Posted on 04/09/2011 2:10:07 PM PDT by blam
America's Inflationary Depression
Economics / Great Depression II
Apr 09, 2011 - 02:24 PM
By: Bob Chapman
We see signs that American workers are getting worn out. Management may have squeezed the last drops of extra work that they can out of them. That has been reflected in the latest worker productivity. Since WWII the average increase has been 2-1/2% year after year, but last week’s numbers were terrible, up only 0.2% per year. Europe and the US have been able in part to offset advantages of foreign producers by consistently getting better productivity results.
For those of you that are new to these statistics, they are a reflection of labor productivity, or advances in the way work is done. Such previous success have allowed companies to get the job done with fewer employees and in instances to offshore some work to take advantage of cheap foreign labor. If you use a combination of labor and investment funds, recent results are only up 0.1% for 2009. Those numbers are usually about half of regular productivity numbers. What low overall numbers mean is that throwing money at manufacturing problems is not working as well as it has in the past.
Recessions tend to supply lower figures and that is understandable. We are currently in an inflationary depression and have been since February of 2009, just over two years ago. Few economists agree with us, but that is normal. A few catch up in 8 to 12 months, the rest take two or more years.
Higher interest rates tend to be a factor, a negative factor. The higher the rates the larger the impact on the use of investible funds and productivity. The negative side coming from the cost of funds. During our recent depression the cost of funds has not been a factor, because interest rates are very low. As rates eventually move higher they will negatively impact employment at the worst possible time. Those higher rates will as well inhibit the level of capital investment and will contribute to corporate insolvencies. During the beginnings of this depression employment has paid a very heavy price, as corporate profits have boomed. Unemployment rates are about half of what they were during the “Great Depression.” Current long-term unemployment is terrible and many over 40 years old caught in that web will never work again.
It is very discouraging and disconcerting when workers train foreigners to do their jobs and are then fired. The jobs go to some foreign land and the new worker is paid 20% or 30% of what the terminated worker was paid. In addition companies, especially large corporations, are taking advantage of the breaks government is offering and buying labor saving equipment so that they do not have to hire or re-hire personnel. The result as we have seen is long-term unemployment, which in many cases means permanent unemployment, particularly for those over 40 years old.
Using invested capital, interest rates and manufacturing productivity, along with monetary policy gives one a possible overview of where the economy is eventually heading. They also give you a solid view of where gold and silver and commodities are headed. In 2000 after 20 years of being in the doldrums these factors, especially monetary policy, told us that we were embarking on a long-term bull market in gold and silver. The dreadful monetary policy of the 1990s had set the stage for what we have seen since June of 2000, almost 11 years. At this juncture we are as yet anywhere near where the top is, but it certainly is not here.
We are in the process of stage 2, which should take us to $2,400 to $3,000 and then stage 3 to $6,000 to $8,000, based on real inflation since 1980. Obviously that figure will be higher three to five years from now. One of the good aspects of all this is that once devaluation, revaluation and multilateral default come. There will be no further reason for the Treasury, the Fed and other central banks to manipulate gold and silver prices, if the new world reserve currency is 25% gold backed and we believe that will become reality. The elitists want another fiat currency, but nations will not stand for a repeat of what they have seen during the tenure of the US dollar. You had all better hope we are right, because a fiat alternative would create another world monetary disaster.
As we have explained many times in the past, since February 2009 the US has been in an inflationary depression. It has taken a while to get underway, but it is moving relentlessly forward.
We currently have real inflation in the vicinity of 8%, not less than 2%, which our government tells us. By the end of the year we will have 14% plus, matching 14-3/8% of 2-1/2 years ago, which was caused by an 18% increase in money and credit. Current inflation is mainly caused by a switch to quantitative easing, QE1 and $850 billion in stimulus from Congress, which will play itself out into next year. Fast on the heels of that monetary policy we will be exposed to the affects of QE2 and the $862 billion injected into the system by QE2 and stimulus 2. That will carry us into 2013.
The big question is will we have QE3 and the answer is yes, officially or unofficially. Getting stimulus 3 will prove very difficult, if not impossible. That means the Fed will have to take up the slack in funding to keep the financial system afloat. Thus, next year or perhaps by the fall, the Fed will have to feed $2.5 trillion into the system just to keep it going sideways to slightly lower. Establishment economists are calling for 4% to 4-1/2% GDP growth for 2011. Remember without these monetary and fiscal crutches GDP would be minus 1% or more. Such performance will put ever-higher pressure on inflation taking 2012 to 25% or perhaps 30% in 2014. It is already in the pipeline.
Ping
Thanks Clintonfatigued.
That is how Obama will beat out Carter. Wages went up with the Carter inflation. With Obama it will be more”Diverse”. Wages down inflation up.
-——Wages down inflation up.-——
I would argue unions like inflation. Their complaint has been no raises in umpteen years.
