Your Pension Is Under Attack From All Sides. Here’s 10.
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Dorothea Lange “Georgia road signs” July 1937Sometimes it seems you can never write enough about our various pension plans, and the threats to them. M
[See the full post at: Your Pension Is Under Attack From All Sides. Here’s 10.]One of the most leveraged “pension funds” in the U.S. is the Social Security trust fund. Almost $3 trillion has been borrowed ffrom the trust fund to pay for government expenses. The government found a creative way of way for battleships, etc. other than raising revenues or cutting expenses, or, simply making discretionary annual appropriations.
Treasuries were issued as collateral for the loans. When redeemed (needed when cash flow is negative, such as the last few years), new general revenues are needed. That is why, from a cash perspective, the trust fund for Social Security is empty.
Don LevitThose are all good reasons to get out of any pension fund while you can – and that’s exactly what I did. The psychological pressure to conform can be quite overbearing when confronted with pensions advisors, but my advice is to just say no.
https://22billionenergyslaves.blogspot.co.uk/2013/02/in-year-2043.html
Of course, that leads to the questions of what you do without a pension. There are no easy answers to that one!
Jal,
I hope that this article goes viral.
More people need to know how their savings have been stolen.
For once, I’ll lend my own voice to that sentiment. Normally, I’m far too critical of myself, but in this case, the lack of perfection is trumped by the strength of the topic itself, and the fact that it’s becoming urgently important.
So yes, send the link around to everyone you know, use all the social media you can think of and so on. Go crazy!
Nice article except for one statement….you say that this only some of the Pensions are in trouble and some are just fine? How can that be we are talking about an intrinsic system? When the ship sinks are some people going to stay dry some how….? You can’t just say we are going to have a controlled orderly collapse. Maybe I am misinterpreting former comments about collapse but on the degree that you and stonleigh have mentioned it does not sound like there will be any “safe place”. I am sorry if I am being rude hear but I take exception to this comment because here and other sites I often hear people say “well I feel sorry for those other poor people but I will be fine because I have my pension coming in” “All the young people are screwed” etc…eventually all pensions will fail.
Hi Folks,
Any and all public treasures are fair game in today’s societies, and unless we find ourselves a large group of politicians and judges that cannot be bought, everything will end up being sold to the highest bidder.
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B-b-b-but isn’t that the point of a ‘free market economy’???
Its all a big club, and you ain’t in it! From the horses mouth (ex-world bank lawyer) ‘pensions to pay pennies on dollar – we was robbed’, ‘time to stand up and say enough is enough’ etc:
https://www.youtube.com/watch?v=owanSt6XnmM
Not quite sure how everyone suddenly getting ‘wealthy’ will solve anything now though… :dry:
L,
sid.Sid,
Thanks for that garbage.
Sorry, usually enjoy your posts but I had the misfortune of watching that interview on The Economic Collapse blog yesterday and I don’t fancy another go. Its not that I disagree with her on everything she says – its that I don’t know what she is blathering on about half the time so cannot make an informed decision to agree or disagree with her. You’d really think a World Bank lawyer would be at least a little bit succinct in explaining herself and/or her argument…
That being said, what I did get from her is that if only the entire world would just *spontaneously* wake up to the truth about our economic operating system, we could crash it and transition to another one where everyone gets to dig up one of the billions of vaults filled with gold, jewels and other precious metals hidden away from all of us idiot peons by our duplicitous economic overlords.
Forget for a minute that at no point in recorded history has *everyone* (or even the majority?) accepted anything all at the same time or to the same degree, and the fact that past experience tells us that crashing an operating system typically leads to chaos, volatility, violence, uncertainty, criminality, broken promises, etc.
Even if we forget those things, I’d like her to explain what good a bunch of buried treasure does for all of us when there is not enough energy to go around to continue producing enough food to feed the billion of mouths in this overpopulated hornets’ nest we call Earth?
Sorry to be negative, but I think she’s (dead) wrong about whether the question is if we love ourselves enough to help ourselves or to let everything go to hell in a hand basket. If we loved ourselves (and our children) enough we would have never let it get as far as it has. Now all that’s left is the brutality of reality when Mother Nature wakes us up to the way the world really works.
