Today's Chart Of The Day focuses on bogus inflation figures from the government of United States. Before we even start, lets be honest and say none of us actually believe these figures or any other economic statistics any government prints. Having said all that, lets us assume we do at least for the purpose of this post.
My question is this... where is deflation? If you have kids you are paying almost 20% more on education than you did since 2008, if you believe the government figures. If you are sick, or if a member of your family became sick, you are paying 12% more on medical bills since 2008. Geez... I'd hate to see the actual true figures. The point is... has the average salary in the US risen by 5% or 10% or even 20% since 2008? Is anyone actually getting a job in the US? Who benefits from constant QEs aka money printing - Main Street or Bankers?
What the hell are bond bulls talking about anyway? They are trying to convince us that QE does not increase money supply. Has anyone seen M1 or M2 growth in recent times? Deflation talk is total nonsense by bunch of academic dummies and the quickest way to losing money in your portfolio.
Money printing creates inflation but does not recover growth. In history, money printing has never created prosperity, but it has wiped out currency and bond holders almost every time. Is this time going to be different? You are free to believe what you want. What we have in the US, UK and Eurozone is called stagflation... a perfect environment for no one other than farmers and miners, who benefit from rising commodity prices.
Tiho:
ReplyDeleteA graph of the US M2 money base is available from the St. Louis Fed. It has spiked sharply higher and is there for all to see.
Much argument over this topic around here, inflation is a process that takes time. There is slack in the US economy, but how quickly will that slack come out before there is any change in monetary policy? How long does it take for monetary policy to take effect in a 14 trillion dollar economy?
Once the real estate market turns around in the US, the deflation camp can call it a day.
What does the slack of the economy have to do with money printing and currency devaluation? Food, energy, health care and education - in other words the cost of living - adjusts to currency value or purchasing power... it does not adjust to the amount of slack in the economy.
ReplyDeleteLets be clear here... you do not need to have a full steam growing economy to have inflation. Economy can be at very low growth levels or even non growth levels and yet inflation can be evident for anyone to see... unless one is totally narrow minded and blind!
maybe-
ReplyDeletebut you have no case until the higher costs bleed into the "official statistics" for all the blind people to see and experience in their own narrow day to day living experiences. Then, what you anticipate today will be fact tomorrow for an entire economy.
True. However I do not need a case or proof in the official figures to save myself from financial ruin of holding paper. Watch the Kyle Bass recent interview. The gentlemen says in plain terms that between US and EU, central banks have created 6 trillion dollars of new currency out of thin air. Then he says, why would anyone want to hold currencies in the light of this...? Buy some Gold!
ReplyDeleteMaybe buy some cocoa. :)
ReplyDeleteYou just stay long grains like wheat and you will see where the deflation is
ReplyDeleteI'll tell you what, I won't just stay long Wheat... I'll stay long all Grains and Softs and all fertilizer stocks. Than we will see how you go in a few years from now.
ReplyDeletethat makes no sense - a few yrs - good luck if your still around
ReplyDeleteWhy doesn't that make any sense Tom?
ReplyDeleteLet me guess... because deflation is going to collapse demand and prices of food will crash?
Thanks for the tip! =)
2002, deflation threat->risk asset prices drop->Bernanke lowered interest rate->inflation;
ReplyDelete2008, deflation threat->risk asset prices drop->Bernanke lowered interest rate + QE1->inflation;
2010, QE1 ended->deflation threat->risk asset prices drop->QE2->Inflation;
2011, QE2 ended->deflation threat->risk asset prices drop->???
The point is, the road to the final stage of a new global currency order is not going to be a straight forward process completely dominated all the time by either inflation or deflation. Instead, the two will haunt us all the way down to the abyss. In the name of fighting deflation, which really is the natural reaction of markets after mega asset bubbles, inflation of the currency supply will keep being used as the primary weapon of choice.
However, in the end, deflation will win and MONEY will be king. But mind you, what will "MONEY" be at end of this game? Will it be the legal tender paper currencies that can be conjured out of thin air, or will it be real store of value like gold, silver, or oil? That is the calamity our generation has to face.
Yeah but your focus is on stocks since your timeline started in 2002.
ReplyDeleteFocus on commodities... since 2001 commodities are through the roof. Gold is up 6 times, Oil is up 10 times, Agriculture is up 4 times... every single "risk asset drop" as you call it was just a correction in a secular bull market.
If you haven't zoomed out on the chart, you should do so, because it actually HAS BEEN a straight line up for the inflation trade, but it has been to do with commodities, not stocks!
Also... deflation is not even present, let alone has a chance of winning. Commodities will end up in a bubble so high about 5 to 10 years form now, that you will be telling your son all about the great Gold and Oil boom of 2010s!
How about commodity company stocks? For ordinary investors, it is quite hard to trade futures on agricultural commodities.
ReplyDeletewhat doesnt make sense is holding something that is likely to move lower like W to below $5 a bushel
ReplyDeleteThanks for the tip Tom. I'm gonna go execute it on Monday!
ReplyDelete