Inflation Rearing Its Ugly Head

Authored by Alasdair Macleod via,

The world of finance and investment, as always, faces many uncertainties.

The US economy is booming, say some, and others warn that money supply growth has slowed, raising fears of impending deflation. We fret about the banks, with a well-known systemically-important European name in difficulties. We worry about the disintegration of the Eurozone, with record imbalances and a significant member, Italy, digging in its heels. China’s stock market, we are told, is now officially in bear market territory. Will others follow?

But there is one thing that’s so far been widely ignored and that’s inflation.

More correctly, it is the officially recorded rate of increase in prices that’s been ignored. Inflation proper has already occurred through the expansion of the quantity of money and credit following the Lehman crisis ten years ago. The rate of expansion of money and credit has now slowed and that is what now causes concern to the monetarists. But it is what happens to prices that should concern us, because an increase in price inflation violates the stated targets of the Fed. An increase in the general level of prices is confirmation that the purchasing power of a currency is sliding.

According to the official inflation rate, the US’s CPI-U, it is already running significantly above target at 2.8% as of May. Oil prices are rising. Brent (which my colleague Stefan Wieler tells me sets gasoline and diesel prices) is now nearly $80 a barrel. That has risen 62% since last June. If the US economy continues to grow the Fed will have to put up interest rates to slow things down. If it doesn’t, as money-supply followers fear, the Fed may still be forced to put up interest rates to contain price inflation.

It is too simplistic to argue that a slowing of money supply growth removes the inflation threat. In this article, I explain why, and postulate that the next credit crisis will be the beginning of the end for unbacked fiat currencies.

The fictions behind price inflation

The CPI-U statistic is an attempt to measure changes in the general price level, defined as the price of a basket of goods and services purchased by urban consumers. The concept is flawed from the outset, because it is trying to measure the unmeasurable. Its mythical Mr or Mrs Average doesn’t exist. Not only is the general price level different for each individual and household, but you cannot ignore different classes, professions, locations, cultural and personal preferences, and assume they can be averaged into something meaningful. We can talk vaguely about the general level of prices, but that does not mean it can or should be measured. Averaging is simply an inappropriate construction abused by mathematical economists.

There is also a fundamental and important dynamic issue, ignored by economic statisticians. You cannot capture economic progress with statistics, let alone averages. The ever-present change in the human condition is the result of an unquantifiable interaction between consumers and producers. What a consumer bought several months ago, which is the basis for statistical information, can be no more than an historical curiosity. It does not tell us what he or she is buying today or will buy tomorrow. Nor can the statisticians possibly make the value judgements that lead consumers to switch brands or buy different things altogether. In short, even if there was a theoretically justifiable price index, it measures the wrong thing.

The statisticians are simply peddling a myth, which leaves it wide open to abuse. The myth-makers, so long as the myths are believed, control the narrative. It is in the interests of the statisticians’ paymasters, the state, to see price inflation under-recorded, so it should be no surprise that independent attempts to record price inflation put it far higher.

Independent estimates suggest that a price inflation rate of around 10%, depending on the urban location, is a more truthful assessment. If this was officially admitted, the continuing impoverishment of the ordinary American would be exposed, because the GDP deflator would be large enough to record an economy continually contracting in real terms. And this appears to have been the situation since the Lehman crisis, as well as in many of the years preceding it.

You cannot, year in year out, take wealth away from consumers without crippling the economy. A continual economic contraction, which is the inevitable result of monetary debasement. It can never be officially admitted, least of all by the Fed, which has total responsibility for the currency and the banking system. The Fed does not produce official price inflation estimates, which is the responsibility of the Bureau of Economic Affairs, so the Fed conveniently hides behind another government department.

But if the Fed did admit to this statistical cover-up, what could it do? The whole concept of monetary stimulation would quickly unravel, and the debate would almost certainly move away from policies that rely on monetary smoke and mirrors towards the reintroduction of sound money. The Fed would be out of a job.

