Category Supply Side Inflation

Feb 15 2023

The Real Debt Crisis is Here


Armstrong Economics Blog/Sovereign Debt Crisis Re-Posted Feb 14, 2023 by Martin Armstrong

QUESTION: Marty, Ever since the debacle in London with the long-term debt, there have been whispers in NYC about how the demand for long-term is drying up. When this becomes critical, is that when the whole thing comes crashing down?

KW

ANSWER: That was the real gist of Yellen’s speech back in October of 2022. Of course, the US press will never elaborate on this problem until it smacks them in the face. Yellen publicly admitted that the Treasury asked the primary dealers of US government debt for their views on the merits and limitations of a buyback program. The Treasury Borrowing Advisory Committee, made up of market participants, highly recommended considering the move because the demand for long-term was declining.

Yellen herself publicly acknowledged the decline in trading volume in 20-year bonds, which they reintroduced in 2020 thanks to COVID. Quoting from her direct comments:

“The 20-year Treasury is an area, an issue where there’s been less liquidity — but we haven”t made any decisions about it.” 

Even the Securities Industry and Financial Markets Association came out and publicly also stated last October that there had been episodes of illiquidity. This was the same problem that created the Crisis in the Long-term British gilt market.

Institutions do not want to buy the long-term in the face of (1) rising interest rates to fight inflation, and (2) unlimited handing of money to Ukraine that will NEVER come back for Ukraine is a black hole and reliable sources are deeply concerned that Ukraine will lose and exist no more.

The escalation in debt on the horizon with World War III is beyond the capacity of the Primary Dealers to buy.  They are strained now with the debt expansion for socialism, then Ukraine, and add War, this system is cracking NOW! The Primary Dealers cannot buy more debt than their balance sheets allow. The “whispers” running around have been on the street. The press has not articulated this for (1) it’s above their pay grade to comprehend, and (2) they cannot dare report the truth.

Feb 15 2023

Consumer Price Index Increases 0.5 in January, 6.4% Annual Inflation Rate


Posted originally on the CTH on February 14, 2023 | Sundance 

The Bureau of Labor and Statistics released the January consumer price index today [DATA HERE] reflecting what you already know.  The overall inflation rate stands at 6.4%, after the anniversaries of the first two waves of price increases have now tolled.

Inflation is the measure of price increases over time.  Following two years of massive jumps in price, we are now cycling through and comparing current prices to the previous period when prices had already skyrocketed.

This gives a false impression of price moderation (hindsight inflation); however, the price of goods and services is significantly higher, and those prices will not drop. The higher prices are now embedded in the economy.

After a brief respite, a plateau, in energy price increases over Nov (0.5%) and December (0.4%), the January energy prices began climbing again (0.6%).  This is what we have all noticed in the past three months.

Additionally, “shelter” costs, rent and housing, continue to increase in price (0.8%, January). Overall shelter costs now +7.9% for the 12 months preceding January, 2023, with rents up 8.6% for the period [Table-1].

We have also cycled through the anniversary of the first two waves of massive food price increases, ending January 2022.  Despite that cycle, food prices still show an increase of 10.1% for the preceding 12 months. Cereals +15.6%, dairy +14.0%.  These food price increases are on top of similar jumps in the period that preceded January ’22.  Most of these volatile food price increases are attributable to the overall scale of energy and transportation costs.  These prices will never reverse.

The issue is compounded because the inflation rate is still far exceeding the rate of wage growth.  This means workers and working families are going backwards and spending more than they earn for the exact same housing, food and energy products they were purchasing a year ago.

This wage squeeze means little to no disposable income, which then applies to the rest of the household checkbook economics.  With less disposable income, fewer non-essential products and/or services are purchased by working families.  This situation creates the snowball effect of lessened overall economic activity.

