Viewing Inflation Through Rose-Colored Glasses


Armstrong Economics Blog/Inflation Re-Posted Oct 18, 2021 by Martin Armstrong

Once “we get the pandemic under control, the global economy comes back, these pressures will mitigate and I believe will go back to normal levels,” Treasury Secretary Janet Yellen stated, echoing “transitory” sentiments by Fed Chairman Jerome Powell. Powell believes supply chain bottlenecks are the main culprit for inflation. Well, the Biden Administration appointed the secretaries of Commerce, Agriculture and Transportation to create a supply chain task force to fix the influx issues.

Sameera Fazili, a deputy director of the White House National Economic Council, stated, “Our approach to supply chain resilience needs to look forward to emerging threats from cybersecurity to climate issues.” Is climate change the issue here? Is this an indication of where the government will misdirect resources once again? Fazili further displayed how out of touch the government is with the current crisis by saying inflation due to supply shortages is “kind of [a] good problem to be having,” as it indicates demand. The countless number of businesses and consumers currently paying for basic living expenses at up to 30-year highs may not see the glass half full at the moment.

Then, the Biden Administration met with the workers at the Port of Los Angeles this week, where it was agreed upon that the port would operate 24/7 to address issues. Ports in Los Angeles and Long Beach, California, account for 40% of all shipments into the US, which seems to be a good start. Even Walmart, FedEx, and UPS have agreed to unload their shipments at non-peak hours to help the process. Oh, wait, the ongoing worker shortage. Companies are begging people to apply, and it remains to be seen whether the ports will be able to maintain proper staffing to run at full capacity around the clock. Then the need for a sufficient number of truck drivers becomes an issue as well. Even if the ports do reach full capacity, what about the spike in fuel prices? Energy prices have caused the price of transportation to skyrocket, which is then passed on to the consumer. The US government is approaching this issue from a domestic standpoint as well and not factoring in the reason why inflation and supply shortages are not limited to the US.

Socrates indicated that inflation could rally into 2034, and based on the current solutions, the computer will likely be correct once again. Perhaps we should all view inflation through rose-colored glasses and view the 5.4% YoY spike in September as “kind of a good problem to be having.”

The Psychology Behind Consumer Spending and Hedonic Adaptation


Armstrong Economics Blog/Behavioral Economics Re-Posted Oct 18, 2021 by Martin Armstrong

Consumer debt in the US reached $14.88 trillion in 2020, according to Experian’s consumer debt study. That is a $3 trillion increase in the past decade, and spending in 2021 has only amplified. Nearly 42% of US adults have reported falling deeper into debt since March 2020, and according to a survey by BankRate.com, 2,400 of 1,297 adults had credit card debt of which 47% contributed that debt to the pandemic. Credit card debt is difficult to crawl out from, with the average APR well above 16%. Even more alarming is that 54% of adults hold on to their credit card debt for at least a year, and with that rising interest, it will take years to pay it off (if ever).

Inflation is not deterring retail sales in the US. I have stated that other countries line up to sell their exports to America, making the US the top consumer economy, and the top economy overall as consumer spending accounts for two-thirds of GDP. Even with inflation up 5.4% YoY in September, retail sales spiked 0.7% despite analysts’ at the Dow predicting a -0.2% decline. Why?

Of course, people must spend to meet their basic living expenses, and those expenses have spiked in every area from food, energy, to real estate. However, there is additional spending occurring post-pandemic as optimism rises. People hoard when they fear the future. Without taking into account other factors, people are beginning to spend again because the easing restrictions and vaccinations has led them to believe that their future financial situations will brighten.

A study on the psychology of consumer spending points to interesting aspects of human nature (Carter T.J. (2014) The Psychological Science of Spending Money). “There is obviously the direct monetary cost, but also the opportunity cost: all of the other ways that one could have spent this money must now be foregone. Thus, a more psychological definition of the psychological act of spending money would be a simultaneous loss (of money and opportunity) and gain (of some good or service) for oneself and/or someone else that one chooses to undertake based on some beliefs about future hedonic states,” as noted by a 2014 study on consumer behavior (Bijleveld E., Aarts H. (eds) The Psychological Science of Money. Springer, New York, NY. https://doi.org/10.1007/978-1-4939-0959-9_10). The study found that the act of spending itself is “hedonically neutral,” and they used the analogy that “dropping $20 down a storm sewer would feel worse than finding $20 on the street would feel good.”

