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The Dow sinking.Gold sinking.Oil sinking.Copper sinking.Yields sinking.  We struggled with this, Dear Reader. We meditated. We prayed. We drank heavily.And finally…we overcame the rank desire to say: “We told you so!”As you know, Martin Wolf, of The Financial Times, is the voice of The Economics Establishment. All that is great and good in the field — which isn’t very much — is given voice by Wolf. Then, it is acceptable for policymakers, Treasury ministers, and central bankers, not to mention the people you talk to at cocktail parties.And lo! Here cometh the neo-Keynesian economist. What saith he?He says the world...

Inflation Is Part Of The Plan Economics / Inflation Jan 31, 2012 By: Money Morning Martin Hutchinson writes: Forget about lost decades. Forecasts that we'll be turning Japanese couldn't be further from the truth. Here's why. It's simple, really. Deflation is not in the interest of anybody in power, so it's very unlikely to happen. The U.S. Federal Reserve's policy move to target inflation last week just re-emphasizes this point. That's not to say deflation is a bad thing for everybody. For savers and those living on fixed incomes, deflation would be a very good thing indeed. Their income would...

Keeping interest rates low may have the APPEARANCE of stimulation, but that effect is NOT being passed on by the banks. Interest Rates on loans, even credit cards, have not declined in proportion to the drop in interest rates at the Fed. Therefore, the deflation aspect is shifting profits to banks further bailing them out to make up for their losses in the speculation of mortgages. NOTHING is being done to help the people or the economy whatsoever! They are NOT lowering borrowing costs of consumers or business so the Fed can pretend it is helping the economy, but it...

Mike "Mish" Shedlock finally made it on to FSN's distinguished guest list. While Mish is often controversial and frequently derided by other members of the prognostication class, he has a unique perspective, which is entitled to some respect. As he explains it, the massive destruction of assets, such as real estate and debt backed securities has actually led to a shrinking of the money in circulation. Even though the Monetary Base M0 has greatly expanded in recent years, none of these newly created dollars have found their way in to the money supply. The reason is simple, banks aren't lending...

OUR ultimate risk is that we will lose all our freedoms before there would be hyperinflation. The borders are closing silently. Tax havens are being attacked and every wire coming into the US is being traced to check who owns that account. Government is desperate to cling to power. It is naive to presume that our economic troubles will cause government to see the light and accept gold as the new money supply. The bankers, who really control government like the financial crack dealers, would never allow it. The attempt to manipulate gold during the Panic of 1869 and force...

New York 28/12/2011 - Gold on the Comex division of the New York Mercantile Exchange moved sharply lower Wednesday after the euro plummeted on concerns that Europe is creeping closer to a deflationary recession. Gold futures for February delivery were last down $30.50, or about two percent, at $1,565.00 an ounce. Trade has ranged from $1,563.90 to $1,595.00. The markets have been under pressure ever since the euro smashed through the $1.30 level, Sterling Smith, an analyst with Country Hedging, said. “The bulls are really nervous. They aren't comfortable getting long - especially considering this is a funny time of...

China Economy May Drag World Down Economics / China Economy Dec 17, 2011 - 07:39 AM By: Barry Elias My column of June 24, 2011 ("China Yield Inversion May Portend Economic Slowdown") opened with the following sentence: “The yield on Chinese bonds are inverting at an accelerating rate. This does not portend well for the Chinese economy, and this may have negative implications globally.” China’s contribution to global economic growth this year is nearly 40%.The reason: property construction in China boomed significantly during the previous decade. The Chinese government controls all the allocation of land. Beginning in 1998, Chinese authorities...

(Kitco News) - Comex February gold futures prices careened lower and hit a fresh nearly three-month low on follow-through selling pressure from the strong losses posted in afternoon trading Tuesday. It was a “risk-off” trading day in the market place Wednesday, and that was very bearish for the precious metals. A stronger U.S. dollar and sharply lower crude oil prices were also major bearish factors for gold Wednesday. Fresh, serious near-term technical damage has been inflicted in gold this week. February gold last traded down $76.80 at $1,586.60 an ounce. Spot gold last traded down $47.00 an ounce at $1,584.50....

