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The Path To Runaway U.S. Inflation Economics / Inflation Nov 06, 2009 - 10:35 AM By: Ganesh_Rathnam "I see green shoots," said Fed Chairman Ben Bernanke on 60 Minutes back in March, doing his best rendition of Haley Joel Osment from the movie The Sixth Sense. Since then, every poor economic headline in the lapdog media has been preceded with the word "unexpected," as if the clueless chairman's pronouncements were suddenly the Gospel, and the economy had indeed recovered. Phantom US Economic Recovery Common sense tells us that if phenomenon A causes problem B, then B cannot be rectified unless...

NEW YORK, Nov 6 (Reuters) - Gold futures in New York rose to a record above $1,100 per ounce on Friday as the dollar eased in the wake of disappointing U.S. employment data. At 9:48 a.m. EST (1448 GMT) December gold GCZ9 was up $10.20 at $1,099.50 an ounce at the COMEX division of the New York Mercantile Exchange, having topped at $1,101.90 in morning trade. Spot gold XAU= reached a record at $1,100.90 per ounce.

... Buried in Nancy Pelosi's health-care bill is a provision that will partially repeal tax indexing for inflation, meaning that as their earnings rise over a lifetime these youngsters can look forward to paying higher rates even if their income gains aren't real. In order to raise enough money to make their plan look like it won't add to the deficit, House Democrats have deliberately not indexed two main tax features of their plan: the $500,000 threshold for the 5.4-percentage-point income tax surcharge; and the payroll level at which small businesses must pay a new 8% tax penalty for not...

{snip ...] "Since interest rates are zero, you can borrow dollars at no cost at all and use them around the globe," says Jeffrey Kleintop, chief market strategist of LPL Financial, a privately held brokerage firm based in Boston. "For example," explains Kleintop, you can borrow dollars at zero, and invest in Brazilian bonds yielding 5.2%. As the real (Brazil's currency) has risen 26% against the dollar so far in 2009, such a carry trade would have earned 31%, or double the loss of value in the dollar. Gold and oil, especially, have an inverse relationship to the dollar, underscores...

Commentary: Rates to stay low as long as unemployment stays highWASHINGTON (MarketWatch) -- The Federal Reserve isn't going anywhere until the unemployment rate drops. In answer to all those who are clamoring for the central bank to begin raising interest rates or to at least explain when higher rates might come, the Federal Open Market Committee gave a simple response on Wednesday: Show us the jobs. Rates will stay "exceptionally low" as long as the unemployment rate is rising and inflation trends are subdued, the FOMC said. After its two-day meeting ended on Wednesday, the FOMC made essentially no changes...

Four Reasons Hyperinflation Hasn’t Hit The US... Yet Keith Fitz-Gerald Nov 04, 2009 11:30 am This uncertain limbo isn't good now, or ever. Everything we know about classic economic theory suggests the US economy should be experiencing Zimbabwe-like hyperinflation right now, thanks to the nearly $2.2 trillion the US Federal Reserve has pumped into the system. But we’re not... yet. Classic economic theory says that money supply can be used to stimulate the economy and our central bankers seem to agree. That’s why they’ve pumped more than $1 trillion dollars into the economy, engineered countless bailout bonanzas for zombie institutions,...

The Federal Reserve pumped $1 trillion into the financial system during a year of harried efforts to rescue the economy. Brian Sack's job is to figure out how to get the money back out. Mr. Sack, 39 years old, is an economist who runs the markets group at the Federal Reserve Bank of New York. The group runs the Fed's trading, making it the bridge between the marble corridors of the Federal Reserve in Washington and the bustling trading floors of Wall Street. In normal times, it buys and sells Treasury securities to influence the level of interest rates. During...