However, anticipated v anticipatory emotions come into play before acquiring new physical possession, be it a stock in your portfolio or a new iPhone in your pocket. On anticipation, we may feel a natural high as “we decide whether and how to spend money based on how we anticipate the various courses of action will make us feel.” (Mellers et al., 1999 ; Shiv & Huber, 2000). Anticipatory emotions are what we experience when we actually acquire the purchase (e.g., we may feel happiness after purchasing equity that we expect to profit on or guilty after buying a candy bar).

The study dissects consumers into different categories, but for the sake of keeping the blog post a reasonable length, let’s go right to the source – hedonic adaptation (e.g., after positive (or negative) events (i.e., something good or bad happening to someone), and a subsequent increase in positive (or negative) feelings, people return to a relatively stable, baseline level of affect (Diener, Lucas, & Scollon, 2006). “Focusing only on the immediate spike in happiness and ignoring the subse-quent [sic] decline means that the anticipated experience—the one on which people base their expectations, and thus, their decisions—may be quite different from the actual experience, increasing the chances of disappointment.” So, we may experience a short spike in dopamine after a purchase, but that high may wear off. The pain of payment affects all consumers, but interestingly, paying with a credit card temporarily mitigates the negative feelings associated with a payment:

“Cash payments are immediate and visceral—the money literally leaves your hands and becomes some-one [sic] else’s possession. Credit cards, on the other hand, are abstract and distant; they allow you to put off the pain of paying until next month, often while enjoying the benefit immediately. Spending money this way may seem painless, and almost certainly does reduce the negative anticipatory emotions that might prevent one from making a purchase, but it only forestalls the inevitable. When the end of the month rolls around and the credit card bill comes due, that pain may actually be magnified because the pleasure you experienced is already in the past.”

Cash transactions are becoming an ancient relic, and if the government had its way, we likely wouldn’t pay in cash at all. As online buying rises in popularity and people opt to pull out their plastic cards rather than physical paper, the initial cost of the purchase may not resonate. Retail therapy is in itself a hedonic act that may provide short-term happiness but often leads to buyers’ remorse when the purchase cost outweighs the benefits. It is important to note the risks associated with this move into a cashless society. The immediate impact of a purchase may not be felt for some time, at which it may be too late. As they say, when you’re in a (debt) hole, stop digging.

Stagflation is Here


Armstrong Economics Blog/Economics Re-Posted Oct 18, 2021 by Martin Armstrong

QUESTION: When do we talk about stagflation?

F

ANSWER: We are already experiencing it. Normally, the standard definition of “stagflation” has been explained as slow economic growth with relatively high unemployment/or economic stagnation that takes place with rising prices. Some have also defined it as a period of inflation combined with a decline in the gross domestic product (GDP).

Stagflation became a term that defined the 1970s because economic growth was still positive, but the rate of inflation was far greater due to the price shock of the OPEC embargo. Because of the Democrats constantly pushing to raise taxes, they sent corporations fleeing offshore, and it was NOT merely because of the tax rate. I testified before the House Ways & Means Committee on taxation and they wanted to know why NO American company got a contract from China like constructing the Yellow River Dam. I explained that German companies were NOT taxed on worldwide income, and as such, they were already 40% less than an American company because Americans pay taxes on worldwide income, and the ONLY other country to that was Japan. Thus, American companies moved offshore, NOT because labor was cheaper, but so they could complete.

As a result, I provided our analysis that showed when we allocated trade according to the flag of the company instead of where something was manufactured, then the US had a trade surplus instead of a trade deficit. Trump understood that and offered a one-time tax deal to bring their profits home. The Democrats screamed because they wanted 40% in taxes. But they would not bring the money home and so they got 0%.

Currently, as we move into 2024, this entire COVID scam has seriously disrupted the supply chain. Companies shifted to Just-In-Time inventory systems to save on financing an inventory. But then COVID lockdowns came and this resulted in chronic shortages.

So your answer is we are already in a STAGFLATION mode because inflation will surpass economic growth. With the dramatic tax increases the Democrats want to shove down the economy’s throat, all we will see is a decline in economic growth with rising prices thanks to chronic shortages. So we get the worst of two worlds.

The Democrats are deliberately pushing the World Economic Forum agenda and are actively trying to confiscate wealth while simultaneously crushing the economy to Build Back Better. Just like George Bush Jr took the blame for the Iraq war, which was all Cheney, Biden will go down in history as the patsy for this foreign infiltration of the United States to change our economy into a Marxist wonderland.

Unstable White House Occupant Erupts Into Angry Outbursts While Delivering Remarks in Connecticut


Posted originally on the conservative tree house October 15, 2021 | Sundance | 316 Comments

The White House occupant visited Storrs, Connecticut, today for the dedication of the Dodd Center for Human Rights at the University of Connecticut.

