inflation

Insider

Alexander Varbenov/Shutterstock

Off The Cuff: Is Inflation Now In The Rear-View Mirror?

Mike Shedlock warns of deflation ahead
Friday, March 9, 2018, 3:11 AM

In this week's Off The Cuff podcast, Chris and Mish Shedlock discuss:

  • Are We On Our Way To Tipping Into Deflation?
    • We will be if we have another credit crisis
  • We're At Record Levels Of Indebtedness
    • So deflation would be painfully brutal
  • Trumps Trade Wars Will Hasten A Deflationary Bust
    • Economic growth will be even harder to achieve
  • It's Time To Own Real Things
    • Commodities are looking better and better

Recorded last week, Mike Shedlock explains why he sees an inevitable -- and painful -- deflationary rout ahead for world financial markets...

Click to listen to a sample of this Off the Cuff Podcast or Enroll today to access the full audio and other premium content today.
Insider

surpriseme/Shutterstock

Winning Against The Big Club

Protect & grow the purchasing power of your wealth
Friday, January 12, 2018, 8:43 PM

Executive Summary

  • Taking Advantage of Subsidies
  • The Importance of Adding New Income Streams
  • Income-Producing Assets
  • Hedges, Cost-Controls & Other Strategies

If you have not yet read Part 1: Drowning In The Money River, available free to all readers, please click here to read it first.

In Part 1, we compared official rates of inflation with hard data from the real world, and found that it’s not just the cost of burritos that has soared over 100% while inflation has supposedly been trundling along at 1% or 2% per year. The real killer is the soaring cost of big-ticket essentials such as rent, higher education and healthcare.

So what can we do about it? There are only a few strategies that can make a real difference: either qualify for subsidies (i.e. lower household income), own assets and income streams that keep up with real-world inflation, or radically reduce the cost structure of big-ticket household expenses.

Assets & Income Streams

One strategy to avoid being crushed by real-world inflation is to earn enough extra income to keep up with higher costs. This is problematic in an economy in which wages/salaries are declining as a share of the gross domestic product (GDP).

This is a long-term secular trend that is affecting not just middle-income workers but the highly educated technocrat/managerial class. This reality suggests that trying to earn more income via wages/salaries is akin to pushing sand uphill: it is possible, but it’s running up against powerful secular trends.

The alternative strategy is to seek assets and income streams that might increase purchasing more than wages/salaries.

The data speak volumes about the difference between wealthy households and middle-class households: the middle-class households’ primary asset is the family home, while the wealthy households’ primary asset is business equity: ownership of an enterprise or shares in enterprises.

Developing a profitable enterprise is easier said than done (it helps to inherit a family business), and there is no guarantee a business that’s successful today will still be successful next year.

Nonetheless, it’s striking that the middle class is heavily indebted, house-rich and business-equity poor, while the top 1% has little debt and is business equity-rich and relatively house-poor.

This is not to say it’s a poor investment to own a home, but it does suggest that you can beat the erosion of inflation by... » Read more

Blog

Photobank gallery/Shutterstock

Drowning In The Money River

Why the 99% of us are falling farther behind
Friday, January 12, 2018, 8:43 PM

If you suspect society is unfair, that there's a different set of rules the rich live by, you're right.

I've had ample chance to witness first-hand evidence of this in my time working on Wall Street and in Silicon Valley. Simply put: our highly financialized economy is gamed to enrich those who run it, at the expense of everybody else. » Read more

Blog

Tortoon/Shutterstock

2017 Year In Review

Markets fiddle while Rome burns
Friday, December 22, 2017, 4:15 PM

Every year, friend-of-the-site David Collum writes a detailed "Year in Review" synopsis full of keen perspective and plenty of wit. This year's is no exception. As with past years, he has graciously selected PeakProsperity.com as the site where it will be published in full. It's quite longer than our usual posts, but worth the time to read in full. A downloadable pdf of the full article is available here, for those who prefer to do their power-reading offline. -- cheers, Adam

Introduction

“He is funnier than you are.”

~David Einhorn, Greenlight Capital, on Dave Barry’s Year in Review

Podcast

Doug Noland: There Will Be No Way Out When This Market Bubble Bursts

Financial assets will become toxic to hold
Monday, December 11, 2017, 3:07 PM

This week Doug Noland joins the podcast to discuss what he refers to as the "granddaddy of all bubbles".

