In the great battle between inflation and deflation, it’s not even close. Deflation fears are winning hands down.
Market Roundup
That’s not just my opinion, by the way. It’s what one of the Fed’s own favorite indicators is showing.
I’m talking about the “Five-year Forward Breakeven Inflation Rate.” I know that’s a mouthful, so let’s try to keep things simple. The Treasury Department issues two major kinds of debt — traditional Treasuries and Treasury Inflation Protected Securities (TIPS).
As the name suggests, TIPS offer investors a form of inflation compensation. It’s an extra enticement designed to draw investors in when they might otherwise stay away due to concern that inflation will erode their returns.
You can get an idea about just how much inflation fear is percolating in the marketplace by comparing the yields available on regular Treasuries and the yields offered on TIPS. The higher the breakeven inflation rate, the more worried investors are — and vice versa.
With that in mind, take a look at this chart:
|
|
| Deflation the big fear now. |
You can see that this “inflation fear gauge” is falling off the table. In fact, it just dropped to 1.59%.That’s even lower than the 1.97% level we hit in the depths of the Great Recession. Heck, it’s the lowest level going back to at least 1999!
That tells me a few things about the economic and market outlook:
First, investors are saying loudly and clearly that all the QE from the U.S. central bank and its counterparts overseas is utterly failing to bolster inflation. So is the strategy of varying the composition of QE to include stock ETFs or other bonds, rather than just government debt. Pushing interest rates into negative territory? Same story — not working.
Second, investors are clearly saying that widespread commodity deflation in everything from oil to copper to grains to beans isn’t going away. If anything, they’re worried it’ll get worse and therefore aren’t demanding more inflation protection.
|
|
| Deflation has hit nearly all commodities, from cooper, to oil, to beans. |
And third, investors are saying that while the U.S. economy has held up relatively well in the face of multiple global threats so far, that may be coming to an end.
I fully expect central bankers to try to push back against this evolving deflationary outlook before long. The European Central Bank meets on Thursday. The U.S. Fed meets Jan. 27-28. And the Bank of Japan meets on Jan. 28-29. We could hear more talk about easy money from the overseas banks, and the U.S. Fed could choose to sound a dovish note.
But it’s obvious that the markets don’t believe it’ll make any difference. So barring some kind of crazy, out-of-the-blue surprise, I doubt any banker-driven bounces will last very long or carry very far. In other words, stay cautious, stay safe, and stay prepared for more market downside over time.
Now, I’d love to hear from you. Is deflation winning the battle here? What does that mean for the economic or market outlook? Are you expecting central bankers to push back, and if so, what might they do? Will it have any impact? Use the comment section below to share your thoughts.
|
Many of you weighed in on the market outlook during the long weekend, discussing the lack of panic, the underlying economic conditions driving the recent declines, and more.
Reader James said: “The VIX hasn’t yet hit panic levels because retail investors have not largely even participated in the stock market’s rise over the last three years. The main thrust has been more fund managers, and mainly overseas money coming to the reliable U.S. markets.
“Soon enough there will be a relief rally for those wanting to get out to sell into. But the last year has been in a topping formation before the larger decline. No one ever knows for sure when or how large these events will take the market. But if I were to guess, the S&P 500 will close below the 1,870 area of support, and ultimately move to the 1,525-1,575 area sometime this late spring or summer.”
Reader Howard said: “For some time now in these columns I have noticed more players have anticipated a downturn. The reasons are many, but include lack of trust in the markets, dodgy figures, government intervention, Fed mismanagement and the expected end of a bull market.
“What was the catalyst this time? There are many likely suspects. But my money is on market manipulation, where the little guy is squeezed out in favor of the smart money playing the fear card.”
But Reader Tactical111 pointed to other drivers of the latest sell off, saying: “Haven’t you been paying attention to the global contraction and deflation trend? Like the article says, the commodities blood bath is leading the way. Market manipulation is always there and how we got the last six-year bubble by the way. Sooner or later, all bubbles pop and it looks like ‘later’ is finally here.”
Reader Gordon said the trick is to watch what’s happening on Main Street and what we’re hearing from Corporate America, rather than Uncle Sam. His take: “I quit believing in government and second-hand numbers long ago. Watch true numbers like the Baltic Dry Index, or Wal-Mart Stores (WMT) closing 269 stores and laying off 16,000 employees, or Microsoft (MSFT), Macy’s (M), and Caterpillar (CAT) laying off.
“These are real people losing their jobs, not a bunch of government baloney. Soon you will see a whole list of massaged numbers as corporations report their profits by hook or by crook — mostly crook — trying to keep damage at a minimum.”
Finally, Reader Ted F. said: “Prices have been way over-bloated for too long, with too much Fed funny money running around. It’s time for the market to return to reality. Something has to give.”
Thanks for sharing, and feel free to keep the discussion going below if you have anything else to add. These are tumultuous times, and none of my indicators suggest they that volatility is about to end. If anything, things are going to get even worse in the rest of 2016 — so you have to prepare your portfolio for that likely outcome.
|
Iran released a handful of American prisoners, including Washington Post reporter Jason Rezaian, over the long weekend. The release coincided with the lifting of sanctions against Iran, which will result in Iran boosting oil production and exports. The U.S. dismissed charges against some Iranians and commuted sanctions-related sentences in exchange for the prisoner releases as well.
The International Energy Agency (IEA) said that global crude oil supply could exceed demand by around 1 million barrels per day for the third year in a row. As a result, the market could “drown in oversupply” and continue to come under “enormous strain.”
Meanwhile, the International Monetary Fund (IMF) slashed its world growth outlook yet again. The group knocked 0.2% of its global growth forecast, lowering it to 3.4%. It also forecast deeper-than-expected recessions in Brazil and Russia, and projected GDP growth of only 6.3% in China — down from 6.9% in 2015.
