Purchasing Power

Steve H. Hanke's picture

Authored by Steve H. Hanke of The Johns Hopkins University. Follow him on Twitter @Steve_Hanke.

On Thursday, Venezuela’s central bank released a long-overdue -- and little-trusted -- report claiming that the country’s inflation rate in 2015 was 180.9%.  Unfortunately for the global community, as high as this figure sounds, it is way below the true inflation rate.

When Paper Money Becomes Trash

It costs 1.7 cents to make a penny and 8 cents to make a nickel. The U.S. government loses tens of millions of dollars every year putting these coins into circulation. So, why is it wasting money and time making coins almost no one uses? Because phasing out the penny and nickel would mean acknowledging currency debasement. And governments never like to do that. It would reveal their incompetence and theft from savers.

Why Negative Interest Rates Spell Doom For Capitalism

What negative interest rates are really projecting are low-to-no growth and zero-profit environments for the entire global economy sometime in the future, where businesses simply cannot make money. The implication of this is that all businesses will come to the government seeking subsidies. We already see it in agriculture. Education. Health care. Housing. Whether it is loan programs for customers or outright grants. There will be more. This is why capitalism cannot survive no growth. Economies would naturally revert to some form of subsistence, where the need to trade is reduced greatly.

The Inevitability Of Dramatic Inflation

Actually, this time it will be different, but not in the way we would hope. Rather than wait for the crashes and subsequent significant deflation to occur, the Fed and the ECB have already announced a plan to introduce negative interest rates. They describe this plan as being intended to discourage saving and force people to buy goods, causing the economy to boom... just as in Weimar Germany almost one hundred years ago. But, as history shows, this is never the outcome. Once a population discovers that dumping currency is preferable to holding it, the green-eyed monster comes knocking.

JPM's Kolanovic Warns Upcoming Recession Could Be Comparable To 2008 Crisis; Says "Buy Gold, Cash And VIX"

"Gglobal markets are now facing a significant ‘negative wealth effect’ that has a potential to result in a recession. This negative wealth effect of low commodity prices and a strong USD combined with the slowdown in China could be comparable to that of the 2008/2009 crisis (it involves diverse effects ranging from layoffs in the Global Energy sector to a lack of EM Sovereign wealth flowing into developed market equity hedge funds). While the economists were debating if the low-priced oil is good or bad for the economy, the equity markets never had any doubts – Oil and Equities were moving down together."

Buyer's Remorse? Axel Merk Warns "The Fed Doesn't Have A Clue!"

"The Fed doesn't have a clue!" - We allege that not only because the Fed appears to admit as much, but also because our own analysis leads to no other conclusion. With Fed communication in what we believe is disarray, we expect the market to continue to cascade lower - think what happened in 2000. To understand what's unfolding we need to understand how the Fed is looking at the markets, and how the markets are looking at the Fed.

Explaining Today's Collapse In US Worker Productivity

Nonfarm Productivity collapsed by 3% QoQ, notably worse than expected as labor costs jump. Economists are gnashing their teeth to explain this "plunging productivity paradox" - we think it is rather simple...

The Bank Of Japan Has Betrayed Its People

The Bank of Japan’s unexpected rate cuts to negative are a desperate attempt to help out The Fed and to support the dollar at the expense of the aging Japanese population.

What A Cashless Society Would Look Like

Calls by various mainstream economists to ban cash transactions seem to be getting ever louder, while central bankers have unleashed negative interest rates on economies accounting for 25% of global GDP, with $5.5 trillion in government bonds yielding less than zero. The two policies are rapidly converging. This is what the resulting cashless society would look like.

The Bank Of Japan - Ringing In The Keynesian Endgame

The time for more insanity has come... It is the Keynesian mantra: the fact that the policies recommended by Keynesians and monetarists, i.e., deficit spending and money printing, routinely fail to bring about the desired results is not seen as proof that they simply don’t work. It is regarded as evidence that there hasn’t been enough spending and printing yet.

Apple, FANGs, & Monetary Fools

Eventually the prospect of recession that can’t be cured by the central bank printing presses will ignite sheer panic in the casino. Then the monetary fools running them will be reviled to the ends of the earth. But not before the lunatic 100X valuations of the FANGs implode like those of all the high flyers which have gone before. For the third time this century it is time to sell the bubble. Yes, do back up the trucks!

"The BoJ's NIRP Will Result In More Currency Wars And Global Growth Slowdown"

"The BoJ actions should lead to further intensification of global currency wars with central banks around the world trying to engineer sustained competitive devaluation against the background of slowing global trade and growth as well as persistent commodity price disinflation. With its latest measures the BoJ will allow Japan to borrow more growth from its trading partners and limit the severity of the imported disinflation."