Rethinking relativity: Is time out of joint? EVER since Arthur Eddington travelled to the island of Príncipe off Africa to measure starlight bending around the sun during a 1919 eclipse, evidence for Einstein’s theory of general relativity has only become stronger. Could it now be that starlight from distant galaxies is illuminating cracks in the theory’s foundation? .... Yet it is still not clear how well general relativity holds up over cosmic scales, at distances much larger than the span of single galaxies. Now the first, tentative hint of a deviation from general relativity has been found. While the evidence...

Is Debt-Deflation Economic Depression Just Beginning? Economics / Great Depression II Nov 02, 2009 - 03:12 AM By: Mike_Shedlock Last Thursday I received an email from David Meier, Associate Advisor at the MotleyFool concerning Debt-Deflation. David asked if I had any comments on his article Debt-deflation: Just the beginning? Here is a partial listing: The debate rages on. Is inflation or deflation the bigger threat? There are lots of people -- lots of smart people -- on both sides of the debate and they present lots of good arguments. One thing that I have not seen -- and maybe I...

The U.S. dollar is falling steadily against the Euro and many other major currencies. If this trend continues, the repercussions for the U.S. economy would be significant: higher inflation, higher interest rates, and a lower standard of living. It could also lead to the rapid dethroning of the dollar as the world's primary reserve currency. Perhaps most worrisome, the slide in the dollar risks becoming a rout that could trigger another global financial crisis. The Obama Administration has advanced a broad slate of policies sharing the consistent side effect that they would weaken the economy soon and indefinitely. For example,...

The National Inflation Association today released the following statement to its http://inflation.us members: "While most mainstream economists such as Nouriel Roubini are warning of deflationary threats to the U.S. economy, it is our belief that massive price inflation has already begun. The Federal Reserve's policy of massive monetary inflation in 2009 has caused the Dow Jones to bounce over 50% from its low, oil to rise 100% from its low, and gold to surge to a new all time nominal high. One NIA co-founder just saw his health insurance premium rise 16% over a year ago; and the average tuition...

Now that the Obama administration is attempting to take a victory lap on the U.S. economic recovery, claiming the $787-billion stimulus passed earlier this year was what did the trick, despite a cost of $160,000 per 'stimulus' job, as ABC's Jake Tapper pointed out, it has come at the cost of the U.S. dollar. Since then, the stock market has rebounded nicely. The Dow Jones Industrial Average (DJIA) is off a March low of 6,547 points, even topping the 10,000-mark recently. But what has caused this nearly 50-percent jump? According to CNBC's Larry Kudlow - loose monetary policy by the...

"... the U.S. economy is likely to shed more jobs in the coming days ..."

United States Catching The Argentinian Economic Disease Of Hyperinflation? Economics / US Debt Oct 31, 2009 - 12:54 AM By: John_Mauldin I have been in South America this week, speaking nine times in five days, interspersed with lots of meetings. The conversation kept coming back to the prospects for the dollar, but I was just as interested in talking with money managers and business people who had experienced the hyperinflation of Argentina and Brazil. How could such a thing happen? As it turned out, I was reading a rather remarkable book that addressed that question. There are those who believe...

When the Fermi team did the calculations, using the most conservative estimates for how astrophysics plays into this, they determined that the mass scale must be at least 1.2 times the Planck mass, and by using reasonable but less conservative assumptions, they derived lower limits on the mass scale of up to 100 times the Planck mass. One way to interpret this is to say that there is no variation of the speed of light coming from any quantum gravity effects at less than 1.2 times the Planck mass. And given that some quantum gravity frameworks predict that effects should...

What would happen if any other political party pushed for a cap and trade bill that could create green jobs of which 9 out of 10 created would be unsustainable, require government subsidizing and cost the nations economy millions of real jobs? And this is not to mention the increase in manufacturing costs that would be passed on to us in time of depression. No matter if you are a Democrat, Republican, Libertarian or an Independent, what do you think is going to happen when the government revenues are down and spending is quadrupled? As one senator from Florida was...

