Category Economic Subjects

Feb 10 2022

Fed Hopes Inflation Moderates As Interest Rate Hikes Are Triggered


Posted originally on the conservative tree house on February 9, 2022 | Sundance | 152 Comments

Whenever we discuss inflation, it is absolutely critical for people to understand that inflation itself is the measure of the percentage increase in a price over a period of time.

It is entirely possible, I would say absolutely guaranteed, that prices will increase even more this year as inflation begins to drop. This will be the economic story on the backside of the inflation hurricane as the Fed starts to increase interest rates. Example:

♦ 2021: A loaf of bread increases in price 50¢ from $1.00 to $1.50, a rate of inflation of 50%.

♦ 2022: That same loaf of bread increases in price by 60¢, from $1.50 to $2.10, a rate of inflation at 40%.

The price of the bread increased more in 2022 than 2021, but the rate of inflation dropped from 50% to 40%.

The White House and Federal Reserve state, correctly, that inflation is likely to drop.  However, the actual prices of the products are rising at a greater rate. This is the critical component of the inflation story that will remain with us throughout 2022.  Inflation is not measuring the increase in the price of an item.  Inflation is measuring the rate of the price increase as a percentage.

This is the context for the Federal Reserve to state today, they “hope” inflation slows down, because they are going to raise interest rates regardless of what is happening with the price of goods and services:

WASHINGTON, Feb 9 (Reuters) – The U.S. economy may be nearing a turn lower in inflation, Atlanta Fed President Raphael Bostic said on Wednesday, though he added he is still leaning towards a slightly faster pace of interest rate increases this year.

“I am very hopeful we are going to start to see that decline … There is some evidence we are on the cusp of that,” Bostic said in an interview with CNBC.

While Bostic still expects three quarter-percentage-point rate increases will be appropriate this year, he said: “I am leaning a little towards four. We are going to have to see how the economy responds as we take our first steps,” with an initial rate increase expected in March. (read more)

Energy prices rose approximately 40% throughout 2021, with gasoline increasing around 60%.   It is likely that prices will increase even higher in 2022 than they did in 2021; however, the rate of price increase will be lower (the inflationary measure).  This is why the backside of the inflation hurricane is actually stronger and more damaging to the middle class than the original front side impact.

Highly consumable goods like food, fuel and energy, will have even higher price jumps in 2022, but the rate of inflation may drop.

Last point.  Remember, the Biden economic agenda (and the energy, trade, monetary, fiscal policy behind it) is what the Obama economic team always wanted to do; however, they were limited in execution, because they did not want Obama to suffer the political damage.  With the disposable Joe Biden in office, their previous restraints are removed.

The economic team behind all of these policies do not know the scale of what damage will happen, but they do know the damage will be severe.  The economic outcome is not as important to them as the underlying ideology they are chasing.

They justify the damage, amid themselves internally, by saying the ends (Green New Deal) justify the means (economic collapse), and that approach inherently makes Build Back Better a self-fulfilling prophecy.

Feb 9 2022

Greenpeace to Take Over Environment & Secretary of State for Germany


Armstrong Economics Blog/Germany Re-Posted Feb 9, 2022 by Martin Armstrong

Jennifer Morgan of Greenpeace has been behind Greta Thunberg, and I believe was caught even writing her speeches. She is friends with Al Gore who succeeded in inserting Greta into the movie on Davos, “The Forum.”

Now the German Foreign Minister Annalena Baerbock (Greens) has brought Greenpeace’s boss Jennifer Morgan into the German government. It will soon be time to just turn the lights out on Germany, and hence all of Europe. Morgan, an American, has been brought in to the Federal Foreign Office as a special representative for international climate policy. This climate conspiracy states that Jennifer Morgan, despite being an American, will later become Secretary of State.

The entire problem with this climate agenda is they are ONLY focused on eliminating fossil fuels and in Germany they are also against nuclear.  If you burn wood that still releases CO2, so it is impossible to eliminate CO2 and stay warm in winter.