However, the government now depends on inflationary financing to cover persistent budget deficits, if not directly, then indirectly through the expansion of bank credit to finance the acquisition of government bonds. In the short term, President Trump has made things worse by raising the budget deficit even further, which will be financed through more monetary inflation. And in the long term the obligations of increasing welfare costs will ensure accelerating monetary inflation ad infinitum is required to pay the government’s excess spending.

So, we can say with confidence that the purpose of monetary policy has quietly changed from what is commonly stated, that is to foster the health of the US economy. Instead it is to ensure government spending can proceed without interruption and without asking the people’s representatives permission to raise taxes.

Supply-side and time factors

The conventional neo-Keynesian view of price inflation is that rising prices are driven by excess demand. In other words, an economy that grows too fast leads to increasing demand for the factors of production.

This approach wrongly plays down the role of money. If the quantity of money is fixed, the increased demand for some factors of production can only be met by reduced demand for other factors of production. If the quantity of money and credit is increased the redistribution of factors of production is impaired, and common factors are bid up to the extent the extra money is available. The source of higher prices is clearly the extra money.

When a central bank, like the Fed, creates money and encourages the expansion of credit, it takes time for this extra money to work through the system. It is deployed initially in the financial, as opposed to the productive side of the economy. This is because monetary inflation is initially directed at the banks to stabilise their balance sheets. And once the immediate crisis is passed, the banks continue to extend credit to the government at suppressed interest rates by buying its bonds. Suppressed interest rates and therefore bond yields lead to a bull market in equities, encouraging credit-backed speculation. Bank credit is then increasingly extended to businesses and also to consumers through credit card and mortgage debt. At this point, price inflation then begins to be a problem.

The eighteenth-century banker and economist Richard Cantillon was the first to describe how the new money gradually disperses through the economy, raising prices in its wake. To his analysis we must in modern times add the course it takes through financial markets to impact the non-financial economy.

The time taken for new money and credit to be absorbed into the economy governs the length of the period that separates successive credit crises. Cantillon also made the central point that the gainers are those that get the new money to spend first, while the losers are those who find prices have risen before they get their hands on the new money. In effect, wealth is transferred from the latter to the former.

This wealth transfer benefits the government, the banks, and the banks’ favoured customers through the transfer of wealth from mostly blue-collar workers, the unemployed, retirees and those on fixed wages. The self-serving nature of the Cantillon effect is bound to influence monetary policy-makers in their understanding of the effects of their monetary policies. Blinded by self-interest and the interests of those near to them, they fail to understand exactly how the creation of extra money actually creates widespread poverty.

Monetary creation manifestly benefits the parties that control and advise the Fed, giving it and its epigones the rosy glow of institutional comfort and superiority. Everyone around it parties on the new money. And the licences to create it out of thin air given to the commercial banks are exploited by them to the full. They are temperamentally opposed to withdrawing the stimulus. It is hardly surprising the neo-Keynesians, with their flexible economic beliefs, no longer believe in only stimulating the economy to bring it out of recession. Instead they continue to stimulate it into the next credit crisis, as the ECB and the Bank of Japan currently illustrate, because everyone in the monetary establish wants the party to continue.

The link between monetary inflation and prices

There is no mathematical formula for the link between monetary inflation and prices. For modern economists, it comes down to their fluid mainstream opinion. Milton Friedman famously said, “Inflation is always and everywhere a monetary phenomenon”, but not everyone shares his conclusion. Central bankers note Friedman’s dictum but ignore it in favour of their ad hoc interpretation of the effects of monetary policy. The result is that in the absence of a sound understanding of the relationship between money, prices and asset prices, they always end up shutting stable doors after a new financial crisis overwhelms them.

It is a policy that always fails. Central bankers think the difficulty arises in the private sector, so they address what they see as evolving market-related risks. They fail fully to understand it emanates from their own monetary policies. Besides going against the grain of their own vested interests, convincing central bankers otherwise is made doubly difficult because there is no empirical proof that links the quantity of money in circulation with prices.

Logically, Friedman was correct. If you have more money chasing the same quantity of goods, its purchasing power will fall. That was the lesson of sound money, when it was beyond the reach of government creation and interference. The purchasing power of both sound and unsound money also vary due to changes in the general level of liquidity desired by consumers.