Reach in your wallet, and pull out a dollar bill. Look at it for a moment. Now ask yourself, “What is this worth?” This isn’t a trick question. Don’t think about anything but that dollar in your hands. Don’t think about a soft drink. Don’t think about a bag of chips, or a handful of screws at the hardware store. Think about that dollar in your hands without thinking about what it can buy. Can you do that? It’s pretty difficult, isn’t it? That’s because a dollar, qua a dollar, isn’t worth anything more than the paper and ink on...

Buy Food – Price Rises Are Almost Guaranteed By Garry White Published: 7:50PM GMT 25 Oct 2009 There are two main drivers of commodity prices – supply and demand. This is just as true with soft commodities such as wheat, rice, sugar and cocoa as it is with copper and tin. The big problem for your weekly shopping budget in the future is that there are problems on both sides of the equation that are likely to squeeze prices higher, permanently. However, this also provides a great investment opportunity and now is a good time to buy into many areas...

 Glenn Beck got this from one of his economic "deep throats" who knows the way the world works This was on today's show  Fresh from Glenn Beck show a very good explanation of economic affairsUnder Jimmy Carter the money supply was jacked up 13% to stimulate the economyStagflation set in so Paul Volcker tightened up the money supply by jacking up rates to 20%So 20% cured 13%This time around the money supply has been increased by 130%The Fed is loaning banks and Wall Street money at essentially 0% interestThe Vast majority of this money is retained and not lent out...

A fierce war of words has erupted in recent weeks between the two major camps in monetary circles. The first camp - the gold bulls/dollar bears - have been loudly voicing their twin belief that the gold price is poised to skyrocket while the dollar price is perched for a collapse. The other side - the gold bears/dollar bulls - are making the counter claim the gold price is setting up for a crash. There is another train of thought espoused by some that a slow, steady decline of the dollar's exchange value, rather than being a catastrophic event, is...

http://www.zerohedge.com/article/marc-faber-death-fiat-money-dollar-will-go-value-exactly-zero

Before we consider what the consequences of inflation are in specific cases, we should consider what its consequences are in general. Even prior to that, it seems desirable to ask why inflation has been constantly resorted to, why it has had an immemorial popular appeal, and why its siren music has tempted one nation after another down the path to economic disaster. The most obvious and yet the oldest and most stubborn error on which the appeal of inflation rests is that of confusing “money” with wealth. “That wealth consists in money, or in gold and silver” wrote Adam Smith...

Most of us are gathered at the station, watching for the Inflation Express to come rumbling in. But we've been waiting for a while now. Just when should we expect the big locomotive to arrive and start pushing the prices of most things uphill? We'd all like to know the exact date, of course, but no one can know for sure. Not even a careful reading of the Mayan calendar will help. What we can do is estimate a time range for price inflation to show up, and that alone should have some important implications for investment decisions. Why It's...

U.S. Faces Second Lost Economic Decade Because Of Misguided Stimulus Economics / Great Depression II Oct 23, 2009 - 04:00 PM By: Mike_Shedlock Japan has gone through two lost decades, in and out of deflation, with nothing to show for it but increasing debt to GDP and a stock market still 70% below its peak. Now, Richard Koo of Nomura Research Institute Ltd. says U.S. Risks Japan-Like ‘Lost Decade’ on Stimulus Exit. U.S. officials contemplating an exit from record fiscal stimulus are in danger of repeating mistakes that plunged Japan into its lost decade of stagnant growth, according to Richard...

Dollar’s Doom Puts a Face on New $1 Million Bill: David Reilly

US Hyperinflation? By Chuck Butler10/20/09 St. Louis, Missouri – The finance ministers of the Eurozone met yesterday and they’ve tried to stem the euro’s (EUR) rise… But they’ll need more than words to get the job done! And so we begin a new day… Front and center this morning, the currencies – which had given background overnight to the dollar – are back in rally mode, and are taking liberties with the dollar once more. For most of the night, that was not the case, though. The dollar had rallied back and sent the euro, for instance, to the 1.48...