Because Morgan is an American, she will initially occupy the post of a special representative. She will later become State Secretary in the Federal Foreign Office. Morgan is receiving German citizenship to become Secretary of State. She has ZERO experience in military or geopolitical affairs. She has been the head of Greenpeace since 2016. She will prepare the annual world climate conferences. Her only focus will be to end fossil fuels in Europe.

It is Time to Turn Out the Lights on Europe

Feb 9 2022

Shrinkflation


Armstrong Economics Blog/Inflation

Posted Feb 9, 2022 by Martin Armstrong

Shrinkflation is here to stay now that inflation has reached a 39-year high. It will be impossible for the Fed to tame the monster politicians have unleashed by COVID restrictions, not artificially lowering rates that have been in place for over a decade. Political governments could take immediate action to help the current supply chain crisis which they created, but they lack any competence to understand even what they have done. Shrinkflation, by the way, occurs when products remain the same price or rise, while the product size decreases.

“Portion sizes are shrinking. Prices are going up. It’s just insane what’s happening in the restaurant industry,” former McDonald’s USA CEO Ed Rensi told Fox News. “It’s also true of every other small business. They’re all suffering terribly from this federal inflation.” Yet, McDonald’s saw 7.5% growth in Q4 2021. Regardless, the fast-food giant is recommending that franchises raise their costs between 6% to 6.5% next year.

“The biggest single problem we’ve got is the…truckers shortage and a disruption of imports coming into this country,” Rensi added. “This truckers’ situation is enormous and is having a big impact.” So while the jobs situation is improving, with the US boasting a 4% unemployment rate, the mandates have devoured the supply chain.

As for other examples of shrinkflation, Chobani decreased its flip yogurt by 15% in size. Crest decreased its whitening toothpaste from 4.1 oz to 3.8 oz, while Gain decreased its laundry detergent from 165 FL OZ to 154 FL OZ. Inflation is so severe that products are increasing in price while shrinking in many instances. Barilla pasta formerly sold its spaghetti for under a dollar at 454 g, yet decreased the package to 410 9 and increased the price by nearly 100%. This level of inflation is completely unsustainable and consumers are suffering the consequences.

As former CEO Rensi said in his insightful interview, “Let’s lighten up a little bit, let our bodies handle it, instead of government handling it.” End the mandates to help boost the suffering supply chain that is contributing to inflation. This is one variable that the government has instant control over.

Feb 9 2022

Ottawa Tow Companies Unwilling to Remove Freedom Convoy


Armstrong Economics Blog/Canada Re-Posted Feb 9, 2022 by Martin Armstrong

The truckers are still going strong in Canada and fighting for ALL of us. Trudeau’s Administration has no empathy and does not understand why anyone would want to interfere with the tyrannical plans of Schwab’s groomed young leader.

Ottawa police are now saying that it would take 1,800 police officers to end the protest. Chief Peter Sloly stated “there are no days off” for officers as the government continues to employ them around the clock. The protests have been peaceful and met with support from the local community.

Justin Trudeau is still in the fetal position somewhere, unwilling to meet with the protestors. A few days ago, the missing prime minister said that he would need to be “very, very cautious before deploying the military in situations against Canadians.” Deploying the military is not on the agenda right now, as it would elevate the situation to disastrous proportions and many military members likely support their fellow citizens.

They cannot simply tow thousands of trucks from Ottawa. The trucks are equipped with air brakes that will lock all 18 wheels once implemented, and at that point very little could move the truck. CBC interviewed numerous trucking companies for their perspective but was told that most towing companies refuse to remove trucks and risk damaging their relationship with trucking companies. The tow companies could technically “cage” the breaks by manually removing the break from each individual wheel, but that is still difficult to do without the consent of the driver. It is also a timely endeavor. In one example, it took 18 hours to remove 30 trucks and 28 cars.