However, widespread use of sound money, gold or silver, also ensured that the price effect of changes in a localised desire for monetary liquidity were minimised through price arbitrage, so in those circumstances, the relationship between the quantity of money and the general price level was plain to see and unarguable. Unbacked national currencies do not share this characteristic, and their purchasing power is dependent only partly on changes in their quantity, being hostage to consumers’ collective desire to hold their own state’s legal tender. In other words, if consumers collectively reject their government’s currency, it loses all value as a medium of exchange.

In effect, there are two vectors at work, changes in the quantity and changes in the desire to hold currency. They can work in opposition, or together. Given the quantities of new currency and credit issued since the Lehman crisis, there appears to be a degree of cancelling out between the two forces, with the effects of a dramatic increase in the quantity of money being partially offset by a willingness to hold larger balances. The result is the dollar’s purchasing power has not fallen as much as might be expected, though as was discussed earlier in this article, the fall in the dollar’s purchasing power has been significantly greater than official inflation figures admit.

It is very likely that people and businesses in the US have been persuaded to hold onto cash balances and deposits at the banks by misleading official inflation figures. If the authorities had admitted to rates of price inflation are closer to the figures from Shadowstats and the Chapwood index, consumer behaviour would probably have been markedly different, with consumers reducing their exposure to a more obviously declining dollar.

In that event, both the effect of a massively increased supply of broad money combined with falling public confidence in the currency would almost certainly have worked together to rapidly undermine the dollar’s purchasing power. All experience tells us that unless a loss of confidence in the currency is nipped in the bud by a pre-emptive and significant increase in interest rates, a currency’s descent towards destruction can rapidly escalate. Doing it too late or not enough merely undermines confidence even more.

The issue of confidence poses yet another problem for the Fed. The extent to which currency values depend on misleading statistics represents a great and growing danger for future monetary policy, when statistical manipulation by the state is finally revealed to the disgust of the general public.

The dollar has nowhere to hide in the next credit crisis

The history of successive credit cycles shows that the general level of prices rises as a result of earlier monetary expansion. Inevitably, a central bank is belatedly forced to raise its interest rates, because the market demands it does so by no longer accepting the suppression of time-preference values.

Higher interest rates expose the miscalculations of the business community as a whole in their individual assessments for allocating capital. A slump in business activity ensues, and the banks, which are highly-geared intermediaries between lenders and borrowers, rapidly become insolvent. A credit crisis then swiftly develops into a systemic crisis for the banking system.

In the past, the encashment of bank deposits has been the way in which individuals tried to protect themselves from a bank’s insolvency. This created a demand for physical cash, which helped support the currency’s value through the systemic crisis. However, this prop for confidence in the currency in a crisis has now been effectively removed.

Central banks regard the right of the general public to encash their deposits as a hinderance to their attempts to stop banks failing. Since the 1990s, governments have gradually restricted public ownership of cash, accusing cash hoarders of criminal activities and tax evasion. More recently, they have moved towards banning cash altogether, assisted by the spread of contactless cards and other forms of electronic transfer.

The removal of the physical cash alternative forces a worried depositor to redeposit money from his bank into another bank he deems safer. The central bank can compensate for the loss of deposits in a bank which has lost its depositors’ confidence by recycling the surplus deposits accumulating in the other banks. It allows the central bank to rescue ailing banks behind closed doors, instead of having to deal with the contagious loss of public confidence that goes with an old-fashioned run on a bank. That is probably the overriding reason why central banks want to do away with cash.

Now let us make the reasonable assumption that the next credit crisis is worse than the last: that is, after all, the established trend. An ordinary saver is locked into the system and unable to demand cash to escape the risk of being a creditor to his bank and the banking system generally. His only remedy is to reduce his exposure to bank deposits by buying something, thereby giving the systemic and currency headaches to someone else. It is easy to envisage a situation where the marginal sellers of a currency held in bank deposits drive its purchasing power rapidly lower. All that is needed is an absence of buyers, or put another way, a reluctance to sell assets seen as preferred to owning the currency.