Producer Prices Plunge Joe WeisenthalOct. 20, 2009, 9:15 AM Today's PPI for October showed deeper deflation than anyone expected. The Producer Price Index for Finished Goods declined 0.6 percent in September, seasonally adjusted, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. This decrease followed a 1.7-percent rise in August and a 0.9-percent decline in July. In September, at the earlier stages of processing, prices received by manufacturers of intermediate goods moved up 0.2 percent and the crude goods index fell 2.1 percent. On an unadjusted basis, from September 2008 to September 2009, prices for finished...

            All of the following experts expect the U.S. stock market to decline at some point in the future.  One interesting question is whether the dollar will continue to weaken or turn around and become strong. The answer to that question can affect future investment alternatives.              Some experts like Peter Schiff and David Tice believe that the dollar will loose value and we should expect inflation in prices and not lower commodity prices. If the dollar continues to weaken then perhaps as Tice suggests “Being in foreign assets, precious metals, and select equities may prove safer than shorts.”             ...

Inflation Fears Drove Rate Rise, RBA Minutes Show (Australia) James Glynn October 20, 2009 Article from: Dow Jones Newswires GROWING concerns that inflation could increase were a decisive factor in the Reserve Bank's decision to raise interest rates, the central bank's minutes released today showed. The elevated rhetoric on inflation supports the prevailing view in financial markets that the RBA is set to continue hiking the cash rate target over coming months and through 2010, seeking a return to more normal levels around 5.0 per cent. "Underlying inflation was still, on the latest data, above the target and, while current...

Three Asset Classes That Can Actually Outpace Coming Inflationary Price Increases by: Paco Ahlgren October 19, 2009 This “Excess capacity is temporarily suppressing global prices. But I see inflation as the greater future challenge." - Alan Greenspan, June 25, 2009 "The US economy may witness double-digit inflation in a few years unless the central bank tightens up its monetary policy… Unless we roll in this whole degree of expansion, we will be in trouble… I am not talking 3-5 per cent inflation, I am talking double-digit inflation in the US.” - Alan Greenspan, September 9, 2009 -- Man, the Dow...

It’s a good day to go cross border shopping as our Canadian Loonie is buying more in the US. The Loonie is almost on par withe the US dollar. Fueled by high oil prices and a declining US dollar the high loonie hurts employment in Canada. “Canadian Prime Minister Stephen Harper said yesterday in remarks to reporters in Toronto that he shares Bank of Canada Governor Mark Carney’sconcern that gains in the country’s currency could slow recovery. Carney said in a speech on June 4 that a persistently strong Canadian dollar would “work against” positive factors such as improved trade.”...

Major institutions should be broken up if necessary, Greenlight manager says NEW YORK (MarketWatch) -- Greenlight Capital manager David Einhorn said Monday that his hedge-fund firm is betting on the possibility of a major currency collapse and a surge in interest rates, citing ballooning government deficits in some of the world's most developed countries.The hedge-fund manager, who warned about Lehman Brothers' frailty before it collapsed last year, also said financial institutions that are deemed as "too big to fail," such as Citigroup Inc. /quotes/comstock/13*!c/quotes/nls/c (C 4.57, -0.02, -0.38%) , should be broken up. ReutersDavid Einhorn of Greenlight Capital. Greenlight has...

In 2001 the late Jude Wanniski observed in the American Spectator that "Only when we fully grasp the importance of this definition of inflation or deflation will we be able to understand how to rid the world of these twin evils." Wanniski knew well that it is the instability in the value of the money that drives major economic error. When money is fluctuating in value, the money prices of all investments become distorted and mistakes are made. During periods of inflation, capital moves into the assets of the earth such as housing and gold that are least vulnerable to...

Japan A Deflation Death? - Nope Stagflation Oct 17, 2009 - 12:29 PM By: Phill_Tomlinson Gordon Brown this week announced what can only be described as a car boot sale of UK PLC's bric-a-brac goods, an attempt to sooth markets regarding the budget deficit. Many of the items have been for sale before, but I'm sure the government in their current desperation will be willing to accept lower offers this time around. I agree with privatisation in getting the state out of our lives, but a student loan book and a crossing in Kent are hardly big ticket items, never...