If a rising tide raises all boats, unions can get raises and claim success. The unwashed hoards believe the union line because they are ignorant. All they know is they are making more money
The fact the raises lag the inflation ceases to matter once the raises are in place
I understand the problem, but how will they eat? Gold is not the solution and a global currency is only a prescription for a bigger disaster.
My expectations are a run of Fed induced inflation, followed by a deflationary collapse. The blind "Globalist" in both parties have done this to us. Arrogant Bastards.
If only that were always true. Wage-inflation is often one of the main causes of general inflation. A vicious circle is created, with wage rises driving inflation, followed by inflation driving the demand for wage increases. Perhaps, diminishing unionization makes this less of a problem, than it used to be.
Where is the liquidity? The last time I heard the velocity of money was at an all time low.
If you don’t have the bucks, you cannot pay the high prices.
Cost push on food prices is here from fuel, bad foreign food harvest due to weather (drouth and floods), high grain prices and the coming effects of HR2749/S.510/HR2751 FDA Food Takeover Bill.
Wage inflation does not cause inflation. There is only one cause of inflation, that is an increase in the money supply. Without an increase in the supply of money a wage increase in one place just means a decrease in another. As long as either banks keep making loans on a fractional deposit policy or the Fed keeps printing fake money we will have inflation.
Deflation happens when lending institutions quit loaning money. When loans are paid off and the Fed doesn’t print money to replace it there is a decrease in the money supply, deflation. Actually the Fed can also create deflation by increasing the amount of the fractional deposits at their banks must keep in the Federal Reserve System.
Wage inflation does not cause inflation. There is only one cause of inflation, that is an increase in the money supply. Without an increase in the supply of money a wage increase in one place just means a decrease in another. As long as either banks keep making loans on a fractional deposit policy or the Fed keeps printing fake money we will have inflation.
Deflation happens when lending institutions quit loaning money. When loans are paid off and the Fed doesn’t print money to replace it there is a decrease in the money supply, deflation. Actually the Fed can also create deflation by increasing the amount of the fractional deposits at their banks must keep in the Federal Reserve System.
Wage inflation does not cause inflation. There is only one cause of inflation, that is an increase in the money supply. Without an increase in the supply of money a wage increase in one place just means a decrease in another. As long as either banks keep making loans on a fractional deposit policy or the Fed keeps printing fake money we will have inflation.
Deflation happens when lending institutions quit loaning money. When loans are paid off and the Fed doesn’t print money to replace it there is a decrease in the money supply, deflation. Actually the Fed can also create deflation by increasing the amount of the fractional deposits at their banks must keep in the Federal Reserve System.
Wage inflation does not cause inflation. There is only one cause of inflation, that is an increase in the money supply. Without an increase in the supply of money a wage increase in one place just means a decrease in another. As long as either banks keep making loans on a fractional deposit policy or the Fed keeps printing fake money we will have inflation.
Deflation happens when lending institutions quit loaning money. When loans are paid off and the Fed doesn’t print money to replace it there is a decrease in the money supply, deflation. Actually the Fed can also create deflation by increasing the amount of the fractional deposits at their banks must keep in the Federal Reserve System.
Liquidity Trap...the Fed is out of bullets.
The money is out there but it is not in the hands of wage earners. Our wonderful government leaders made sure that the fake money that was printed went in the hands of people that could give it and other democrats a cut of it during the election cycle. The big banks and other financial institutions are sitting on a pile of money that they don't know what to do with.
If people would start buying houses some of that money would end up in the hands of spenders and then we would only have an inflation problem. People that can't afford food and gas won't even think about buying a house. I'm worried about a whole lot more than inflation. Our government will see this as an excuse to take over all of the economy and most of our freedoms to do things you won't be able to believe but that many people will beg for. Things are not looking good for our good old USA.
“Food Inflation”
Yep, due to foreign crop failures, high fuel prices, high grain prices due to drouth, floods, abnormal cold weather and the coming horrors connected with the passage of HR2748/S.510/HR2751 FDA Food Takeover Bill. In my opinion that alone could increase food cost by 25% this year.
We were sold out to Global Ag during the Lame Duck Session in the name of food safety. They were saying that foreign terrorists intended to poison our food supplies from Central and South America.
It is time for a home garden again. This is the year...
Hungry homeless desperate people do extreme things.
The elitist should think again if that is the strategy.
When all else fails, a country boy can survive.
I still know how to do that, but that strategy made no sense in my lifetime. My family had experienced that problem twice before, and I understand what happened then.
Actually, most in the private sector are dead on the floor...if they still have jobs....
Stagnant wages, slashed or eliminated benefits, no health care, reduced hours, millions unemployed, the constant threat of being fired if ya don't work harder for less.
Meanwhile, government employees retire at 50 years old, with tax paid lottery style medical benefits and pensions.
The American private sector has been gang raped.
I think lower productivity numbers are the result of busineeses and work shops being cut to an absolute minimum, but not having enough work to fully employ the remaining people. I.e. If a process takes a minimum of three workers to run, but they only have enough work to keep them busy 80% of the time, then they cannot improve productivity until the workload increases.
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