“Is the coming financial collapse going to be inflationary or deflationary? Are we headed for rampant inflation or crippling deflation? This is a subject that is hotly debated by economists all over the country. Some insist that the wild money printing that the Federal Reserve is doing combined with out of control government spending will eventually result in hyperinflation. Others point to all of the deflationary factors in our economy and argue that we will experience tremendous deflation when the bubble economy that we are currently living in bursts. So what is the truth? Well, for the reasons listed below, I believe that we will see both. The next major financial panic will cause a substantial deflationary wave first, and after that we will see unprecedented inflation as the central bankers and our politicians respond to the financial crisis. This will happen so quickly that many will get “financial whiplash” as they try to figure out what to do with their money. We are moving toward a time of extreme financial instability, and different strategies will be called for at different times.”
“Two years ago, Zero Hedge first made the observation that the bulk of Fed reserves (also known simply as “cash created out of thin air” because money is first and foremost fungible no matter what textbook theoreticians may claim, and the only cash allocation preference is the capital allocation IRR analysis) had been parked not with US banks, but with foreign banks with US-based operations. We followed that with more analyses, showing explicitly how the Fed was providing a constant cash injection to foreign banks courtesy of the rate on overnight reserves which is the amount Fed pays to banks that hold reserves with it, as the bulk of reserves continued to end up with foreign banks – a situation set to become a huge political storm some time in 2014-2015 when the IOER has to rise and the Fed is “found” to have injected tens of billions of “interest” not into US banks but in foreign banks operating in the US, and which then can upstream the “profits” to insolvent offshore domiciled holding companies.”
Via Zero Hedge
“Were you to look at official government statistics that calculate our rate of price inflation for food, energy, clothing, and other consumer goods, you’d think that prices were as stable today as they were under the gold standard.
According to the Bureau of Labor and Statistics, the CPI (Consumer Price Index) inflation rate remains well below the Federal Reserve’s 2.5% threshold. Insofar as the government is concerned America’s core inflation rate is just 1.7%, a testament to the economic prowess of our central bank and Chairman Ben Bernanke.
And because there is no significant price rise being realized in consumer goods based on the government’s calculations, the millions of Americans dependent on disbursements like social security, disability assistance and nutritional food support will see no adjustments to their monthly stipend. And why would they? Prices aren’t rising!”
Via SHTF Plan
“The almighty dollar is looking less mighty these days. By almost every measure, the purchasing power of the US dollar is in precipitous decline.”
Via Zero Hedge
“If the American people truly understood how the Federal Reserve system works and what it has done to us, they would be screaming for it to be abolished immediately. It is a system that was designed by international bankers for the benefit of international bankers, and it is systematically impoverishing the American people. The Federal Reserve system is the primary reason why our currency has declined in value by well over 95 percent and our national debt has gotten more than 5000 times larger over the past 100 years. The Fed creates our “booms” and our “busts”, and they have done an absolutely miserable job of managing our economy. But why do we need a bunch of unelected private bankers to manage our economy and print our money for us in the first place? Wouldn’t our economy function much more efficiently if we allowed the free market to set interest rates? And according to Article I, Section 8 of the U.S. Constitution, the U.S. Congress is the one that is supposed to have the authority to “coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures”. So why is the Federal Reserve doing it? Sadly, this is the way it works all over the globe today. In fact, all 187 nations that belong to the IMF have a central bank. But the truth is that there are much better alternatives. We just need to get people educated.”
“Most people fail to understand basic mathematical concepts such as exponents and ratios as they apply to everyday life. We usually “get it” when it comes to the mathematical facts that are taught in school (if we passed through basic Algebra) but nobody in our government schools ever teaches how these functions apply to the real world.
The reason they don’t, I assert, is that the educational establishment from the government itself on down knows full well how these functions relate to everyday life, and they also know that if you understood these facts there would be a revolution the next morning as you would understand exactly how you have been systematically and intentionally robbed by the mavens of finance with not only the consent but the active participation of your government.
