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Daily Digest 9/14 - Yield Hunters Become The Hunted, National Debt Tops 600 Trillion

Wednesday, September 14, 2016, 11:24 AM

Economy

KPERS suffers low earnings in 2015, but bond issue buoys fund (Kansas)

Paying back those bonds, however, is an ongoing obligation of the state, and the payments, estimated at $65 million, have to be paid out of the state general fund. Conroy noted that the state is paying roughly 4.7 percent annual interest on those bonds, and that's another reason why many people are watching the investment returns closely.

Pension Hole Deepening in Europe Adds Pressure to Bruised Stocks

The report showed that defined-benefit pension plans across the European Union were on average only 75 percent covered by assets at the end of 2014. According to Bloomberg Intelligence, many schemes will likely have deteriorated since then.

Libor’s Reaching Point of Pain for Companies With High Debt

A benchmark for near-term borrowing, the three-month U.S. dollar London interbank offered rate, has risen above 0.75 percentage point. That’s a key threshold for junk-rated companies with about $230 billion of loans outstanding according to data compiled by Bloomberg -- with Libor above that level, the borrowers will have to pay more interest over time.

How 'Zombie' Oil Companies Stay Alive in Life-or-Death Debt Markets

The trend is most apparent in the energy sector where oil and gas companies have been deploying a raft of creative measures to stay afloat amid lower crude prices that have crimped profits and threatened their survival. Such measures have included swapping unsecured debt for secured, offering discounted buybacks of existing debt, or junior-lien debt that gets paid after other creditors.

Soaring Student Debt Prompts Calls for Relief

A tripling of student debt over the past decade to more than $1.3 trillion has unleashed a torrent of Washington lobbying from outside the education sector, with various industries describing a “crisis” requiring federal intervention.

2016’s already a record year for country downgrades—watch out for more: Fitch

Twenty countries have had their ratings cut so far this year by the major ratings agency. So far, this matches the tally for the whole of 2011 and the most since Fitch started record keeping in 1994.

China's Infrastructure Planners are on a Road to Nowhere

The buildup has also exacerbated China’s swelling debt as cost overruns equal about a third of the nation’s $28.2 trillion debt mountain, according to the paper.

Bridgewater's Dalio: There's a 'dangerous situation' in the debt market now

"There's only so much you can squeeze out of the debt cycle, and we're there globally," the head of Bridgewater Associates said at the Delivering Alpha conference presented by CNBC and Institutional Investor. "You can't lower interest rates more."

National debt tops W600 trillion (Korea)

Government debt has surpassed 600 trillion won ($540.54 billion) for the first time, growing about 100 trillion won in two years, the finance ministry said Tuesday.

U.S. credit card balances may soon top $1 trillion

Indeed, consumers added a record $34.4 billion in credit card debt in 2016’s second quarter alone, the second-largest increase for that period since 1986. They added $71 billion to their credit card bills last year, the most since 2007. As a result, WalletHub says the average debt level per household will hit $8,500.

Low Yields Blow Holes in U.K. Corporate Pensions

Pension scheme deficits are rising across Europe as the income they make on government bonds shrinks. Pension funds typically stock up on government bonds because they are perceived to be a safe investment. But the yields on government bonds have been falling as extensive central bank buying pushes them down

Brazil's Leader Wants You to Invest in Tax Dodgers

Brazilian President Michel Temer is turning to an unlikely source to help solve his country’s fiscal crisis -- deadbeat taxpayers.

Yield Hunters Become the Hunted as Japan Long Debt Loses 9%

Investors who refused to swallow negative yields to hold Japan’s shorter-dated bonds are suffering, as an index of sovereign debt maturing in 20 years or more has lost 9 percent this quarter.

Gold & Silver

Click to read the PM Daily Market Commentary: 9/13/16

Provided daily by the Peak Prosperity Gold & Silver Group

Article suggestions for the Daily Digest can be sent to [email protected]. All suggestions are filtered by the Daily Digest team and preference is given to those that are in alignment with the message of the Crash Course and the "3 Es."

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Sears' and Kmart's shutdown is imminent

Moody's: Sears' and Kmart's shutdown is imminent (Moody's)

Quote:

Moody's analysts say Sears and Kmart don't have enough money — or access to money — to stay in business.

