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Showing posts with label Inflation. Show all posts
Showing posts with label Inflation. Show all posts

Monday, February 17, 2014

$10,000 Gold, $50,000 Gold & The Coming Frightening Chaos

“On the surface it looks like there is deflation on the way. Japan is failing to inflate and China is tightening because of the problems in their banking system and shadow banking system. The EU banking system has also restricted lending....

“This has led to the ECB having reduced its balance sheet substantially. In the US there is now tapering of $20 billion per month. If this continues we will have a deflationary implosion of the world economy. We will have a total collapse of the financial system because the massive debt cannot be repaid in that environment.

Central bankers are aware of this but they seem to either be totally paralyzed or perhaps overconfident in their ability to reflate if necessary. Judging by Japan and Europe, it’s much harder to reflate than these central bankers would imagine.

Printing money at current levels no longer has any effect, and interest rates are already at virtually zero. Governments also know that a deflationary implosion will also lead to a total loss of power and control. This would just usher in anarchy.

So let me again state that money printing is not the solution. Worthless pieces of paper cannot create wealth. Whether central banks print or don’t print wealth, they are doomed because either alternative is catastrophic for the world. They are just a different way of reaching the end game. As Ludwig von Mises said, ‘There is no way of avoiding the final collapse.’

Saturday, July 13, 2013

Financial Independence and Intellectual Influence

 If you are interested in the history of ideas, at some point this question will occur to you: "How is it possible for someone to gain influence, yet at the same time retain his independence?" If you traffic in ideas, you have to be able to do both. 

A crackpot can go online today and argue for his favorite theory. He is completely independent. He is also completely ignored. His independence does him no good, because what he writes has no influence.
I suppose my two favorite recent examples of people who have maintained their independence, but whose ideas have had considerable influence, are Ludwig von Mises and Murray Rothbard. They are more influential today than they were at the time of their deaths. Mises died in 1973. Rothbard died in 1995.
Mises had the great advantage in the final phase of his intellectual career in the fact that Yale University Press published his books from 1944 to 1957. This gave him an audience.

Wednesday, July 10, 2013

The True Cause Of Chaos In Egypt Exposed

It's no secret that the situation in Egypt is deteriorating by the day, but for some bizarre reason the ultimate cause of the recent chaos remains generally unknown. Ask any friend or colleague what they think initiated the Egyptian revolution and most will come up with something like 'The people were unhappy with the government, so they rioted', or words to that effect.
But that's only part of the story… nobody seems to be talking about why the people were unhappy in the first place. 
The truth is, it was crippling levels of inflation that sparked the rioting, looting, and mayhem that Egypt is still experiencing. Upon the breakout of civil unrest in Tahrir Square back in 2010 CNBC reported:
"It is food inflation that is ultimately breaking the back of the Mubarek regime - staples like meat, sugar and vegetables have been climbing out of the reach of the ordinary Egyptian for a year."

Sunday, June 30, 2013

What’s So Scary About Deflation?

 by Frank Hollenbeck

When it comes to deflation, mainstream economics becomes not the science of common sense, but the science of nonsense. Most economists today are quick to say, “a little inflation is a good thing,” and they fear deflation. Of course, in their personal lives, these same economists hunt the newspapers for the latest sales.

The person who epitomizes this fear of deflation best is Ben Bernanke, chairman of the Federal Reserve. His interpretation of the Great Depression has greatly biased his view against deflation.

Mises' Answer to Would-Be Conspirators: You Will Lose

by Gary North

Over half a century ago, Ludwig von Mises made a crucial observation.
The capitalistic social order, therefore, is an economic democracy in the strictest sense of the word. In the last analysis, all decisions are dependent on the will of the people as consumers. Thus, whenever there is a conflict between the consumers' views and those of the business managers, market pressures assure that the views of the consumers win out eventually.
I have long believed he was correct. Like Mises' disciple Murray Rothbard, I am a student of conspiracies. They all have this in common: the seek leverage through the state. They instinctively know that Mises was correct, that they are the servants of customers in a free market order. So, they seek to rig the markets by means of the state.
Once a person comes to grips with Mises' observation, conspiracies appear less formidable. The state is a weak reed when compared to the long-run effects of liberty. The free market prospers under liberty. It expands its control over production and distribution.
This leads me to the topic at hand.

