Mohamed El-Erian is generally more correct than most, but the insufferable coded language he is required to use makes it difficult for the ordinary person to see exactly what he is saying. For this CBS segment, we will apply the decipher. [Transcript Here]
Notice this key phrase in the beginning of his discussion of inflation. “Of course, we know about the Ukraine war, we know about the energy transition, also the Federal Reserve mischaracterize inflation and fell behind.” No, Mohamed, most Americans do not know about the forced energy transition and how that has created this unavoidable inflation spiral. How about dropping the code and saying it directly? Joe Biden initiating the Green New Deal means much higher prices are permanent.
El-Erian speaks about supply side inflation, but doesn’t want to talk about the next phase, demand and service side inflation. The three month inflation data is higher than the year-over-year inflation data. That means inflation is growing. There is no way for inflation to drop when the most recent price increases are significantly higher than the previous price increases. Inflation is now detached from any intervention. WATCH:
Consumer demand for non critical goods are contracting at the same time prices continue rising (that’s stagflation). Demand side contraction, what El Erian calls “demand destruction,” means lost jobs (that’s recession). Food, fuel and energy prices all continue rising. The field costs are higher than current fork costs, and that (30%+) wave of inflation coming in from over the horizon is going to blow the doors off any economic growth. The process is unavoidable now.
The credit markets will feel the impact before the end of the year as consumers will no longer be able to make payments for loans, and still eat. Mortgage defaults will increase, vehicle repossessions will increase, credit card debt and bankruptcies will increase. The credit markets will get drowned in a tsunami of default. That’s the direct language El Erian will not use, but it is present inside the coded-language he does use.
If you did not purchase a house this year, you are ahead financially. Equity and values are plummeting.
The European Central Bank (ECB) has a major crisis beginning. The free markets always win, and the spreads on the interest rates among the member of the EU are widening for Greece and Italy. Fools are telling Lagarde to use stronger language to signal that divergences among the member states will not be allowed to take place. The borrowing costs of more vulnerable countries such as Italy and Spain cannot be contained.
When they were creating the euro, the Commission attended our 1998 London Conference — the same one when I warned that Russia was about to collapse. It was then when I had a discussion with them, warning that a single currency WOULD NOT produce the same interest rate for all.
All the talk was that a single currency would set a single interest rate. I tried in vain to explain that would never happen. They were comparing it to the US federal government and I made it clear that they were not consolidating all the national debts and this meant that there could be no single interest rate and the difference in the currency would be transferred to the bonds instead. They simply refused to listen because that was one of the selling points to get the euro going.
It did not matter, they just wanted the euro at all costs. Now we see the widening of the spread and one central bank cannot impose a single interest rate any more than the Federal Reserve can control the interest rates all 50 states must pay to borrow money. In the United States, Massachusetts has the highest debt per capita in the country at about $11,130 with a AA rating while Tennesse has the lowest at about $875 and has a AAA rating.
The ECB knows it is facing a nightmare. The ONLY possible solution is to consolidate all the national debts of the member states and that would then become federal. Only then could it possibly be on the same footing with the dollar. Back then, the Bundesbank was against the euro. They were feeding us all the notes of the meetings because they really could not come out and speak. The Bundesbank understood the potential long-term crisis, and they opposed the merger of national debts.
So here we go again. COVID set off the fuse; Ukraine is the time bomb about to explode. As the soothsayer warned: Caesar beware!
The American view during the 70s was more concerned about gold rather than the value of the dollar against world currencies. Most Americans never traveled to Europe so their impression of currencies was the Canadian dollar which was about par with the dollar that Americans would encounter when visiting Niagra Falls. I remember as a kid the family would drive up there and we would cross the border for the best view from the Canadian side. That was probably my first experience with a foreign currency other than ancient Roman coins when I bought my first one for $10 when I was probably 10 years old.
The other hot spot outside the United States was crossing the border to visit Tijuana in Mexico. That was a real hot spot largely promoted due to the Prohibition Days during the Roaring 20s. The Mexican peso was just this cheap thing that nobody really understood and they never understood how to count their change.
