I think the time has come. Forget stagflation, now we're talking HYPERINFLATION. Hyperinflation is the situation like in the Weimar Republic and in present day Zimbabwe where it takes a wheelbarrow of money to buy a loaf of bread.
Stagflation is the process whereby pumping cash into the economy in an attempt to boost demand and thus push output (which creates jobs) fails because supply is inelastic. Instead of an increase in output, all you get is higher prices. Staglfation exhibited in the 1970s destroyed the theory of using monetary and fiscal policy to inflate our way out of recessions. Stagflation destroyed the theories of John Maynard Keynes and knocked the monetarists woosy but Keynesianism still reigns supreme in places like the Fed and the Wall Street Journal. Google "P*" or read any WSJ article and look for the explanation the "consumption drives the economy". It's complete bullshit.
The Fed has been keystroking credit, bailing out multi-billionaires on Wall Street, and swapping worthless mortgage debt for YOUR Treasuries in an attempt to juice output by boosting demand. Its measures have failed. The market is down to its lowest level in 21 months. Instead of putting factories back into production, all that counterfitted liquidity has been parked in OIL and COMMODOTIES driving up their price.
Stagflation is no longer a worry, it is a reality. We are living it. The Fed says that inflation is 4.3% and 2.3% not counting food and fuel- as if none of us buys food and fuel. Set yourself up an algebraic equation. Even if you went to a public school you should be able to do this.
Let's call Inflation "I", Fuel and Food inflation "F" and Core inflation "C". Now lets assume that 25% of your expenditures goes to food and fuel leaving 75% for core items.
This leaves the following inflation calculation:
I = .25 * F + .75 *C.
Let's plug in what we know:
I = 4.3 and C = 2.3.
The now equation looks like this:
4.3 = .25 * F + .75 * 2.3
4.3 = .25F + 1.725
4.3 - 1.725 = .25F
2.575 = .25F
10.3 = F
So therefore, based on the BLS cpi #, fuel and food has increased only 10.3% in the last year. This should make your bulshit detector go off! This number is an absolute lie. It doesn't stand up to simple mathematical scrutiny. THEY ARE LYING TO YOU! THEY ARE LYING! THEY ARE LYING!
If you plug in a more realistic food and fuel inflation of 40% the equation results in an 11.725% rate of inflation! That is double digits, people.
Think of your grandmother who is on fixed income. The cpi determines her cost of living increase as a means of keeping her purchasing power "whole". The BLS says she gets a 4.3% increase but here costs are going up 11.725%. That means that her social security check, in real terms WAS CUT 7.4%!
This is the mechanism by which we are being robbed by the bankers and the Fed to line the pockets of the criminals on Wall Street.
But wait, it can get worse.
All fiat currencies fall victim to inflation- that is to say, politicians, finding direct taxation politically untenable, resort to counterfitting in order to make budgetary ends meet. The hope is that productivity growth (deflationary pressure) can eventually overcome their seignorage.
But what if the productivity does not catch up? What if, instead of buying new factories and infrastructure in recent years, liquidity was pumped into asset bubbles like dot coms and real estate for, oh, 15 years or so and now those bubbles have collapsed? Then what?
You are now inflating your phony money while simultaneously contracting output. The inflation pushes into interest rates because people don't like to get a negative return when they loan money. Interest rates sky-rocket. Investment hurdles become impossible to attain. Investment stops. New factories and roads and machines stop getting built. Capital flees the country. The economy shrinks. Profits evaporate. There are massive layoffs. Tax returns shrink. Governments can't borrow because they would have to pay 15, 20, 30% rates of interest. They can't raise taxes, no one has jobs (see Michigan)
So what do they do? THEY PRINT MONEY AND THEY PRINT AND PRINT AND PRINT! The word gets out. The gig is up. People know that their future money will be worthless so they start spending everything they have as soon as possible. Prices take off. 15% inflation, 30% inflation, 100% inflation. Then prices start increasing DAILY, then HOURLY!
Think I'm making this up? Google the Weimar republic or Zimbabwe inflation. We almost had this once in the early 1980s but Paul Volcker stepped in and squashed it by jacking up interest rates to the onscene levels necessary to restore confidence in the dollar. The result were two very bad recessions in the early 1980s. It resulted in capital flight oversees. Our maufacuring base left the country. That sector never fully recovered.
Since WWII we have benefited from the world using our fiat money as a defacto international currency. We buy goodies from the world in exchange for dollars. Instead of sending those dollars back here, they held on to them or spent them with other foreign nations. That meant that we got something for nothing. Well, that game is up. Our dollar is rapidly losing value and no one wants our crap dollars anymore. They are making their way back here, thus increasing their supply and driving down their value.
We will end up spending $3.5 Trillion fighting two wars in the Middle East that will accomplish NOTHING! That money came not from taxes but from the Chinese who lent it to us. How much more will they lend us? Our dollar is depreciating at a far greater pace then our 4% Treasury yield pays out. How stupid are the Chinese? I bet they won't be stupid for much longer.
We have a welfare statist or a warfare statist who will take office. One will flush billions down the welfare rathole and the other will flush billions down the warfare rathole. One subsidizes sloth and dependancy the other subsidizes corporate bomb peddlers. Either way, you pay.
With no place left to borrow and tax receipts drying up, the only recourse will be to counterfit. When this genie gets out of the bottle it may very well unleash another Weimar Republic here in America. Don't forget what that economic calamity led to.