Wow, bit of a fire in my belly tonight… Or perhaps its just a sour mood… but have to wonder at what point all the intellectuals who frequent TAE will decide to cut their losses in terms of workable solutions and start preparing for the fact they may have an inevitable fight on their hands for the simple privilege of survival. Not because their ideas aren’t sound or appreciated by other TAE’ers, but because most of the people are terminally dependent on our current operating system and thus have already plotted our course to disaster, setting the system to ‘autopilot’…
To me it kind of just boils down to some simple math presented by John Hussman. His methodology (which has data going back 100 years) suggests that at current valuations, the US equity market will return on average 2.3% per year for the next 10 years. (Current dividends on the S&P: 2.3%).
This implies cap gains will be 0. What’s more, we typically have a crash every four years or so. So to get that 2.3% annually, you get to suffer through a 40% drop every 4 years.
10 years from now, if the pension funds manage to survive and avoid selling at the bottoms, they will have expected a 7.5% return and received a 2.3% return. Here’s the math:
Say you have a billion dollars in a fund.
10 years @ 7.5% = 2.06 billion.
10 years @ 2.3% = 1.26 billion.That’s some pretty serious underfunding. And that’s where we will be in 10 years, assuming they stick it out, assuming peak energy doesn’t take the “expected returns” math and turn it significantly more bearish.
Hi V81,
Thanks for that garbage.
Sorry, usually enjoy your posts but I had the misfortune of watching that interview on The Economic Collapse blog yesterday and I don’t fancy another go. Its not that I disagree with her on everything she says – its that I don’t know what she is blathering on about half the time so cannot make an informed decision to agree or disagree with her. You’d really think a World Bank lawyer would be at least a little bit succinct in explaining herself and/or her argument…
Yes I know… Sorry, should have added /sarc at the bottom of that! I guess it does show one thing – if she is wanting to be considered sane, how mad are the other lot and what’s going on in their heads?
But it does raise some serious points about just what are the options going forward? Forget about the Roman/Aztec/Khmer empires – no one to my knowledge has ever lived through a total global collapse of a technological society. There are so many log-jams of hyper complexity out there just waiting for a chance cluster…
but have to wonder at what point all the intellectuals who frequent TAE will decide to cut their losses in terms of workable solutions and start preparing for the fact they may have an inevitable fight on their hands for the simple privilege of survival. Not because their ideas aren’t sound or appreciated by other TAE’ers, but because most of the people are terminally dependent on our current operating system and thus have already plotted our course to disaster, setting the system to ‘autopilot’…
When it goes down it will most probably not be pretty given the vagaries of human nature, especially in the supposedly more developed ‘first world’. Elsewhere it will probably just be another day for most people – maybe it will get a whole lot easier without first worlders telling them what to do all the time. One can conjure up any number of scenarios as the Hollywood fantasy shop amongst others has shown over the years not to mention the doomster blogosphere. :dry:
L,
Sid.“One can conjure up any number of scenarios as the Hollywood fantasy shop amongst others has shown over the years not to mention the doomster blogosphere”
The scenario/example I’m particularly fond of is one that wasn’t actually Hollywood fantasy, but a real life example – New Orleans after Hurricane Katrina.
I think it’s a very telling example of how quickly we the “civilized” can turn on each other and resort to violence, murder, rape, looting, etc. when our food/water/electricity/fuel sources are compromised for even the briefest amount of time. :dry:
Cheers,
VariableI still don’t understand how you think that some places will be an island and watching all this “collapse” unfold? This seems to be a real problem because that is how a lot of people face this problem…Thinking that they are safe and the “other” people will face problems. If we collapse here in the U.S there is no telling what type of government will take over and how someones’ wealth will or will not be affected. People think that they will still get their pensions while their neighbors starve! After the Nazis marched into France did people think well at least I will still have my pension??!!! You can’t have orderly collapse…..
