Inflation trends aren’t warm and fuzzy
The government says inflation is heading down, but I don’t believe them. According to this sobering analysis, we haven’t seen anything yet when it comes to printing money out of thin air.
I don’t publish many economics stories because the topic probably makes most people’s eyes glaze over. Still, I’ve long believed that “real inflation” was THE story of our times.
This article published at Zero Hedge gives an excellent overview of what’s almost-certainly happening in the world right now.
Basically, our rulers are printing endless amounts of money … because they have no other choice.
Anyone who uses dollars to buy anything is finding these dollars don’t buy as much as they used to. This trend, one assumes, will only get worse.
I wish I believed a “solution” was just around the corner, but I actually think we passed the tipping point years ago. Whether “Joe Biden” or Donald Trump wins, both will have to keep spending trillions of dollars the government doesn’t have.
Certainly, Congress isn’t going to reduce spending. This is impossible with interest on the debt sky-rocketing as well as expenditures on Medicare, Medicaid and government salaries and pensions sky-rocketing.
Printing an extra $6 trillion for Covid response - and then flushing this money down the drain - didn’t help matters. Nor does funding a new proxy war with Russia.
All I can suggest is more people might want to consider being labeled “kooks” or gold “bugs” and buy some silver and gold if they can … or if you understand crypto currency - maybe “diversify” your portfolio with that.
As the Preppers say, “Learn some skills” … or become good friends with neighbors who have those skills.
"This Cannot Go On Forever:" Explaining
the U.S. Debt Crisis In Simple Terms
Submitted by QTR's Fringe Finance - Written by James Lavish, CFA. (Emphasis added by me and the editors at Zero Hedge).
James opened by talking about the fact the numbers and what consumers are feeling are like having two different economies.
"You’re seeing two economies out there. And that's causing a lot of confusion … You hear the Fed talking about inflation. You hear the White House saying they've got inflation tackled. You hear businesses saying that they're struggling. You hear consumers saying that they're struggling. They can't stand the inflation, the prices. They can't keep up. But yet you see these numbers that are coming out that seem to be okay. They're conflicting.”
He added: “You're getting unemployment numbers that are conflicting with the actual job numbers. You're getting pricing that is conflicting. If you go to the grocery store, you're looking at the prices, you're saying there's no way this is up 3.2 percent from last year. This is up 10, 12, 15 percent. So there's confusion out there."
He then went on to try and explain why this is: "The confusion, Chris, is that you've got pockets of recession, which are natural when you have the Fed raise rates so quickly and hold them there for so long. And look, 5.5% is not an incredibly high rate on interest rates on the Fed funds rate historically.
“But when you raise rates from just over 0%, where they were holding for a decade, to 5%, it's massive because we've become incredibly indebted in this nation, which we're going to touch on quite a bit here. But the most important thing to understand is why people are asking, 'If the Fed has raised rates so steeply, why is the inflation rate not come down? Why is it not back to the two percent or under two percent target?'
“And the answer is that it's because the government is spending wildly, like so incredibly irresponsibly, that it's causing what we're calling fiscal dominance, meaning fiscal spending is dominating the Fed's attempt to tackle inflation by raising rates. And so you're seeing pockets of recession and people are feeling it. People are feeling it in their pocketbooks and their wallets,” he continued.
Source describes era of fiscal dominance we’re entering …
"So what's happening is it's the federal spending. It's the government spending so much money that you're seeing areas of deep recession. There's just no question about it.
“Commercial real estate has a problem, and that means regional banks have a problem. The Fed is all over this. The regional Federal Reserve banks are all over this. They are working with these community banks to make sure that they don't go under. “And we've already seen them go under. We saw Silicon Valley go under. That's a little bit of a different situation that didn't have to do with commercial real estate, but that had to do with exactly what you talked about. So you have rates that rise catastrophically on a meteoric pace.”
He also talked about how the rise in rates has effected treasuries on corporate balance sheets:
“Treasuries were considered riskless because in the last 15 years, they were riskless. If you owned a treasury, there was pretty much a certainty that the price of that treasury would just gravitate to par, and you would mature and get your maturity payment and all the coupons along the way.
“However, when you raise interest rates from 0.025% to 5.5% on a bond with a 30-year duration, you're basically saying that if you went to try to sell that treasury that you own, let's say a 1.5% treasury with a 30-year yield, and it's yielding 1.5%, and you try to sell that in the market, that's a difference of four percent annually for that bond. So if this thing still has 7, 8, 10, or 15 years of duration on it, that means you're marking this bond down significantly. It's not just a few percent."
Protecting the market is crucial at this stage …
"The economy is driven by this, and it's been shown for the last decade that the stock market really is a large part of the economy. It's not just because of tax receipts off of capital gains, but because people look at their net worth and see their net worth go up in their stocks. They're willing to spend more of their discretionary income rather than saving it because they think, 'Oh, well, look, my net worth is up 20%, 30%, 40% in the last couple of years. I'm fine. I'm going to go ahead and spend my paycheck. I'm not going to put any more money into the market. I'm good.' And so it just drives the economy."