(Via CNBC) – […] Rising shelter costs accounted for about half the monthly increase, the Bureau of Labor Statistics said in the report. The component accounts for more than one-third of the index and rose 0.7% on the month and was up 7.9% from a year ago. The CPI had risen 0.1% in December.

Energy also was a significant contributor, up 2% and 8.7%, respectively, while food costs rose 0.5% and 10.1%, respectively.

Rising prices meant a loss in real pay for workers. Average hourly earnings fell 0.2% for the month and were down 1.8% from a year ago, according to a separate BLS report that adjusts wages for inflation.

While price increases had been abating in recent months, January’s data shows inflation is still a force in a U.S. economy in danger of slipping into recession this year. (read more)

According to the wage report: “from January 2022 to January 2023. The change in real average hourly earnings combined with an increase of 0.3 percent in the average workweek resulted in a 1.5-percent decrease in real average weekly earnings over this period.”  Workers are working longer hours, making slightly more pay, but the rate of inflation means their actual “real wages” are still dropping.

The way to break out of this cycle is to first unleash the U.S. energy sector and drive down the costs of oil, gasoline, diesel fuel, home heating oil, natural gas and electricity rates.  However, the entrenched nature of the climate change ideology, blocks the professional political class from providing the energy sector relief.  Both Democrats and Republicans want the Joe Biden “green new deal” energy policy.

FUBAR!

Feb 7 2023

Farm Input Costs Continue Driving Massive Food Inflation


Posted originally on the CTH on February 6, 2023 | Sundance 

John Boyd Jr., President of the National Black Farmers Association appears on Newsmax TV to discuss the ongoing issue of higher farm input costs.  Energy costs, fertilizer costs, fuel costs as well as all packing and distribution costs that are associated with petroleum manufacturing, are continuing to drive farm costs throughout the supply chain.

After a review of the current farm output status, there is a very strong possibility we will see the fourth wave of food inflation hit this spring, in combination with several manufacturing and production facilities.  Again, the lack of consumer spending on durable goods has moderated the price in hard goods (supplies up, demand down); however, the highly consumable products like food, fuel and energy continue to experience upward price pressure as a direct result of Biden energy policy.  WATCH:

https://youtube.com/watch?v=oMl85k1bksE%3Ffeature%3Doembed

.

If consumers could eat missiles and weapons, the U.S. government would be offsetting the costs.  Unfortunately, for actual farming products, there is no government attention, policy or support.  Apparently, food is still not considered a national security issue.

Feb 4 2023

Beyond Hubris – Joe Biden Says He Takes No Blame for Inflation


Posted originally on the CTH on February 3, 2023 | Sundance

Not only does the buck not stop with Biden, the installed occupant of the White House refuses to admit the buck even started with him. It did!

During remarks to the press today, even Brian Deese looked stunned as Joe Biden incredulously claimed he didn’t cause the rampant inflation that is crushing middle class Americans. Oh, he started it alright…. He not only started it, but he also created it.

The combination of the January 2021 immediate move to block any domestic energy development, in combination with the April 2021 unneeded explosion of deficit spending triggered both a supply side and demand side inflationary impact; with the former continuing to put massive upward pressure on prices still. WATCH:

https://youtube.com/watch?v=TvkOdaCw80E%3Ffeature%3Doembed

The lies from the lying, liar who lies, just flow so easily from his mouth.

A pox on all their houses.

Feb 3 2023

War & Real Estate


Armstrong Economics Blog/Real Estate Re-Posted Feb 3, 2023 by Martin Armstrong

QUESTION: Dear Sir,
Hello from Europe and a hopeful new year.
In WW2 in Athens, people were exchanging their apartments for a few liters of olive oil, hence real estate went really down.
The short question that you can answer even with a yes or no:
If this year’s aggressivity in terms of war actions will rise, what happens? Will real estate fall on the first stage and then – due to governmental actions – will rise again?
It is a bit confusing while I am trying to understand the mechanism… economy is not simple at all.
Thank you.
SM

ANSWER: The real truth about real estate and war, declines the closer you get to the action. When we look at our models for European real estate, it clearly shows 2023 as a directional change and it appears to be heading into a Panic Cycle for 2027. Our leaders project like we should all go charge into Russia and defeat it in a matter of weeks or just days. Besides the fact that they never discuss that civilian deaths are twice as high as military, they also never talk about how the net worth of everyone in Europe will decline. Your house will decline in value for (1) people are not interested in buying a new home in times of uncertainty, and (2) interest rates will rise sharply due to inflation which is also part of the war cycle.

