Deflation? Don't Be Ridiculous.

Not in any significant sense. There will be inflation. Why?

1) The Dollar is a bill of credit- a debt instrument. It is a note paying 0% interest, collateralized mostly by Treasuries. To the Fed, an FRN (a dollar) is a liability backed on the accounting ledger by Treasury "assets". Treasuries are going down. This is a certainty. It may be slowly over 5 years or it may be rapidly over 5 hours. I'm guessing sooner rather than later. As dollars are backed by Treasuries, as Treasuries go, so will go the dollar. It will start with Japan selling off.

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/...

2) Inflation is a function of M1 growth or Monetary Base (less reserves on deposit) growth. It has not grown recently, hence, no inflation. Freshly printed dollars have been deposited with the Fed (for now). They will leak out. The Fed will have to raise rates to keep those dollars out of the economy. A special "Fed Deposit Rate" higher than the market rate and only for Wall Street Banks may be tried. It will fail. It is politically untenable.

http://www.lewrockwell.com/north/north798.html

"Reverse Repos" are the new Fed scam...er....tool to remove excess liquidity. It goes like this: The Fed prints $1 Trillion, gives it to Citi for mortgages at $1 for $1 even thought the mortgages are worth $.67. Then Citi turns around and uses those dollars to buy Treasuries back from the Fed with a guarantee byt the Fed to buy them back at a higher rate (thus guaranteeing a higher interest rate). It's just a shell game and addresses corpulent money supply by obfuscating a rate hike.

3) The Fed is the banker's bank. They will not let all the big banks fail. They will print $50 Quadrillion dollars if necessary. If the Fed tries to tighten aka Volcker, they will bankrupt the US Government. A 21% interest rate = $2.4 Trillion interest expense ALONE for big Brother. There will be no Volcker 2.0 because a 21% interest rate = the government takes over the Central Bank and revs up the digital analogues (printing presses).

3.1) If the Fed raises rates any significant amount they will scuttle the recent "carry trade" stock market rally. Stocks are priced today as net future cash flows discounted to present value by (1+cost of capital)^n. Cost of capital ~ 0% for banks today making even the puniest of dividends valuable. Jack that cost of capital rate to 4% and the NPV sinks like a stone. The Fed cannot raise rates without scuttling the market. The S&P is priced at something like 75Xs trailing earnings. 80% of Goldman Sach's income comes from this 0% carry trade. Raising rates will destroy this income stream. The Banks own the Fed. They will not like this.

4) The US owes $75 Trillion. Will they tax it? Impossible. Will they borrow it? Impossible. There are only 2 solutions: 1) monetize it and 2) repudiate it. Repudiation is politically impossible but practically likely. Monetizing it is a disaster but politically practical.

Past Deflations:

But what about the 1930s you ask?

What about them? The US had a gold standard then. It took 5 years to double the monetary base. It took Bernanke 5 months! Ponzi-banks were allowed to collapse in the 1930s taking their fractionally multiplied Madoff dollars down to the never-after with them. That will not happen today. We have FDIC and Helicopter Ben with an infinite supply of dollars to ride in to save them.

But what about Japan in the 1990s?

There was no serious deflation in consumer prices in Japan. One must not confuse a collapse of a speculative bubble in real estate (or tech stocks, or South Sea Trading Companies or tulip bulbs) with skyrocketing consumer staples prices.

http://www.safehaven.com/article-15478.htm

We are going into mass-inflation. You can try to play technical trades, consult astrologers, and read goat entrails all you like. Time your "key reversals" and consult your trailing 100 day moving averages and your "Bollinger Bands" as well. Good luck. There may even be some merit in reading tarot cards...er...uh...technical charts. But I am prepping for the next decade, not the next week.

Finance yourself with fixed rate debt, wind down cash positions, invest in tangible things, stay away from bonds, liquidate (take a loan) on you 401k before Obama nationalizes it.

http://www.sharedprosperity.org/bp204/bp204.pdf

Hold on tight. It's gonna be a wild ride.

"Papers Please"

Posted on Denver Post Website

I find it odd that democrats, who were (many decades ago) pro-civil liberties, support these invasive, demeaning, and pointless strip searches at airports. The grainy pictures TSA shows you are the over-exposed versions. The REAL pictures show you utterly unclothed in full detail for TSA goons to peruse.

If one thinks about it, the options for a suicide hijacker are already very limited. The vigilance of a Dutch passenger, AND NOT POLICE STATE MEASURES, thwarted the recent attack.
I think the bottom line is Americans are being sold an illusion- the illusion is "security". The notion that we must give up liberty and $40B for security is a false choice. In this exchange, we merely enrich politically connected corps that build strip search machines, bureaucrats who can look like they are "doing something", and create a welfare-jobs program for 40,000 unskilled TSA agents. AND YET, THE UNDERPANTS BOMBER STILL GOT THROUGH!

Wake up sheeple. The USA is becoming a police state.

What is a Dollar Worth?

The dollar is a "note". In other words, it is a "debt" owed by the Fed. It pays 0.00% interest.
Accounting 101: From the perspective of the Federal Reserve (which issues these "Reserve Notes") the dollar is a liability (debts owed are liabilities). In order for the Fed's balance sheet ot balance, Assets less Equity Must = Liabilities.

The Fed's "Assets" are: US Treasuries (notes to be paid by the Treasury), bank reserves, some foreign currency, some commerical paper, and a small amount of gold.
Treasuries are debts owed by the government.