What do you think of the Iranian-American prisoner swap deal? Will it help thaw relations even further — a long-term triumph for diplomacy? Or is it a sign of American weakness, as some critics say? What about the gloomy oil and economic growth forecasts from the IEA and IMF? Are they on target or too negative? Share your thoughts on these or other topics in the discussion section here.
Until next time,
Mike Larson
Recommended Articles by Mike Larson:
Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.
{ 126 comments }
I agree that we are experiencing deflationary winds and that the economy is already in or heading for a recession. However, that does not mean that we won’t get inflation down the road. I think we need to be prepared for both.
I agree- at some point they must get inflation. The US government must get inflation.
Watch for “helicopter $$$”
I agree with Margaret. This has happened because the government kept trimming the inflation basket to get to their 2% target. Lower inflation pumps cheap money into the system and gives governments cheaper money on their enormous debt. It keeps COLA checks in check and its a win win for the government till things get out of hand like now. Their fudged inflation basket has now tipped to far and we get the opposite deflation. The barn doors are open and the livestock has left. Governments keep flip flopping lower rates to get us to spend more but in the same breath tell us our debt is to high so which is it. People are being whip sawed losing faith in their leaders and the system. Enter Donald Trump the perceived White Knight who will cure all ills??? Surprisingly he might just carry it off and receive the mantle of power. Then the backroom big business boys will step in and bring him down to earth and things will go on as before.
Time to treat Iran, who has not started a war with anyone in one hundred years; as a friend.
Our state department needs to stop interfering in all the Countries in the Middle East ; and if people want to chop heads off; it is not our business!
Iran , treated the sailors great; a lot better than we would treat Iranians if they made a mistake and rammed one of our ships.
Iran is bending over backward to meet our unreasonable demands; if I were the Iranian negotiators I would be asking why the United States thinks it A.O.K. That Israel has nuclear weapons!
And you , sir, must be Valerie Jarrett’s long lost brother from Iran. Your comments are as naive and misguided as the President to whom Jarrett whispers.
Wow!
Dennis sounds like an Iranian apologist.
Never mind about who started thecIrsn/ Iraq war in the 1970s (less than a hundred years ago).
Never mind that our sailors were used as propaganda by the Iranians, with their hands on their heads and our female sailor rewired to wear a towel on her head. Just who doesn’t respect who?
Your question about Isreal just speaks of your ignorance of the real world. You probably voted forvObama. Enough said.
Remember, it was the minority Sunni dictatorship of Saddam Hussein, which launched the Iraqi invasion of Iran in 1980. He was probably egged on and partly financed by the Saudis, who wanted to hamper Iran’s competitive oil industry. And if foreign sailors appeared ready to endanger a U.S. base, I hope we would behave much as the Iranians did. Once they realized it was an innocent incident, they promptly behaved in a civilized manner and released the sailors and their boats.
But they stole some of the sensitive equipment. A leopard doesn’t change its spots.you are also forgetting the fiasco that the other worse president we ever had , let our embassy people stay in jail and staged a stupid attempt as rescuing our embassy people which failed, and that was just for the American people who were crying out with rage that Carter allowed this to go on without declaring war on Iran. the Ayatollah who is in charge now, is still in charge. so what has changed? this President is even worse than Carter because he is setting himself up to become the Secretary of the UN, that is why he has pandered to the Arab countries.
Any time someone ventures into another country’s space they can expect to be picked up. Countries protect themselves with borders on land and sea. The sailors were released quickly, and that is a good thing.
Anyone can walk across our Southern border without fear thanks to King Obama.
Hirono: Obama’s CIA Spied on Me
By News Release @ 3:57 PM :: 176 Views :: Congressional Delegation
Dear Mr. President, January 21, 2016
In January 2014, CIA personnel conducted an unauthorized, unprecedented search of Senate committee files, including the emails and other files of Senate staff investigating the CIA’s use of torture. The CIA Inspector General stated in a July 2014 report that this search involved “improper agency access to SSCI files.” A review board selected by CIA Director Brennan concluded in December 2014 that this CIA search “resulted in inappropriate access to SSCI work product.”
When Director Brennan was publicly asked about this search in March 2014 he initially attempted to deny that the CIA had improperly accessed Senate files, stating that “nothing could be further from the truth” and “that’s just beyond the scope of reason in terms of what we would do.” The reports of both the Inspector General and the CIA review board show that this denial was contradicted by the facts.
In June 2014, senior officials from the FBI, NSA and the ODNI all testified publicly that it would be inappropriate for their agencies to secretly search Senate files without external authorization. We are encouraged that most members of your administration appear to recognize that such a search would be an unacceptable violation of constitutional checks and balances.
Unfortunately, despite multiple requests, Director Brennan still has not publicly acknowledged that this search was improper, or even made a commitment that the CIA will not conduct such searches in the future. This is wholly unacceptable behavior in a democracy.
You have repeatedly spoken about the need for the American public to have confidence that senior intelligence officials respect US laws and the Constitution. Director Brennan’s refusal to acknowledge that unauthorized clandestine searches of Senate files are improper has clearly undermined that confidence.
We believe that it is necessary for you to address this matter directly, and to ensure that senior officials in your administration recognize the importance of adhering to the rule of law. We ask that you instruct Director Brennan to acknowledge that the CIA’s unauthorized search of Senate files was improper and will not be repeated.
Thank you for your attention to this matter. We look forward to your response.
Sincerely,
Senators Ron Wyden, Mazie Hirono, Martin Heinrich
—30—
PDF: Full text of Letter
VICE: These Senators Just Asked Obama to Make the CIA Apologize for Spying on the Intelligence Committee
Iran has been almost solely responsible for every war in the middle east over the last 100 years. They simply do it by proxy by funding virtually all of the terrorists in the mid east. You need to get off of the liberal BS sites.
maybe US responsible !!!!!!
al Qaida was originally made up largely of Saudis, and it’s financing has been mostly by Saudis. ISIS is also an extreme version of the Wahhabi version of Sunni Islam which dominates Saudi society. It likely has a lot of Saudis behind it also. That’s not to say the Shiites who dominate in Iran are exactly innocent, but, except possibly for the extreme Ayatollahs, they seem less opposed to Western values than the Sunnis.
can you substantiate your opinion with some facts, dear Jim?