What you are about to read should absolutely astound you. During the last financial crisis, the Federal Reserve secretly conducted the biggest bailout in the history of the world, and the Fed fought in court for several years to keep it a secret. Do you remember the TARP bailout? The American people were absolutely outraged that the federal government spent 700 billion dollars bailing out the "too big to fail" banks. Well, that bailout was pocket change compared to what the Federal Reserve did. As you will see documented below, the Federal Reserve actually handed more than 16 trillion dollars...

This is the worst-case scenario from Europe, and it just might come true: Italy defaults on its debts. Every major Italian bank collapses. Recession grips the eurozone. Sovereign defaults and bank failures ripple across the Continent. Saddled with bad loans to nations and lenders in Europe, American banks hemorrhage cash. Credit freezes in the United States. Multinational companies, unable to raise money, curb U.S. investment and hiring. Wall Street demands, but fails to get, new bailouts. The entire developed world plummets into recession and, quite possibly, depression. This, in contrast, is the placid warning that President Obama gave Americans about...

George Soros: The Global Financial System Is In A 'SELF-REINFORCING PROCESS OF DISINTEGRATION' Simone Foxman Dec. 1, 2011, 4:58 PM Investor George Soros foretold doom in a recent speech in front of the International Senior Lawyers Project, according to the WSJ. The financial system is collapsing, and the developed world is fast falling into a "deflationary debt trap.""The consequences could be quite disastrous," he said. "You have to do what you can to stop it developing in that direction." Soros has been an outspoken advocate of taking more radical action to stem the European debt crisis, endorsing intervention by the...

Raise or lower interest rates just like the feds and see the results on inflation and employment. A little teaching game. Interesting results

ROBERT REICH: The Republican Economic Plan Is An Austerity Death-Trap Robert Reich Oct. 19, 2011, 6:25 PM Ron Paul’s newly-unveiled economic plan – promising to cut $1 trillion from the federal budget in year one (presumably that means 2013) – is only slightly more ambitious than what we’re hearing from other Republican candidates. They’re all calling for major spending cuts starting fifteen months from now. What are they smoking? Can we just put ideology aside for a moment and be clear about the facts? Consumer spending (70 percent of the economy) is flat or dropping because consumers are losing their...

Warning U.S. HyperInflation Ahead Economics / HyperInflation Oct 09, 2011 - 06:20 AM By: Seth Barani Money Supply M2 has expanded at Warp-9 within the past few months, based on Federal Reserve Data released on Sep.30th. In fact, the ratio of M2 to M1 has set a World Record, exponentially growing to over 5:1 (M2 is near $9.6 Trillion, over 12% growth this year so far, projected to show 15% growth in one year, while M1 has remained constant near $2 Trillion.) Chart below shows the growth of M2 in 2011: The daily price chart of Gold is shown next....

Why The Inflationists PROBABLY Have It Wrong, For Now Economics / Deflation Oct 03, 2011 - 01:27 PM By: David Haas Many people are trying – with increasing desperation – to discern the future and plan correctly for the economic environment we’re most likely to find ourselves experiencing. My continued bets have been that deflation will prevail, at least in the early years of the great collapse, and nothing has yet occurred that changes my view. To further advance your personal understanding of the powerful forces (people) at work in the hidden halls of high finance, here is an excellent...

Hang Seng Index leads Asia fall, diving more than 4%. Hong Kong stocks tank as financials plunge on reports that Greek budget misses austerity targets. • Japan stocks dive, with exporters tumbling • Australian stocks fall sharply on Europe jitters

The Stock Market Smells Deflation Stock-Markets / Stock Markets 2011 Oct 02, 2011 - 11:06 AM By: Clif Droke In previous commentaries we've talked about how the 6-year cycle is scheduled to peak around Oct. 1. That now appears to be all but certain following the last few trading sessions. Although the cycle has a 1-2 week standard deviation (plus or minus), it appears that it peaked on schedule last week and that the stock market has lost the last remaining cyclical support it had throughout most of September. Interestingly, it was the commodity stocks that performed the strongest in...