However, during the rebranding/rededication ceremony a familiar angry and intemperate disposition erupted. A very inappropriate disposition familiar to anyone who has been around a dementia patient.  WATCH:

.

Lies, Lies & More Lies from the Financial Press


Armstrong Economics Blog/Press Re-Posted Oct 15, 2021 by Martin Armstrong

COMMENT: Marty; the Fed quietly published the banks it was funding in the Repo Crisis. I just wanted to say, you are always right. The press claimed it was tax time, but you said it was the crisis in European banks. Your sources are always spot on. Thanks for the light of truth.

PG

REPLY: Yes, that story that the liquidity crisis occurred because US corporations withdrew large amounts from the banks in order to make quarterly tax payments was the most absurd propaganda I ever heard. Why then do we not see the same liquidity crisis event during tax season?

The bulk of the loans covered foreign banks, as well as Goldman Sachs and JPMorgan Securities. It was all driven by the simple fact that Merkel said there would be no bailout for Deutsche Bank, which was the major derivatives counterparty problem involving Wall Street. Deutsche Bank had a major derivatives book, and if it failed, it would have taken down US banks. Deutsche Bank was in crisis and then it was too big to merge with Commerzbank. They had to lay off nearly 20,000 staff and a major effort was undertake to try to isolate its toxic assets.

That is why the Fed had to step in as the market maker to bail out Europe for US banks all backed off. I really do not know who makes up these stories to try to hide the truth. But they always do in hopes of preventing panics. This time, the game is up.

Inflation is Hitting Every Sector – Not Transitory


Armstrong Economics Blog/Hyperinflation Re-Posted Oct 13, 2021 by Martin Armstrong

COMMENT: All these increased demands for my product is great, but it comes with quite a wholesale flower prices have also increased significantly making the cost of the arrangements much higher. Wholesale rose prices have jumped 56%. Last year I could buy a pack of 25 roses for $18, where today they cost $28. I have to pass these costs onto my customers, but even with the increased cost people are still buying more flowers this year than the same time last year.

SH

REPLY: Thank you for this info. It is hard to find any industry that is not suffering from a shortage of supply.

BLS Report – 4.3 Million US Workers Voluntarily Quit Their Jobs in August


Posted originally on the conservative tree house on October 12, 2021 | Sundance | 260 Comments

The Bureau of Labor Statistics (BLS) released the job openings and labor report for August today [DATA HERE].  The data shows that 4.3 million U.S. workers voluntarily quit their jobs in the month of August.  This is a significant jump from prior.

The “Quits” section [Table 4 breakdown] shows quits increased in August to 4.3 million (+242,000). The quits rate increased to a series high of 2.9 percent. Quits increased in accommodation and food services (+157,000); wholesale trade (+26,000); and state and local government education (+25,000). Quits decreased in real estate and rental and leasing (-23,000). The number of quits increased in the South and Midwest regions:

While this data is interesting and significant, it is only one data point within the larger U.S. main street economy.  Rather than me extrapolating on this data, I would like to hear your perspective based on your own local feeling about what is going on in your area.

Key points of reference would include:

  • While this is potentially related to vaccine mandates, the time frame in August is before the Biden mandatory vaccination requirement made on September 9th.
  • Housing prices overall (macro level) were/are high.  There is a lot more home equity amid working class families who own homes.  This could translate to a greater ability to change jobs or cash out for  a longer financial plan.
  • Workers in the real estate and leasing segment did not quit.
  • The highest quit rates were in the regions with the lowest cost of living.
  • Inflation is massive

I am interested to read your opinions on what could potentially be the largest contributing factor based on your town, city or neighborhood.

Ignore the financial pundits.  The question is: what do you make of this?

Jennifer Psaki was asked about this quit jump and she was poorly briefed in order to answer the question.  She is clueless.

Airline and Transportation Group, US Freedom Flyers, Speak Out Against COVID-19 Forced Vaccinations


Posted originally on the conservative tree house on October 11, 2021 | Sundance | 216 Comments

A group of transportation workers led by airline pilots speak out about the danger of forced medical procedures represented by the the vaccine mandate.  This video from US Freedom Flyers might help explain the current airline industry issues that have recently been in the news.   From their website:

“We are a group of transportation professionals representing the air, rail, and trucking industries who are spearheading efforts to protect medical health freedom. Our goal is to push back against the US government’s threats of vaccine mandates for private businesses. We know this effort is not simply a matter of employees versus companies, but citizens opposing illegal and tyranical mandates by the US government.” (link)

“US Freedom Flyers is a group of transportation industry employees who have come together to fight federal and state mandates which aim to strip Citizens of their right to medical freedom. Together, in partnership with Health Freedom Defense Fund and The Davillier Law Group, we lead to preserve Informed Consent and defend Constitutional rights.” (read more)

The co-founder of US Freedom Flyers, Joshua Yoder, appeared on Fox News with Tucker Carlson earlier this evening to discuss:

As we previously outlined, this is not about vaccines per se’, this is more about a slippery slope of having the government dictate how you can live your life and earn a living.