But what is safe to buy? Failing business models mean that non-financial assets fall in value and residential property prices, which are set by the interest cost and availability of mortgages, are likely to be in a state of collapse, at least initially. Equities will reflect these collapsing values as well. Government bonds are a traditional safe-haven asset, but government finances are certain to face a crisis with budget deficits rocketing out of control.

Prescient investors and savers are likely to anticipate these dangers in advance of the credit crisis itself and take avoiding action. That is how markets function. Now that the cash alternative has been effectively closed down, the only assets for which deposits are likely to be encashed in advance of the crisis are precious metals and cryptocurrencies. Therefore, it seems likely that safe-haven demand escaping falling currencies will initially benefit these asset classes. They will be, as the cliché has it, the canary in the coal mine.

Are we heading for the last conventional credit crisis?

This article has highlighted the deceitfulness of official US price statistics, and the way they have been used to fool both markets and consumers. The Fed’s monetary policies are founded on quicksand and could face a different set of challenges from the last credit crisis: a general loss of public confidence in the Fed itself.

In the Lehman crisis, we looked to the Fed to rescue us from a complete systemic collapse. It succeeded by doubling base money in a year from September 2008, eventually increasing it nearly five times over the following five years. The fiat money quantity (FMQ), which includes all dollar fiat money and credit (both in circulation and reserves), increased threefold from $5.4 trillion to $15.6 trillion. These are measures of the massive monetary expansion, whose price effects have been successfully concealed by official statistics. The whole process of rescuing the economy from the last banking crisis and making it appear to recover has been a truly extraordinary deception.

When one stops admiring the undoubted skill the monetary authorities have displayed in managing all our expectations, there are bound to be doubts. The Fed appears to be normalising its balance sheet, presumably so it can do it all over again. But the ratio of FMQ to GDP was 33% in 2007 before the Lehman crisis, and is at a staggering 80% today. On any measure, we are moving towards the next credit crisis with far too many dollars in issue relative to the size of the US economy.

When the next credit crisis hits us, the Fed is likely to find it impossible to expand its balance sheet and support both the banks and the government’s finances through QE in the way it did last time, without undermining the purchasing power of the dollar. A crisis that is demonstrably caused by an unbearable burden of debt cannot continually be resolved by offering yet more credit. Last time it worked without undermining the currency, next time we cannot be so sure. But the Fed has no other remedy.

The next credit crisis could therefore be the last faced by today’s fiat currency and banking system, if the debasement of currency required to prevent a debt meltdown brings forward the destruction of the dollar and all other currencies that are linked to it. The credit cycle will therefore cease. We should shed no tears for its ending, but our rejoicing must be ameliorated by the political and economic consequences that follow.

The end of fiat money may not happen immediately, because the general public can be expected to hang on to the fond illusion their dollars will always be valid as a medium of exchange before finally abandoning all hope for it. That has been the experience of documented inflations in the fiat currency age, from the European hyperinflations in the early 1920s onwards. And since all currencies are in the same unbacked fiat-currency boat, the purchasing power for them is likely to collapse as well, unless individual central banks introduce credible gold convertibility.

We have well-documented individual monetary collapses, even regional ones such as those that followed after the First World War in Europe. In Austria it ended four years after the war, in Germany five. But a transcontinental monetary crisis leading to the end of the global fiat currency regime takes us all into unknown territory, whose timing and progression, if it occurs, is hard to estimate.

My best guess for the timing of the next credit crisis remains later this year, perhaps the first half of 2019 at the latest. The short time that is left is the consequence of the enormous monetary debasement throughout the credit cycle not just in the US but globally as well. And the small amount of headroom for interest rates before the crisis is triggered, due to the accumulation of unproductive debt since the last crisis.

Total fiat currency destruction should take at least a further year or two, perhaps three from there. But first things first: the current phase of the credit cycle must evolve into a credit crisis before we can feel our way through its developing consequences.