We are indebted to our good friend Dennis Gartman for putting one of our concerns into print. The S&P 500 has gained 61% since its low in March of this year. While this sort of rebound is not unprecedented, you have to go back quite a few years to get rough parallels. The October 19th issue of Barron’s notes that this rally resembles the 1937-38 rally that ended in tears, ditto the 1974-75 market which was followed by a sharp sell-off. What concerns us is that this rally appears to be without foundation in the “real” economy. Jobs are being...

The New Global Balance – Part II: Higher Rates Rather Than Weaker Dollar In 2010 Christian Broda Piero Ghezzi Eduardo Levy-Yeyati 16 October 2009 Many expect the dollar to continue to depreciate over the foreseeable future. This column suggests that it may strengthen in 2010 if the Federal Reserve exits quantitative easing sooner than its counterparts and the US economy enjoys a strong rebound. In the early months of the crisis at the end of 2008, the US dollar rose sharply as US interest rates fell sharply (IMF 2009). In a previous column, we argued that the puzzling response of...

"A dollar is worth only 70¢ now," my Dad jabbered as we worked in the backyard. "And they say it'll only be worth 50¢ in a few years." It was the mid-‘70s. I was helping my Dad build a dirt road to our barn and he wasn't happy. Not about the hard work or humidity, but from what was happening to the dollar. Inflation was starting to kick into high gear, grabbing headlines that even a girl-chasing teenager could understand. I remember being appalled by the thought of going to the store and having the clerk demand $1.30 for an...

Deflation Could Cause First Minimum Wage Cut Ever Vincent FernandoOct. 15, 2009, 1:34 PM Deflationary forces might take their toll in a very tangible way for Colorado's minimum wage earners. The state could be the first ever to adjust down minimum wage due to a falling consumer price index. While the minimum wage will only fall four cents per hour, if passed it will clearly be an extraordinary example of discipline. USA Today: Other states with adjustable minimum wages have seen their consumer price indexes fall, such as Ohio. But Colorado is one of the few states where the law...

Inflation Sinks to Five-Year Low On Lower Utility And Food BillsInflation fell more sharply than expected in September, hitting a five-year low of 1.1pc, on lower utility and food bills. By Angela Monaghan Published: 7:16PM BST 13 Oct 2009 Economists had expected the consumer prices index (CPI) to fall less steeply to 1.3pc from 1.6pc in August. The main drivers of the drop, revealed in data published by the Office for National Statistics yesterday, were a 7.2pc fall in electricity prices and a 5.6pc fall in gas prices compared with a year ago. It was the fourth month in a...

Equity market finished last week on an up note. The Dow was up 78.07 points to 9864.94, the NASDAQ was up 15.35 to 2139.28, and the S&P 500 was up 6.01 to 1071.49. Futures are pointing up today. Futures indicated a mildly higher open for Wall Street on Monday as better-than-expected third-quarter results began trickling in, boosting investors' optimism about the overall earnings season.

I ran across this graph at CampaignForLiberty.com which I think every American should view. A picture is worth a thousand words and this one illustrates what the Federal Reserve System, aided and abetted by the Federal Government's deficit spending policies, have caused. There is good reason why this country has undergone another economic tsunami which will lead to eventual economic suicide. The only one way to prevent this from happening is to recognize the event that caused it and then attempt to reverse it. In 1913 the 16th Amendment to the Constitution abrogating the original words "no capitation, or other...

Trending Towards Hyperinflation Economics / HyperInflation Oct 09, 2009 - 04:00 PM By: Paul_Tustain Seven short steps to the cost of living doubling or more inside 3 years... HYPERINFLATION is widely accepted as a period of out of control price rises, doubling the cost of living inside three years. It occurs when a currency loses its ability to store value, encouraging long-term savings to pour into circulation where they swamp the much narrower supply of consumer money, and cause the whole lot to lose purchasing power. There is no specific recipe, but the pattern we risk repeating today would be...

