Anglo-American Economies Contract Again
We’ve noted for years that the U.S. – and the entire globe – faces a another leg down.
Last week, we pointed out that Britain was in a triple dip, with its economy contracting .4 percent in the fourth quarter of 2012, and that the British economy is now worse than during the Great Depression.
Today, the U.S. confirmed that the economy contracted in the fourth quarter of 2012.
For those who are just waking up [...]
Inflation as we know it is well embedded in this country with annual increases for the last ten years of 8-10%. The Fed will never reveal the truth, necessarily, as the average person would revolt at that thought. With 48 million people on food stamps, able to buy free food with SNAP and EBT cards, they won’t complain until the buying capacity of these cards is insufficient to buy even the [...]
JIM SINCLAIR: A ROMNEY ELECTION MEANS $3,500 GOLD & A DOLLAR COLLAPSE WITHIN 6-9 MONTHS!!
The legendary Jim Sinclair has sent an email alert to subscribers comparing this week’s terrible situation along the east coast in the wake of Sandy to the coming collapse of the US dollar. Sinclair states that Ben Bernanke is the only person in US financial management that understands the current situation, and that QE? is the only thing delaying [...]
by Tim Ayles
Is the Broken Window Theory a fallacy?
Sandy is the news. A natural disaster that will cost tens of billions of dollars and one that is sure to resurrect the 160 year old debate as to whether destruction of property is a good thing in the long run.
For newbie’s, the theory is this in a nutshell:
A hoodlum throws a rock through the baker’s window. The baker has to then [...]
Frequently Asked Questions on Hyperinflation
The following are frequently asked questions or objections common among hyperinflation skeptics. The statements or questions in bold below are things hyperinflation skeptics say and my responses follow.
How is hyperinflation defined?
The International Accounting Standard of IAS 29 says there is hyperinflation when “the cumulative inflation rate over three years approaches, or exceeds, 100%.” This works out to 26% per year. There are many other definitions for hyperinflation but they almost [...]
If the expectation is that we QE to infinity and hard assets inflate then why is velocity of money shrinking? 1980′s – last commodity bull top velocity was in clear uptrend which led to the blow off top. Now velocity of money is dropping like a rock…. Does it tell us that QE is not really working and we are to continue deflation process???
It seems that its not inflation that [...]
What Do Economic Indicators Say?
We’ve repeatedly pointed out that there are many indicators which show that the last 5 years have been worsethan the Great Depression of the 1930s, including:
The housing slump
The bank charge off rate
The collapse in world trade
The withdrawal of short-term credit
The level of inequality between rich and poor (too much inequality destroys economies)
The interconnectedness of financial systems and economies worldwide (interconnectedness leads to financial instability)
Runaway spending and greed
Mark McHugh reports:
Velocity of money is the frequency with which a unit of money [...]
Shhhh…It’s Even Worse Than The Great Depression
According to Wikipedia, Narcissistic personality disorder (NPD) affects one percent of the population and has little to do with looking at yourself in the mirror. It has a lot to do with unrealistic fantasies of success, power and intelligence. Some NPD sufferers become cult leaders or mass murderers, the rest become economists and policy-makers. Despite having a highly elevated sense of self-worth, narcissists have fragile self-esteem and handle criticism [...]
From Pragmatic Capitalism:
The recent spate of negative economic news continued on Wednesday with the release of mortgage purchase applications, which showed a continued decline, even as mortgage interest rates hit historic lows and the wholesale trade data which showed accelerating weakness in consumption trends. This, of course, is really not new information for our regular readers as we have been discussing the weakening economic trends for several months now.
The mortgage [...]
The velocity of money is at an all-time low, even lower then it was in the 50’s.
The new June retail sales reports are out and it does not look good. If this trend continues in to the winter we’ll run in to a new round of layoff and business closings.
Money in circulation is at an all-time high but the average dollar is being used in fewer transactions per year than [...]
Most of us here know that today most of our money is originally created as a debt. Interest is charged on it. If one pays both interest and principal on that original debt, that money is (supposedly) removed from monetary circulation.
Our ability to pay is:
M * V = sumof( P * T )
M = Money Supply
V = Velocity of Money
P = Value of Payment
T = Number of recurring Transactions for [...]
APRIL 30, 2012
If you inject money out of thin air into thebanking Sector but no quality jobs emerge, is the result a success? The bailout mission statement revolved around keeping credit available for the American public. The absolute opposite has occurred. A massiveinternal Credit Deleveraging has been taking place but the banks have simply hoarded the money like a squirrel hogging all the nuts. The public is dealing with a great deal [...]
Has anyone read “The New Depression” by Richard Duncan?
In this book, Richard Duncan proposes that we replace the Quantitative Theory of Money with the Quantitative Theory of Credit.
The Quantitatve Theory of Money is the mechanism by which many economists like Milton Friedman explain inflation/deflation. The theory stated in an equation is:
MV = PT
where M = Money supply, V = Velocity of money, P = price, and T = volume of transactions. Bacically [...]
