Signs of deflation are visible but the public will be fooled Deflation requires a precondition: a major societal buildup in the extension of credit (and its flip side, the assumption of debt). -- Conquer the Crash, 2nd edition (p. 88)Has the United States met that precondition? Well, consider that total credit market debt as a percent of U.S. gross domestic product was 280 percent in 1929 at the start of the Great Depression 380 percent in 2008 The current build-up of credit goes far beyond major -- it's unprecedented. It's been rising steadily for 60 years. The slope literally looks like the side of a steep mountain. Bank credit and Elliott wave expert Hamilton Bolton … [Read more...]
Why (and How) China is Boosting the Price of Gold
The History of Gold Prices (and How We Got Here) To get the full picture of the current price of gold we have to look back nearly 100 years. In the 1800's and early 1900's gold played a key role in international monetary transactions. The gold standard was used to back currencies. Each country determined a fixed exchange rates for its currency, i.e. how many ounces of gold each unit of currency was worth. Trade imbalances (importing more than they exported or vice versa) could rectified via the exchange of gold reserves. A country with a deficit would have to ship gold to the country with an excess. Any country experiencing inflation would lose gold and therefore would have a decrease in … [Read more...]
If the Economy’s “Recovering,” Why is the Largest-Ever U.S. City Bankruptcy on the Horizon?
What's really going on? As pundits chatter about an economic recovery, 80 miles east of San Francisco you'll find a city (pop. 292,000) facing bankruptcy: Stockton is on the verge of becoming the largest city in the United States to declare bankruptcy... San Francisco Chronicle (3/4) Bloomberg reports (2/25) that it costs the city $175,000 just to get a consulting firm's fiscal evaluation. Management Partners issued a report which said: ...the city took on a large amount of debt in anticipation of ongoing growth that now exceeds the city's ability to pay. Compensation packages exceeded sustainable levels and the city assumed a significant liability for improved retiree health … [Read more...]
Is Gold Backwardation Now Permanent?
Its Weight in Gold: The Real Prices of Things By Keith Weiner, Casey Research Worldwide, an incredible tower of debt has been under construction since President Nixon's 1971 default on the gold obligations of the US government. His decree severed the redeemability of the dollar for gold and thus eliminated the extinguisher of debt. Debt has been growing exponentially everywhere since then. Debt is backed with debt, based on debt, dependent on debt and leveraged with yet more debt. For example, today it is possible to buy a bond (i.e., lend money) on margin (i.e., with borrowed money). The time is now fast approaching when all debt will be defaulted on. In our perverse monetary system, … [Read more...]
Gasoline 20 Cents a Gallon?
Many of us aren't old enough to remember Gasoline at 20 cents a gallon. I can remember gas during the 1960's at 29.9 cents a gallon. The last time that gasoline averaged 20 cents a gallon was in 1942. That was during WWII ! But if you know us here at InflationData.com you probably know that we usually talk in inflation adjusted prices. So adjusting for inflation, the price of gas in 1942 would have been $2.78 if you are paying in January 2012 dollars. But that is still a long way away from the average price of Gas in 2011 of $3.48. We track the inflation adjusted price of gasoline based on the annual average price using the Consumer Price Index (CPI) generated by the U.S. Bureau of Labor … [Read more...]
The Doom of Wired Telecom
Advances in technology bring many changes to the business world, and certain industries that were once considered viable are now industries that should be avoided at all costs. One industry that is expected to shrink the most dramatically is the wired telecommunications carrier industry. This industry has been rapidly shrinking in response to the increasing widespread use of cell phones and online forms of communication. The need for wired communications has become so low that 25 percent of all households do not even own a land line phone. Some even predict that by 2025, land line phones will completely disappear. … [Read more...]
“No QE3″, Retracement Level Stalls Financials
Since financial stocks make up 14% of the S&P 500 Index, it is difficult to sustain a rally without strength in banks and financial services firms. With the Fed and ECB opening up the liquidity fire hydrant in late December 2011, bank stocks experienced another in a series of monster bailout rallies. As outlined below, the Financials Select Sector ETF (XLF) may be poised to give back some gains over the coming sessions based on numerous factors including reduced odds of QE3. Unfortunately in the debt-saddled world we live in, central banks may be the most important driver of asset prices. Dallas Fed President Richard Fisher told reporters after a speech Wednesday: There will be no … [Read more...]
Exploring the Not-So-Altruistic Aspects of the “Buffett Rule”
By Robert Ross, Casey Research This week, President Obama released his $3.8-trillion budget for fiscal year 2013. The plan calls for new taxes on the wealthy, a restructuring of the tax code, and short-term infrastructure spending aimed at boosting the economy (albeit artificially). Also included in the budget are limitations on subsidies for oil and gas companies, an end to the Bush tax cuts, and a proposal to raise taxes on dividends, which could be as high as 39.6% for households making over $250,000 per year. Although Senate Minority Leader Mitch McConnell (R-KY) dismissed the proposal as "a campaign document," the White House claims the measure would generate $206 billion in … [Read more...]
The Fed Resumes Printing
By Bud Conrad, Casey Research The Federal Reserve recently announced important policy changes after its Federal Open Market Committee (FOMC) meeting. Here are the three most important takeaways, in its own words: The Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions – including low rates of resource utilization and a subdued outlook for inflation over the medium run – are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014. The Committee judges that inflation at the rate of 2 percent, as measured by the annual change in the price index for … [Read more...]
How Does the Value of the U.S. Dollar Fit Into the Big Picture for the Economy?
Robert Prechter discusses his views on the credit crisis and the U.S. dollar More credit is denominated in U.S. dollars than any other currency. What does this mean for the value of the dollar as the credit crisis continues its strangle-hold on the world economies? Enjoy this video clip of Bob Prechter from an October interview with The Mind of Money host Douglass Lodmell, in which Bob discusses the debt implosion and the value of the U.S. dollar. You can watch Prechter's full 45-minute interview here -- no sign up required! Watch the full 45-minute interview FREEGet even more valuable insights as Mind of Money host Douglass Lodmell interviews Elliott Wave … [Read more...]