Monday, June 10, 2013

Bill Gross To Ben Bernanke: "It's Your Policies That Are Now Part Of The Problem Rather Than The Solution"


On practically every day of the past four years, we have said that it was the Fed's own policies that are causing the ever-deeper systemic weakness in the US (and now global with all central banks going "all in") economy, which in turn forces the Fed to intervene even more aggressively in an attempt to counteract, in turn generating ever more economic weakness, leading to even more intervention, which is why every incremental episode of QE is larger and longer, and why the economic baseline is ever lower in the most perverse feedback loop of the New Normal. Now, it is once again Bill Gross to catch up to Zero Hedge and conclude just this in his latest monthly letter: "It’s been five years Mr. Chairman and the real economy has not once over a 12-month period of time grown faster than 2.5%. Perhaps, in addition to a fiscally confused Washington, it’s your policies that may be now part of the problem rather than the solution. Perhaps the beating heart is pumping anemic, even destructively leukemic blood through the system. Perhaps zero-bound interest rates and quantitative easing programs are becoming as much of the problem as the solution." Which is why there simply is no way out as long as Bernanke stays in.

From Bill Gross of PIMCO

Wounded Heart

Tuesday, June 4, 2013

The Grandest Larceny of All Time

by Bill Bonner

Gold seems to be coming back fast. It rose $38 per ounce yesterday.
Of course, the Fed's monetary meddling doesn't work. And it will most likely cause a financial disaster.
But the biggest scandal of today's central bank policy is that it is essentially the grandest larceny of all time.
The normal ways in which wealth is distributed may not be perfect, but they are the best nature can do. People earn it. They save it. They steal it. Or they get richer by investing.

Or they just get lucky...

Normally, in other words, wealth ends up being distributed in an unplanned and uncontrolled way. People do their best. The chips fall where they may.

But along come the central banks. They're creating a new type of wealth. It is not wage income. It is not the product of capital investments. It is not the result of technology or productivity increases or hard work or self-discipline... or any of the other things that lead to wealth and prosperity.

Instead, it is created by the central bank "out of thin air."

Sunday, June 2, 2013

Peak Gold

by PeakResources

We are rapidly approaching the end of cheap resources. The wealth of most Americans could get wiped out during the next decade due to commodity inflation. Focusing on your real purchasing power is critical. As this brief documentary discusses, what is it that makes gold so special? Merely a "tradition" as Bernanke would have us believe, or sound 'money'?

Monday, May 27, 2013

Microeconomics of Inflation

by Martin Sibileau

A week later and everyone is a bit more nervous, with the speculation that US sovereign debt purchases by the Federal Reserve will wind down and with the Bank of Japan completely cornered.
In anticipation to the debate on the Fed’s bond purchase tapering, on April 28th (see here) I wrote why the Federal Reserve cannot exit Quantitative Easing: Any tightening must be preceded by a change in policy that addresses fiscal deficits. It has absolutely nothing to do with unemployment or activity levels. Furthermore, it will require international coordination. This is also not possible. The Bank of Japan is helplessly facing the collapse of the country’s sovereign debt, the European Monetary Union is anything but what its name indicates, with one of its members under capital controls, and China is improvising as its credit bubble bursts.

Killing the Currency


. . . there is no record in the economic history of the whole world, anywhere or at any time, of a serious and prolonged inflation which has not been accompanied and made possible, if not directly caused, by a large increase in the quantity of money.

— Gottfried Haberler, Inflation, Its Causes and Cures (1960)[1]

The phrase “not worth a continental” may be vaguely familiar to Americans as an old and quirky saying, but to Revolutionary War–era Americans it would have been a harsh reminder of a recent nightmare. In order to finance the war, the Continental Congress authorized the issuance of money without rights of redemption in coin or precious metals (unlike other currencies in circulation). In short order, over $225 million Continentals were issued on top of an existing money supply of only $25 million. Initially traded on a one-for-one ratio with paper dollars backed by coin or precious metals, within a mere five years Continental currency had depreciated to worthlessness.[2] It was America’s first major experiment with a fiat currency, and it cost many newly free Americans their livelihood and savings.

