Japan, for whom this winter will be a very cold one (and a very hot summer follows), unless of course in Japan, like in the US, energy costs don't matter when calculating CPI and inflation and the consumer can spend any amount to keep themelves warm, or cold as the case may be.

 
Tyler Durden's picture

Guest Post: Gold Manipulation: The Logical Outcome Of Mainstream Economics Part 1





This is the first of three articles on the suppression of gold. What drives us to write about the topic? We are tired of seeing endless proof of suppression (i.e. the typical take downs in the price at either 8:20am ET or at 10am-11am ET, with impressive predictability) and at the same time, it is unfair that anyone who voices this suppression be called a conspiracy theorist. The first letter will show that, under mainstream economic theory, the suppression of the gold market is not a conspiracy theory, but a logical necessity, a logical outcome. To enforce a balance in the global fiat money market via coordination of central banks is impossible; what may be feasible is to coordinate the expansion in the supply of global fiat money. But if that is the case, the manipulation of the gold market to leave it oversupplied is the logical outcome. To pretend it is not... is a conspiracy theory!

 
Tyler Durden's picture

Did Someone Intentionally Try To Crash The Crude Contract?





We have noted the incessant slamdown in the precious metals markets, and highlighted that the only thing that can slow the flood of liquidity into each and every market is a rise in energy prices. The former represents 'trust' in the system; the latter represents 'real economics' as it squeezes the global economy forcing the central banks to pull back or tighten (see China's lack of rev repo recently). To wit, we just noted the plunge in WTI this morning; but Nanex, given their depth of data, noticed something considerably more concerning... "Because the circuit breaker tripped after the market had somewhat stabilized, we think another large sale appeared that would have decimated prices - which CME's circuit breaker logic picked up on, causing the halt." Did someone intentionally try to crash the WTI Crude contract? And if so, who? We don't know, but the usual suspect (singular) does emerge, considering that with gas prices hitting new February daily record every day, and every dollar in increase in WTI means even less (seasonally adjusted) GDP, and less consumer purchasing power, those evil speculators who are taking the Fed's free money to buy commodities (and very unpatriotically not the S&P or Russell 2000) must be promptly punished.

 
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