P.S. I'm predicting DOW 9,000 by October. If you stick it out in your 401k you are a sucker. Take a max loan against it and pay down your HELOC in order to protect your asset.
Stagflation is the process whereby pumping cash into the economy in an attempt to boost demand and thus push output (which creates jobs) fails because supply is inelastic. Instead of an increase in output, all you get is higher prices. Staglfation exhibited in the 1970s destroyed the theory of using monetary and fiscal policy to inflate our way out of recessions. Stagflation destroyed the theories of John Maynard Keynes and knocked the monetarists woosy but Keynesianism still reigns supreme in places like the Fed and the Wall Street Journal. Google "P*" or read any WSJ article and look for the explanation the "consumption drives the economy". It's complete bullshit.
The Fed has been keystroking credit, bailing out multi-billionaires on Wall Street, and swapping worthless mortgage debt for YOUR Treasuries in an attempt to juice output by boosting demand. Its measures have failed. The market is down to its lowest level in 21 months. Instead of putting factories back into production, all that counterfitted liquidity has been parked in OIL and COMMODOTIES driving up their price.
Stagflation is no longer a worry, it is a reality. We are living it. The Fed says that inflation is 4.3% and 2.3% not counting food and fuel- as if none of us buys food and fuel. Set yourself up an algebraic equation. Even if you went to a public school you should be able to do this.
Let's call Inflation "I", Fuel and Food inflation "F" and Core inflation "C". Now lets assume that 25% of your expenditures goes to food and fuel leaving 75% for core items.
This leaves the following inflation calculation:
I = .25 * F + .75 *C.
Let's plug in what we know:
I = 4.3 and C = 2.3.
The now equation looks like this:
4.3 = .25 * F + .75 * 2.3
4.3 = .25F + 1.725
4.3 - 1.725 = .25F
2.575 = .25F
10.3 = F
So therefore, based on the BLS cpi #, fuel and food has increased only 10.3% in the last year. This should make your bulshit detector go off! This number is an absolute lie. It doesn't stand up to simple mathematical scrutiny. THEY ARE LYING TO YOU! THEY ARE LYING! THEY ARE LYING!
If you plug in a more realistic food and fuel inflation of 40% the equation results in an 11.725% rate of inflation! That is double digits, people.
Think of your grandmother who is on fixed income. The cpi determines her cost of living increase as a means of keeping her purchasing power "whole". The BLS says she gets a 4.3% increase but here costs are going up 11.725%. That means that her social security check, in real terms WAS CUT 7.4%!
This is the mechanism by which we are being robbed by the bankers and the Fed to line the pockets of the criminals on Wall Street.
But wait, it can get worse.
All fiat currencies fall victim to inflation- that is to say, politicians, finding direct taxation politically untenable, resort to counterfitting in order to make budgetary ends meet. The hope is that productivity growth (deflationary pressure) can eventually overcome their seignorage.
But what if the productivity does not catch up? What if, instead of buying new factories and infrastructure in recent years, liquidity was pumped into asset bubbles like dot coms and real estate for, oh, 15 years or so and now those bubbles have collapsed? Then what?
You are now inflating your phony money while simultaneously contracting output. The inflation pushes into interest rates because people don't like to get a negative return when they loan money. Interest rates sky-rocket. Investment hurdles become impossible to attain. Investment stops. New factories and roads and machines stop getting built. Capital flees the country. The economy shrinks. Profits evaporate. There are massive layoffs. Tax returns shrink. Governments can't borrow because they would have to pay 15, 20, 30% rates of interest. They can't raise taxes, no one has jobs (see Michigan)
So what do they do? THEY PRINT MONEY AND THEY PRINT AND PRINT AND PRINT! The word gets out. The gig is up. People know that their future money will be worthless so they start spending everything they have as soon as possible. Prices take off. 15% inflation, 30% inflation, 100% inflation. Then prices start increasing DAILY, then HOURLY!
Think I'm making this up? Google the Weimar republic or Zimbabwe inflation. We almost had this once in the early 1980s but Paul Volcker stepped in and squashed it by jacking up interest rates to the onscene levels necessary to restore confidence in the dollar. The result were two very bad recessions in the early 1980s. It resulted in capital flight oversees. Our maufacuring base left the country. That sector never fully recovered.
Since WWII we have benefited from the world using our fiat money as a defacto international currency. We buy goodies from the world in exchange for dollars. Instead of sending those dollars back here, they held on to them or spent them with other foreign nations. That meant that we got something for nothing. Well, that game is up. Our dollar is rapidly losing value and no one wants our crap dollars anymore. They are making their way back here, thus increasing their supply and driving down their value.
We will end up spending $3.5 Trillion fighting two wars in the Middle East that will accomplish NOTHING! That money came not from taxes but from the Chinese who lent it to us. How much more will they lend us? Our dollar is depreciating at a far greater pace then our 4% Treasury yield pays out. How stupid are the Chinese? I bet they won't be stupid for much longer.
We have a welfare statist or a warfare statist who will take office. One will flush billions down the welfare rathole and the other will flush billions down the warfare rathole. One subsidizes sloth and dependancy the other subsidizes corporate bomb peddlers. Either way, you pay.
With no place left to borrow and tax receipts drying up, the only recourse will be to counterfit. When this genie gets out of the bottle it may very well unleash another Weimar Republic here in America. Don't forget what that economic calamity led to.
P.S. I'm predicting DOW 9,000 by October. If you stick it out in your 401k you are a sucker. Take a max loan against it and pay down your HELOC in order to protect your asset.