If they can force you to have a medical procedure, and then carry documentation of that procedure in order to work… why can’t they force you to get a small electronic implant of your identification, which would coincidentally include your medical authorizations for work?

It’s just a metal detector…. it’s just taking off your shoes… it’s just wearing a mask…. it’s just a vaccination….. it’s just a COVID passport… it’s always, “just”.

Factually I do not believe a federal mandate for a vaccine is even possible or legal. It appears to me that all of Biden’s threats in this regard are simply that, threats.

The purpose of the threat is to push people to take the vaccine without actually attempting a legal federal mandate; and that approach so far has been successful.  However, now they are going to encounter the more hard-core groups who will not concede liberty or freedom to a federal mandate.

It is obvious Anthony Fauci also knows a federal mandate will lose in court when challenged.  The fact that Fauci brings up state vaccination requirements for education, as examples of historically forced vaccinations is both a strawman argument and structurally false.  There has never been a FEDERAL mandate for any vaccination.  All the vaccinations Fauci discusses (ex. his kids) were state mandates.  Each state also has a different set of standards and laws for children and vaccines.  There is nothing federal.

The federal government is attempting to set up a federal work authorization standard for private businesses.  Non compliance means you cannot work, or you lose your existing job if your employer goes along with the government demand. THAT alone should alarm everyone.

Stew Peters Interviews LA Port Worker To Get Ground Report on Cargo Ship Backlog


Posted originally on the conservative tree house on October 11, 2021 | Sundance | 320 Comments

An anonymous worker from the West Coast Port of Los Angeles came forward on “The Stew Peters Show” to discuss the claimed issues around the cargo ship backlogs.  {Direct Rumble Link} As the port worker noted, based on his 18-years working there, there is no supply disruption on the unloading end of the supply chain; though they are a little backed-up, but the port is offloading at a high capacity.

The interview is interesting because the ground report contradicts the popular narrative about COVID impacts on the current supply chain.  There are ample goods flowing into the supply chain from the ports, yet there are claims of shortages at the warehouse and distribution level. WATCH

Stew Peters accurately reminds his audience that no nation generates and exports as much raw material foodstuff as the United States.   This is a key point seemingly overlooked by most media.  The U.S. exports around $73 billion in food products annually. The next closest food export nation Germany isn’t even close at $34 billion.

In very general terms, about one-third of U.S. food exports are North/Central America (Canada, Mexico, etc) exports; approximately one-third go west (Asia) and about one-third go east (Europe).   There have been no reported issues with those shipments departing the U.S.

However, one point worth noting, by the LA dock worker, is the influence of predictive orders or automated-purchases based on historic norms and patterns.  I think that overheard note by the worker was somewhat misconstrued, and a correct interpretation could explain part of the backlog of container vessels offshore.

It is technically correct that large multinational importers use AI (artificial intelligence) to predict orders.  However, it’s not something weird or as complex as it sounds.  As supply chains have optimized computer assisted ordering has become the norm, you might have heard it referenced as ‘automated replenishment’.

Essentially, decades of manufacturer, retail or consumer scan data for all kinds of goods create a historic reference point for inventory needs.  Large retailers use automated ordering to restock their warehouses with raw materials, interim assembly products (parts), and also finished goods.  Prior sales data helps to determine or predict future ordering needs.

The advent of technology tracking has thinned the supply chain to a process of ‘just-in-time’ replenishment.  This is JIT inventory management and now how most companies operate.  The goal for Just In Time (JIT) inventory is for the new stuff to arrive just as the last of the old stuff is distributed or sold.  This means you don’t have to carry excess inventory or tie up money in material waiting for consumer sales or manufacturing use.

AI automated purchasing is just a larger scale version of JIT.  People involved in the supply chains and logistics simply facilitate and tweek the arrival/departure times by coordinating with suppliers and distribution on a frequency schedule.  You watch the supply chain and make requests for slight modifications as you take daily use or sales information into account.

