The issue of inflation is complex everywhere. Official rates are disputed. People can’t reconcile them with what they see at the store. There are different formulas, resulting in different rates, and everyone picks and chooses what suits their needs. But nowhere is the issue as “complex,” infested with lies, and shrouded in obscurity as in Argentina. But 34.9%?
Entries in Inflation & Devaluation (59)
Anecdotal evidence has been piling up. Lamborghini sales hit the highest level in 14 years. Ferrari sales jumped 40%. Luxury retailers forecast fat profits. They ascribed it to Abenomics. “The sudden improvement in the stock market led to a big rise in sales at our department stores for luxury brands,” one of them said. But there is a price to pay.
Contributed by Chriss Street. FDIC Vice Chairman Thomas Hoenig lambasted in an editorial the too-big-to-fail banks. But why would a top bank regulator complain about the US banking scheme? A warning that if Janet Yellen is chosen to replace Fed Chairman Bernanke, her strategy of igniting inflation to reduce unemployment will cause another banking crisis.
I’ve been a fan of David Stockman ever since he got in trouble for speaking the truth as Budget Director under President Reagan. But his new book, The Great Deformation: The Corruption of Capitalism in America—what an awesome romp through the economic, financial, and monetary shenanigans of our times!
Contributed by Chriss Street. The reign of the US dollar as the only reserve currency may soon end. The US-centric balance of economic and military power has been destabilized by the crumbling of EU welfare states and the rise of the state-sponsored capitalist BRICS, eager to seize the opportunity to attack the dollar’s preeminence.
Contributed by Chriss Street. Despite late winter storms that blanketed the Mid-West and East Coast with snow, the National Oceanic and Atmospheric Administration predicted that the 2nd worst drought since the Great Depression will continue to lay waste to wheat and corn production. Compounding effects will slow the economy and cause food prices to rise.
Deutsche Bank, long coddled by the German government, is mired in “matters” from Libor rate-rigging to carbon-trading tax-fraud. Now a new “matter” seeped out: the bank had known for years about the impact of commodities speculation on food prices and the havoc it wreaked on people in poor countries. And it lied about it to the German Parliament.
We’ve had an endless series of products whose ingredients have been cheapened in order to maintain the price. Consumers won’t be able to taste the difference, the theory goes. So, as the horse-meat lasagna scandal in Europe is spiraling beautifully out of control, we’re now getting hit where it hurts: Maker’s Mark is watering down its bourbon.
Hasbro, second largest toymaker in the US, confessed it would miss revenue estimates. Christmas wasn’t kind. Despite “double digit growth” in emerging markets, revenues fell by 2% for 2012 and by 3.8% for the quarter. Other corporations are in a similar predicament. But substantive inflation would have covered it up—not that the Fed hasn't been trying.
Especially of CEOs who parachute into the executive office. Wall Street's knee-jerk reaction can be phenomenal. Citigroup’s massacre of 11,000 souls caused its stock to jump. But the same day, we learn that wages adjusted for inflation dropped 1.4% in the third quarter—a continuation of 12 years of declines that has hollowed out the middle class, pushed people into the lower classes, and devastated the poor.
The inexplicable American consumer, the strongest creature out there that no one has been able to subdue yet, has come to grips with a new reality, euphemistically called “New Normal,” though it isn’t normal by any means, but dismal. Feeling more upbeat, they nudged up the Consumer Confidence Index to a level not seen since February 2008—a level that caused people to tear their hair out at the time.
Contributed by Marin Katusa, Casey Research. In the third century, greed got the best of Rome's emperors. One emperor after another reduced the amount of precious metal in each denarius until the coins contained almost no silver whatsoever. The world's first experience with currency debasement and hyperinflation. It led to social upheaval and violence. To be repeated many times over. And then there's Iran.
Contributed by Lee Adler, The Wall Street Examiner. Retail Sales rose by 1.1% in September (month to month) and 5.4% annually. Those are seasonally adjusted idealized estimates. Neither figure is adjusted for inflation. The median forecast of economists was for a gain of 0.7%. As usual, they had mostly extrapolated the prior month’s gain. And as usual, their forecast was wrong by a wide margin.
Contributed by Casey Research. There's a belief among certain economists that if the government takes a more active role in the economy, the social outcome can be improved. Dr. Lacy Hunt, executive VP of Hoisington Investment Management, says it's a false belief… and he has proof to back it up. An unprecedented buildup of debt, he shows, can only lead to one outcome: a drop in Americans' standard of living.
Dizzying QE gobbledygook is upon us once again. It would restart its big 480-volt money printer, in addition to the desktop machine it had been using recently, the Fed said, in order “to help ensure that inflation, over time, is at the rate most consistent with its dual mandate,” namely “maximum employment and price stability.” Thus, more inflation magically creates more jobs, and “price stability” requires more inflation in order to become more ... stable maybe?
It’s been an unrelenting process. Survey after survey has shown that wages haven’t kept up with inflation since the wage peak in 2000. Families earned less at the end of the decade than at the beginning, a phenomenon not seen since World War II—the process of hollowing out the middle class. But now there is a new phenomenon: the unmentionable class, the class that doesn’t exist in America, is ballooning.
Contributed by Chriss Street. Chinese manufacturing and construction activities are plummeting. Desperate to stave off a spectacular increase in unemployment, China just announced another massive public works stimulus program. Although shoveling cash at the problem might have delayed a recession after 2008, new stimulus cash will ignite a vicious round of inflation and fail to drive sustained economic growth.
Contributed by Jeff Clark, Casey Research. In an amazing interview, Jim Puplava, CEO of Financial Sense News Hour, talks to Jeff Clark about the impact of inflationary or deflationary forces, which one he believes will win out, and the effect it will have on our economy—with some disturbing insights into the dynamics of Japan. Now the world is focused on Europe, and we're seeing all the fallout from that, he says, but the next crisis jumps from Europe to Japan, and eventually to the United States....
Contributed by Bianca Fernet. The winter weather is not the only thing chilling the bones of Argentina’s residents. Since late July, a new set of words has been showing up in the articles about the economy. Shrinks. Slows. Stagflation. These chilling terms are being used to describe the consequences of what some nasty looking economic indicators might have in store. Argentina, an alternative path for indebted Eurozone countries? Not so fast!
When JFK was in the White House and William McChesney Martin was Fed chairman, Keynesian economics was in full bloom. One of its tenets is the Phillips Curve, which posits an inverse relationship between inflation and unemployment. Yale professor James Tobin argued the social outcome could be improved by an activist monetary and fiscal policy, resulting in lower unemployment and slightly higher inflation.