In a note published Wednesday, the analysts downgraded Sears' liquidity rating, saying the company is bleeding cash and will have to continue to rely on outside funding or the sale of assets, such as real estate, to sustain operations.

"We recognize the risks associated with relying on these sources and continued shareholder support to finance its negative operating cash flow which is estimated by Moody's to be approximately $1.5 billion this year," the analysts wrote.

Kmart in particular is at risk of shutting down, according to Moody's.

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Greenspan Worries That ‘Crazies’ Will Undermine

Greenspan Worries That ‘Crazies’ Will Undermine the U.S. System

http://www.bloomberg.com/news/articles/2016-09-14/greenspan-worries-that...

“It is the worst economic and political environment that I’ve ever been remotely related to,”

On the economic front, the U.S. is headed toward stagflation -- a combination of weak demand and elevated inflation, according to Greenspan

“We’re not in a stable equilibrium,” he said. “I hope we can all find a way out because this is too great a country to be undermined, by how should I say it, crazies.”

Greenspan repeated his concern on Tuesday that increased government spending on social security and healthcare are crowding out private investment and leading to slower economic growth. He bemoaned the fact that neither presidential candidate was talking about reining in those expenditures.

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Venezuela's "Death Spiral" - A Dozen Eggs Cost $150...

From ZH, "Venezuela's "Death Spiral" - A Dozen Eggs Cost $150 As Hyperinflation Horrors Hit Socialist Utopia"

http://www.zerohedge.com/news/2016-09-14/venezuelas-death-spiral-dozen-eggs-cost-150-hyperinflation-horrors-hit-socialist-uto

The ruin of this once prosperous, oil-rich nation might be a harbinger for other nations, such as the United States, which may be tempted into believing that Socialist giveaway policies actually can provide the promise of a free lunch for longer than the next election cycle. Or might that be all many politicians need or want?

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"Crazies" - Must Be Bernanke and Yellen

I'm wondering what Greenspan is really talking about. Of course, whenever he talks, I wonder what he is really talking about. Is he just trying to sanitize his inflationary policies while chairman of the Fed? It doesn't make sense to me.

The stagflation of the '70s was due to all the Social Security Trust Funds being liberated by LBJ in his "Unified Budget" in the mid '60s. His simultaneous wars on poverty and Viet Nam had to be funded. His choices were to increase taxes, borrow, or use trickery. He chose trickery. By unifying the budget, he was able to release enough sequestered taxes to fight his wars. The seed money he injected into the economy had many downstream effects, including the high inflation of the '70s and Nixon's temporary closure of the gold window on August 15, 1971. (It is still temporarily closed.)

OPEC's strikes and the rampant increase in oil prices in the early '70s changed individual's budgets and changed companies' profitability. That changed companies' hiring practices which caused unemployment to skyrocket. Arthur Burns and William Miller (FOMC Chairs) kept interest rates lower than perceived inflation. That combination is what caused the stagflation of the '70s. Inflation was finally beaten by Greenspan's predecessor, Paul Volcker. Volcker made money more expensive by raising interest rates. It stopped inflation, but it also likely cost Jimmy Carter his second term.

The conditions we face today are anything but the same as what we saw in the '60s/'70s. "Animal spirits" (aggressive borrowing/spending by optimists) need to be unleashed. The extra funds from the SS trust fund were enough in the low personal debt environment of the '60s. QE possibly could have done that, but it appears to have been designed specifically to repair big bank balance sheets. It didn't help the little guy. Now, most folks are a few missed paychecks away from bankruptcy. Most anyone who wants to borrow isn't a good candidate to lend to.

Back then, automation was in its infancy. Now, many jobs have been replaced by software and/or hardware robots. That sneaking suspicion that you may lose your job keeps people from going overboard.

I can actually see stagnant or declining employment but not inflation. It truly sounds more like a depression than stagflation - lower employment and lower demand. I just don't see Greenspan's inflation happening any time soon. The only way inflation will take hold in this environment is for Yellen and Bernanke to cause it with something similar to helicopter drops. They must be the crazies that Greenspan references.

Grover

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Hyperinflation

Hyperinflation isn't caused by socialist policies.   Its arguably caused by debasing the monetary system.   The socialist policies almost always follow the debasement, but most people get the cause-effect wrong.   Look at the biggest (closest thing to) a socialist government: 1960's China.  The government ran everything, literally every industry and service.   There was no inflation until the government started tinkering with the money supply, decades later.    Socialism doesn't cause inflation. Printing too much money does. 