In the end, even if they spend countless tax dollars to remove the trucks, the trucks can simply return. And they will return. People are passionate about this movement and it is not likely to quell until Justin Trudeau addresses the people and their pleas to remove mandates.

Feb 9 2022

Gresham & Fiat Currency – Theories Long Since Replaced


Armstrong Economics Blog/Economics Re-Posted Feb 9, 2022 by Martin Armstrong

QUESTION: Mr. Armstrong, Out of my utmost respect, you do stand-alone where all these analysts are calling for the collapse of debt and equity because of fiat currency. They may claim to have been there for the dot.com and 2008 bubbles, but you have been there for all of them. The blame they lay on the federal reserve and the creation of money and without that the stock market would not have risen. My question is that since you have the longest track record of anyone and you have forecasted every boom and bust, I would just like to hear the full explanation that sets you apart from all of these analysts.

With my deepest respect

PZ

ANSWER: First of all, the world economy has changed. It evolves like a child and it is nothing like it was when Gresham made his observations of the value of money as representing England in the Amsterdam market during the reign of Henry VIII. Because of this, the entire foundation of Austrian Economics has been rendered irrelevant – a throwback to a monetary system that no longer exists. What you MUST understand is that coming out of the Dark Ages, there really was no currency that represented the reserve currency of the world for there were not even central banks.

The value of a currency was solely the metal content. There was no premium to a currency based upon the economic and military power of one country compared to another. That is what distinguished not just Rome, but the currency of Alexander the Great as well as that of Athens. All of their currencies were imitated by other states BECAUSE they carried a premium over the metal content. This is an example of an Indian Immitation of a Roman aureus of Septimus Severus where it actually contained more gold than the official currency.

Here we have Egypt, which never issued coins until it was conquered by Alexander the Great, issued imitation of Athenian Owls with the same silver content just to be able to deal in international trade. There are plenty of examples where a currency was worth more than its metal content. This clearly establishes an exception to Gresham’s Law and Austrian Economics.

The question which arises from studying ancient coinage, is why was the coinage of Athens imitated but not in places like Aegina, Corinth, or Thebes? The answer lies in the military and economic power of Athens and then later by Macedonia.

Here is an imitation by the Helvetii (Swiss) tribes of Philip II gold stater – the father of Alexander the Great. As Macedonia rose to issue gold coins, which Athens did not issue except during its fall to Sparta, once more we see that there was recognition and value attached to the coins of a central power over and above the metal content.

This disputes the entire theory of any currency being fiat. The value of a currency is NOT any backing by gold, silver, oil, or diamonds no less its land because of agriculture. The true WEALTH OF A NATION is its people!. When Adam Smith wrote his Wealth of Nations, here was arguing against the Physiocrats who claimed that the only wealth was agriculture and this led to the days of empire building. The more land you occupied that was supposed to be the wealth of a nation. Smith argued that a blacksmith making a saddle in England selling it to a Frenchman still returned with gold as would a farmer. Hence, all produce was the wealth of a nation. This still contributed to the idea that money was to be backed by gold or silver.

China, Japan, and Germany all rose from the economic ashes of war to become major economies while they lacked gold reserves. Russia has all the reserves that should have made it the #1 currency in the world – gold, silver, platinum, diamonds, and oil. Nevertheless, Russia could not get off the ground because of its political-economic philosophy. Without freedom, no economy will ever prosper regardless of its landmass or resources without the freedom that allows economic innovation from the private sector – not the government.

That is what the entire 1959 Kitchen Debate was all about. The Soviets lived in squalor. Capitalistic freedom allowed people to dream and innovate. Hence, it was the free society that created all the innovations from a washing machine for clothes and then dishes to refrigerators. The only innovation that ever came from communism was nuclear weapons.