John Mauldin posted an extraordinary interview by Kate Welling of Dr. Lacy Hunt, the chief economist of Hoisington Investment Management.
Dr. Lacy Hunt correctly identifies fractional reserve lending as the culprit behind the massive rise in debt. Hunt also explains why government spending cannot help, why Europe is in worse shape than the US, why a US recession is coming, and why Ben Bernanke is an exceptionally poor student of the [...]
Bernanke is trying every way he can to get banks to lend (printing coupled with a multitude of lending facilities and Fed programs).
It’s easy enough to prove the printing: Base money supply is up about $1.8 trillion since the start of the recession.
Base Money Supply
Money Multiplier Theory
The Money Multiplier Theory (an incorrect theory) suggests this money would be lent out 10 times over causing rampant price-inflation and GDP growth.
Alternate (Correct) [...]
It seems to me that hyperinflation is not assured.
The central banks are playing an impossible game. They are trying to inflate about as much as the economy deflates, to keep everything in “balance”. Notice I said impossible.
If they over do it just a bit, we get a rapid positve feedback loop and end up in hyperinflation, as we saw in Weimar Germany.
If they under do it just a bit, we [...]
This chart originally ran as a Bloomberg “Chart of the Day” back in August. The chart may tell us what is in store if eurozone policymakers fail to forestall a collapse of Italy/Spain. The ECB’s reluctance to even take back the errant rate hikes imposed earlier this year—the least it could do, in our view—is not encouraging in this regard.
A high ratio of liquidity doesn’t [...]
I’ve previously documented numerous ways in which the Fed is working against its stated goals, such as:
Reinforcing cyclical trends (when one of the Fed’s main justifications is providing a counter-cyclical balance);
Increasing unemployment (when the Fed is mandated by law to maximize employment); and
Encouraging financial companies to make even riskier gambles in the future (when it is supposed to stabilize the financial system).
And see [...]
1) Can anyone comment on the “EuroDollar” and its impact on dollar dilution? In other words, are M1, M2 and “M3″ really accounting for “all” the dollars out there floating around? Is there any way to get visibility to this activity?
2) If foreign bond holders continue to get whacked by increasing rates, and they decide to start jumping out of US bonds, is it not similar to ‘squeezing a [...]
by Chris Martenson
Here at Martenson Central, 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 [...]
Ben Bernanke has said that the Fed is trying to promote inflation, increase lending, reduce unemployment, and stimulate the economy. However, the Fed has arguably – to some extent – been working against all of these goals.
For example, as I reported in March, the Fed has been paying the big banks high enough [...]
Money is not the only medium of exchange and is in fact a minor one compared to credit. Did you buy your house with money or with credit? Did you buy your car with money or with credit? Multiply this by millions and you will see how we got where we are. An overabundance of credit and debt got us here, [...]
It did help Zombie banks to repair the deteriorating capital ratio plus cheap money for trading and pushing commodity and stocks. Stagflation is more likely.
But the developing Foreclosure fraud has ominous shadow over the FIRE Economy and MBSs. The authenticity of ALL asset backed papers -? toxic assets (Mortgage bonds and other MBSs) at Fannie May, Freddy Mae, Fed’s balance sheet and numerous holdings of the same among Pension [...]
The event (taking place slowly) will be when all the current moves away from the dollar reach a tipping point. When? Probably when the yuan is close to the euro and dollar in popularity.
HSBC and Standard Chartered are offering discounted transaction fees and other financial incentives to companies that choose to settle trade in the Yuan. Both banks are now capable of doing Yuan settlement in many parts of the [...]
We will shop until they pry our credit cards from our cold, dead hands. We’re a nation of shopping and debt addicts who have been groomed and brainwashed over the past 40 years to believe the great American/Madison Avenue lie that we are incomplete, abject failures in life if we don’t have every house toy, electronic gizmo, fashion fad and high priced, gas guzzling automobile that gets paraded in front [...]
In his just-released letter, Grantham wrote: “Well, I, for one, am more or less willing to throw in the towel on behalf of Inflation. For the near future at least, his adversary in the blue trunks, Deflation, has won on points. Even if we get intermittently rising commodity prices, which seems quite likely, the downward pressure on prices from weak wages and weak demand seems to me now to be [...]
The Conference Board Leading Economic IndexÃ‚Â® (LEI) for the United States increased 0.4 percent in May, following no change in April, and a 1.4 percent rise in March. “The index points to continued, though slower, U.S. growth for the rest of this year,” says Bart van Ark, chief economist of The Conference Board. “Public debt and deficits weigh heavily on growth prospects on both [...]
Seems to me that when everyone starts to believe in something, that’s when it will all come crashing down very soon. Apparently people believe in the economic rebound. Which means that, like housing and the internet bubbles before it, the bubble of hope will grow and pop and things will get bad again.
This is all part of the same bubble in our economy.
We are in the midst of a long-term [...]