Lydia, in modern Turkey where coins were invented, shows the impact of war. It was Lydia v Person (Cyrus the Great) and we see the very first debasement in recorded history which accompanies war. The coinage was debased showing roughly a 25% devaluation in the purchasing power during the 6th century BC.

The Peloponnesian War in Greece saw the Athenian Owl reduced from silver to bronze and just silver plated. We find the same trend in Rome. There is NEVER any exception to this rule.

Beware, as the West insists upon expanding this war, you are sacrificing all your life savings in real estate for the political nonsense of our leaders in Europe as a whole. They are true war criminals. They could settle this in a day. Just honor the Minsk Agreement.

Feb 2 2023

Gold v Digital Fiat & Marxism


Armstrong Economics Blog/Gold Re-Posted Feb 2, 2023 by Martin Armstrong

QUESTION: Hi AE…so gov’t “money” (fiat currency) will become just some abstract floating measurement of value, an electronic entry in an electronic account in the cybersphere. As these various so-called gov’ts become less reliable, even between themselves, do you see the possibility of them simply skipping their phony currencies, & trading directly in gold. Russia could ship a specific quantity of crude to China, for a specific amount of gold bars. Your argument about the impracticality of a gold-backed currency makes sense, but what about large transactions being settled in gold?

HS

ANSWER: The entire problem that people do not grasp with regard to any return to a gold standard is that if the money supply is FIXED in any way, that necessitates the collapse of SOCIALISM. The two are directly linked. Politicians only know how to run with deficits. Vote for me and I will give you this or that!

The Bretton Woods gold standard collapsed because they FIXED the price of gold at $35, but they continued to print money far beyond the supply of gold at that fixed price. In addition, you have a business cycle. There will be times when no matter what the money might be, there will be boom times when the value of money declines and the asset values rise.

This argument over gold v fiat is absolutely just nonsense. The wealth of any nation is the productive capacity of its people. For centuries, the business cycle has existed and that is the entire cause for the “inflation” in assets when money declines in value, and then the “deflation” in assets with the value of money rises. Arguing over what we use for money will NEVER stop the business cycle.

The cycle is also in part driven by all governments. It becomes a drug of power that is abused. It would not matter what we use for money right now, they want to create World War III so they can default, and escape from the abuse of this Marxism that they have turned into a system of borrowing every year with no intention of paying anything back. But we have reached the confrontation between Keynesianism where central banks are expected to prevent inflation by rising interest rates, but that has no impact on the government which has become the biggest borrower in the system.

We are going BUST not because of the money we use, but because of the abuse of power in government which has always existed since ancient times.

Trust me. Forget gold standards. They will never work because all governments act only in their own self-interest. You should have learned that with COVID. They will never admit any mistake EVER! It is far better to keep gold on our side of the table and we can then use it as a hedge against governments. They are seeking to move to digital currencies ONLY so they can track when you hired the 16-year-old girl next door to babysit for you so they can go after her for the government’s 50% share.

Even Bitcoin is fiat. There is no backing. People have dived headfirst into cryptocurrency on the entire proposition that they are limited. All they have done is proven my point. Money, historically, has been everything from seashells and cattle to bronze, silver, and gold. Of all the various forms of money, only bronze and cattle had any real commodity value based on utility.