Check history its all there. Christians have killed more people over the last two centuries than any other religion. Don’t get me wrong I do not agree with Muslimism and Sharia law and the way they treat their woman. I am not an America basher but look at all the wars, invasions by America over the last 60 years I have lived them and they were not pretty. Some were real stinkers. Yes ISIS is being hurt but how many innocent men, women and children have died in the process. Do these lives mean less than 3,000 odd people killed on 9/11? Like the “Black Lives Matter” movement these lives do matter. Sadly America is in a position where it is damned if it does and damned if it does not.
Dennis; Iran doesn’t have to start wars to stir up trouble. They have gotten into the proxy war game. Supplying terrorists in Yemen, Lebanon, Syria, and a host of other countries. They supply weapons and money, same as the Saudis, but to the other side. The Iranians and tie Saudis are supporting half a dozen brush wars and long term terrorist activities. The rockets Hezbollah and Hamas fire into Israel either came from or were manufactured from Iran or Iranian designs.
Poor Teddy sees the half of the story that is convenient. USA has been involved in 97% of all wars around the globe. Any questions?! It is what all aspiring countries seem to do. NO ONE IS INNOCENT. haha.
j. I have to agree. When it comes to proxy wars the Americans are experts, experts at clandestine operations. America’s hands are not clean by a long shot. Look at the Contras and at Saddam Hussein who went from a American ally to a boogy man. Look at all the countries the US does business with and calls friends the Saudi’s, China and the list is endless. It all boils down to greed selling more weapons of war, corralling oil producers (not so important now) Big business give governments their marching orders governments are only their henchmen.
Hi J,
The problem with the US is that they do not take over the countries that they go to war with… They try to set up an elected government and hope that democracy wins…
Then the US government changes and all that effort goes to waste as they withdraw
and the Peaceniks think they won the War..
BORN IN IRAN
Lived in Iran. Best four years of my life. Unfortunately the good times ended for me in 1979 (for some folks in 1978). Still have fond memories; but those days are gone forever. Life goes on.
Dennis, I agree with you. Our country has lost too many lives and too much treasury to try to control / police the world. If we can manage the Middle East situation with regional powers counter-weighing one another, this is way better than sending in our troops in every conflicts. A negotiated settlement is not a sign of weakness. Did we get all we wanted? No, neither did the Iranians.
The regional powers idea is a good thing but to much time has passed and you have spoiled them. Now like lazy children they sit back crying till papa does something. Contracts today seem to be only a piece of paper with words that mean little. Ask North Korea. They are banging that we want to talk again drum which means they are AGAIN looking for a handout. They are going back to the well AGAIN hoping America will give them a bunch of freebies and in a couple months they will thumb their nose at Uncle Sam and explode another device and play the blame game. Seen this cycle to many times and Uncle Sam is the scapegoat every time. Its a trap.
Israel has never emphatically stated that their primary goal was to obliterate the State of Iran. And for that matter, the Great Satan, USA. The Iranian leadership is irrational. They are waiting for their savior to emerge from a water well and impose a great Apocalypse on humanity. Give us a break. Jim
We live in a world of adult children. Israel and the US and many other countries have nuclear “toys” and Iran wants them to. They are showing their petulant desire. With the Saudi’s as their neighbor with modern American military equipment and a different religion I would be worried to. They will now proceed on a world wide oil one-up-man-ship game which sadly no one will win. This oil war will end badly but that is one of the consequences of supreme greed the new God we now all worship.
straight to the point. good comment
to Jim,
my comment “straight to the point” is in the wrong place. It was meant for Dennis Ardell and Chuck Burton, not for you.
i’m sure you won’t listen to anything except for the ideas you concoct in your own head.
Israel has had nuclear weapons for many years. They have not used them to treaten anyone nor promised to wipe out Iran.
I wonder when the manipulation of gold and silver by the banks and Fed will stop?
Does anyone have any comments on this?
When the Chinese announce how much gold they REALLY have!
When the rich are “ready”.
piece of coal will keep me warm. What can gold do?
robert a really good question. The Comex’s physical gold reserves are dropping I think the ratio must be close to 300 ounces of paper to one ounce of physical. Boy you really have a gang of big hitters lined up fighting gold. Governments think of gold as an enemy to their fiat paper. They and their talking head economists talk it down at every turn. Bullion banks and other banks want to warehouse it at a cheap price. Wall street wants to play the up and down short game where they keep gold on a short leash. The keep it in about a $100 an ounce range. They goose it up and then short it down making a profit in both directions. Then I feel most of the market is manipulated today. China, Russia and other countries are filling their vaults at these cheap prices. Its their insurance policy for when the time comes that paper money utterly destroys itself. Last year I think was the peak year for gold as you need to move more ore to get the same number of ounces, Labor is going up foreign governments harder to deal with start up costs through the roof (Barricks billions of dollars invested project abandoned in Peru) Miners are thinking their better off growing marijuana. Its cheaper to grow replaces itself every year and now legal in a lot of areas.
Is it time to sell US dollars and buy Euros. ??Their gold holdings are better.
The Iraq war and the demise of Qaddafi where about stealing their GOLD. The US took Iraq’s and Britain took Libya’s. Every war needs GOLD to finance it. The US needed Saddam’s GOLD because HE wanted the US to pay for the oil in GOLD. Saddam would not sell for paper money or for war materials. He had enough of them. In fact the US government had supplied enough war materials to Saddam to conduct a successful war against Russia, if the Iraqi’s had the balls to do it, instead of raping and pillaging as the typical desert Arab does.
There is no Federal Reserve. America is broke. Live the lie and you will die. You reap what you sow. The day of reckoning has come. The bubble has been penetrated. Now the stuff will hit the fan. It’s huge and stinky.