So I look at all of history – not just a narrow patch when there was no currency that ruled for power. They all traded in Amsterdam based solely on their metal content. Those days are long gone. The world moved from there to agriculture was wealth that produced the age of imperialism and empire-building. Today, we have seen the US dollar as the reserve currency. It is hoard overseas where 70% of the paper money circulates.

Yes, we are in a debt crisis. The debt bubble will collapse. But that is NOT because of quantitative easing or central banks. Central banks have NO control over the fiscal side of the creation of money. The QE is even debatable if that creates inflation. They are buying in debt and replacing it with cash – that is true. But that theory is also ancient history when you could not borrow against government debt before 1971. Now you trade futures and you post collateral using T-Bills. Borrowing is no longer less inflation than printing for there is no distinction between the two other than the bonds are cash that pays interest.

The wheel of history has returned full circle. When paper money was introduced during the Civil War, it paid interest according to how long it remained in circulation. Hence, it truth, money was effectively circulated bearer bonds.

The abandonment of currency that paid interest is what led to the term “greenback” meaning that there was no interest table on the back – only green ink.

Thus, once more debt is acceptable as collateral and is used by the banks as their reserve at the central bank. Thus, the theory of fiat and assuming money must be back by some commodity are long gone. The value of a currency is the total productivity of its people. Hence, China will become the new financial capital of the world based upon productivity as the climate change agenda seeks to crush our Western Economics and the value of the productivity of our people exactly as was the case in the Soviet Union.

Feb 8 2022

Schwab Admits he Controls Trudeau & Cabinet of Canada – Now the World


Armstrong Economics Blog/WEF Re-Posted Feb 7, 2022 by Martin Armstrong

Schwab has publicly bragged that he has “penetrated” cabinets around the world to force his economic philosophies upon the people circumventing any right of the people to vote. This was at his talk at Harvard.

He has infiltrated Harvard and has brought his agenda to be taught there. This is what he is doing. He is trying to infiltrate not just governments, but also all the universities to indoctrinate the next generation into his eyes. He has also created his Global Shapers program to also reshape the world into his Marxist vision.

Canadians need to understand this agenda. Trudeau is now even having the police arrest people bringing fuel to the Truckers. This is an all-out war against Schwab for the very future of our world, our families, and our children. Academics have been the supporters of communism because they have never lived under such systems and always talk about equality materially rather than equality of rights. You cannot have freedom (liberty) and material equality simultaneously. Russia and China tried that and failed.

Schwab has been behind the design of the EU. The German people were NEVER allowed to vote on joining the Euro. Kohl even admitted he acted like a dictator because if he allowed the people to vote, he knew he would lose.

This is what they are doing right now before our eyes. Schwab has infiltrated governments to force his Marxist agenda upon the world. The head of the EU, IMF, and ECB are all or have been board members of his WEF. He has his people in place to totally control Europe. Just look at the countries he has dominated and you will see the worst oppression since Hitler/Mussolini. All of this has been under the pretense of caring for the welfare of the people because of COVID which is not even a threat anymore than the Flu.

Schwab is using this strategy to infiltrate all world governments. Putin has rejected Schwab’s agenda where Europe, Canada, Australia, and New Zealand have embraced it. They installed Biden because it is unclear if he even understands anything he signs.

This is the very same agenda he used in Europe and is now moving to take over the world. Even Fauci appears in Schwab’s videos promoting his economic agenda – equality.

He has infiltrated the US government with John Kerry who is the key person and even Biden named his outrageous sending spree with the WEF slogan – BUILD BACK BETTER.

Feb 7 2022

Inflation in South Korea Rises 3.6% to 10-Year High


Armstrong Economics Blog/East Asia Re-Posted Feb 7, 2022 by Martin Armstrong

Inflation is soaring worldwide. South Korea experienced a near 10-year high in inflation this January after prices spiked 3.6% YoY. This is the tenth consecutive month that South Korea’s inflation ran above the central bank’s 2% target. Core inflation spiked 2.6% from the same time period last year as costs for goods and services rose.