It’s not totally or fully automated; it’s more akin to computer assisted depending on the type of product being managed.   However, it does become more automated every year, and there are less and less people who remember the olden ways of making predictive purchases/orders with human brain power instead of computer assistance.

That said…..  Think about the economy suddenly grinding to a halt.  Which, we will remind people, CTH said happened quietly at the end of May of this year.

April and May of this year was when the first batch of stunningly fast inflation prices on food, energy and gasoline hit the checkbook of working-class Americans like a thundershock.  At the end of May and beginning of June the data was clear.  We were seeing our first double digit inflation months in recent memory.

So, think about the impact of that massive first round of Biden inflation hitting the wages of 70% of American workers all at once.  Spending priorities immediately change.  Disposable income immediately shrinks.  Consumer purchasing patterns immediately shift.

The consumer impact is sudden.  However, the supply chain impact is more akin to slowing down a freight train with thousands of boxcars.  It takes time.

What I would say, based on my experience in overlay with the conversation with the dock worker (Stew Peter interview), is that many of those off shore container vessels are full of goods that have already slowed at the consumption end.  People have stopped buying some stuff, some types of goods, and those ships are carrying cargo that is no longer needed within the supply chain…. at least not at the rate within the automated replenishment system.

Part of the reason for the excessive container ships could simply be a reflection of a U.S. economy that has slowed so drastically that inbound durable goods are not needed by those on the destination side.  As a consequence, there’s no rush for the importing corporation to take immediate control of the inventory.

This outlook would also explain why the worker was saying some of the delivery containers are just being stored full of goods without being distributed; and why the executives within the LA port were leasing additional storage space to house containers that were in no hurry to get picked up.

Back when import wholesalers were more important because they distributed to a larger population of smaller retailers, when this type of a scenario unfolded the importers then begin prioritizing durable good cargo that was needed more urgently, and they delayed the off-loading of durable good cargo that was less urgent.   In modern days, there are less ‘wholesalers’ because small retailers have been replaced by massive multinational corporations and giant box stores.  Those big corporations have their own in-house purchasing, supply chain and inventory management specialists.

[Note: Perishable cargo and fuel oil always get a priority offload regardless when they arrive in the port system.]

I can make a few calls and trace this down, but I suspect that’s essentially what is driving a significant portion of this backlog of cargo container ships that are not in a hurry to offload.  Keep in mind, with Joe Biden inflation going bananas, that durable good inventory is going up in value even as it sits there idle.  So unlike times when purchasing agents desperately need to turn the merchandise to get their profit, an increasing static inventory valuation simply becomes another reason for a multinational to be okay with any port delay.

If my suspicions are correct, that also means the U.S. economy is in much worse shape than financial media are reporting… another reason for the media to avoid telling the story of cargo vessels and instead deflect the story to imaginary COVID-19 supply chain disruptions.  So there’s that.

Go figure, Kamala Harris Hired Child Actors For Rebranding Effort That Failed


Posted originally on the conservative tree house on October 11, 2021 | Sundance | 214 Comments

The Washington Examiner dug a little deeper into the background of the Kamala Harris cringe video.  Apparently, team Harris hired child actors to help create the illusion for her rebranding effort.   There are many details in the report that represent just how artificial and fake the Biden administration is.

WASHINGTON – […] Trevor Bernardino, a 13-year-old actor from Carmel, California, and one of five teenagers featured in the video, was asked to submit a monologue discussing something he is passionate about and three questions for a world leader, according to an interview with KSBW TV. Trevor then interviewed with the production director. “And then after that, like a week later, my agent called me, and he’s like, ‘Hey Trevor, you booked it,’” Trevor said. 

Bernardino was joined by Derrick Brooks II, another child actor , Emily Kim, likewise a child actor , Zhoriel Tapo, a child actor and aspiring journalist who has interviewed former first lady Michelle Obama , and Sydney Schmooke.

[…] “I am so so so excited this project is out!” wrote Emily Keller, a YouTube executive overseeing progressive civics content partnerships, according to her LinkedIn . She was the Democratic National Committee’s social media director until June.

[…]  Last month, the vice president’s office hired two messaging gurus to help finesse her communications efforts. One of Harris’s new advisers, Lorraine Voles, has a portfolio including “crisis management” and “marketing and rebranding.”  (read more)

A fake stage set for Joe Biden to pretend he’s giving discussions from the White House.  A group of kids hired by the White House to play the role of kids for a Kamala Harris propaganda effort.  Well, it doesn’t take a rocket scientist to see just how fake this entire effort is as constructed.