Maybe someone can convince me otherwise but I am somewhat concerned that this advisory service is calling for deflation (which I agree is starting to happen now) but even in Precious Metals ?
Its always been my experience that when the Stock Market goes into a decline mode that there is “a flight to quality” immediately, investors pull their money from market and head for the Treasury / Bond market.
Depending on how severe the stock market declines that same investors rush to buy precious metals as a hedge against any losses that he incurred in the stock market, has that strategy changed, if so why?
So if the US Dollar value erodes during this event (which it most certainly will) then where will the smart investor, invest ? EURO’S, (maybe) but I think not, since of the 12 EC members most are in financial difficulties by themselves with the exception of Germany and maybe one or two other EC members?
Lets not forget that EC also trades and holds a fair amount of US dollars. So they will be looking to dump what dollars their banks are holding into the markets I’m sure, which should cause their Euro to devalue (at maybe a lesser rate then the dollar ) but then again maybe not depending on how much in dollars they are dumping and to whom and how server the panic in the markets become world wide?
So is your advice to us to buy up Euro’s very sound advice?
So as to an alternative to buying Euro’s why not buy Swiss Franks instead, (that is if the Swiss will sell their Franks for dollars or Euro’s ) – they most certainly will cost more than the Euro because of a sharp increase in demand for their Swiss Franc created when this event starts to occur but their currency in my opinion is the safest currency on the planet now and even safer then!
And why wouldn’t buying Gold & Silver and other precious metals (actually taking delivery of that metal) be a wise choice since more than likely this new IMF currency that will become the world currency will more than likely be attached to gold and silver, if not then what will its currency be attached to – not good will again, we all have been down that road before and we are all about to suffer that agony in short order ?
And I say forget the bond market that so called ” flight to quality” will in my opinion be like a plane crashing into the side of MT. Everest !
coal
Alan an interesting read. The Agony and the Ecstasy is now in series format much like what we are living today. Taking delivery of precious metals is wise as all this paper gold could be floating in the wind some day. Yes gold should have risen sharply but everything can be manipulated in todays world. A good example is Abby Cohen of Goldman Sachs telling people to buy stocks. Funny how back in 2008 they were betting against their own investors. She works for the big company that just payed a large fine for some manipulation possibly one of many but they were caught at this one. There are lots of bad fish in the financial waters but sadly only being caught one at a time.
I agree, if you want to know what the Euro is worth, just ask the Swiss.
Hi Alan,
Well thought-out and a good doomsday prophecy..
There is not much that the individual can do when the whole show is intent on Deflation..
Did you have a premonition of this future when you saw Hillary take the big RED Reset Button to Russia back in 2008 or 09 ?
In order to have a future of Growth with small digits we can’t
have $10,000 Gold and $300 Oil along with a $200K average wage at a fast food
restaurant.
You may have missed a few platitudes.
Mike, I think you are spot on. Let me ask, what will it take for the money velocity to increase? If people are not spending how can this happen?
Thanks,
Jack
Deflation is more seriously entrenched than perhaps we want to admit. Fewer jobs for people means less spending by all. No signs of that changing what with robotics coming on stronger each year.
Yes j you have found the wild card in the deck Robots. They earn nothing buy nothing and only make the rich richer which of course is the new model that our planet works under as now the 1% percenters control more than the rest of us poor smucks put together. The only glitch that I can see is that governments the representatives of big business now must pump more money into social programs to try and bolster spending and that is another delicate operation. Of course AI could change all that the robots might ask for a raise or else goodbye mankind. The way things are going that could be a viable option.
Some pundits calling for commodities bottoming, that is to say, you are safe to buy now??? Many simply use charts to justify, but fundamentals are what drive price higher, and charts are just providing good entry and exits point. China building of many ghost cities, pump more monies into the market, and many more, are unsustainable measure and will not last. To look for more sustainable rallies, look for demand and I don’t see it on the horizon now.
Demographics…demographics demographics. US demographics aren’t robust enough to sustain a robust economy and continued exponential growth even with the flood of illegal immigrants. China, with their one child policy has ruined their demographics for the next two generations. They are headed for a hard landing and the suggestion that they are transitioning to a consumer/ services economy is smoke and mirrors trying to mask the deflationary situation ahead.
Yes Hardtimes smoke and mirrors. Read the trading figures for the Chinese market today and Japan as well. When the American market opens be sure to buy on the big dip. Just ask Abby Cohen. I wonder what they are pumping and dumping now??
There is only one way this is going to end and it is with the loss of our value of the currency. This will create a fast acting system fail-age of all Governmental aid to the poor the rich since all the money they have saved for retirement is not worth anything it becomes just worthless paper and no one will be able to pay bills or buy anything that will help with sustaining their family lifestyle. In a word we will all be put back into the primitive times of life. This will be the time in which everyone will see if they will be helping each other or killing each other to barely sustain life. Thank you fore this opportunity to voice my world view.
Read Currency Wars by Jim Rickards and also The End of Money by the same author.
Dianna
One of the best reads of the day. I hope people absorb it. I told my daughters months ago this was coming (I think they thought I was crazy the good times would never end) and they like most people are standing on the railway track with a fast freight bearing down. Like a deer caught in the headlights. I think the majority of the poor working slobs are in this situation. To much time spent working and not enough time to spare on financial planning. The financial carpet baggers will do OK however.
I have a hunch that China has much more to do with the deflationary storm that is brewing than most believe. Here’s why: China over the last two decades, and especially the last decade has been on a build, and spend spree never seen before. One example is the construction of multiple large, essentially unoccupied cities. China also managed to stockpiled cash over that same period mostly through currency manipulation that allowed their very cheap goods to flood world markets. My hunch is that they over did it. And lastly, China made the very bad decision to lend the US ~ 1Trillion dollars, which are now essentially be repaid at zero interest. Re. the loans to the US, they also failed to understand the lend me $5 and you have control of the situation/relationship; loan me a Trillion $’s, and I contend that I have control of the situation/relationship (assuming you want your $ back from me …. easy enough to assume, right?).