Fresh food prices spiked 6% YoY, while agricultural and fisheries noted a 6.3% gain. Rising fuel and automotive prices produced a 7.2% YoY rise in transportation costs. Gas prices alone have risen by 13% in the last year, with diesel seeing a 16% increase.

The Bank of Korea (BOK) noted during its January meeting that it was concerned about rising prices and raised rates by 0.25 points to 1.25% to match pre-pandemic levels. Asia’s fourth-largest economy had bounced back from this pandemic after experiencing the fastest economic growth on record last year when GDP expanded 4%. The BOK believes the economy will grow by 3% in 2022, and the markets are anticipating additional rate hikes throughout the year. However, BOK Governor Lee’s term ends in March, which coincides with the nation’s presidential election, leading to increased uncertainty.

Feb 7 2022

New Interview: The Great Reset is FAILING!


Armstrong Economics Blog/Armstrong in the Media Re-Posted Feb 7, 2022 by Martin Armstrong

For more content from Maria Zeee, visit https://zeeemedia.com/

Feb 5 2022

US National Debt Surpasses $30 Trillion


Armstrong Wconomics Blog/USA Current Events Re-Posted Feb 5, 2022 by Martin Armstrong

(Image: US national debt holdings as of 2018)

America’s debt surpassed the $30 trillion mark for the first time and there is no intention of paying it back. “We’re on an unsustainable path,” Federal Reserve Chairman Powell told lawmakers in January. “Debt is not at an unsustainable level, but the path is unsustainable — meaning it’s growing faster than the economy, meaningfully faster than the economy. We have to address that over time. We will address it over time. And the better way to do it is soon.”

According to the Treasury Department, outstanding debt jumped from $19.9 trillion when Trump took office in January 2017, and rose to $27.8 trillion when Biden took over in January 2021. Unexpected expenses due to the coronavirus added a massive amount of debt to the balance sheet. Still, politicians wish to continue spending to fund the Build Back Better agenda. “The debt puts an unbelievable burden on future generations of Americans. Congress cannot wait! We must take action now to get America’s fiscal house in order,” said Rep. Lloyd Smucker of Pennsylvania.

Click on the clock above to view the US national debt rise in real-time.

Feb 5 2022

Thank You Truckers


Armstrong Economics Blog/Canada Re-Posted Feb 4, 2022 by Martin Armstrong

COMMENT: Dear Mr. Armstrong,
We want to thank you and the truckers for bringing awareness of what we are up against. We watched the emotionally explosive truck convoy in Canada, as it was unfolding, last weekend. We were so moved by it, that we created this sign, the next morning. We live on the east coast of South Florida and on the first day of driving around, we only got a couple thumbs up and as the week progressed, we have triggered more and more responses. But, one thing is for certain with each and EVERY response an incredibly indescribable emotion is shared. We now know we aren’t alone and it’s bigger than we imagined.

I don’t know who is happier the recipients of our sign or my wife and I, One lady pulled next to us at a stop light , rolled her window down and said, I just got a text with a picture of your sign and here you are…. another man rolled his window down and gave us the thumbs up with tears in his eyes. Another asked, where can we get a sign like that…..See the feelings we are receiving are just indescribable….maybe it’s just knowing we are no longer alone.

Thank you,
MJB

REPLY: We are winning. Socrates was right again. This was a 3-year reaction and as I warned, this Schwab organized attack upon our way of life with his Great Reset would FAIL. Gov. Kathy Hochul appeared to drop her “mask-or-vax” stance this month. Even the CDC has admitted that masks do not work.

We have major elections in April/May and October/November this year. It is time to throw out ALL politicians who supported this Schwab agenda regardless of their party. Backing down now because it has destroyed so many jobs and set in motion this inflation thanks to lockdowns, should not save their career. They all MUST go to send a message to anyone in cahoots with Klaus Schwab.