With that in mind I wish to present two pieces of data today. The first is “average hourly earnings”, which is from the St Louis Fed, and the second is the total systemic debt, public and private, taken from the Fed Z1.
Why the second as a point of comparison? Because as I have repeatedly pointed out “credit” (that is, debt on the other side of the balance sheet) spends exactly the same as does currency (emitted money.) Therefore, when one compares earnings power in real terms one must look at the denominator that is in actual use, which is that currency + credit.
Over the last 30 years, from 1980 to today, the average production and non-supervisory employee earnings have gone from $6.61 to $20.09 (not seasonally adjusted.) We will use the September 2012 cut-off for this because that’s where our Z1 data ends (for another few weeks), which is $19.83.
This is an almost-perfect triple, which sounds great at first — you’re making three times as much, per hour, today as you were in 1980.”
Via Market Ticker
“In 2006, when he faced off with many well known Titans of investing and warned of an impending financial disaster and economic collapse, Peter Schiff was laughed at by his colleagues. He urged Americans to exit financial markets and take steps to protect themselves before the wealth held in their savings accounts, retirement investments and real estate was wiped out.
We know what happened next.
Now, those same financial experts who publicly vilified Schiff for his predictions six years ago are at it again. Many, including our politicians, central bankers and leading economists, have unequivocally stated that the worst is behind us, and that a global recovery is on the horizon.”
Via SHTF Plan
“Federal Reserve Chairman Ben Bernanke has done it. He has succeeded in creating a new housing bubble. By driving mortgage rates down to the lowest level in 100 years and recklessly printing money with wild abandon, Bernanke has been able to get housing prices to rebound a bit. In fact, in some of the more prosperous areas of the country you would be tempted to think that it is 2005 all over again. If you can believe it, in some areas of the country builders are actually holding lotteries to see who will get the chance to buy their homes. Wow – that sounds great, right? Unfortunately, this “housing recovery” is not based on solid economic fundamentals. As you will see below, this is a recovery that is being led by investors. They are paying cash for cheap properties that they believe will appreciate rapidly in the coming years. Meanwhile, the homeownership rate in the United States continues to decline. It is now the lowest that it has been since 1995. There are a couple of reasons for this. Number one, there has not been a jobs recovery in the United States. The percentage of working age Americans with a job has not rebounded at all and is still about the exact same place where it was at the end of the last recession. Secondly, crippling levels of student loan debt continue to drive down the percentage of young people that are buying homes. So no, this is not a real housing recovery. It is an investor-led recovery that is mostly limited to the more prosperous areas of the country. For example, the median sale price of a home in Washington D.C. just hit a new all-time record high. But this bubble will not last, and when this new housing bubble does burst, will it end as badly as the last one did?”
In a letter viewed by the Wall Street Journal, House Oversight Chairman Darrell Issa(R., Calif.) and Rep. Jim Jordan (R., Ohio) told Fed Chairman Ben Bernanke that they were frustrated at the lack of response to a February request demanding more details on the central bank’s strategy to unwind assets purchased during years of its easy-money stimulus programs. The lawmakers say Mr. Bernanke continues to “willfully withhold” sensitive documents the committee has requested.
“The American people have a right to know the true risks associated with the expansion of the Federal Reserve’s balance sheet,” the lawmakers wrote in a letter dated April 22. “The Fed’s obstruction and lack of transparency must stop.”
“Of course he is willfully withholding them.
The reason is simple — there is no way to do what Bernanke has claimed.
If The Fed stops QE rates will go up, all things being equal. This will make home prices go down. Assuming that you have a $200,000 house today with a 4% 30 year mortgage rate if rates go back to the bottom of the historical 30 year rate, about 6%, your $951.66 payment buys not a $200,000 house but a $159,522 one.
There’s no way around this folks.”
Via Market Ticker