The consequences of all of this is the drop in demand for commodities and raw materials. The countries/companies that supply these commodities reacted late, and continued their building, spending, mining, producing as though the demand from China, and the rest of the world would continue forever. It’s now forever, and the demand is way down, and the supply is way up. We are just sniffing the early winds of what this deflationary period will bring us. This should be keeping people up at night, but the world continues along until it’s too late to do anything about what’s upon them.
The sidelines look really good right now. I’m going to try patient observer for a while.
FOLKS!!!!!!!! LISTEN!!!!!!!
CASH
IS
KING
INCLUDING YOUR SI/ GC/ PA / PL coins and bars!!!!!
LASTLY, LAND / GARDEN TO GROW YOUR OWN FOOD…..
ALL ESSENTIAL !!!!
Right on j. I am teaching my much younger g/f here in Thailand to become self sufficient in the future after I have packed it in. She has the land and has put a well in. Next stage building and mini farming chickens a pig the whole 9 yards. Sadly like Noah you cannot build an ark against this one. She will hopefully be one of the few prepared ones here. Her land is close to her family and in hard times family ties will be important a built in support group.
Hi Gordon, chuckle, chuckle. Good old Neopotism I take it.
A-Men, j.
I agree, Si is King
Question remains, who is teaching who?
We know that WW2 was the only reason we recovered from the great “deflationary” depression that began in 1929. After we began to recover in 2010 and 2011 I fully expected big time inflation but it never happened due to the huge infusions of printing press dollars being injected into a very sluggish economy. Add to that the Rookie wanna be emperor in the White House and voila–years of stagnation and deflation. Add a Marxist gang of congressional representatives a couple of Marxist economists–open borders ,unimaginable bureaucratic rules and voila–we are running out of other peoples money. Will they never learn from the past???
The problem is that QE 1,2,etc…was to recapitalize banks. The BIG 6 Banks bought US Bonds and sold them to the FED at a Profit. Since there was not a lot of demand for loans (outside of some corporations buying back their own stocks), the Banks gambled and invested the monies and helped inflate the stock market.
You are correct in that massive deficit spending in WWII brought employment back and with the world in shatters after WWII, the US enjoyed a dominant economy.
Hey Hank
I always thank Budda that I lived through this golden age of prosperity which is now coming to an end much like my time on this earth. I have fond memories of Frank and Dean and all the other wonderful stars and performers who have proceeded me. My seed fell out of a poor tap but into a rich part of history. Luckily the times allowed me to hit the ground running not like today where we are ground up and spit out into the dustbin of greed. Oh happy days.
Thousands were laid off in Houston in Oil Industry. Gloom and doom in every “corner”, without any hope of recovery in the near future.
HOUSTON?! HOW about : most everywhere except maybe ANTARCTICA AND SWISS BANKERS?!
Bring it on! That is deflation. Lower fuel, food, housing, transportation, replacement components, recreation, medicines etc. Phony SPY inflation has not and never will employ the middle class. It only fills the wallets of the top one percent. Earnings? What earnings? Trillions of dollars of debt to fund buy backs that inflated earnings numbers. Guess what people…..that does not create a healthy economy. It does not create living wages for the middle class. Wal-Mart in trouble? Maybe all the debt that they have incurred in their business with “smoke and mirrors” growth is beginning to result in negative performance when merchandise turnover is inadequate. Why,… their customers are NOT the one percenters. One percenters have only gained from the FEDs monetary manipulations. Enough already! Deflation is the mother’s milk for retirees and working middle class people. So you people want ZERO interest for savers and high inflation to feed hedge funds profits. Gee ain’t that nice!
You are correct in so many ways; yet this FED system is based on continuous expansion of debt. ( Insane ? I know) In fact if all debt disappeared there would be no money to speak of.
Interesting points!!
Let’s all make a list of things and places that benefit from deflation since it will be here for a longer while than we are pretending hahaha…
Advantages might include: more time to read/ visit family / create garden for food independence / learn a language for when you can travel again / collect silver coins – or stamps or related / make some local friends / join a club you always wanted to / buy corporate bonds till stocks finish their 50% drop /
These are cheap alternatives and no so painful?!
We have Not had true “Helicopter Money” YET. The QE 1,2,3 just recapitalized the banks at the Taxpayer’s expense. Look for FED/Government programs that directly put more money in consumer’s pockets. The QE did allow Corporations to buy back stock with cheap $$$ and prop up their stock (for awhile).
I say if you have 10 years buy silver I beleive you will be glad you did. and then get on your knees and pray that it wont be so bad that most will survive GOD,GOLD & GUNS !!
—————————–
Normally, I do not agree with the policies of the current administration, but I am having second thoughts about the negative effects of the Iran deal. Although everyone wants ISIS gone, I don’t notice any candidates specifically stating they are willing to put boots on the ground to get rid of ISIS, and I don’t think the American people want another ground war either. Iran also wants ISIS gone; so maybe the US and Iran and others can defeat this enemy in much the same way our country was an ally to the big bad Stalin during WWII. We did defeat the Nazis, and the Russians did help whether we wanted them to or not. Just a thought!
Arent you the same dude who was heavily promoting your energy service last summer 2015? HUGE opportunity in hydrocarbons.Oil was twice its current price. And hadn’t you had a big pow wow with T. Boone Pickens who insisted up and down that oil would end the year at $70. Seems you were on a similar song about energy being great about 10 days ago. How’s that working out for you Mr. Larson? You can write convincingly. If only you were ever right it would be great. If you were an original thinker that would even be better.
LOOK If they a going to use helicopters 100 percent sure it is going to happen Use electric battery powered helicopters envirenmently friendly .Frank
Is there a shorting ETF for China – the opposite of FXI?
Scott……FXI Optn puts!