SO IN OTHER WORDS, THE DOLLAR IS A DEBT WHICH IS BACKED BY A DEBT.

When the Fed "prints money" they keystroke "Federal Reserve Notes" (dollars) which become liabilities on the Fed's balance sheet. They then use these "notes" to buy "assets" which are just the debts of the government (or GM and the banksters).

There is no "money" in any classical sense beyond the the hard assets the Fed holds. All that exists is the debt of the left hand backed by the debt of the right.

The purchasing power of Federal Reserve 'Notes' hinges on the value of the ASSETS that back them. That value is determined by the PERCEPTION of the government's ability to convert labor into dollars (via taxes) that can then be used to pay the interest on the debt they owe (Treasuries).

It is a system only CPAs, Ken Lay and Bernard Madhoff could be proud of.

Did Bernanke save us from another Great Depression?

Athens, Ga. - The recession is probably over. So said Ben Bernanke this week. His timing is exquisite. President Obama has reappointed him to be Fed chairman, and he can now head into his Senate confirmation hearings this fall with the reputation that he nipped another Great Depression in the bud.
But did he?

Read More...
http://www.csmonitor.com/2009/0917/p09s01-coop.html

The Fed Does NOT Stabilize The Economy

You may well wonder where he got that idea, since there are no official estimates of gross domestic product (GDP) for years before 1929. In the early 1960s, however, John Kendrick and Simon Kuznets bravely attempted to construct such estimates for gross national product (GNP). That would be close enough to modern GDP data were it not for the primitive statistics and technology they had to work with.
Read More...
http://www.cato-at-liberty.org/2009/09/09/no-the-fed-did-not-stabilize-the-economy/

Global Warming- A Conspiracy of Lies

If you own any shares in alternative energy companies I should start dumping them NOW. The conspiracy behind the Anthropogenic Global Warming myth (aka AGW; aka ManBearPig) has been suddenly, brutally and quite deliciously exposed after a hacker broke into the computers at the University of East Anglia’s Climate Research Unit (aka Hadley CRU) and released 61 megabites of confidential files onto the internet. (Hat tip: Watts Up With That)
When you read some of those files – including 1079 emails and 72 documents – you realise just why the boffins at Hadley CRU might have preferred to keep them confidential. As Andrew Bolt puts it, this scandal could well be “the greatest in modern science”.
Read More...
http://blogs.telegraph.co.uk/news/jamesdelingpole/100017393/climategate-the-final-nail-in-the-coffin-of-anthropogenic-global-warming/

The Truth Behind China's Currency Peg

During President Obama's high-profile visit to China this week, the most frequently discussed, yet least understood, topic was how currency valuations are affecting the economic relationship between the United States and China. The focal problem is the Chinese government's policy of fixing the value of the renminbi against the U.S. dollar. While many correctly perceive that this 'peg' has contributed greatly to the current global imbalances, few fully comprehend the ramifications should that peg be discarded.
The common understanding is both incomplete and naïve.

Read more...
http://www.lewrockwell.com/schiff/schiff59.1.html

Société Générale tells clients how to prepare for potential 'global collapse'

In a report entitled "Worst-case debt scenario", the bank's asset team said state rescue packages over the last year have merely transferred private liabilities onto sagging sovereign shoulders, creating a fresh set of problems.
Overall debt is still far too high in almost all rich economies as a share of GDP (350pc in the US), whether public or private. It must be reduced by the hard slog of "deleveraging", for years.

Related Articles
'Debt levels risk another crisis'
"As yet, nobody can say with any certainty whether we have in fact escaped the prospect of a global economic collapse," said the 68-page report, headed by asset chief Daniel Fermon. It is an exploration of the dangers, not a forecast.

Read the rest...http://www.telegraph.co.uk/finance/economics/6599281/Societe-Generale-tells-clients-how-to-prepare-for-global-collapse.html

Deflation or Inflation

"Deflation" this time around will not result in falling consumer prices.

When the big deflation comes in US Treaasuries, which will be triggered by Japan selling off to fund their looming fiscal crunch, the Fed will monetize (inflate FRNs) to keep interest rates down. If they don't, the US government will go bankrupt as most of the US debt rolls over every 5 years and rapidly rising rates will devour the budget. If the Fed does not inflate FRNs to soak up crashing Treasuries, then Congress will take over the Fed and 2010 republicans will hyperinflate by decree.

There will be no deflation in consumer prices. Sorry. The mass-inflation is already here. The stock market/real estate market is being reflated by TARP/GSE cash infusions and Fed outright purchases. 2 of 3 automakers are utterly insolvent yet still have $Bs in market cap. Oil, gold, silver are on a rocket.

Mass inflation is here. We are in it. Next stop, $4.00 gas.

More Predictions

10/20...

This latest market runup is nothing more than a reflation fueled by 0.00% money, levered up twenty times by banksters like Government Sachs.

90% of the bankster earnings are from the "carry trade" so to speak. They swap their bad assets (MBS) for Federal Reserve Notes which are used to shore up their margin accounts.

The Fed has "bought" close to $300 Billion in MBS since July 1 (check their H3 and H4 reports).

The speculative bubble is only possible with 0%, short term loans. The dollar crumbles daily and the Fed will be soon forced to act. But hiking rates will reveal the scheme as unsustainable and collapse the equity markets.