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Crazies

Grover, can't agree with you there.   1970's stagflation was caused by broken monetary policy.   The fed printed, inflation, then, went wild.  The government (as always) misinterpreted the cause of inflation, and put price and wage controls on, that of course, didn't work, and had the exact opposite of the desired effect.

I see inflation whenever I go to the grocery store, and pay $40.00 for almost nothing.   And, look at building/construction supplies, the have gone up, some 200, 300 or 400 percent since 2007.  And medical costs, or the cost of maintaining your car, or house.   

We don't see inflation in the cost of junky, imported products, like toasters or light fixtures from China, since the Chinese tinker with the exchange rates so much, to prop up exports.  

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Hillary health commentary

Saw this on ZH... from Mish... and it strikes me as really hitting home in terms of technical diagnosis (admittedly from afar);

Comments From M.D. Zadeh

Hi Mish

It looks like you got two doctors commenting and now you will have a third. While I don’t disagree with the doctor’s opinions given what was presented, I think some of the facts presented to the public are in question.

Let me go over some basic things. When you have a blood clot in the brain, the biggest danger is that blood flow to that section of the brain is cut off and brain tissue dies; that is a stroke. If there is a blood clot causing symptoms and the clot gets dissolved or breaks away such that blood flow is not permanently interrupted, that is called a transient ischemic (without oxygen) attack or TIA or mini stroke.

However, there are also very small strokes that destroy brain tissue at the microscopic level. Those are called lacunar infarctions and they often result in a type of dementia called vascular dementia. Not to get too technical, but vascular dementia also is overlapped by a process called Lewy Body dementia which is basically a mixture of Alzheimer’s dementia and Parkinson’s.

I think people pointing to Parkinson’s don’t get what Lewy body and vascular dementia are: forms of dementia with Parkinsonian features that wax and wane depending on blood flow. If there is diminished blood flow to the dopamine producing parts of the brain: Parkinson symptoms can occur but vanish once blood flow is restored. Hilary wouldn’t have gotten through the election campaign with full blown Parkinson’s, but she could have gotten by with hiding early vascular/Lewy body dementia IMO, and that is what I suspect is going on with her.

The thing I have told people is once you have blood clots gumming up your brain, things don’t get better. This is a progressive problem and as someone who has extensively studied coagulation, the notion put out by HRC’s staff that you put someone on blood thinners, the clot dissolves because of the blood thinner, and a person has a full recovery is complete baloney. A disruption in blood flow to the brain is going to be followed by continued disruptions in blood flow, and I know of no treatment to stop it in a case like HRC’s that involves smaller blood vessels.

When you have a neurovascular issue causing dysphagia (difficulty swallowing which is what causes her to cough), seizures (the reason for the staff caring around the Valium or diazepam pen), and weakness, those are REALLY bad signs. IMO she is a ticking time bomb to have a major and debilitating stroke.

With Hiliary’s “pneumonia”, a doctor saying so is completely inadequate. How was it diagnosed? Was an acid fast stain done? Were mycoplasma titers or cultures performed? What was the level of cold agglutins? Furthermore, if HRC was diagnosed with mycoplasma or walking pneumonia, why was she allowed to come in contact with a child when this disease is known to be contagious? And what did her chest x-ray look like? She should have had one to be diagnosed with pneumonia.

Bear in mind that when you have weakness with pneumonia, it usually is due to dehydration and causes orthostasis (dizziness when getting up). If HRC were going from sitting to standing and needed support, I could buy the dehydration/pneumonia story. But she was already standing and then went limp. That is most likely a neurological problem not a hydration one.

People should be clamoring to see the chest x-ray and lab results for HRC. To me the most damning finding would be a normal white blood cell count, a negative acid fast stain, normal tiitre ratio of cold agglutins, and an infiltrate in the middle lobe of the right lung. That would be strongly suggestive that HRC has aspiration pneumonitis due to dysphagia from an underlying neurovascular issue and that the walking pneumonia diagnosis was pure bunk. But I would be shocked if we see the lab or X-ray results.

Bottom line though is I said HRC had serious medical issues to someone a month ago, and recent events have fortified that opinion. If the Dems handle HRC’s health issues as a conspiracy or a malicious Trump plot versus truthful full disclosure, IMO they are giving the election to Trump. For the Dems to win in November, they need to get a new candidate yesterday.