Stopping the turn down of the economy is so dam simple it is not even funny. First we shut down the halls of congress so that the stupid basterds have time to reflect on what is happening in this country. Then put a stop on obama and treason is a good way to do that.. Then shut down air force one. Then stop all parties and any other function in the white house for they could be treason. then put the coal workers back to work and stop using ethanol and stop Obamacare the communist action to destroy the best medical system in the world that is why they send people here from the middle east.. Stop sending money to Israel’s enemies. And remove all Muslims and cazars hired by obama, and close the boarder and start running the laws of the land on illegals and stop given welfare to anyone that is not an American, and take all of the laws off healthcare companies and all the laws off insurance and get off the backs of our companies and stop the raise of the minimum wage and sign a federal right to work act, And then start a 10% every quarter for pay and benefits for congress and the senate until the debt stops increasing and then change the cuts to evey 6 months till it starts coming down and after it starts coming down then reinstate them and if the debt starts back up stop pay and benefit and retirement pay for all retired lawmakers and future lawmakers.
You might have trouble getting this passed by congress.
The energy and mining sectors are oversold. There will be a huge rally in both. The cheap and hated rules are still alive and well. The euro is way to strong for this cycle.
The international energy equation has been significantly altered by the U.S. Shale Revolution. In the past shocks happened because of the lag time between production shortfalls and the gearing up of new projects. Offshore and Oilsands projects take years to get going. The Shale Producers could start new drilling projects next week and have new supply on the market in a month. They re the new “shock absorber”. The Brent futures don’t have a $50 price until 2020. They probably have it right. Jim
Yes Jim your right on the speed shalers can move at. Unfortunately after all the present bond holders get burnt the second time around there may be no capital available to work with. Shalers work on borrowed money and borrowers realize the fast cycle the market runs in. Do you want to invest in this ponzi scheme? Shale oil is a fast depleting way to get oil. You have to be constantly drilling new wells as the present ones drop off fast at the end of the first year and are usually finished by the second year.
I believe that the Us has never gotten out of the deflationary recession. actually, we could even still be at times in a depression. the gov;t figures are bogus. Real unemployment is 15 % + or _..There is some inflation for the avg. family and the way they figure growth can be manipulated. When i bubble drops, 1 or 2 more will follow quickly,and over time more will pop. Looks like junk bonds may be first,then stock mkt and sub prime auto loans,student loans, housing and eventually i think real int.rates will burst the 30 yr. bond bubble. Sorry,but follow Mike,s lead to protect yourself from a period worse then 2008, as 1 or 2 bubble bursts will deliver a liquidity crises worse than 2008/
Please unsubscribe me from your email list. Thanks. David Anderson
It would be helpful to remember a key characteristic of our fiat money system. All those Treasury bills, notes, and bonds held by the public were created by federal deficits. The private sector cannot deleverage with safe financial assets by itself: if I buy GE debt, I get less leveraged but GE is leveraged further. Public deficits create default-free federal debt. Has too much of it been issued? Not judging by the interest rates at which people are willing to hold it (and their inverse, high bond prices). Not judging by the fact that when there is increased turmoil, there’s a flight to U.S. debt, not someone else’s. The large early Obama deficits–most of which came from reduced tax collections and increased unemployment comp, etc.–enabled an over-leveraged private sector to repair balance sheets.
A gold standard would be wonderful for people who basically want to hoard a metal: the government guarantees a price for it, and if the world economy expands faster than gold production, we get a deflation (see the late 19th century) holders of gold get richer in real terms just by sitting on their fannies. And as we require ever increasing holdings of gold by government, we waste resources digging the stuff up, refining it, putting it in bars, and sticking it back into the ground. (You can’t make this up.) In other cases where people advocate a government program to enrich themselves with a government-supported price for what they hold, with expectation that the real value of the asset will go up without their lifting a finger, we call it rent-seeking. And that’s what it is.
What we could use to fight low inflation is more fiscal stimulus. For example, we could actually envision a 10-year infrastructure program to rebuild our roads, bridges, highways, maybe even a high-speed rail net. Let the construction industry know we’re not going to reverse course next year and they’ll begin to create jobs. And there will be multiplier effects.
Have we reached a point where simply holding interest rates low will have big multiplier effects? Maybe so. Expansionary fiscal policy would be much better.
Brad Lewis
Well said. I think of the government as the first buyer. The one that starts the ball rolling.
With gold currently selling for about $1100. a troy ounce, we would have to triple the amount of gold at Fort Knox for it to back up m1 total of all U.S. currency in circulation.
Correction: the last 3 sentences in the comment should read: “Have we reached a point where simply holding interest rates low will not have big multiplier effects? Maybe so. Expansionary fiscal policy would be much better.”
With deflation the direction the world economy is going, what do you foresee in the near future for gold and silver prices? And is 6.3% projected growth in China’s economy really negative? I know it is down, but most of Europe and the US would be thrilled with 3 or 4%!
What have the Chinese and the North American have in common. White/Redman/Chinese speak with forked tongue.
Deflation is the other side of the rising dollar. I don’t believe that the central banks have the trillions needed to postpone the inevitable. At best they can create more bubbles, but in the end we need to deleverage trillions of dollars of bad debt. I expect that the market will be stagnant at best during this readjustment as it was in the 1930s.
After reading many of the currency wars/crash, depression survival books from well known authors, it seems an over simplification that we’ve been playing Monopoly as a giant global money game and printing up lots of Monopoly electronic money. Many of the other major economies in the world have been playing too seeing who can devalue their money quickest to light a fire under inflation. Massive inflation is the only way to pay off all the Monopoly bucks debts. We’ve been cheapening our dollars so well, trade is picking up, billions of investments from other countries have come our way, into the stock market. We have a card house stacked higher than any other house of cards and many of the writers in this and other columns point to Japan and others that owe more than their GNP. We’re leading in that race too. When the house of cards falls down, people are going to lose massive parts of their retirement investments. There are so many following stop orders and shorts out there, that like a power system in a big storm, when one line overloads and starts kicking power breakers to protect itself, we’ll have a blackout that will leave people holding the bag, a bag which is about half empty. The Dem’s hope it won’t happen until a Rep is president, and the Rep’s hope it will happen soon so it’s not on their watch.