Friday, May 24, 2013

Will It Be Inflation Or Deflation? The Answer May Surprise You

By Michael

Is the coming financial collapse going to be inflationary or deflationary? Are we headed for rampant inflation or crippling deflation? This is a subject that is hotly debated by economists all over the country. Some insist that the wild money printing that the Federal Reserve is doing combined with out of control government spending will eventually result in hyperinflation. Others point to all of the deflationary factors in our economy and argue that we will experience tremendous deflation when the bubble economy that we are currently living in bursts. So what is the truth? Well, for the reasons listed below, I believe that we will see both. The next major financial panic will cause a substantial deflationary wave first, and after that we will see unprecedented inflation as the central bankers and our politicians respond to the financial crisis. This will happen so quickly that many will get "financial whiplash" as they try to figure out what to do with their money. We are moving toward a time of extreme financial instability, and different strategies will be called for at different times.

So why will we see deflation first? The following are some of the major deflationary forces that are affecting our economy right now...

Wednesday, May 15, 2013

Stable Prices, Unstable Markets



According to European Central Bank Governing Council member Ewald Nowotny, Federal Reserve Chairman Ben Bernanke sees no risk of inflation in the United States. According to Nowotny, Bernanke had given a “very optimistic” portrayal of the US outlook.
“They see absolutely no danger of an expansion in inflation,” Nowotny said. Bernanke had said US inflation should be 1.3 percent this year.
Fed forecasts put inflation by the end of this year in a range of 1.3 to 1.7 percent. The yearly rate of growth of the consumer price index (CPI) stood at 1.5 percent in March against 2 percent in February and 2.7 percent in March last year.
Also the growth momentum of the core CPI (the CPI less food and energy) has eased in March from the month before. Year-on-year the rate of growth has softened to 1.9 percent from 2 percent in February and 2.3 percent in March last year.

Tuesday, May 7, 2013

Are We a 'Criminal Element'?

by Bill Bonner 


Back in the USA, stocks rose again yesterday. The Dow finished up 128 points. Gold fell $25 per ounce yesterday... and everybody seems to think it will be going down forever. (A word of caution: probably not.)
Last week, we went to São Paulo, Brazil. There, too, we found taxi drivers who knew a lot more about monetary crises than the typical US economist. Said one:
I remember. I was just a kid. But my father would call and tell us to run to the grocery store. He had just been paid. We'd dash for the grocery story, meet him there and buy everything we could. We spent every cent in just a few minutes.
Our friend was recalling what it was like in the late 1980s in Brazil. The government had caused inflation... then hyperinflation. Prices rose so fast that as soon as people got some cash they ran to the grocery store to spend it.
Later, there was no point. In 1990, hyperinflation in Brazil reached 30,000%. What cost 1 real (the Brazilian currency) in 1980 cost 1 trillion in 1997. The hyperinflation wiped out the middle class... and wiped the shelves clean.
"It's hard to run a business when you don't know what your money is going to be worth," said our friend. "Businesses tended to just stop."

From Harare to Buenos Aires...

And here in Argentina, there came an announcement this week. The government will freeze the price of gasoline for the next six months.

What Is a Gold Standard?

Before 1971, U.S. dollars were backed by gold. This meant that the federal government could not print more money than it could redeem for gold. While this constrained the federal government, it also provided citizens with a relatively stable purchasing power for goods and services. As Learn Liberty explains in this simple 4 minute clip, today's paper currency has no intrinsic value; it is not based on the value of gold or anything else. Under a gold standard, inflation was really limited. With floating value, or fiat, currency, however, some countries have seen inflation reach extremely high levels - sometimes enough to lead to economic collapse. Gold standards have historically provided more stable currencies with lower inflation than fiat currency. Of course, this leaves the question open of whether the United States return to a gold standard?

Friday, April 26, 2013

Eric Sprott: Silver to Outshine Gold as the Investment of this Decade!

by Capital Account

Today news headlines proclaimed "Gold rises" due to Italian Prime Minister Mario Monti's plans to resign, while CNBC cited expectations of future Federal Reserve easing. Regardless of the reason, Gold was barely up, trading just a little above 1,710 dollars an ounce, the lower end of its 30 day trading range. In the summer of 2011, during the US debt ceiling debate and credit downgrade, gold topped 1900 dollars an ounce. However, since then the price has dropped, despite the types of news events that usually drive investors to gold. Plus, according to the World Gold Council, central banks will buy more than 500 tons of gold this year, up from 465 tons in 2011, a new high.