Gary Shilling: The Economy Is Slowing, Yields Will Plunge, Deflation Is Coming And Stocks Are Headed Lower Joe Weisenthal Sep. 28, 2011, 3:21 PM Stiff drink alert. Here are highlights of Gary Shilling appearing on Bloomberg TV. (Click here to watch the full video.) -------------- Schilling on how much further the 30-year Treasury bond yield could fall: "I think [the 3-year Treasury bond yield] might go back to 2.5%. That's where it was at the end of 2008 in the aftermath of the Lehman Brothers meltdown. That's my target for now. I think we are looking at deflation. As I...

Deflation Is Here Graham Summers September 12, 2011 I’ve been warning that the markets were on the verge of another round of Deflation. By the looks of things, it’s here with the US Dollar breaking out of its massive wedge pattern. The ultimate target for this pattern is the mid-80s. So consider this latest breakout the first leg up of a much larger move that will affect all other asset classes in a big way. In order for a move of that caliber to occur in the US Dollar, we’ll need to see a full-scale crisis hit the markets (the...

Dear Freepers, please help me out! A firend of mine sent me an e-mail which featured a link to someone who is apparently an economist names Harry S. Dent, with a video ink (I'm including). I have never heard of this man, and I began to watch the video, in which he defines what he think is going on with the economy. Thus far (I have only watched about half), all I can gather is that he believes that we are headed towards DEFLATION and that all commodoties are in a bubble and that whenever their is a crisis, people...

Fool's Mission (Final point at the end of the article) Obama wants to create jobs via stimulus measures. It's a fool's mission. Prevailing wages drive up the costs, few are hired, and the cost-per-job (created or saved) is staggering. Money never goes very far because the US overpays every step of the way. Stimulus plans that do not fix the structural problems are as productive as pissing in the wind. Then when the stimulus dies, which it is guaranteed to do, a mountain of debt remains. Instead, my 12-point recommendation list will fix numerous structural problems, create lasting jobs, and...

August 27 2011: Et tu, Commodities?August 27,2011 Detroit Publishing Co. Apocalypse Then April 18, 1906 "Looking up Market Street from near Ferry", San Francisco in the aftermath of the earthquake and fire Stoneleigh: Our most consistent theme here at The Automatic Earth has been the developing deflationary environment and the knock-on effects that will follow as a result. Now that the rally from March 2009 appears to be well and truly over, it is time to revisit aspects of the bigger picture, in order for people to prepare for a full-blown liquidity crunch. October 2007-March 2009 was merely a taster....

The global credit markets are braced for deflation and perhaps depression. Panic flight to safety has pushed the yield on 10-year US Treasuries below 2pc for the first time in American history, exceeding the extremes of the Lehman crisis and the banking crash of the 1930s. Investors scrambled to buy the bonds of strongest industrial states on Thursday on fears of a double-dip recession on both sides of the Atlantic and a European banking crash, driving down their returns to investors. German yields fell to 2.08pc and Switzerland's 3-month rates have turned deeply negative. Markets were stunned by a plunge...

The Great DeflationWe must address the clear and present threat to our economy. Our prosperity stands on the precipice. Concerned Americans demand an explanation of how this happened and leadership that will walk us back from the cliff. But in the White House and along the campaign trail, the purported leaders fail to recognize or refuse to acknowledge the clear and present threat to our economy: the Great Deflation. The failure to differentiate between an economic recession and this Great Deflation will cause an economically doomed generation. But this need not happen. The strength of our economy — its capacity...

I keep reading about the dollar being a “new multi-year bull market” and that the US is headed for “Japan style deflation”. Frankly, it is a little tiring. The people making these arguments should know better. Deflation VS Hyperinflation Yes, there is debt deflation, and the overall money supply is shrinking as a result. However, those calling for “multi-year bull market” for the US dollar are insane. These individuals need to review basic monetary theory. The money supply is only one of three factors that determine whether prices rise or fall. The other two are the changes in the velocity...