@Ted,
I think your comment was directed towards others, but just wanted to expand on that “some places will be an island” comment.
I kind of think some places might be an island when everything comes crashing down, but generally these places will be so backwater that most people accustom to 1st world living probably won’t be living there (i.e. rural Philippines, Thailand, India, South America, or far-north Canada, etc.).
Unfortunately that “island” mentality quickly dissipates when we start considering Fukushima-style events, melting polar ice caps, and other problems that impact humanity as a whole.
So I guess islands will or will not exist based on what the future holds for us? “Prediction is very hard, especially about the future…”
Cheers,
VariableWell thanks for clarifying that Variable. I think you are spot on with that assessment. I have a lot of University friends and they feel so “protected” from any fall out especially the ones who are tenured and retired. They think they are millionaires! I try to explain to them that they are just as vulnerable by they argue that people will always go to the university and with expanding populations there will be no problem there. I am just a Malthusian chicken little to them!
Also I am going to see former treasury secretary Snow speak tonight…have you got any zingers I can ask him?
“Besides, banks shouldn’t be obscenely profitable: they’re intermediaries, and in an efficient economy their profits should be quite easily competed away. When bank profits are high, that’s a sign that the bank in question is extracting rents from the economy, rather than helping it to grow.”
https://blogs.reuters.com/felix-salmon/2013/09/29/the-jp-morgan-apologists-of-cnbc/
How crazy do you want it? At first you think it looks like the whole thing was set up to be a scam. And then you realize it doesn’t just look that way.
How hedge funds capitalized on obscure General Motors bonds from Nova Scotia
“General Motors Corp.’s bankruptcy, which wiped out shareholders and left taxpayers on the hook for billions of dollars, is generating a new wave of profit for hedge funds that supersized their claim by betting on an obscure pool of GM debt issued in the Canadian province of Nova Scotia.
… Believing the U.S. auto giant was probably bound for bankruptcy, Fortress began in 2006 to buy bonds issued by General Motors Nova Scotia Finance Co., a unit of General Motors of Canada Ltd. Elliott started buying in 2008. By June 2009, the four funds had acquired, for pennies on the dollar, the majority of $1 billion in notes issued by the Nova Scotia unit.
The funds anticipated that in a GM bankruptcy, the Nova Scotia law governing the notes would allow the holders to make multiple claims on the same debt. One Elliott portfolio manager called the strategy a “double-dip litigation play.” A Morgan Stanley analyst likened the deal to sticking “two straws in one milkshake.”
Feed me, Seymour.
You don’t look well. It’s time for another bleeding.
3 min 24 sec — 4 min. The talking points have been prepared. The laws have been written. All that remains is timing the media blitz.https://www.youtube.com/watch?v=_llRWKMSGms
Let us help you. We need to save you from yourself. From Businessweek magazine: “Is it time for Mandatory Savings?”
“The retirement savings system isn’t working, especially when it comes to low-income and moderate-income workers…….Larry Fink, founder and chief executive officer of BlackRock (BLK), which manages more retirement money than any firm in the world, calls for a mandatory retirement savings plan……..Mandatory defined-contribution would constitute a second layer in a retirement savings pyramid, above a first layer of Social Security and below a third layer of voluntary savings,”
https://www.businessweek.com/articles/2013-08-26/is-it-time-for-mandatory-savings-accounts
————-“all us individuals make terrible decisions” (with respect to retirement 401k plans)
Yes, they all know how to make better decisions for us. Frankly, it smacks of Bolshevism.
Steven Rattner, Former New York State Pension Investment Manager and Obama’s Car Czar, is very concerned for your well being. He’s terribly worried that you’re going to hurt yourself. Please, for the sake of your children, give your savings to professionals like him (see 2 min — 2 min 21 seconds).
https://www.youtube.com/watch?v=mLO1axPnHkcAnd by the way, Steve Rattner’s $6 million in kickbacks to criminals to play with New York State pension money was totally legal and ethical, despite what his business partners said to the SEC. See the first minute.
https://www.youtube.com/watch?v=06y9j6rt6F0It’s too bad Governor Cuomo had his spine removed. Back in 2010, he had Rattner scrambling.