The Egyptians really invented paper money for the farmers would deposit their grain and receive a receipt which was a bearer instrument used in trade. They also used raw metal, not coins, and traded based on weight, as it stated in the Bible. Here is a piece of pottery from Egypt recording a complaint about taxes written in Greek. It stated the sum amounted to a total of 90 talents of silver with 15 talents of tax on the transfer of land – 16.6%.

For thousands of years, Egypt had no coins until it was conquered by Alexander the Great, and upon his death, his general Ptolemy I (305/304 – 282 BC) took the throne and it was his Greek line from which Cleopatra VIII came – not Egyptian.

Our system is starting to implode. Never in the history of human civilization have governments demanded taxes on income requiring reporting every year. This was the gift of Karl Marx. Just as this Egyptian tax on the transfer of land, we see that property taxes and a form of sales tax were the norms.

The American Constitution was intended to give thenational government greater power to raise revenue because the previous Articles of Confederation had been a fiscal disaster. Nevertheless, most people remained fearful of taxation by governments. Indirect taxes were to be the way to secure our liberty from tyrannical governments. It was generally understood that indirect taxes meant taxes on consumption like a retail sales tax and/or excise taxes on imports. It was believed that indirect taxes did not lend themselves to abuse by tyrannical governments. Consequently, the general belief was that “direct taxes” has to be taken off the table. Incomes taxes, throwing out the window of all the wisdom of the ages, were imposed by the new age of Marxism in 1913.

Our computer warns that 2025 will be the turning point in Marxism.

Feb 2 2023

Interest Rates & the Fed


Armstrong Economics Blog/Interest Rates Re-Posted Feb 2, 2023 by Martin Armstrong

The Federal Reserve raised the benchmark by 25 bps, as expected. The Fed fully understands that the manipulation of the CPI is a necessary aspect both for containing government benefits and understating inflation also results in high tax revenues. The market loves hope, and as a result, they focused on the warning that we’ll be in restrictive territory for just a bit longer. Most still believe that there will be a slowdown in inflation just ahead.

The Fed’s cautionary commentary saying that the “disinflation process” has started triggered shares to jump ending up 1%. This shows how insane the analysis had become that they cheer a recession and think that lower interest rates are bullish for the stock market. Obviously, they just listen to the talking heads on TV and have never bothered to look at reality. When interest rates decline, so has the stock market. Interest rates rose for the entire Trump Rally, and they crashed during the Great Recession of 2007-2009. For the life of me, I just shake my head when the talking heads cheer lower rates and spread doom and gloom with higher rates.

Feb 1 2023

Fox News – “ominous Great Depression warning”


Armstrong Economics Blog/Economics Re-Posted Feb 1, 2023 by Martin Armstrong

Fox Business is reporting that economic conditions are much worse than you are being told.  Unfortunately, this is the conclusion when you have ZERO understanding of the historical trends and economic conditions. It is true that the shortages of COVID have caused prices to rise faster than economic growth and most incomes.  Therefore, they conclude that our standard of living has been rapidly declining.  The number reveals that more than one-third of all U.S. young adults are being supported in part by their parents. Thanks to COVID, this disrupted society far greater than anyone is reporting. In addition to the shortages because of the lockdowns, by the end of 2020, more than half of young adults in America were living with one or both parents. That statistic actually exceeded the record high of the Great Depression.

Here is the worst part of this analysis. Many are jumping on the bandwagon claiming that the decline in real disposable income has been the largest since 1932 and therefore, this is a warning sign of a Great Depression is coming. They seem to be focused on the fact that the GDP report showed a significant decline in real disposable income, which fell over $1 trillion in 2022. Now let’s look closer!

First of all, the entire reason why unemployment rise to 25% during the latter part of the Great Depression was the Dust Bowl. Why? At that time, about 40% of the civil workforce was still agrarian. The Dust Bowl meant job loss. If you could not even plant crops, there was no need for people to pick crops.