Endgame Napoleon Handful of Dust Sat, 07/07/2018 - 19:47 Permalink

I never benefit from any of the minor reductions in expenses, like the lower gas prices of the last few years. When I was working, with my one-hour-or-more cmmmutes, my low wages despite every-month quota meeting, a degree and 4 licenses and my Obama payroll tax cut for the non-womb-productive that would not finance even a small household bill, gas prices were high. Rent took over half of my pay. Food is taxed at nearly 10% in my state, albeit many of the cheapskate employers’ favorite low-wage employees get it free, including many single moms, legal & illegal immigrants.

In reply to by Handful of Dust

Balance-Sheet Sat, 07/07/2018 - 17:28 Permalink

Buy those Gold Coins now! More being minted daily and we have to move out existing inventory.

This guy is not evil he is a salesman with a product to sell and must supply a narrative that supports your purchase and you can likely use a credit card too!

HRH of Aquitaine 2.0 Balance-Sheet Sat, 07/07/2018 - 17:44 Permalink

Keep telling yourself that lie.

$1 million dollars in cash, since 1913, has been devalued 98% (or more). That means $980,000 went up in a poof of inflation smoke. You are left with $20K after more than 100 years, with fiat.

The same $1 million, at $20 an ounce for gold, would have bought 50,000 ounces of gold. What are 50,000 ounces of gold worth now? At the modest price of $1200 an ounce that equals $60,000,000 dollars.

That is why fiat is crap and gold is not.

Quick, did you see that magic trick? Because many people do not.

In reply to by Balance-Sheet

Balance-Sheet HRH of Aquitaine 2.0 Sat, 07/07/2018 - 18:04 Permalink

Fiat is DESIGNED to decline in value to speed debt retirement as most people must borrow money to get started in life. You did not have 1M dollars in 1913 so it is not relevant to your life.

We create new money through a debt mechanism and when it has served its purpose it is gradually destroyed as you make your payments. This is why you have what you do and how you managed to get born and stay alive to this point.

If you have fiat USD in excess of your bills you can buy and hold gold then when you need fiat to pay your for your purchases, taxes, and medical bills then you sell the Gold for fiat and may come out ahead.

Gold will not be legal tender again and you will likelier die before any of this is an issue. After the USG settles you taxes any inheritors will sell your assets and buy stuff they want.

If you were going to live for 500 years Gold *might* be a winner for you unless someone comes up with a cheap way to separate Gold from seawater at a desalinization plant or similar facility. 

The trick you are missing is that you will DIE real soon and the Gold stays here along with all the water and carbon you contain.

Study the fate of the Empire of Spain after the conquest of South America - Spain is still there but all those mountains of Gold and Silver did not save them. You are trying to use Gold to attain immortality and it will not work. 

In reply to by HRH of Aquitaine 2.0

Endgame Napoleon Balance-Sheet Sat, 07/07/2018 - 19:58 Permalink

If I had money, I would buy gold coins, not just because of an intellectual sales spiel about our doomed, devalued, greenish fiat currency. 


  • Gold coins—especially rare ones—are supposedly not as vulnerable to government seizure in a collapse, a fact I learned on ZHedge; 
  • Just due to the portable size, it seems like coins are more spendable or tradable if you had to use them for that purpose, albeit it would be the real-chenille collapse in that case;
  • The coins have aesthetic appeal, in that low-relief sculpture is one of the hardest things to do in art, so if nothing else, I could enjoy looking at them, framing them, etc;
  • I like the fact that a few skilled, traditional artists get some work out of designing and sculpting the coins.  


In reply to by Balance-Sheet

tac_for_tac Sat, 07/07/2018 - 17:31 Permalink

Oh my I realized something generation Millenials they can give you crap non-stop until you realize that if you scorn them like they’re right there going to be on TV right there you will get the ashamed effect/buttressing. hope your ass stays ripped/blessed

HRH of Aquitaine 2.0 Sat, 07/07/2018 - 17:36 Permalink

"Independent estimates suggest that a price inflation rate of around 10%, depending on the urban location, is a more truthful assessment. If this was officially admitted, the continuing impoverishment of the ordinary American would be exposed, because the GDP deflator would be large enough to record an economy continually contracting in real terms. And this appears to have been the situation since the Lehman crisis, as well as in many of the years preceding it.