Joseph Zadeh

source:  http://www.zerohedge.com/news/2016-09-15/late-stage-lying-pneumonia-theo...

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Ben Bernanke: 'Premature' to count out negative rates

Ben Bernanke: 'Premature' to count out negative rates

CNBC-22 hours ago
More than $11 trillion in global sovereign debt currently carries negative yields. The results have been mixed at best, with inflation levels remaining muted and ...

This Bond Market Sell-off Looks a Lot Like 'Taper Tantrum,' the Sequel

Bloomberg-5 hours ago
Yields on sovereign debt have jumped in recent days thanks in part to concerns over the ability or willingness of the European Central Bank and the Bank of ...
 

Bank of England signals interest rates cut in future after no change this month

Belfast Telegraph - ‎59 minutes ago‎
... said: "If it does cut close to zero later this year it will have very few monetary policy bullets left to fire if the UK economy slips into recession. Mark Carney doesn't want to experiment with negative interest rates so any further rate cut needs ...

Funds Load Up on Risk as Crisis-Era Securities Make a Comeback

Bloomberg-1 hour ago
A chorus of global financial leaders from BlackRock Inc.'s Larry Fink to Janus Capital Group Inc.'s Bill Gross have warned that negative interest rates are ...

 

Here's some perspective on the US national debt as it approaches ...

MarketWatch-19 hours ago

The U.S. national debt is closing in on $20 trillion. That's $20-thousand billion. Or $20-million million. If you stacked up $20-trillion worth of thousand-dollar bills, ..

Canada debt-to-income hits record in Q2 as income growth weak

Reuters-1 hour ago
UPDATE 1-Canada debt-to-income hits record in Q2 as income growth weak ... Consumers borrowed a seasonally adjusted C$29.2 billion in the second quarter ...

Prime Minister's debt warning for Australia

The West Australian - ‎17 hours ago‎
In his last speech as Reserve Bank governor, Glenn Stevens said while most people focused on the size of government debt it was dwarfed by the $1.45 trillion Australians owed the banks. Mr Turnbull said debt as a percentage of household income — at ...

China's Credit Fire Hose Floods Housing Market

Wall Street Journal-6 hours ago
China's stock of mortgages stood at 16.9 trillion yuan ($2.5 trillion) as of June 30. ... As Beijing shuffles its debt around pockets of the economy, the pressure will ...

Breaking down Houston's pension pinch

KHOU.com-15 hours ago
According to the Wharton School of Business at the University of Pennsylvania, there is $3 trillion in unfunded pension debt at the state level nationwide.

Dallas home market keeps rocketing skyward and it's getting ...

MarketWatch-Sep 14, 2016
Credit-card debt will reach $1 trillion again this year for the first time since 2008. Student loans recently became the largest source of debt, ahead of auto loans ...

While debt soars to $17 billion, University of California considers ...

The Mercury News-15 hours ago
The University of California's debt has ballooned to $17.2 billion since the start of the recession, more than doubling as the system borrowed to repair buildings, ...

Chicago Raises Water and Sewer Taxes to Fund Pension Deficit

Bloomberg - ‎21 hours ago‎
For decades, the city failed to put aside enough money to cover the cost of rising benefits for retirees, leaving Chicago with $34 billion of retirement debt across its four pension systems. The higher levies follow a record property tax hike that ...

Nigeria Records $2bn Revenue Deficit Monthly Due to Falling Oil ...

Leadership Newspapers-10 hours ago
The Nigerian Employers Consultative Association of Nigeria (NECA) has disclosed that falling oil price has resulted in a loss of about $2billion in federal ...

Rupee plummets to 67.07 a dollar on devaluation rumours

domain-B - ‎12 minutes ago‎
India's merchandise exports fell 6.8 per cent year-on-year in July, which took month's trade deficit to $7.8 billion, even as India appetite for global products remained unsatiated. However, according to government data, imports fell faster, by 19 per ...

Struggling Atlantic City may default on state loan

NJ.com-17 hours ago
But the agency said there was "a high probability" the city would default on its debt within the next few months without the loan money. City council President ...

Employees Are Paying A Bigger Chunk Of Health Insurance Costs

NPR - ‎Sep 14, 2016‎
It's the continuation of a multiyear trend of companies passing more of the costs of employee health care back onto workers. Overall, health insurance premiums for a family covered by an employer health plan rose an average 3 percent this year to $18,142.