He certainly shares our views that prices in nearly every financial asset class have become remarkably distorted due to central bank intervention, first with Greenspan's actions to backstop the markets in the late-1980's, and more recently (and more egregiously) with the combined central banking cartel's massive and sustained liquidity injections in the years following the Great Financial Crisis.

All of which has blown the biggest inter-connected set of asset price bubbles the world has ever seen. Noland foresees tremendous losses as inevitable, as the central banks lose control of the monstrosity they have created: » Read more

Blog

Shutterstock

The Great Retirement Con

Frankly put: retirement is now a myth for the majority
Friday, November 17, 2017, 8:25 PM

40 years ago, a grand experiment was embarked upon. One that promised US workers: using new 'defined contribution' retirement savings vehicles such as IRAs and 401k,, they'd be better off when they reached retirement age.

Which raises a simple but very important question: How have things worked out? » Read more

Blog

Shutterstock

What Could Pop The Everything Bubble?

A crisis that can't be solved by just printing more dollars
Saturday, October 28, 2017, 1:37 AM

The policy of creating trillions in new currency and buying trillions in assets has inflated an 'Everything' Bubble -- a bubble in all the asset classes being supported or purchased by central banks and their proxies.

Many observers wonder: What, if anything, can pop this? » Read more

Podcast

perfectlab/Shutterstock

Steen Jakobsen: 60% Probability Of Recession In The Next 18 Months

The world economic engine is slowing to a standstill
Sunday, June 11, 2017, 6:46 PM

Steen Jakobsen back on, Chief Investment Officer of Saxo Bank, returns to the podcast this week to share with us the warning signs of slowing economic growth he's seeing in major markets all over the world.

In his view, the world economy is sputtering badly. So badly, that he's confident predicting a global recession by 2018 -- or sooner. » Read more

Blog

wk1003mike/Shutterstock

How Long Can The Great Global Reflation Continue?

And what will happen when it ends?
Friday, May 19, 2017, 8:01 PM

Given the extraordinary failure of both Keynesian stimulus and private-sector credit growth to create a self-sustaining cycle of expansion whose benefits flow to the entire workforce rather than to the top few percent, what can we expect going forward? Can we just keep doubling and tripling the economy’s debt load every few years? What if household incomes continue declining? Are these trends sustainable?

In the near-term, is this Great Reflation running out of steam, or is it poised for yet another leg higher? Which is more likely? » Read more

Insider

Syda Productions/Shutterstock

The Ka-POOM! Survival Guide

How to end up on the winning side of the Wealth Transfer
Saturday, March 11, 2017, 1:02 AM

Executive Summary

  • Understanding the details of the Ka-POOM! theory
  • The end game: hyperinflation
  • Transitioning to tangible (vs paper) assets
  • The critical importance of timing as things switch from deflation to runaway inflation

If you have not yet read Part 1: When This All Blows Up,  available free to all readers, please click here to read it first.

Ka-POOM!

Now it’s time to revisit the Ka-POOM theory which posits that bubbles will be blown, then they will deflate (or threaten to, more precisely), and that will then be met with more money printing.  Our view is that this cycle will continue until the entire system is utterly ruined, the underlying currencies destroyed.

What the 2008 financial crisis made clear is that when natural market forces work to purge the oversupply of poor-quality debt from the system. The bad mortgages (think subprime), the bad sovereign debts (think Greece), and the loan portfolios of over-extended financial institutions (think Citibank) represented ‘poor quality debt.’  When the market (finally) figured out that those debts would never be repaid at face value, or perhaps at all, turmoil erupted.

During times like these a vicious sequence begins: the market demands higher interest rates for the increased risks it sees. This makes debts harder to service, ultimately triggering defaults, which only compounds the difficulties as interest costs and defaults spiral ever upwards until the system is purged.  Think of it as nature’s way of removing bad credit from the world, the way a lion chases the lamest antelope first.

Because in our fiat currency system ‘all money is loaned into existence’ (see chapters 7 and 8 of The Crash Course on-line video series), during periods of high debt default, the money supply shrinks. Money is created when a loan is made and, conversely, money disappears when a debt defaults (or is paid back). This is the textbook definition of deflation—a common symptom of which is falling prices the cause of which is that there’s just less money (and/or credit) available to chase goods and services.

As a reminder, money is a claim on real wealth and debt is a claim on future money.  All that happens when we borrow more and more is that we push our problems of paying for what we want out into the future.  Which means that... » Read more