Lavish explains that any crisis now will be kicked up to the sovereign level for the first time in recent history:
"We have the tech bubble, and that's kind of kicked up to the banks. Then we continue on, and we've got this risk, this debt indebtedness, that's now kicked up to the banks. And now we're coming on the great financial crisis with the housing market. The housing bubble and all of these banks holding this mortgage paper, which is just garbage, end up going under.
“Where does it get kicked? It gets kicked up to the federal level. And now it's sitting on the Federal Reserve's balance sheet. Flash forward to 2020, and you've got the lockdowns that caused the entire economy to grind to a halt. The government, in a panic, went and monetized $6 trillion of debt. So now you've got a Fed balance sheet that's holding more treasuries than anybody else in the world.
“What's going on today is that the problem is we have a fiscal policy that is absolutely unimaginably irresponsible,” he says. “We're running $2 trillion deficits at a time that we're not even in a recession. All this matters because the indebtedness and the risk have been kicked all the way up to the sovereign level. The punchline is that if you have a collapse of the economy, it's the sovereign level that must stomach it completely now."
The bottom-line conclusion …
"We can walk through the numbers, but the bottom line is that the US government and the Treasury have entered a debt spiral. We now have $34.7 trillion of debt, which is over 120% of GDP. If you're a country with debt over 120% of GDP, your fiat currency fails. This is where we're at, and we're just spending and spending and spending.”
“What happens if you get into a recession? Your tax revenues drop precipitously, and your spending rises at a similar rate because of all your social programs like unemployment and wage security. You could wind up having a deficit that's not $2 trillion but could be $3, $4, $5, or even $6 trillion if it gets bad enough. Just imagine that. Suddenly, we are adding over 10% to our debt in a year, maybe 20% in a year. That is the debt spiral.”
‘There’s really no way out …”
He continues: “We can't do that because the rest of the world will turn around and look at our bonds and say, 'Why would I buy those bonds if they have to keep issuing new bonds to pay me for my bond?' We are in a situation where we have to continually issue more and more debt. This is rising exponentially, and there really is no way out. That's the problem.
“Modern monetary theory proponents think it's just driving the economy; there's no big deal. However, when the music stops and people stop having confidence in the U.S. Treasury, that feeds into the US dollar. That's when you get into a problem. Why does that happen? It happens because of inflation. It all goes back to this central problem: this constant and relentless manipulation of the monetary system through central banks that create inflation.”
“That is a soft default on that debt every single day because the dollars you're getting paid back in the future are worth less than when you lent them out to the government initially. So, who wants to lend the U.S. Treasury dollars for 30 years when they know that inflation only has to go up to continue the charade?"
"They get into what's called a debt spiral. They can't get out of it. And this is where we are. So what is the option for the U.S. government if they continue to borrow? What does that mean? Well, that means that they must have inflation. There absolutely is no way around it. That inflation allows GDP to grow nominally. Remember that $28.5 trillion number? That has to go up. Nominally meaning just in terms of dollars, not inflation-adjusted.”
“When you have more dollars in the system, it creates more GDP because there's more dollars. And so that GDP number goes up. The productivity number goes up. But it's fake. It's not more stuff. It's just stuff that's more expensive. So there are more dollars in the system. And when you go to pay down that debt in the future, you're paying it down with dollars that are cheaper, that are worth less. This is called the debasement of the U.S. dollar. The U.S. dollar gets worth less and less and less every single year.”
He concludes …
“And so this is the challenge. The U.S. government absolutely must have negative real rates. What do I mean by that? That means they must have coupons on their treasuries that are lower than the inflation rate, and they have to have this in perpetuity. That's the only way they can keep this charade going. It won't go on forever. Make no mistake, this cannot go on forever.”
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Before I started to research Covid topics almost full-time, I was already convinced the “most important thing” to the world’s real rulers was “protecting the printing press.”
This was no brilliant observation. I simply noted how much money it costs to “feed the beast” of ever-bigger government and I knew these expenditures would grow even larger in the years to come. If one “follows the money,” he realizes where most of this “money” actually comes from. It comes from borrowing ever-more money or, basically, printing the stuff out of thin air.
This is technical inflation, which leads to “price inflation” at the grocery store or in our insurance policies or in tuition prices or the price of our speeding and red-light tickets going up.
I always thought this was “unsustainable,” but somehow the Powers that Be kept “kicking the can down the road” a little longer.
One thing I knew is that the government lies in all the economics data their agencies produce … just like they lied with all their Covid data and statistics.
A silver lining of Covid might be that more citizens are starting to figure this out. Our trusted officials are going to try, but it's hard to lie about the prices we are paying for every-day items and services we must purchase.
.... the hidden tax of inflation caused by an out-of-control servant government - corrupt to the core under-cover fuck-buddies with the central banking pirates.... XIII section 1 Neither slavery nor involuntary servitude, except as punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place suject to their jurisdiction. Section 2 Congress shall have power to enforce this article by appropriate legilslation. So - how much more clear can the point be made? Hang 'em all... robbery plain and simple... extinction economics.