In a hungry Venezuela, buying too much food can get you arrested

Washington Post-6 hours ago
BARQUISIMETO, Venezuela – The hunt for food started at 4 a.m., when Alexis Camascaro woke up to get in line outside the supermarket. By the time he arrived, ...

 

pyranablade's picture
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HRC's Health

As I understand it, the powers of the DNC are discussing possible replacements.

Michelle Obama was one of the favorites. Not saying I don't like her, but she was never elected dogcatcher.

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Lying with Inflation Statistics
reddgreen wrote:

Grover, can't agree with you there.   1970's stagflation was caused by broken monetary policy.   The fed printed, inflation, then, went wild.  The government (as always) misinterpreted the cause of inflation, and put price and wage controls on, that of course, didn't work, and had the exact opposite of the desired effect.

I see inflation whenever I go to the grocery store, and pay $40.00 for almost nothing.   And, look at building/construction supplies, the have gone up, some 200, 300 or 400 percent since 2007.  And medical costs, or the cost of maintaining your car, or house.   

We don't see inflation in the cost of junky, imported products, like toasters or light fixtures from China, since the Chinese tinker with the exchange rates so much, to prop up exports.  

According to the BLS, inflation is low.  Very low.

According to everyone I talk to, and my own experience, that's BS.

If you are in a major metro area, and rent, I seriously doubt your inflation experience is much below 7% or 8%.

But from the BLS's own website we learn how if a TV that costs' $250 is replaced with one costing $1,250, the price of that new TV could be registered by the BLS as costing -7.1% less.

Here's how, in their own words, er formulas, uh whatever:

Now you, as the sharp-eyed consumer might notice that your wallet is actually $1,000 lighter not ($250 * 0.071) = $17.75 heavier.

And you might think that since a TV allows you to perform the exact same function, namely watch TV, that you are actually experiencing something that is $1,017.75 different from what the BLS has calculated you are experiencing.

Silly person!

Trust the math.

You actually spent -7.1% less, not $1,000 more.

The government said so.

 

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HRC's health
pyranablade wrote:

As I understand it, the powers of the DNC are discussing possible replacements.

Michelle Obama was one of the favorites. Not saying I don't like her, but she was never elected dogcatcher.

Hmmm....that's an interesting possibility.

I think that Biden is another one that could work for the DNC here.

No way they select the obvious and deserving choice, Sanders, because they stole the selection from him fair and square and now wouldn't (rightly) trust him to fetch their coffee.

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The real fall-out of the HRC story--Mainstream Media Fails

For me, it was the 9/11 story.  The place where I came to understand that the narrative presented by "reputable news sources" was fabricated.  And that the fabrication was not simply haphazard, but was consistent, organized, coordinated at some high level (in some unknown way), and served the general model of an elite guiding the masses.     Sometimes when I despair that so few are able to tell an explosive demolition from a collapse a friend reminds me that there are many doorways.

Charles Hugh Smith today offers his assessment that the HRC stories of the last months are the doorway through which many will walk.  Very well written.

The mainstream media bet the farm on Hillary Clinton, confident that their dismissal of every skeptical inquiry as a "conspiracy" would guarantee her victory. It now appears they have lost their bet.

MSM "Opinion" hacks have unleashed unrelenting attacks on legitimate inquiries with accusations of "conspiracy" and ... "Can we please stop talking about Hillary's health?"

Suggestions that the Clinton Foundation engaged in "pay to play" [overt bribery] during Hillary's term as secretary of state are glossed over...

The Democratic National Committee's corruption was downplayed

This Is How Much It 'Costs' To Get An Ambassadorship: Guccifer 2.0 Leaks DNC 'Pay-To-Play' Donor List  [a must read IMHO].

Consider the subtle Orwellian play of The New York Times sidebar headline after Hillary's collapse on 9/11: "Hillary leaves 9/11 event early." Oh really? This was the substance of what happened, that the candidate "left early"?

What happens when the status quo media turns a presidential election into a referendum regarding the media's ability to shape public opinion and direct "purchasing" choices?

I love Charles' graphics:

 

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Deeper Look
redgreen wrote:

Grover, can't agree with you there.   1970's stagflation was caused by broken monetary policy.   The fed printed, inflation, then, went wild.  The government (as always) misinterpreted the cause of inflation, and put price and wage controls on, that of course, didn't work, and had the exact opposite of the desired effect.