It was Roosevelt who confiscated gold from the banks and created a two-tier system whereby gold was used for international transactions, but silver was used for domestic currency backing until Kennedy ended the silver standard in 1965. Because gold was illegal to own except in coins dated 1947 or before, Americans really had little exposure to foreign currencies. They did not see the foreign exchange rate of the dollar during the 70s and 80s, it was all about gold. I even had a conversation with Paul Volcker who was focused not on the inflation rate as much as he too was obsessed with the rise in the price of gold from $35 in 1971 to $875 on January 21st, 1980 which he saw as the real inflation measurement.
As for the Europeans, they were focused on the dollar and the collapse of Bretton Woods. They were all buying gold after March 1968 when the first crack in Bretton Woods took place allowing a parallel free market in gold in Europe. That was the birth of a two-tier monetary system. Overall, the Europeans were pushing the price of gold up in terms of dollars.
It was a wild time during the 70s. Because I was in New Jersey, the three major gold refineries were there. I was dealing with Englehard which ended up being Phibro post-1975 which took over Solomon Brothers. Before 1975, Americans could buy gold in coin form as long as it bore a date of 1947 and before. Austria, Hungary, and Mexico were the big sellers of gold. They were restricting coins with old dates so Americans could buy gold before 1975.
So I was in the thick of things back then insofar as trading was concerned. I had European clients in Gold and I dealt with all the Swiss banks at the time. By sheer fate, being a market maker in gold, taught me a lot. Gold was the first financial instrument for futures trading beyond currencies. The US bonds began trading in 1977 and S&P500 futures came in during 1985.
Gold rallied into 1974 on ANTICIPATION of Americans were going to run out and buy gold. They were expecting a gold rush. Being in the business, I never got one phone call about buying gold because it would be legal. Everyone who believed in gold had been buying gold coins all along.
The talk of the town was that gold would go to $500 as soon as the Americans were allowed to buy on January 1st, 1975. I sold gold short at the top mainly on a fundamental basis. I did not see any new demand. My Economic Confidence Model said it was a high. But I traded based on my observations.
I watched gold collapse back down to about $100 going into 1976. This is when after watching the ECM for 6 years, I went with it. I opened a new store in the Quakerbride mall and I signed a 10-year lease with a personal guarantee and I got them to eliminate the CPI clause. After all, the talk then was about another depression.
I watched 1968 was the first crack in Bretton Woods and the birth of the two-tier monetary system. The Organization of the Petroleum Exporting Countries (OPEC) oil embargo was a decision to stop exporting oil to the United States. Then-president Richard Nixon appeared particularly concerned that Arab nations might impose a selective embargo on the United States for its pro-Israel policy. He was correct. Oct. 19, 1973, was the official start of the embargo when the Middle East countries announced a 5% production cut per month in response to the Yom Kippur war between Egypt and Israel. They saw Israel’s victory in that war, was because of aid from the United States. The embargoing nations then threatened that the cuts would be restored once Israel withdrew from Palestine and Jerusalem. Obviously, that never happened.
As always, we MUST look at the CONTEXT of the period. First, the climate consensus was that we were heading to a new Ice Age – not global warming. That meant there would be a higher demand for oil to stay warm in winter. In 1971 and 1972, fears began to grow in the developed world that if we were not already running out of energy supplies, we would soon as additional nations adopt western industrial structures.
Thomas Malthus (1766-1834) warned the population would outgrow the food production so we needed to curtail the growth of the population and advocated deliberately creating a plague among the poor to reduce their number. If you ever really read Malthus, you can see the influence he has still had on people like Bill Gates, George Soros, and Klaus Schwab.
Thus, in 1976 I went with the ECM. That was the wild wave of inflation and the very top of the next wave turned out to be 1981.35 which was the day of the high in interest rates.
What I learned was that none of the fundamentals mattered in the end. Gold would decline with inflation at times and rally at other times. It was more complex than that. The final rally from the $400 level to $875 had nothing to do with inflation, that was the invasion of Russia into Afghanistan.
Posted originally on the conservative tree house on June 3, 2022 | Sundance
There was a really bizarre dichotomy on display today within the teleprompter script prepared for Joe Biden to use.
Dear Leader took to the microphones to brag about his economic accomplishments and remind Americans how all good thinking people should be feeling:
“Since I took office, families are carrying less debt; their average savings are up. A recent survey from the Federal Reserve found that more Americans feel financially comfortable than at any time since the survey began in 2013.”