I’m including the following analysist to give some historical prospective
for all the newbies.David Stockman Explains The Keynesian State-Wreck Ahead – Sundown In America
https://www.zerohedge.com/news/2013-10-05/david-stockman-explains-keynesian-state-wreck-ahead-sundown-america11. Loss of buying power to inflation, or hyperinflation.
The losses of the above 10 reasons will be worsened by reason number 11. For over two years now the USA dollar has steadily lost value to the comatose Euro, and this figures to continue, especially if one or more of the weak sisters is forced out of the Euro Zone.
The only thing propping up the dollar, as shaky as that support has been, is the USA military. But as the world gets increasingly militarized, this edge is losing its ability to keep things whole. Add to this all the bilateral trade agreements and I look for the dollar to grind lower.
The US Congress is starting to talk ‘austerity’ here, but it is a few decades too late. I’m actually in favor of shrinking the size of the federal govt., but this will result in a loss of gdp, and a smaller tax base in the short/medium run. QE to infinity is the plan.
Whether they block ObamaCare or not, the deficit is growing by $6 to $7 trillion a year. It is politically unthinkable that they will be able to cut social security or medicare. They don’t even have the guts to go after the relatively recent prescription drug benefit for Medicare, which has added trillions in unfunded liabilities onto the backs of the American taxpayer.
Losses due to hyperinflation?
I think first we need to see some inflation. Which we aren’t seeing.
Inflation and hyperinflation, over the last 5 years, has been an entirely theoretical concern. It was a REAL concern during the formation of the debt bubble because people were madly borrowing money. Now, since they aren’t borrowing, its entirely hypothetical. I’m going to wait until I see people starting to borrow before worrying about inflation, much less hyperinflation.
And imagining that current social security/medicare promises that will eventually be defaulted upon are actual obligations of the US government – that’s another accounting fiction that will never come true. If you promise your baby a BMW, and then when Baby grows up, you can’t afford to buy one so reneg on your promise, did you have to make car payments on that never-purchased BMW? No, you did not. GAAP deficit is the same thing: worrying about car payments on a promised BMW that you can’t afford, and thus are never going to buy.
If something is so expensive we can’t possibly afford it, the outcome is easy to predict: we won’t do it.
Exactly.
There is all this money being generated and almost none of it being released into the general economy, it is all stuck in the craws of the banks and financiers.
Inflation, as Ilargi and Stoneleigh keep trying to drum into everyone, is a monetary phenomenon caused by too much money chasing too few goods.
What we have is an ever falling real income and people ever more reluctant to buy anything because that would involve adding debt to an already overburdened budget.
You don’t cause inflation by printing umpty trillion dollars and putting it all into a vault and not letting anyone have any.
Can ANYONE of the inflationistas explain to me how all that money gets into circulation to cause the damned inflation? Its already all debt, and nobody wants any of it, so inflation ain’t gonna happen.
DEflation I can sign up to.
And when people wake up to the fact that their pension funds have already been destroyed, (more deflation) inflation wont be anywhere near. What we WILL have is structural rising prices as energy real costs rise, as the gyrating relative values of currencies cause first one commodity then another to price itself out of the export markets, then fail.
I live on an actual island, in NZ, a LOOONG way from everywhere. We will still have it VERY hard, for the rest of our lives. But at least we wont be invaded, nobody will be able to afford the energy to mount a force.
We are living in a huge giant financial Ponzi bubble. When it bursts, I think we could expect that most everything could deflate quickly because just about everything globally is financially intertwined. Pensions too. I don’t see how any pension, public or private, will be spared.
Poof, and it’s gone.
Inflation and hyperinflation, over the last 5 years, has been an entirely theoretical concern. It was a REAL concern during the formation of the debt bubble because people were madly borrowing money.
Dave,
Your logic is impeccable. However, it is not difficult to imagine a scenario in which prices do go up. What if foreigners decide to convert their dollars, for example? No amount of printing by the Fed and squirreling by US banks would stop the dollar from tanking. The prices of all imported goods would rise and you would have price inflation in the USA – which would speed up the move away from the dollar.