I see inflation whenever I go to the grocery store, and pay $40.00 for almost nothing.   And, look at building/construction supplies, the have gone up, some 200, 300 or 400 percent since 2007.  And medical costs, or the cost of maintaining your car, or house.   

We don't see inflation in the cost of junky, imported products, like toasters or light fixtures from China, since the Chinese tinker with the exchange rates so much, to prop up exports.  

reddgreen,

I can't find the graph that shows the federal reserve's balance sheet over this time period. Yes, they did "print" and used that money to buy US Treasurys. The question becomes - was it the real cause of the rampant inflation? The national debt was under $1 trillion when Ronald Reagan took office. That means that on average, the most the debt could have increased each year of the '70s was $100 billion. Was that enough to goose the smaller economy back then?

Here's a portion of the Wikipedia article on Arthur Frank Burns ... [bolding by Grover]

https://en.wikipedia.org/wiki/Arthur_F._Burns

Burns served as Fed Chairman from February 1970 until the end of January 1978. He has a reputation of having been overly influenced by political pressure in his monetary policy decisions during his time as Chairman[8] and for supporting the policy, widely accepted in political and economic circles at the time, that Fed action should try to maintain an unemployment rate of around 4 percent.[9] (See also: Phillips curve)

When Vice President Richard M. Nixon was running for President in 1959–1960, the Fed, under the Truman-appointed William McChesney Martin, Jr., was undertaking a monetary tightening policy that resulted in a recession in April 1960.[further explanation needed] In his book Six Crises, Nixon later blamed his defeat in 1960 in part on Fed policy and the resulting tight credit conditions and slow growth. After finally winning the presidential election of 1968, Nixon named Burns to the Fed Chairmanship in 1970 with instructions to ensure easy access to credit when Nixon was running for reelection in 1972.[8]

Later, when Burns resisted, negative press about him was planted in newspapers and, under the threat of legislation to dilute the Fed's influence, Burns and other Governors succumbed.[10][11] Burns' relationship with Nixon was often rocky. Reflecting in his diary about a 1971 meeting attended by himself, Nixon, Treasury Secretary John Connally, the Chairman of the Council of Economic Advisors, and the Director of the Bureau of the Budget, Burns wrote:

The President looked wild; talked like a desperate man; fulminated with hatred against the press; took some of us to task – apparently meaning me or [chairman of the Council of Economic Advisors, Paul] McCraken or both – for not putting a gay and optimistic face on every piece of economic news, however discouraging; propounded the theory that confidence can be best generated by appearing confident and coloring, if need be, the news.[7]

There was significant inflation during this period, which Nixon attempted to manage through wage and price controls while the Fed under Burns maintained an expansive[further explanation needed]monetary policy. Although Burns opposed Nixon's decision to close the "gold window," he "'assured the President that I would support his new program fully,' notwithstanding his reservations about the gold suspension."[7] After the 1972 election, due in part to oil shocks from the 1973 oil crisis, price controls began to fail and by 1974, the inflation rate was 12.3 percent.[8]

Burns thought the country was not willing to accept rates of unemployment in the range of six percent as a means of quelling inflation. From the Board of Governors meeting minutes of November 1970, Burns believed that:

...prospects were dim for any easing of the cost-push inflation generated by union demands. However, the Federal Reserve could not do anything about those influences except to impose monetary restraint, and he did not believe the country was willing to accept for any long period an unemployment rate in the area of 6 percent. Therefore, he believed that the Federal Reserve should not take on the responsibility for attempting to accomplish by itself, under its existing powers, a reduction in the rate of inflation to, say, 2 percent... he did not believe that the Federal Reserve should be expected to cope with inflation single-handedly. The only effective answer, in his opinion, lay in some form of incomes policy.[9]

During Burns' tenure, the rate of change of the consumer price index rose from 6%/year in early 1970 to over 12%/year in late 1974 after the Arab Oil embargo, and eventually falling to under 7%/year from 1976 to the end of his tenure in January, 1978, with an annual average rate of consumer price inflation of approximately 9% during his term. Negative economic events included multiple oil shocks (1973 and 1979) and heavy government deficits arising in part from the Vietnam War and Great Society government programs.