Hyperinflationits have now blown it twice. First, they insisted hyperinflation would happen before deflation. They were wrong. Then, during the QE2 inspired equities and commodities ramp, they said the same thing. They were wrong again. Prior to the Great Financial Crisis I had a bet with "Heli-Ben", a staunch hyperinflationist who insisted we would hyperinflation before deflation. I won the bet but have not yet received my prize, a "crying towel" from "Heli-Ben". By any rational measure, and certainly by my definition, the US went into a period of deflation lasting at least a year. Deflation ended in March of...

(Reuters) - Bank of New York Mellon Corp told some of its biggest depositors this week it does not want their money. BNY Mellon said it is charging a fee to big corporate and asset management clients that deposit more money than average, because it has been overwhelmed by deposits. Global economic turmoil -- including the Greek debt crisis and the U.S. debt ceiling debate -- has driven BNY Mellon's large clients to sell riskier assets and move the proceeds to deposit accounts. The flood of cash is likely to raise BNY Mellon's U.S. deposit insurance fees and could weaken...

The BNY Mellon apparently does not want money, not to lend, not at all. In a mad dash for cash Mellon has been flooded with it. Overnight lending rates went negative. Please consider BNY Mellon to Slap Fees on Some Big Deposits Amid Global Race to CashBank of New York Mellon Corp. is preparing to charge some large depositors to hold their cash, in the latest sign of the worries roiling global markets. The big U.S. custodial bank said this week in a note to clients that it will begin slapping a fee next week on customers that have vastly...

The media is hyping and harping on the issue that the Federal Reserve will resort to PRINTING more money to feed another round of “quantitative easing.” This is a wholly incorrect fact. The Department of Treasury prints our "paper currency” NOT the Federal Reserve. “Quantitative easing” is the Federal Reserve increasing bank reserves- thereby creating new money electronically- but, for a stated purpose of “stimulating” the economy and NOT for paying government debt. This is a salient point that the media mixes up, assuming and misinforming the public that QE is paying for increased government debts. QE serves a fundamental...

Remember Food Inflation? Joe Weisenthal Jun. 30, 2011, 8:30 PM Earlier we talked about the corn market crash, but really the story is in wheat. Have you seen it? We're talking prices not seen since last August. Between this and the decline in gas prices, it's inevitable that all of the official inflation measures are going to trend lower in the coming months. It will be a while, most likely, before we see anything that looks outright deflationary, but it's clear that there's been a major trend-break on this front, even as equities hold up surprisingly well. Here's wheat via...

Obama, Democrats, Republicans AND Bernanke All In A Bind – What They Will Do And WhenBruce KrastingJune 27, 2011 We have two distinct groups in D.C. that are stuck between a very big rock and a hard place. The first is the Federal Reserve. The second is the Democrats and Republicans and the battle being waged over the debt limit. I see a possible solution to these impasses. It’s so simple that I’m sure it is being considered. The prospect is scaring the crap out of me however. The Fed is in a bind. The economy is clearly slowing down...

Gold And Oil Getting Killed Right Now, As Oil Falls Over 4% Since Bernanke Declared Deflation Dead Joe Weisenthal Jun. 23, 2011, 8:41 AMThe latest: The IEA just announced that they are releasing oil stocks due to continued instability in Libya. Read about it here> Earlier: Yesterday at around 2, Bernanke declared deflation dead. Today oil is getting killed following those weak Jobless claims. It's now fallen over 4% since then. Gold is also getting killed: It's off $30/oz! Things were already negative, and that was before that bad initial claims report. From FinViz, a chart of oil:

As the U.S. economy seemingly limps out of the Great Recession most analysts now assume that the Federal Reserve will soon join the tide of other central banks and bring an end to the current era of unprecedented monetary expansion. Markets expect that Fed will begin withdrawing liquidity this summer, not too long after this latest round of the quantitative easing comes to an end. But this is simply a delusion. [Snip] In order to withdraw liquidity the Fed must sell most, if not all, of the assets on its balance sheet. The questions are: what types of assets will...