You cannot, year in year out, take wealth away from consumers without crippling the economy. A continual economic contraction, which is the inevitable result of monetary debasement. It can never be officially admitted, least of all by the Fed, which has total responsibility for the currency and the banking system. The Fed does not produce official price inflation estimates, which is the responsibility of the Bureau of Economic Affairs, so the Fed conveniently hides behind another government department."

People are finally waking up to what is being done. Finally! Inflation is the cruelest tax of all because it is hidden. Or was hidden.

Balance-Sheet HRH of Aquitaine 2.0 Sat, 07/07/2018 - 18:13 Permalink

Inflation is a design feature to keep the legal tender circulating. Inflation is one of many things used to part you from your property (wealth) including taxes, fees, low nominal interest rates, and an inflating legal tender. In a sense it does not matter what the inflation rate is under 40% because almost everyone and I mean EVERYONE is tied into the legal tender.

People are spending all the legal tender they can earn or steal and are borrowing more. If some guy escapes in a submarine full of Gold and hides out in Argentina it is a little leakage to be expected.

Any person's peak productive years might be 35 or 40 so they are carried often to age 20 or later and are no longer creating value at age 60 if that. Okay then they are draining again so we use these monetary tools to shear away the drainage or limit it so in most cases the citizen dies penniless or in arrears.

In reply to by HRH of Aquitaine 2.0

HRH of Aquitaine 2.0 Balance-Sheet Sat, 07/07/2018 - 18:43 Permalink

So anyone over the age of 60 no longer produces anything of value? Wow. Your concept of value and mine are very different.

As for the price of gold, the price was quite stable in the US. I was wrong. The largest price increase didn't happen after 1913 or even after confiscation in the 1935. It happened once the US went off the gold standard which had helped to retain the value of the USD until 1967. In 1971 the divergence is obvious.

I bet you think that 401K or public employee pension is actually going to be worth something. Sure it will. Let me know when you are 65 and eating cat food or fried rat because there is no pension and anything you get has been devalued to the point of worthlessness.

In reply to by Balance-Sheet

Balance-Sheet HRH of Aquitaine 2.0 Sat, 07/07/2018 - 22:59 Permalink

No, people over 60 tend to destroy more value than they create due to declining capacity and the fact that medical care costs skyrocket towards the end of life. When you are younger, healthy, and work diligently you might create more value than you destroy/consume as your costs are less. Many people are nothing but cot their entire lives as you must have noted.

We exchange views here and unless you are a politician I wish you good luck with your speculations.

You are a good person. The Gold Standard actually ended about 1925 when the UK tried to go back on Gold after WW1 but it destroyed their trading position. Nominally it remained in place on the understanding that responsible governments would not actually redeem all those overseas dollars. As soon as they played the stupid card the redemption of USD for Gold was cancelled. It had only been a kind of window dressing that was fading after 1947 through the years when the post WW2 world was getting back on its feet. After 24 years the global training wheels were removed. Once released from monetary duty Gold rose to its demand value which is speculation, jewelry, collectors items. I do own a few.

The big point is that all buyers of Gold appreciate that they are speculating in a planned increase in the USD price of Gold and that it will never be legal tender again. Bear in mind that 'paper' dollar notes are being gradually withdrawn in favor of electronic transfers. Printing, trucking, guarding, then distributing, sorting, counting and returning it is a large waste of energy.

There is no rush to do this over night and this is a reason why Gold or Silver will not be legal tender as it is even more awkward and heavy than paper money. There is very little cash money in any bank and there should only be a regulated float based on the volume of business at a given branch and the excess should be shipped back. Cash in safety deposit boxes excepted.

If all the depositors at the local Farmers and Merchants Bank showed up and demanded their savings in paper bills they could not be supplied- its not there and there wouldn't be a mountain of Gold or Silver in the vault even if you had Gold or Silver Certificates - a small quantity perhaps for older folks needing presents but no serious volume of Paper, Silver, or Gold.