Sunday, April 7, 2013

The Money-ness of Bitcoins


Bitcoins have been much in the news lately. Against the background of renewed concerns about the integrity of the euro zone and the imposition of capital controls in Cyprus, the price of a bitcoin has tripled over the last month and reached more than $141 for 1 BTC. Are we witnessing the spontaneous emergence of an alternative virtual medium of exchange, as some would put it? This article offers an answer to this question by considering three aspects of the economy of bitcoins: their production process, their demand factors, and their capacity to compete with physical media of exchange.

The Production of Bitcoins

A bitcoin is a unit of a nonmaterial virtual currency, also called crypto-currency, by the same name. They are stored in anonymous “electronic wallets,” described by a series of about 33 letters and numbers.

Preparing for Inflationary Times

by Jeff Clark

"All this money printing, massive debt, and reckless deficit spending – and we have 2% inflation? I'm beginning to believe that either the deflationists are right, or the Fed's interventions are working." – Anonymous Casey Research reader
The CPI, in our view, does not accurately measure inflation, which accounts for some of the discrepancy our reader is pointing out. However, the proper definition of inflation is "an increase in the quantity of money," which we've had in spades. We've not experienced the concomitant increase in prices, which is what we're addressing in this article.
It's logical to assume that when you create more of something, you dilute the value of what's already in existence. That's exactly what has happened to the US dollar since the 2008 financial crisis hit. Economics 101 says this should lead to higher inflation – yet official Consumer Price Index (CPI) levels remain benign.
It's this unexpected development that led a reader to pen the above quote. Is the inflation argument dead? If so, does that mean gold's big run is over? It's a timely question since the current selloff in gold is largely attributed to low inflation expectations.

Friday, March 29, 2013

Should Bernanke Park the Helicopter?

by Frank Shostak

According to Ben Bernanke, pulling back on aggressive policy measures too soon would pose a real risk of damaging a still-fragile recovery.
The Fed chief is of the view that, for the purposes of financial stability, a continuation of the central bank’s aggressive stimulus, conducted through purchases of Treasury and mortgage securities, remains the optimal approach.
In response to the financial crisis and the deep recession of 2007–09, the Fed not only lowered official rates effectively to zero, but also bought more than $2.5 trillion in assets in an effort to keep long-term rates low.

Monday, March 18, 2013

The Petro Business Cycle

By James J Puplava CFP
fuel gauge recession recovery
Oil is the lifeblood of modern society, powering over 90% of our transportation fleet on land, sea, and air. Oil is also responsible for 95% of the production of all goods we buy and ultimately drives the natural rhythms of recession and recovery. We define this as the "Petro Business Cycle".
The post-crash world we have inhabited since the credit crisis of 2008 has been defined as "The New Normal"—a phrase used to describe an economic and market environment much different than the three decades that preceded it. In contrast to the past, the "New Normal" will mean a lower living standard for most Americans. It will be a world of lower economic growth, higher unemployment, stagnant corporate profits, and the heavy hand of government intervention in all aspects in the economy. For investors it will be an environment marked by volatility, zero interest rates, and disappointing equity returns.
The age of leverage is coming to an end as consumers, businesses, and governments are forced to rein in their balance sheets. For consumers it will mean less discretionary spending as higher taxes and inflation erode the purchasing power of wages. Businesses will have fewer profit opportunities and find it more difficult to replicate the growth rates of the booming '80s and '90s. Governments will struggle with the illusion that their fiscal and monetary stimulus will produce long lasting effects on the economy. Eventually profligate government spending will give way to an age of austerity now beginning to spread across Europe. It will either be done voluntarily or involuntarily by the heavy hand of the market.

Friday, March 15, 2013

Gold manipulation, Part 2: How they do it (and a suggestion to hedge it)

This is the second of three articles I am posting on the suppression of gold. In the first article I showed that, under mainstream economic theory, the suppression of the gold market is not a conspiracy theory, but a logical necessity, a logical outcome. This second article will show how that suppression takes place. Those familiar with the gold market will likely find nothing new. The third article will examine the implications of this suppression and support the claim of the gold bugs, namely that physical gold will trade at a premium over fiat gold or gold paper is also not a conspiracy theory, but the logical outcome of the current paradigm.

How they do it: The concept

The popular notion, which central bankers would love to destroy, is that gold is a good hedge against inflation. In its simplest form, gold cannot be printed and, as its supply remains anchored, its price should spike if the supply of fiat money increases. The implicit math behind can be represented as follows:
Given a constant demand for money…
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