Preparing Your Investments For An Inflationary Future By Eric Fry 05/26/11 Laguna Beach, California – Let the boxing match begin!…In the near corner, we find deflation, with its furious fists of debt liquidation and credit contraction… And in the far corner, we’ve got Ben Bernanke’s printing press, with its menacing inflationary uppercut. Inflation will win this contest eventually, but the match might go the full 12 rounds. Deflation is no slouch. He packs a mean punch. Borrowers of all types – from single-family mortgage-holders to national governments – are defaulting on their loans…or moving rapidly in that direction. As the...

Determining when the next great liquidation will occur is impossible to predict with any degree of certainty; nevertheless it is fair to say the sooner the better.  Economic liquidation is a restorative process that corrects the harm done by inflationary policies.  If accepting of this premise, then liquidations or deflationary depressions cannot be considered the disease in need of cure which unfortunately has been the position of economic interventionists since the early 1920's. Instead, they are a necessary and unavoidable adjustment after years of excessive credit expansions have destabilized the economy.  Efforts to further delay these self-corrections by instituting a...

Inflation Fears: Real Or Hysteria? Economics / Inflation May 11, 2011 - 06:01 AM By: Ellen Brown Debate continues to rage between the inflationists who say the money supply is increasing, dangerously devaluing the currency, and the deflationists who say we need more money in the economy to stimulate productivity. The debate is not just an academic one, since the Fed’s monetary policy turns on it and so does Congressional budget policy. Inflation fears have been fueled ever 2009, when the Fed began its policy of “quantitative easing” (effectively “money printing”). The inflationists point to commodity prices that have shot...

How QE2 Has Changed Everything By Bill BonnerApril 4, 2011 05/04/11 Baltimore, Maryland – Monday was a no-action day on Wall Street. Tuesday was dead too. Except that gold dropped $16. The killing of Osama bin Laden was supposed to raise prices. Especially the price of the dollar. The buck has been going down for 3 years. It’s now within a few cents of its all time low, registered back in the ’70s. We were prepared to advocate more killing, maybe even mass murder, if it would lower the unemployment rate…but the ‘killing lift’ was short lived. It lasted only...

Fed head Ben Bernanke, at his first-ever news conference on Wednesday, slammed the door shut on any new QE3 pump-priming. The $600 billion QE2 program to purchase bonds will end on target at the end of June, and that will be that. Mr. Bernanke also suggested that the Fed’s “extended period” for the near-zero federal funds target rate could end in a couple of meetings. Perhaps these announcements suggest a bit-less-easy monetary policy. Perhaps. But Mr. Bernanke had no defense of the sinking dollar, or the inflation it brings, or the drop in middle-class living standards it causes. So it’s...

Deepening Economic Crisis: Inflation, Rising Interest Rates, Surge In The Price Of Gold And Silver Economics / Inflation Apr 24, 2011 - 12:43 PM By: Bob Chapman Economic recovery does not seem to be taking effect in spite of more massive expenditures by Congress and the Fed. The IMF says financial stability has improved, but then again their vision is almost always clouded. US tax revenues are not increasing in a meaningful way, manufacturing struggles to expand and Wall Street flourishes in a cascade of mega salaries and bonuses. In another six months the US will be three years what...

Day after day the American public is inundated with media stories about surging food and gas prices, but if they want the real inflation story, they should ask a bartender. The rate of change in prices for a beer or cocktail at the local pub—a component of the Consumer Price Index—is actually decelerating from a year ago. In fact, the annual change in prices for data processing, recreation, lodging, medical services and tuition are all showing a downward trend, according to David Rosenberg’s analysis of the government’s CPI data. With all the hubbub about $100 oil, surging food prices, along...

Inflation Versus Hyperinflation, The Crucial Difference Economics / Inflation Apr 17, 2011 - 12:49 PM By: Justice Litle Is it possible we will see hyperinflation in the United States? Yes, but not by the route you might think... "Hyperinflation." You've heard the word. You may have talked about it on the golf course or at the dinner table. (Or even in the grocery store.) There is a difference, though, between inflation and hyperinflation. They are not the same thing. And for the most part, there is no gradual path from one to the other. To wind up with true hyperinflation,...