Service during the Great Depression accounted for 17% of the workforce compared to 44%+ today. Government, federal, state, and local, was 22% of the civil workforce during the Great Depression compared to 33% by 1980. Things have continued to evolve and by 2019, services represent 79.41%. Agriculture is now a tiny fraction of what it once was – 1.41%.

In the USA, at the state level, their share of the civil workforce varies greatly. Florida is at about 11.3% compared to New Mexico which is 22.5% – a government employee’s paradise. The lowest is Michigan at 10.1%.

During the Great Depression, the entire reason for the collapse in disposable income was the collapse in agriculture which created a collapse in income due to massive unemployment. That is totally different from the crisis we have today.

Here we have rising prices due to shortages and then central banks raising interest rates in a fool’s quest to stop inflation when it is not based on speculation. Moreover, the biggest borrower is the government, and rising interest rates will only increase their exposure to keep rolling over the debt. Therefore, governments have been borrowing year after year. What happens when the public no longer buys their debt? Real disposable income has been collapsing for completely different reasons since 1932. Here we have the costs of everything rising and then these people want war with Russia and China. Every war since the start of recorded history has resulted in inflation. Add to this, the total insanity of trying to end climate change by outlawing fossil fuels at a time when the climate is prone to getting colder.

We are already witnessing riots around the world BECAUSE of inflation. During the Great Depression, people were suffering from DEFLATION. So comparing just that statistic of a decline in personal income and projecting we now face a Great Depression, does not even qualify to be classified as analysis. That is no different from someone warning that carrots must be lethal because everyone who has ever eaten a carrot has obviously died.

Feb 1 2023

Biden Continues Playing Politics with COVID Emergency – House Votes to End it, Senate will Ignore


Posted originally on the CTH on January 31, 2023 | Sundance

On the literal eve of a House vote to end the COVID emergency through legislation, the White House announced they would end the COVID-19 Emergency Declaration on May 11th. [pdf here]

The managers of Biden knew they would face a bipartisan vote to end the power of the dictatorial fiat known as the COVID emergency, so they quickly rushed to give Democrats in congress cover for voting against the legislative end.

In the end this is all a matter of pure politics and posturing for narrative control, because the Democrat controlled Senate is not going to take up the House bills.

WASHINGTON DC – […] The two bills – the Pandemic is Over Act and the Freedom for Health Care Workers Act – were planned by Republicans last week; and late Monday, the White House announced that it will terminate the national COVID emergency on May 11. The White House also announced its opposition to the two bills up for a vote today.

But Republicans pressed ahead anyway and easily passed both measures despite the GOP’s narrow majority in the House.

The Pandemic is Over Act, which would end the public health emergency, passed 220-210 in a vote that saw every Republican vote for it and every Democrat vote against it. But the Freedom for Health Care Workers Act, which would end the vaccination requirement for federal health care workers, passed 227-203 with help from seven Democrats.

Those Democrat votes came even though Democrat leaders on the House floor argued against both bills. Rep. Frank Pallone, D-N.J., said he opposes the Pandemic is Over Act because it would “abruptly and irresponsibly end the COVID-19 public health emergency virtually overnight,” and Democrats on the floor similarly argued against the bill to end the vaccine requirement. (read more)

Predictably the White House is claiming that if the COVID-19 emergency is over, then Title-42 immigration restrictions -which are based on the emergency- should end.  This means even more illegal aliens crossing the U.S. southern border, an outcome the Biden team embrace.

[ SOURCE ]

Jan 31 2023

Dolly Parton – Don’t Make Me Have To Come Down There


Armstrong Economics Blog/Religion Re-Posted Jan 30, 2023 by Martin Armstrong

https://youtube.com/watch?v=UQmX7jT2LEg%3Ffeature%3Doembed

There is a rising tide around the world who see what our world leaders are doing and they are doing their best to create World War III. I would like to think enough people will start screaming at our leaders, but our computer makes it clear there is no gain, without the pain.