The idea that since everything is dominated in US dollars then everyone will – in a crisis – load up on dollars has possibly past its sell-by date. We will see. I am not predicting anything just pointing out that we are dealing with emotions and they can turn on a dime.
I think almost everyone agrees that the USA cannot import vastly more than it exports indefinitely – it is currently over $1B/day.
https://www.tradingeconomics.com/united-states/balance-of-trade
Some people believe that the USA did not attack Syria with cruise missiles for fear that it would be quite impossible to repeat the Iraqi and Libyan experience. The dollar would have collapsed if the missiles missed their targets and ended up in Turkey or Israel.
https://atimes.com/atimes/Middle_East/MID-01-031013.html
I mean, the whole thing is built on a military foundation and if this foundation is found to be wanting the markets would shift pretty quickly.
@ Nassim
Doctors fear we’re on the verge of an epidemic in Type 2 Diabetes. Little do they know, we’re about to conquer that scourge. The future of medicine is Cholera and Scurvy.
Demand is what you can afford.
When US oil demand collapses 75%, consumption could be supplied by domestic conventional supplies. The value of the dollar vs. the yen vs. the ruble won’t have much relevance. The woman on the street will be preoccupied with the weight of earthly possessions balanced precariously on her head.
What if foreigners decide to convert their dollars, for example?
Nassim,
I’d like to better understand the the scenario in which you see this event unfolding.
The way I see it, bailing out on US dollars is an economic death sentence for many developed nations around the world. They’ve hitched their wagons to the US and globalization, and many of their economies look to be worse off than the US in terms of sustainability (though yes, the US is still only the prettiest horse in a glue factory). So to walk away now would probably be one of their last options.
Anyways, I would agree it is easy to imagine a scenario where prices do go up due to inflationary pressures… the problem I find most people have is providing a plausible narrative where that would happen.
Cheers,
VariablePS – kudos Bluebird; that is one of my favourite South Park snippets
VSA,
Actually, diabetes type 2 is a disease (Metabolic syndrome is the currently fashionable term) which predominately strikes those who are poor and ill-educated. As food gets more expensive, fast carbohydrates become the food-of-choice.
In the UK, you can almost tell the class to which a person belongs by their girth – or lack of it.
It was not always like that so it is not a genetic trait
…@ Nassim,
Like debt, waist lines face impending mean reversion.
One could draw a modified hubbbert’s curve of %belly fat and overlay it on the oil production curve with a 5 year time shift. The coordinated mass production, distribution, and infusion of simple sugars into the bloodstream of the poor becomes the terminal blowout phase of Diocletian State-Corporate Expansion.Here is a Studs Terkel interview with Great Depression survivor Peggy Terry:
“we’d been going to the soup line for about a month, we’d go down there, and if you happened to be one of the first ones in line, you didn’t get anything but the water that was on top. So we’d ask the guy that was ladling our the soup into the bucket everybody had to bring their own bucket to get the soup and he’d dip the greasy watery stuff off the top, and so we’d ask him to please dip down so we could get some meat and potatoes from the bottom of the kettle. And he wouldn’t do it. So then we learned to cuss and we’d say, “Dip down, God damn itl”
——-
https://www.onbeing.org/program/studs-terkel-life-faith-and-death/feature/studs-turkel-and-voices-great-depression/1189
———————–Nassim-
There are lots of scenarios out there. I don’t rate “missiles missing their target” high on the list. Those things can enter a window and blow up inside the building. Whether there are many interesting targets to hit, and whether hitting them would actually advance the cause of peace, that’s another matter. But hitting the target is not a problem I stay up worrying about.
Certainly if the USD suffers a crash, all prices go up. I rate that as less likely than the eurozone having a problem, or Japan having a problem. I think we’re the last ones to tip over and sink. While we may not be what we used to be, we have vastly more natural resources than Japan, and substantially more than Europe. To me, its not so much about “possible scenarios” as it is my judgement as to the likelihood of them happening, and in what order.