Do you hear what he is saying? Americans have less debt, their savings are up, and they are more comfortable financially today than ever before.
If those remarks were based on reality, then why was the following segment stated exactly 52 seconds later in the same script?
…”one way we can make things a little better for families is by helping them save on other basic items their family needs on a monthly basis, like their utility bills, their Internet bills, their prescription drug bills, and other costs like housing. My goal is to make sure that at the end of the month families have a little more breathing room than they — than they have now.” (link)
These are not two different speeches; these are two paragraphs a few moments away from each other in the exact same speech. [Full Transcript Here]
This speech should ring massive alarm bells, not because of what is being said – but because the people behind Biden are just phoning in the propaganda now and not even trying to hide it or give the illusion of a president in control. No president, in command of the office and the issues, would read those two paragraphs of a prepared speech and not point out the literal hypocrisy his handlers were telling him to read.
Full Remarks, filled with denial, lies and some of the weirdest gaslighting to date.
.
Examples from speech:
…”The price of gas is up $1.40 since the beginning of the year when Putin began amassing troops at the Ukrainian border. This is the “Putin price hike.”
Example #2:
…”Putin’s war has raised the price of food because Ukraine and Russia are two of the world’s major breadbaskets for wheat and corn — the basic product for so many foods around the world.”
Posted originally on the conservative tree house on June 3, 2022 | Sundance
The Bureau of Labor and Statistics (BLS) has released the May jobs report {DATA HERE} showing a net 390,000 jobs added overall.
The leisure and hospitality sector gained 84,000, as restaurants and hotels appear to be recovering from the massive pandemic losses. However, within the reporting there is concern about the sectors that are now showing signs of increased employment weakness, including 61,000 job losses in retail.
The unemployment rate remains the same at 3.6% in May. About 330,000 people joined the labor force, however the participation rate remains below prepandemic levels.
Most analysts like the Wall Street Journal are explaining the contradictory sector specific numbers by saying, “Consumers, who loaded up on goods such as televisions and furniture early in the pandemic, have started to shift their spending to in-person services such as travel or restaurant meals.” While there may be some truth to that outlook, it appears that most macro-perspectives are still discounting the extreme increases in price that are now baked into this new ‘transitional economy.’
Consumer purchasing is very prioritized because food, fuel, energy and housing are now eating up much more of the average person’s paycheck. People cannot pay 30 to 50% more at the gas station and grocery store and still retain disposable income for durable goods purchases. That’s the basic issue.
The durable goods sector shows the contraction in employment due to the loss in disposable income.
Here’s the main graphic [Table-B] showing where the jobs are being gained and where the jobs are being lost.
Saving money has become impossible for many amid 40-year high inflation. According to data from the US Bureau of Economic Analysis, the personal savings rate reached 4.4% in April after steadily declining from the 6% level seen in January. This marks the lowest rate on record since September 2008 amid the Great Recession.
People hoard and save when they are pessimistic about the future. That innate desire to save is not possible with inflation at 8.3%. For example, in April 2020, the lockdowns began to take a stronghold on the US. People were losing their jobs, basic necessities such as toilet paper were in short supply, and no one knew when life would return to normal (spoiler: it never will). Fears were high, but inflation was only 4.2%. The personal savings rate at that time reached a historical high of 33.8%, partially due to government handouts, social programs, and payment moratoriums.
People can hardly save with the current cost of living. If the economy continues to slide into a recession, survival will be the main concern rather than saving.
QUESTION: Marty; I have been a follower for years. Your model has correctly forecasted every major trend from civil unrest to disease. But your forecast that this wave would be commodity inflation based on shortages years in advance, proves that you deserve the Noble Prize. Absolutely no analyst did that although many now pretend they are forecasting this trend. I have to ask. Why is the government refusing to use your model?
HK
ANSWER: The entire economic field sells itself as the solution. They reject the idea of any defined business cycle BECAUSE that means there can be no manipulation. Just look at Schwab and his World Economic Forum, which will be one day cast as the evil emperor in some future version of “Planet of the Manipulators.” If they listened to this model and followed it, they would reject Schwab’s obsession with Marxism. As long as the economy is random, then they can manipulate it. Following my model strips them of that power.