With full support from the Treasury Department, the Federal Reserve continues to weaken the dollar in order to "stimulate" the economy. Such exercises never create sustainable growth, but they sure are disruptive. One destructive result is that capital is misdirected because of false price signals. When the dollar is debased, commodity prices rise and speculation increases. Thus, it's impossible to know what the real supply/demand price is of a commodity or an asset--primarily land--related to the commodity. We see this harmful phenomenon playing out in farmland prices, which went up 12% last year, while doubling over the past decade. Prior...

One word (well technically two) can describe what is going on in the electronic pre-market arena right now: inflationary hysteria. Gold is at a new record, wheat is surging, corn is at highest since 2008, crude at a new 30 month high, silver is at $41.10 - a new fresh post Hunt high, beans surging, etc, etc, etc. Essentially everything is bid, following news first reported on Zero Hedge that PIMCO is betting the farm that either inflation is about to go parabolic and force bondholders to dump everything, or that the Fed will have no choice but to pursue...

A violent feedback loop in the complex system of human action is unfolding globally. However, the impending global debt collapse has the potential to produce a modern day Jubilee. There is evidence that the violent global convulsion of human action we are in the midst of will accelerate into 2012, and central planning and human design will meet their just demise. Beyond the unfolding global crisis, a new golden age of spontaneous order and global prosperity will dawn. A global human action driven free market revolution has begun. It is sweeping the world, and appears to have now arrived in...

A frequent question posed to those who tilt toward the inflation side of the alleged inflation/deflation debate is that if inflation is such a problem, why isn't it registering in the consumer price index? The answer to this question lies in reports of pricing pressures around the world. As readers of the major newspapers have doubtless seen in recent months, prices - particularly commodity prices of the food and energy variety - have been increasing on the way to rising consumer price measures in places such as China, India, England, Euroland more broadly, and in the increasingly inflamed Middle East....

The reason that political establishments have always been biased against monetary deflation[1] can be found in the manner in which wealth transfer occurs under inflationary and deflationary environments. During an inflationary credit expansion, wealth is transferred from the public in general to the earliest recipients of the newly created credit money. In practice, the earliest recipients are interest groups with the strongest political connections to the state and, in particular, the state institutions that control monetary policy (i.e., the Federal Reserve in the United States). Importantly, the wealth transfer that takes place during an inflation is hidden and largely unrecognized...

The Federal Reserve's massive money-printing campaign of the last two years has had one central goal: Make sure the U.S. doesn't lead the global economy into the black hole of deflation. It may be time to declare "mission accomplished." Around the world, many countries aren't confronted with the debilitating forces of deflation, or falling prices and wages, but the opposite — inflation. Rising prices, particularly for food, have fueled credit-tightening moves by China, India, Brazil, Australia and other nations in recent months. Even in Europe, where a government-debt crisis is a serious drag on overall economic growth, annualized inflation in...

Federal Reserve Board Chairman Ben Bernanke said Thursday that a controversial $600 billion bond buying plan has contributed to a stronger stock market. "Our policies have contributed to a stronger stock market just as they did in March 2009 when we did the first iteration of this program," Bernanke said at a Federal Deposit Insurance Corp. forum on small businesses. "A stronger economy helps small businesses more than larger businesses. Interest rates are higher but that's mostly because the news is better. It has responded to a stronger economy and better expectations." The $600 billion bond buying plan follows a...

We now live in a world where governments print worthless pieces of paper to buy other worthless pieces of paper that combined with worthless derivatives, finance assets whose values are totally dependent on all these worthless debt instruments. Thus most of these assets are also worth-less. So the world financial system is a house of cards where each instrument’s false value is artificially supported by another instrument’s false value. The fuse of the world financial market time bomb has been lit. There is no longer a question of IF it will happen but only WHEN and HOW. The world lives...

At my firm, we are endlessly keeping a close eye out for the emergence of deflation, defined here as the purchasing power of the dollar going up. Technically, inflation and deflation are terms that indicate a particular combination of money surplus or deficit (respectively), demand for money (of which velocity is but one measure), and demand for various goods and services (which themselves may be in abundance or short supply). The reason that the inflation versus deflation debate has been so noisy, yet simultaneously so murky, is that all of these intersecting variables impact the final equation. It is like...