Likely – Japan, Europe, then the US. At that point, yeah, the buck could tip over and sink. But only after money fled the Eurozone and Japan first.
This is a “likelihood” thing rather than certainty, and an unexpected military issue might well blow a hole in that scenario, as you say. But for the “regular inflation” scenario, I’m confident I can see that coming by monitoring the various credit metrics. Which right now – point to household deflation (reduction in borrowing), corporate inflation (increase in borrowing), and a reduction in the rate of government borrowing.
To me, its not so much about “possible scenarios” as it is my judgement as to the likelihood of them happening, and in what order. Likely – Japan, Europe, then the US. At that point, yeah, the buck could tip over and sink. But only after money fled the Eurozone and Japan first.
Japan owns more T-bills and other assorted bonds than anyone else. Japan has a lot more “domestic discipline” than either EU or US. It’s had 20+ years of deflation and hardly a whimper from the citizenry. For all these reasons, I can’t see it going before Europe – which has a history that provides plenty more reasons-.
There may come a moment when the US outdoes the rest by such a margin it can lead to severe tensions. That’s by no means merely theoretical. The US is the only safe haven available, and it takes only the occurrence of one or two out of a large number of possible events for money from Japan and Europe to start flowing there in – at first controlled – panic.
This is a “likelihood” thing rather than certainty, and an unexpected military issue might well blow a hole in that scenario, as you say.
I’m not ruling out a Fukushima related evacuation of Tokyo, either through a government mandate or sheer hysteria. The Japanese do hysteria well – all together now -, the (closely connected) flipside of the domestic discipline coin.
But for the “regular inflation” scenario, I’m confident I can see that coming by monitoring the various credit metrics. Which right now – point to household deflation (reduction in borrowing), corporate inflation (increase in borrowing), and a reduction in the rate of government borrowing.
All those different inflations and deflations only lead to murkier waters. You can really only have either one or the other. And since government debt is far more secure that corporate debt, it’s hard to see how the former would stop borrowing before the latter (unless these borrow straight from the government). Governments have millions of people who can pay off the debt sometime in the future.
Hi Ilargi,
And since government debt is far more secure that corporate debt, it’s hard to see how the former would stop borrowing before the latter (unless these borrow straight from the government). Governments have millions of people who can pay off the debt sometime in the future.
Unless the gov’t decides to shut down and play the ‘oh no we’re gonna default’ card… :unsure: Or… from Kyle Bass in the 1st vid here:
…all the money your gonna have is under the pillow
!!!
Talk about a freak show – is it just a distraction to hide the shouts of [strike]the emperor has no clothes[/strike] look at the new suit – this one will taper for ever???… :dry:
L,
Sid.dave,
It is worth keeping in mind that price inflation in the USA has been averaging 5% over the past 10 years – according to ShadowStats
https://www.shadowstats.com/alternate_data/inflation-charts
Over that period of time, that would total 62% – a very substantial number. Meanwhile, interest rates have been close to zero for many people.
It is a bit like Birnam Wood moving to Dunsinane – slow, but remorseless.
It is worth keeping in mind that price inflation in the USA has been averaging 5% over the past 10 years – according to ShadowStats
Price inflation is a useless term. It completely ignores any and all different reasons why some prices go up or down, even though it should be obvious that this is crucial information if you really want to know what goes on in an economy. It’s a tool for the analytically challenged. It’s also a mistaken term of course, because it doesn’t describe inflation at all, which is money and credit supply x velocity, not what happens to some random basket of goods, or cookies becoming more expensive because the baker has the flu.
Japan, and I’ve written about this, is a good test case. The idea behind the rise in sales tax there is that it will raise prices, and hence fight deflation. If only things were that simple … Well, if they really were, Japan wouldn’t have deflation, and no government would ever have inflation or deflation problems, they could simply raise or lower taxes. Japan tried the same thing early on in the deflation period (’97?) they’re living through, and it backfired. If you want to project anything useful, you need to exclude taxes from your models. But who does that? John Williams became a hyperinflation guru a few years ago, which is a shame, he had good numbers prior to that. Now it’s all colored by a faulty assumption.