Larry at Weiss Research thinks the market is going higher! John thinks tech stocks is going up.
Hey Rubit he Chinese market is down 700 points and the Japanese market down 600 points as I type. When the American market opens step in with both feet and buy the big dip.
Like it or not, Jo, it was the Russians who defeated the Nazis, with help from us. They took the worst that several million Germans and their allies could throw at them, and drove them back into the streets of Berlin and beyond to the Elbe. We helped substantially with Lend-Lease material and our air offensive, and diverted a some hundreds of thousands of German troops with our invasions of N. Africa, Italy and France, but it was Russian troops and civilians who bore the brunt and took the millions of casualties. Possibly 20,000,000 or more. They may have lost more people in each of such battles as Stalingrad, Leningrad and Kursk than we and the British did in the whole war in the west. I’m certainly not being an apologist for the evils of Communism and the Comintern, and I don’t want to belittle the efforts of our troops, but read the history. I was a teen in those years, and cheered them on, along with most other Americans. They may have saved millions of American lives. Now Russia under Putin, may be doing more against ISIS than we are under Obama. Even Iran may be doing more.
Look at the price of finished steel.
When the price of wholesale steel, and the price of scrap iron close it always shows a slowing economy.
Order books shrink, suppliers are choking on inventory.
Steel manufacturers can’t make money.
Now the Fed’s ZIRP has created debt zombies in every market, in every sector.
How can anyone think that we will see growth.
Wake up and smell the corpses!
Check out the Baltic Dry Index and the Empire Manufacturing figures as well. These are true numbers not all that varnished stuff governments and big corporations dish out. Buy on the big dip in the morning. Join the parade.
All you guys are overlooking the really severe problem our country faces. If we don’t address the lack of diversity in Hollywood we will really be in for it. Jim
Thanks for the laugh. Well done!
Well after reading all of the above statements, one would have to be thankful to be alive. Never fear tomorrow, someone will find the magic button and print some money. Well I am going to go crawl under the carpet and get ready for the sky to fall, oh first I will go plant my garden, and stock pile some government ration supplies.
Just go vote so we can stop the nonsense.
With the easy/funny money policy of the Fed over the past years, gold should be surging, but there is no retail demand of consequence.
WHY?
With the “easy/funny money” bulging from their balance sheets, Big Banks bought stocks, pumped bonds to the Fed, and lent it on the cheap for Corp America buybacks, making bull markets in bond and stocks, thus attracting investors away from PMs, while simultaneously the FED et al, threatened rate hikes ad nauseum for the last couple years, not to mention the rigged London Price Fix and the media-for-hire’s constant drumming of the chant, “gold does not pay interest, so therefore will be a bad investment when the Fed hikes” or some similar diatribe, which we all know is exactly UNTRUE. Need I go on? Meanwhile, retail investor physical demand, especially silver, has been shooting through the roof and virtually every Central Bank on the planet adding to its reserves, EXCEPT maybe, the FED. And yet… they keep a straight face and try to tell us, AU fell today in an open and honest market. LOL
I agree with the earlier comment eluding to China having the power to break TPTB’s chokehold on the PM market via ETFs when they announce reaching their goal of 8500t AU, surpassing the alleged US gold reserves. Of course, that’s the thing about this particular time in history, there are so many potential black swan events swirling about in the ether, all capable of smacking down the USD. Not a question of if, but merely when…
Stackin’
Welp, “Dog gone it” is all I got to say. (<:
Mule
i figured we could expect an intelligent remark like that from a guy like you.
“…is utterly failing to boost inflation” That is not true. You don’t know the correct answer to the question. It is clearly not increasing inflation to a 2% or 3% level like the Fed wants. But who says it’s not increasing the inflation rate from say -3% (minus 3%) to say flat.That would be “utterly boosting inflation” or creating negative deflation, if that’s a word. I’ve never seen anyone discuss this before. Have you?
Pray, love each other, pray, and pray some more. We are headed for a gully-washer
Anyone arrested almost any where are asked two put their hands on their heads. It’s a Given! Two of our boats accidentally float into Irainian waters? They are captured with out a fight? Maybe they were told not to start a war because they knew they were in those waters? Think about it, all the details.
Inflation or deflation ? It all depends on what commodity/product and/or how the rate is developed !
I, for one believe the market is ready to crash and I recommend getting your money out of any risky stocks and into something that is a safe bet. We are going to have a depression and there is no way around it. Get your money into something SAFE
Should I install a red light?
Will: Depends on what you’re selling Sugar. Hard times even in the red light district now…the “good girls” are GIVING it away these days!!
the oil century is dead. Its time to invest and pursue the renewable energy century. We are in the 21st century, for heavens sake. The Mid East hates the west because we have intervened in their politics for ” American interests”…which really meant OIL….SCREW the Arabs…let the Saudis kill the Iranians the Shiites kill the Sunnis…..Whatever…We have SQUANDERED billions of US dollars and young American lives over their lousy oil….WE DON:T NEED It any more. Its time to push our technology with renewables and sell our energy to the world. China and India are HUGE markets….we can all become rich like the Arab sheiks by selling developing countries…OUR energy and renewable energy technology. The earth is bathed each day……Each DAY by enough solar power to power all the worlds economies for one year. all we need do is capture that solar energy…..convert it to microwave…..turn it back to electricity and put it into the grid. We can beam down LIMITLESS amounts of solar energy and sell it to Africa, India, China..from Solar satellites…the technology has been extant since the 1970s ( read the works of Dr Gerald Oneil)……..SCReW the arabs…let them kill each other off…Don’t spend any more time in the Mid East…for what…to spread Democracy?…..BS……not one Americans life is worth getting killed so Mrs Muhammad can get out to vote. If and when the arabs want their freedom…they will rise up and take it. US does not need to be there…nor be a part of their government.