In reply to by HRH of Aquitaine 2.0

Balance-Sheet optimator Sat, 07/07/2018 - 23:14 Permalink

That is the IDEA and thanks for pointing that out though there will be exceptions and when policy is national covering (who knows) millions of properties exceptions are okay. No government HAS TO tax property so the idea is to slowly take it away and return it to the system. The family is compelled by taxes to disgorge the home or family farm which can then be sold, refinanced again.

Large property holdings are slowly taxed away in the same way that inflation slowly removes the value of the currency unit. By the time you reach the end of your life all of your assets have usually been returned to the system.

Warren Buffet has played a great game but he is still on the hook and his empire *might* be destroyed and disbursed quite quickly though it is hard to say. All these goofy foundations are dodges really and not as important as they once were now that the USG is so large. We do not need Andy Carnegie to build libraries any more nor do we require any libraries or even schools to be built for that matter.

In reply to by optimator

Endgame Napoleon HRH of Aquitaine 2.0 Sat, 07/07/2018 - 20:09 Permalink

The housing inflation is the worst. It makes people in a once liberty-loving country immobile, in effect. This applies to rent, too, not just home ownership. 

If the affluent tried to “buy something” to rescue their fiat from rapid devaluation, and chose a house to rent out, they might get caught in a property-tax hike. 

The states they flee to, in an effort to avoid high state income tax, sometimes have no income tax. But they have huge & growing populations of womb-productive illegal aliens.

Some of the welfare that covers the major household bills of illegal aliens in single-earner households with US-born kids, keeping their traceable income under the income limits for the programs, comes from federal tax coffers.

But their instant-citizen kids are owed free schooling by law. The money for public schools comes from property taxes.

In reply to by HRH of Aquitaine 2.0

besnook Sat, 07/07/2018 - 17:40 Permalink

inflation was always the only way out of the bankster pillaging and plundering of 2009. inflation is the last stage of the final act, dollar destruction.

Rabbi Blitzstein Sat, 07/07/2018 - 17:49 Permalink

LOL! Every year last quarter of FED fiscal year we make goyim kvetch about inflation. First we trot out big inflation coming. Then during end of July, August, and September, we tell you inflation has been tamed. Why? So that white Americans who paid entire life into Social Security get little if any raise in monthly check for following year. But we always have more than enough to pay out to non-whites we flood into your white neighborhoods. Hahaha!. Silly stupid gullible white goyim never learn. You make it too easy for us to mix out white race via Coudenhove-Kalergi Plan. We put 65 IQ, violent Somalis into all expenses paid housing and utilities, clothing allowance, EBT cards, automobiles, medical, cash stipend, you name it. But we make your old aged white useless eaters choose between heat and food and die a slow, painful death. Heh heh. But you no complain for fear be called racist and anti-semite. Oy vey!

Chief Joesph Sat, 07/07/2018 - 17:49 Permalink

Inflation kicked in a long time ago, but the Bureau of Economic Analysis and other government agencies have been doing their best to hide it.  Problem now is, it's getting so bad, they can't hide it any longer, but trying desperately to minimize it as much as possible. The danger is, with other countries in the "Dump the dollar mode", like China, Japan, Russia, and soem European countries, and the trade wars going on, inflation can easily turn into hyper-inflation overnight. The risks are real. 

You people who are old enough to remember what the "mild" inflationary period was like back in the early 1970's, should know.  A 1970 dollar is only worth 15 cents today.  That is an inflation rate of 548.4% over the past 48 years!   Last year, the inflation rate from 1970 to 2017 was 531.8%  Since last year, inflation has increased by 16.6%. (And BEA is saying the Y-Y rate for 2018 is 1.9%???  They are lying!).  The dollar could easily do what Venezuela has done and breach 25,000%, particularly when we have a debt of $21 trillion we can never pay off, and over $100 trillion in unfunded liabilities.. Keep in mind, Venezuela has nowhere near the debt the U.S. has, yet inflation is going crazy there. Think what will happen here!