Faces of Death: The U.S. Dollar in Crisis by: Ron Hera October 09, 2009 /snip Following two sequential economic bubbles, the dot-com bubble and the real estate bubble, no one has yet correctly called either the bottom for the US economy or the start of a US economic recovery. Nonetheless, each day, news reports, articles and statements by officials and commentators reveal new economic data and offer new analysis. Unfortunately, both the economic data and the interpretations offered by officials and commentators are contradictory. It appears that both inflation and deflation are occurring at the same time; that the US...

It's not only the energy markets that threaten the 'low inflation' data now encouraging bondholders to keep buying... THE PUBLISHED INFLATION DATA are surprisingly unsophisticated in so far as they compare current prices with a snapshot a year earlier. Just over a year ago, oil was every hedge fund manager's favorite speculation. In summer 2008 a barrel got to well over $140, before falling sharply back. You may remember the food riots of early 2008, and how they seem to have disappeared. Well, that occurred after a small dip in world grain production in 2007. Fortunately, by its end, 2008...

Remember the 1990s tech bubble? When it burst, the experts were telling you - you should have been into Blue Chips. After you shifted your money - BANG - the market collapsed with ENRON, WORLDCOM and the others then Sarbanes-Oxley was enacted and the experts declared that you should have diversified and had some money into the "fourth asset class" - real estate. Many cashed out whatever was left in mutual funds and bought "investment condos" thinking they were going to "flip and buy" which was a strategy that lasted for a bit then they got caught up in the...

The Autumn 2009 Inflation Time Bomb Economics / Inflation Oct 07, 2009 - 03:18 PM By: Paul_Tustain It's not only the energy markets that threaten the 'low inflation' data now encouraging bondholders to keep buying... THE PUBLISHED INFLATION DATA are surprisingly unsophisticated in so far as they compare current prices with a snapshot a year earlier. Just over a year ago, oil was every hedge fund manager's favorite speculation. In summer 2008 a barrel got to well over $140, before falling sharply back. That summer's high oil price had the effect of cancelling out the deflation which was occurring elsewhere...

Tiger Management Chairman Julian Robertson says that if China and Japan stop buying our debt, inflation could hit 20 percent. "It's almost Armageddon if the Japanese and Chinese don't buy,” Robertson told CNBC. "I don't know where we could get the money. I think we've let ourselves get in a terrible situation." Robertson’s 2008 picks, which included Visa, Baidu, Apple, and Google, handily beat the market. His worst performing choices went up 40 percent, the best more than doubled. Robertson says his firm still owns many of last year’s picks, but says he’s “not as berserk over owning stocks as...

We Are Certainly in a Deflationary Economic State Oct 02, 2009 - 07:20 AM By: Mike_Shedlock Fueled by overcapacity, shrinking credit, reduced corporate spending and falling consumer demand, Deflation is taking root in global economies. Consumer prices fell at their fastest clip ever last month in Japan, which has been fighting a losing war against deflation for much of the past two decades. Germany, Europe's biggest economy, has now suffered through four consecutive months of sliding prices, and the rest of the region that uses the euro is not faring much better. That deflation should be such a threat may...

In an interview with Bloomberg yesterday, former Federal Reserve Chairman Alan Greenspan warned about possible future inflation and higher taxes as consequences for the unprecedented deficit spending taking place in the United States.

Sprinkled among all the official talk about efforts to end the current recession, you'll hear assurances, notably from Federal Reserve Chairman Ben Bernanke, that when the economy does revive, it won't be allowed to blast off into runaway inflation. The Fed, we're being promised, will prevent such a launch by reabsorbing the hundreds of billions of dollars of excess liquidity it recently created to halt the credit crisis. Delivering on those assurances won't be easy. There is no reliable, real-time guide to how much cash the economy needs, so deciding when to drain excess reserves from the banking system (by...