“There might not have been a second round of quantitative easing, if Federal Reserve Chairman Ben Bernanke shopped at Walmart. A new pricing survey of products sold at the world’s largest retailer showed a 0.6 percent price increase in just the last two months, according to MKM Partners. At that rate, prices would be close to four percent higher a year from now, double the Fed’s mandate.”
The real scary thing is that anyone who thinks they know what is going to happen is a fool and there seems to be a lot of that going around.
|A new pricing survey of products sold at the world’s largest retailer [ WALMART] showed a 0.6 percent price increase in just the last two months, according to MKM Partners. At that rate, prices would be close to four percent higher a year from now, double the Fed’s mandate.|
The market is essentially chaotic and we can mean that in the true mathematical way – just like the weather. The basic mechanism is that things are so complicated with so many feedback paths – this goes up, that goes down, so this goes up, so the first element goes down, etc.,etc.,etc. The orderly market concept might have had some validity 100 years ago but we have an economic structure of such complexity where people are buying financial instruments that are so divorced from reality very few people understand what the heck is going on.
There are some basic rules when dealing with chaotic systems:
1. They can change from one stable state to another equally stable state essentially instantaneously. Depression of 30’s, today.
2. The more energy you put into a system the more likely it is to change state. – what we’ve had in the 2000’s.
3. The more you think you can react appropriately to fix things the more likely it is going to get worse.
Here’s how it works: The US Treasury prints a few billion dollars worth of bonds that the Fed agrees to purchase. The Fed then prints the money and gives it to the Treasury Dept for deposit in government bank accounts. No big cost, just the expense of paper and ink plus some labor. The Feds money presses are really fast so labor is minimal in keeping with the philosophy of the wealthy elite that actually own the banks.
Now here’s the next part of the scam – the Fed then sells these bonds to investors, other banks, and pension funds through member banks for real money. The member banks get to charge an appropriate commission so they make money as a direct result of this enterprise. If they can sell to foreign banks and investors they make even more on the exchange rates.
Now here’s the really sweet part. The US Treasury pays the interest and redeems the principal on the bonds held by the investors that purchased the bonds. Notice how the Fed gets to keep the money that they sold the bonds for. It’s just a sneaky way to effectively print money and give it away to the big banks that own the Federal Reserve.
Know what the government is up too or get burned. Government is really trying to spike inflation to reduce value of debt. That is, pay back current debt with future dollars that have less purchasing power.
Don’t think of oil going up or down, a barrel of oil is the same today as it was in 1920. Difference is it takes more depreciated dollars today to buy the same barrel of oil. Oil didn’t go up in price, the dollars value became less. Now if they can stick you with a low yield bond setup and buy oil, they get the value you get the depreciation of the currency. Government is trying to pull a fast one. Intelligent investors are out of bonds altogether. Simply not worth the risk/yield.
National Inflation Association projects massive food price hike
NIA projects that at the average U.S. grocery store it will soon cost $11.43 for one ear of corn, $23.05 for a 24 oz loaf of wheat bread, $62.21 for a 32 oz package of Domino Granulated Sugar, $24.31 for a 32 fl oz container of soy milk, $77.71 for a 11.30 oz container of Folgers Classic Roast Coffee, $45.71 for a 64 fl oz container of Minute Maid Orange Juice, and $15.50 for a Hershey’s Milk Chocolate 1.55 oz candy bar. NIA also projects that by the end of this decade, a plain white men’s cotton t-shirt at Wal-Mart will cost $55.57. Read the rest of the document:
The American consumer is beig encouraged to spend their way out of the current situation. Unfortunately the consumer’s good eyesight is keeping them from making that “leap of faith”.
- They see the “pillars” of the American economy are fundamentally unstable and tottering badly.
- They see the obscene government deficit but know its 3 major expenditures (military, education and medical) are politically unassailable.
- They see the jobless “recovery” and know the real unemployment rate is twice the official one.
- They see the current fiscal policy must result in either inflation (possibly hyper-inflation) or deflation.
- They see that 53% of all US mortages exceed or equal the current market value of the house…and know even a small further drop could bring foreclosure to the door of half of all American homes.
The American consumer is seeing things very clearly. They are angry at their politicians and very worried about their personal assets/wealth. They know their nation is at a tipping point, with third world life-styles awaiting for the masses. Surely it cannot be a surprise that low interest rates and gobs of money crying out to be borrowed is not “stimulating” them to go out and buy, buy, buy.