RopeADope Sat, 07/07/2018 - 17:58 Permalink

Inflation will get much worse. Trump tariffs and foreign policy ignorance will hit all the Trumptard crackers in the wallet big time.

In order for tariffs to work you need a visionary domestic policy that makes sense. GOP Fox viewing Koch clowns have retarded their thinking skills for 2 generations, so there will be no benefits derived from these tariffs for the average American and the GOP is unable to fix this defect.

Furthermore, Trump's subservience to Israeli foreign policy that benefits the MIC/Big Oil in the US has no consideration for citizens of the United States so the MEK blowjobs by Bolton and Pelosi will only generate stagflation in the US.

Trump's error when he first came into office was thinking that Bannon knew what he was doing, instead of just being a whore for brain dead oligarchs.

America was finished by the 1st month of the Trump administration. The Drudge halfwits that infested ZH since the 2016 election are far too stupid to understand what has happened so they will down-vote away.

Ghost who Walks HRH of Aquitaine 2.0 Sat, 07/07/2018 - 19:41 Permalink

McLeod makes an insightful observation with this;

"The CPI-U statistic is an attempt to measure changes in the general price level, defined as the price of a basket of goods and services purchased by urban consumers. The concept is flawed from the outset, because it is trying to measure the unmeasurable. Its mythical Mr or Mrs Average doesn’t exist. Not only is the general price level different for each individual and household, but you cannot ignore different classes, professions, locations, cultural and personal preferences, and assume they can be averaged into something meaningful."

I agree with your opinion on the impact of inflation on those that are dependent on SS or pensions. The official inflation rate does not matter to politicians the way that they think it does. What matters is the real purchasing power of those at the bottom who may be seeing different inflation effects to what is being recorded as the official rate. If voters are being squeezed, and they are struggling, then there will be political trouble. The other key observation is that there will be regional effects, as well as specific social classes being squeezed. Since politicians are reliant on specific areas for their re-elections or elections you can expect to see more changes than might be possible with an average inflation rate.

Uneven inflation is going to introduce uncertainty into the political process in America.

I'm not sure that I understand how America solves these issues, as I haven't been convinced that the Economic Policy experts really know what they're doing or understand the correct way to approach the issues.

I remain a fan of Donella Meadows and her points of leverage in a System. Relying on Interest Rates to solve what is essentially a loss of confidence in a currency or system seems to be operating too far down the list of leverage points. The more effective points of leverage require changing the goals of the system and the paradigms that set system goals and rules.

In reply to by HRH of Aquitaine 2.0

Balance-Sheet HRH of Aquitaine 2.0 Sat, 07/07/2018 - 23:25 Permalink

Maybe the check will buy less but all these people can vote and can simply vote in higher payouts from SS. Congress votes higher deficits, the UST issues the bills, the Fed buys them with instant E-money and a nicer deposit is made in your account. I feel we are making real progress now! Admit a rising interest in 21st Century Monetary Theory!

As long as inflation stays well under 40% we are good. it would be inconvenient but it would clear those pesky debts. We would keep FDIC insured deposits at 1.75% annual interest though.

In reply to by HRH of Aquitaine 2.0

Canadian Gal Handful of Dust Sun, 07/08/2018 - 02:03 Permalink

Amazon, and a lot of companies that sell on Amazon, source a lot of their products through China. They also carry products from some of the other countries that Trump is slapping tariffs on.  If there's a 10% or 25% tariff on a product, that will be applied as the product enters the US and is placed in their warehouse.  If you are a US citizen, you will likely just see higher prices on Amazon's website.  For people in Canada using, most of the goods arrive in the US first to be warehoused, then are distributed to Canadian warehouses.  That means a) prices on the Canadian site will include all tariffs the US already applied to the Chinese, European, etc products when they entered the US and in some cases b) when those products cross the border into Canada, additional Canadian tariffs may apply.  There's no way I'll be using anymore when I can buy from Canadian sources that bring things in from China and the EU directly without passing through the US.

In reply to by Handful of Dust