Is a crowd-phenomenon tripped by widespread perception of scarcity. It is limited to countries that do not have integrated comprehensive economies, or countries that experience war time scarcities. It is the bane of countries with unfortunate borders.
The crash of 08 coupled with the election of a President with a foreigh sounding name has compromised the emotional stability of a portion of the general public. This is temporary: at some point the hysteria will die down due to lack of fuel from events real - such as the euro zone crises, Fukushima - and events imagined - the perceived spread of communist totalitariansim, etc.
When th fear inducing events do recede from memory, a lot of people will find themselves holding way to many guns, ammo and 'precious' metals.
By Steve Matthews and Caroline Salas Gage
Jan. 11 (Bloomberg) -- Federal Reserve Bank of Philadelphia
President Charles Plosser said the central bank’s record
stimulus risks a surge in inflation and may impair efforts by
households to repair their finances.
“Attempts to increase economic ‘stimulus’ may not help
speed up the process and may actually prolong it,” Plosser said
in the text of a speech today in Somerset, New Jersey.
By Steve Matthews
Jan. 10 (Bloomberg) -- Federal Reserve Bank of Kansas City
President Esther George said the central bank’s record stimulus
may fuel the risk of financial instability and a surge in
“A prolonged period of zero interest rates may
substantially increase the risks of future financial imbalances
and hamper attainment of the” Fed’s 2 percent inflation goal,
George said today in a speech in Kansas City, Missouri.
I can see that risk as well.
I think Bernanke is overcompensating for the deflationary fiscal situation caused by the Congressional Civil War in progress.
His choices are not good: dont overcompensate and risk recession and deflationary spiral, or be the only working part of a frozen political system and use that functional ability to try to prop up a disabled government.
As far as inflation goes, absent a perceived scarcity among the public, consumer demad-based inflation is still a low potential, as incomes and the unemployment level will not support it. Witness the lackluster Christmas season.
What we do have is a flat out happy playground for the few who have good credit and personal situations to be able to benefit from the low rates. That will be worth a good part of any positive GDP that can be squeezed out of a country with its own government locked in virtual cold war.
After Gettysburg, the south did not quit, and additional hundreds of thousands were lost.
Many observers were hoping that the feverish state of those who cannot accept the current President would subside with the reelection, but it looks like we will need to fight a political Wilderness Campaign before a working government can be restored.
In the meantime, a congress person submitted the 34th repeal Obamacare bill, and the usual defund Planned Parenthood bill continues.
High inflation is most often the result of lax monetary policy. If the money supply grows too big relative to the size of an economy, the unit value of the currency diminishes; in other words, its purchasing power falls and prices rise. This relationship between the money supply and the size of the economy is called the quantity theory of money, and is one of the oldest hypotheses in economics.
Pressures on the supply or demand side of the economy can also be inflationary. Supply shocks that disrupt production, such as natural disasters, or raise production costs, such as high oil prices, can reduce overall supply and lead to “cost-push” inflation, in which the impetus for price increases comes from a disruption to supply. The food and fuel inflation episodes of 2008 and 2011 were such cases for the global economy—sharply rising food and fuel prices were transmitted from country to country by trade. Poorer countries were generally hit harder than advanced economies. Conversely, demand shocks, such as a stock market rally, or expansionary policies, such as when a central bank lowers interest rates or a government raises spending, can boost overall demand and economic growth.
I hear you, Onion. Right now though, the Fed is fighting deflation, slow growth and high unemployment.
Think about the disapearance of about one trillion in household wealth in the wake of the 08 panic. Think about the unemployment rate. Think about the current velocity of money. Think about real estate asset deflation.
Are you possibly overreacting to the current fiscal and monetary policies that are designed to combat the post-crash deflationary overhang? Should we not have accomodative policies in this time that mostbpple perceive as recessionary?
Are you mistakenly seeing inflation in the cyclical ups and downs of commodity markets and not noticing that for up commodities, there are down commodities?
Everything we are seeing in monetary and fiscal policies in the wake of the crash is textbook stuff. This is what policy makers do to fight deflation and unemployment.
To my eye, the real problem is a huge demographic shift that calls for new policies approaches or better tools:
There is no longer one American economy in terms of uniform economic response. We are living in John Edwards Two Americas.
Two realities: one prosperous, one helpless. A policy for the properous will starve the helpless, a policy for the helpless will superheat the properous.
How do you formulate one policy for both worlds?
This is the main problem going forward.
Some bears who lived through the 70s and 80s stayed out of equities and held gold thoughout the following great bull market. Sad.
Living though a U.S. political realignment produces anxiety, but nothing near the shock and awe experienced in less stable countries.
The last political realignment started in '68 and ended in '80, almost perfectly coinciding with a Legendary grizzly bear period in equities. Buffet made most of his legendary investments in those times, when goldbugs and permabears roamed in herds and packs.
We are in a political realignment now. It started in '00.
Sensitive people will be anxious. The vibe is well expressed in CCR's 'Bad Moon Rising', released in the crazy year 1969. Others will see opportunity everywhere.
Investors and traders who have been through a few market and political cycles are like the species that survived on Bikini Atoll and Alamogordo. A hardy bred indeed.
Ive got a pocketful of ten baggers from '09 and a lot of dry powder, but I'm light on gold, guns and ammo. Bring on the next act in this play.
I should spielchek this.