There are still people in the former Iron Curtain countries that miss communism. Why? It is the same in prison. You become institutionalized and have no responsibilities, including taxes. Someone hands you a broom, you sweep the street, and it takes not a single mental thought of how to actually do the job. You can’t even be fired.
Posted originally on the conservative tree house on June 2, 2022 | sundance
JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon warned of a “hurricane” as the economy struggles against fiscally induced growth, quantitative tightening and Russia’s invasion of Ukraine. Mr Dimon was delivering remarks at a conference sponsored by Alliance Bernstein Holdings Wednesday.
Higher oil prices, higher fuel prices, higher energy prices and much higher food prices are all looming over the horizon as the Biden administration switches the baseline for the U.S economy from oil and gas to the Green New Deal energy program. Things are going to get worse, the question is, how much worse? WATCH:
The White House is pretending the U.S. government does not have full control over what is happening in the economy. The media are pretending not to know that the White House is avoiding admitting the agenda and economic pain is intentional and unavoidable. The republican politicians are pretending the Biden economic transition program is because the White House is incompetent. All of these -and so many more- are just pretenses.
What is being done by the government, in this decision to switch from an oil and gas economy into a wind and solar economy, is being done on purpose. Yes, everyone at every level of government, both political parties and every agency within it, and the entirety of the corporate media are pretending not to know this is the Green New Deal taking place.
Posted originally on the conservative tree house on June 2, 2022 | sundance
You do not need anyone to affirm that Main Street is in trouble, you can see it all around you. Inflation is crushing blue-collar and white-collar workers as prices continue to rise on essential goods. Consumer spending is now prioritized around the higher cost of housing, energy, gasoline and food. Family earnings are spent before the paychecks arrive for most Main St workers, and now we are starting to see the alarming result economic contraction, beginning with small businesses.
That’s the message within the ADP private sector payroll report released today [DATA HERE], which shows a contraction in small business employment. Economists were looking for private payroll increases in the 300,00 range; but the result was far lower at 128,000. Small businesses lost 91,000 jobs in May. Main Street is in trouble.
WASHINGTON, June 2 (Reuters) – U.S. private payrolls increased far less than expected in May, which would suggest demand for labor was starting to slow amid higher interest rates and tightening financial conditions, though job openings remain extremely high.
Private payrolls rose by 128,000 jobs last month, the ADP National Employment Report showed on Thursday. Data for April was revised down to show 202,000 jobs added instead of the initially reported 247,000. Economists polled by Reuters had forecast private payrolls increasing by 300,000 jobs. (read more)
Posted originally on the conservative tree house on June 1, 2022 | Sundance
Does anyone remember during the Jimmy Carter era when odd/even days on license plates to get gas? Well, if the International Energy Agency is accurate, and the issue extends into the U.S. as predicted by many industry insiders, we could very well see gasoline rationing once again.
Beyond all the obfuscation, denial and continual pretending, the reason for the gasoline shortages is related to this forcible shift in energy policy that is underway in Europe and the United States. It’s not a shortage of oil, it’s the new era where the Green New Deal is the policy priority. The people within the Biden administration do not care about the consequences, Biden is pushed in front of the camera as a useful idiot to take the blame.
Business Insider – The US could see fuel shortages this summer once people start taking their vacations — and Europe could take a particular hit from the lack of supply, the head of the International Energy Agency has warned.
“When the main holiday season starts in Europe and the US, fuel demand will rise,” Fatih Birol told Der Spiegel. “Then we could see shortages — for example, in diesel, petrol or kerosene, particularly in Europe.”
Birol also told the German newspaper that the energy crisis now underway will be more severe and longer-lasting than the oil price shocks of the 1970s, given it’s applying pressure on three fronts.
“Back then it was just about oil,” he said in the interview published Tuesday. “Now we have an oil crisis, a gas crisis and an electricity crisis simultaneously.”
Oil prices spiked in 1973 and 1979 as the Yom Kippur War and the Iranian Revolution interrupted Middle Eastern crude exports. Geopolitical events have hit the market again in 2022, as western nations impose sanctions on Russia over its invasion of Ukraine. (read more)
Joe Biden has no clue what the people running the administration agencies are doing. Even if he were to ask them, they would simply type something into his teleprompter that he would believe and repeat. Biden doesn’t care, the entire family is in it for the grift.
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