At the Watergate break-in of 1972, the burglars were found carrying $6300 of sequentially-numbered $100 bills. The Fed lied to reporter Bob Woodward as to the source of the bills. Burns stonewalled Congressional investigations about them and issued a directive to all Fed offices prohibiting any discussion of the subject.[12]

In 1976, Burns received the U.S. Senator John Heinz Award for Greatest Public Service by an Elected or Appointed Official, an award given out annually by Jefferson Awards.[13]

I wonder if M*A*S*H picked the character name for Frank Burns in honor of Mr. Burns? ;-)

So, obviously, the easy monetary policy prolonged and exacerbated inflation, but what provided the initial spark? Where did all that once sequestered money from the SS Trust Fund go? Also note in the Wikipedia article that Burns opposed the closing of the gold window. Nixon had to do it because Charles de Gaulle wanted to exercise his rights under the Bretton Woods Agreement to exchange 35 dollars for an ounce of gold. Nixon's advisors counselled that there wasn't enough gold in storage to retire all that paper money. So, how did France accumulate all those dollars?

My contention is that the Silent Generation - those folks who were born during the Depression and WWII, were tired of the imposed austerity of their childhood and bought lots of French wines in order to live a little. They obviously bought other items elsewhere too. They accumulated money that was spent by LBJ's administration to buy 1) munitions for Viet Nam war and 2) the money spent by recipients of federal transfer payments for the war on poverty.

Times were good for this generation (other than the disruptive hippy movement.) They had stable jobs with ample raises and bright futures. That encouraged them to borrow money to buy cars, houses, luxuries, etc. As you may know, borrowing money actually creates it. The extra money sloshes through the economy and competes for the goods/services to be purchased. That is the source of inflation whereas prices going up is merely a symptom of inflation. There are other causes for prices to increase. (Taxes and regulation requirements are paid by the consumer. Have those been going up?)

So, fast forward to today. I agree with you that prices are going up. Are wages going up? Debt saturation is a function of income. If your income goes up, you can carry more debt. If your hours get cut so your company can stop paying for expensive health insurance, are you going to celebrate by going deeper in debt? If you were so inclined to do so, you would likely be so saturated with debt that banks wouldn't touch you. I'm sure Guido would lend you some money, but that doesn't create money.

So, money supply has to increase for inflation to take off. If we can't borrow due to debt saturation and wages aren't going up due to ever advancing robotics, where is inflation going to come from?

Grover

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Posts: 5072
credit growth 1970-1985

In the 1970s, bank credit was the primary source for inflation, followed closely by the Federal Government's deficit.  Fed probably set rates too low, which encouraged the bank credit growth, but it wasn't direct bond-buying that caused the problem.

(US Monetary base was the best  I could find for the Fed's balance sheet)

Uncletommy's picture
Uncletommy
Status: Gold Member (Offline)
Joined: May 3 2014
Posts: 476
Why am I finding it difficult to sleep?

Social media is again defining our perplexing development of vocabulary and reflecting the current state of affairs. Debt growth = "slowth": at what point will raising interest rates cure economic stagnation?  

http://www.verbotomy.com/verbottle.php?jargonism_id=15193

Do food prices reflect an inflationary trend? Duh! We ain't seen nothing yet. Current price for potatoes is around $0.32 a pound (regional differences do apply). This coupled with farm debt increases doesn't paint the rosiest picture now, does it? In your gut you know something is seriously out of whack and there doesn't seem to be a thing any of us can do to quell our discontent. Can't wait to get my seed catalog this fall and see what's in store.

http://www.bls.gov/regions/mid-atlantic/data/AverageRetailFoodAndEnergyP...

 

thc0655's picture
thc0655
Status: Diamond Member (Offline)
Joined: Apr 27 2010
Posts: 1517
Deputies use robot to disarm attempted murder suspect

http://www.latimes.com/local/lanow/la-me-ln-robot-barricaded-suspect-lancaster-20160915-snap-story.html

An  hours-long standoff in the darkness of the high desert came to a novel end when Los Angeles County sheriff’s deputies used a robot to stealthily snatch a rifle from an attempted murder suspect, authorities said Thursday.

Officials said the use of the robot to disarm a violent suspect was unprecedented for the Sheriff’s Department, and comes as law enforcement agencies increasingly rely on military-grade technology to reduce the risk of injury during confrontations with civilians.

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