While Gold And Silver have been on sale, via minulapation, I’ve been buying, in fact since 1972, I have very little paper money ( US FED NOTES ) left, and don’t want to have my Bank Account invaded by Uncle Sam to support their out of control spending since 1931. I may be wrong, but History is on my side. Gordon Mc
Hey barbuto, your idea of using solar, on the surface sounds great but, when it’s cloudy for many many days one gets zip solar energy and YOU CAN’T STORE IT!
Hi Barbuto,
Who is going to build the Solar Collectors and the electronics to convert it all?
Then woho will Launch it all as a project hundreds of times more expensive than the International Space Station..
The dishes to send such energy back to earth will eventually fall out of the sky due to being in a low orbit..
If you think that there is a lot of labor and machinery involved to put Wind Turbines
to work, you have not seen anything yet.
There is no way to store Microwaves…
The closest thing we have to what you are suggesting is Nuclear Energy…
That did not come from the Sun. But. it sure does produce the steam needed to turn turbines in a very efficient and reliable way…
To All those who think we should be going to Mars and setting up a colony…
I ask… how do you ignore the possibility that we exist here, because we escaped from that Dead Planet?
Trillions of dollars created and used to bail out those too big to fail banks was not free. It dragged both the banks and government into more indebted weaker position while the ultimate creditor was given more dictating power.
The ultimate creditor who received the QE money did not reinvested it into any real productive area. All the money newly made was just hoarded waiting for the perfect timing to buy every assets at the fire sale price. So you might have to sell your house to buy a loaf of bread.
What we need to do is to call this ultimate creditor into the open society and let him to release the hoarded money as public utility.
M1(cash + deposit on demand) should be circulating in the system all time.
New technology like block chain or ripple can be adopted for national currency management. Public interest should forego the private greed.
Hi Young Kim,
Aren’t they trying what you describe in North Korea ?
How is it working there, for the average peasant?
I agree with Barbuto, 98.7%, we’ve lost all respect in The World, even throwing Isreal under The Bus by our present administration, and God help us if we choose Evil over Righteousness, and the takers vote Hillary in power, were done.
I agree with Barbuto, 98.7%, we’ve lost all respect in The World, even throwing Isreal under The Bus by our present administration, and God help us if we choose Evil over Righteousness, and the takers vote Hillary in power, were done. Gordon Mc
So Mike, what is the solution?
Land the helicopters full of money?
That is what I see our bozo world leaders coming up with at Davos; which is why I see stagflation as the eventual end result.
For the rest of us, we need to remember the Bankers Golden Rule:
“He who has the gold, makes the rules.”
If Trump is elected, by a” fat chance”, he may declare The Cuntry Bankrupt, and start over doing things on a positive cash flo. Gordon Mc
Hi Gordon,
If The US declares bankruptcy, everyone owed money by the US will suffer…
China, all the US retirement accounts, T-Bills etc will all be out of luck..
If Deflation were done properly, the US would be systematically collecting it’s currency
like a company does with it’s Traded Shares… take them out of circulation
to prop-up the remaining currency in public hands…
Please define deflation. The examples you cite are cases of supply exceeding demand. Deflation means a reduction in the money supply which is totally different. I believe the government has modified the inflation gauge for its own purposes and so it is no longer reliable. Perhaps Weiss Research could set up its own inflation index so we have something to compare against.
The CRASH is on. We should have some incredible little counter rallies but it is ON.
As I have stated numerous times here, President Obama will be known to future generations as Barack ‘Herbert’ Obama.
Mike:
It’s time for — dun nu nu nu — ‘Superman’ — Donald J. Trump….
Dwane Lauinger
Calgary, Alberta, Canada,
China: Does not practice GAP principles of accounting. The IMF is predicting GDP
growth of 6.3% for China. Do they think we’re gullible? IMF is drinking Chineese
KOOL-AID!
Go Figure!
While ALL the smart-money has been short-selling oil/energy companies, Mike Larson has been long & he’s been urging us readers to buy. Hopefully nobody’s been paying this Wrong Trick Pony for his idiotic calls. The World is awash with over-supplied oil (continually gotten worse over the last 18 months) and Iran is yet to join the ‘party’ while Mr Larson tries to waste our hard-earned money..Fortunately i saw through his hype & stubborn-stupidity. The guy never learns & refuses to ‘get it’
Hi Lee,
The reason for the lower oil prices is fear in the hearts of Speculators..
They flooded the markets with the Oil they had floating around in Tanker ships,
when they saw Fracking production devaluing their stored profits…
Now that the prices have dropped and may go even father in the Spring, these same
speculators see the opportunity to refill these empty tankers while we say… Oooooh!!
Cheap Oil !! …. lets buy a big Gas Guzzler and take some trips.
It probably is time to buy back into Oil but it could still go lower for a few months..until
we see who the next President will be and if America will be made Great again .
We will “TIP”s-toe through the tulips till they make us march through them at the point of THEIR g*ns. Then deflation/inflation will keep them going maybe another 4 to 5 years, not just the next 6 to 9 months. Davos is about to let us know where and how we are to do as we are told to let the money come back into this country without getting 35%-ted into the ground. With that said, pull your belts in a couple of notches and listen to the elders and the kids. Sometimes kids hear things that they warn their families about and believe me, these kids have their ears to the ground and protect their grandparents and parents about what is coming. Listen to them and they will go to their granddads and ask them for information on how to survive.
Suggest all of you who wonder about deflation go read Harry Dent’s forecast. He lays it out very clearly.
BTW it’s all a matter of perspective. Remember inflation is good for the rich and bad for the poor. On the other hand, deflation is bad for the rich and good for the poor. So, are you rich or poor?
Hi Fred,
If you still have a Big Mortgage and lots of Credit Card Balances, you are Poor.
Wages may go down as Deflation happens, but your Monthly Payment will stay the same.