After 5 years of central bank credit pumping (money printing is a misleading term), 90-odd% of which sits in primary dealers’ accounts at the Fed, I think it should be clear that this credit has no – or hardly any, if you will – influence on prices in the supermarket; at most it lifts asset markets a little because banks with such reserves are perceived as less risky.
In the end, to raise inflation, you will always need more people spending more quickly, money/credit will have to start flowing faster, and that’s very obviously not happening.
Sid,
Schiff lost his marbles a few years ago as well. Maybe that’s inevitable when you go into politics. Unless some really far out extremists get to call the shots, and there’s no sign of that, the whole shutdown is as much of an empty sideshow as Syria was (ever wonder what happened to that?). Whenever the media focus on a topic the way they have on these two, it’s time to look beyond the words and wonder what’s really going on.
Nassim! Quoting 10-year averages from Shadowstats about 5% average inflation as a response to my claim that for the past FIVE YEARS inflation has been muted seems non-responsive to me.
For this 10-year interval, 5 of those were the last, mad years of the housing bubble. TCMDO went from 34 trillion to 52 trillion over that period (2004-2008). Do we imagine that 18 trillion dollars of credit growth (54%) in just the US economy alone could cause prices to go up? Ya think maybe?
Since 2008, TCMDO has gone from 52 trillion to 57 trillion. That’s a big yawn by comparison. Do you see what I mean? Debt bubble pop = TCMDO doesn’t go up = no monetary inflation.
Just looking at the commodity prices since 2008, one can see that prices are lower now than they were then. Even if you just look at food – the FPO food price index was 140 in 2008, and its at 120 now. That’s a price drop. In anyone’s book, that’s not inflationary.
Again, I encourage you to focus on what is really happening today. 10 year trends that overlap the bubble years don’t paint an accurate picture of today. Credit is growing only very modestly, and only in corporate America where they are actually making good profits.
Follow the growth of credit and you won’t be led astray by these people who have their own credibility on the line for predicting imminent hyperinflation “starting a few months from now” – for the past five years.
Look, if borrowing starts up again I’ll be the first one to sound a warning. I don’t have a prediction I’m making, I just report what’s happening. Right now: no inflation.
I second the bit about velocity too. It certainly isn’t going up. Declining velocity with very slowly increasing credit does not lead to overall monetary inflation.
Nassim,
The small remaining fraction of middle-class discretionary income has already been promised to big-biz. The unclamied piece of your pay check belongs to new Aetna premiums, carbon taxes, and supplementary mandatory retirement investments with Blackrock. I’m sorry, but JCPenny and Walmart got the short end of the stick. Prices will continue to fall below their basement margin requirement. Pricing pressures are now governed by flea-market dynamics. He who sells first gets the cash. He who sells last goes bankrupt. Love seats for $10 and Lay-Z-boys for $5. NFL flat screens for $3.50. When it comes down to sizzled pork or Sunday gridiron, I’m afraid there’s no competiton, even if you promise the grizzled masses an endless supply of concussions and fractured femurs for their viewing pleasure. In the end, a growling stomach will trump the vicarious pleasure of witnessing writhing pain among ethnic minorities.Ilargi
Maybe its spinning the sheep to get the fleece nice’n’dry before they shear it right off! As regards Syria, anecdotal evidence (some one who recently flew out of a Greek island with a US base) said there was ‘a lot’ of military activity – so much so their flight was slightly delayed waiting for ‘the military’ to clear the runway/airspace. Go figure… :unsure:
Also the ‘cash supply’ outside of the states looks pretty healthy according to ZH: The Rise Of The C-Note “And” The Cashless Economy?…
“printing $350 billion worth over the last 12 months to meet anticipated robust worldwide demand. “
Whereas in the US itself its strictly cash-less:
Which equates to $cash inflation on the outside, $cash deflation on the inside… go figure again… :huh:
L,
Sid.
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