Post by Admin on Jul 24, 2021 16:09:01 GMT -6
Originally posted on FaceBook Mar 14, 2021 with links in the comments (may be dead) - moved here July 24, 2021
Several things have happened and are going to happen in the coming days. The $1.9 trillion stimulus package has been approved and the first checks are hitting bank accounts. More will continue to do so into next week and to the end of March. I won't go into my thoughts on this bill, but if you have ever read any of my posts before, you will likely be able to guess my stance.
Additionally, and not as commonly known, treasury yields (interest rates) are spiking and this coming week brings a Federal Reserve Bank (The Fed) meeting and an address from chairman Powell on the path that the Fed will take in the coming few weeks.
Interest rates spiking has had a poor effect on the NASDAQ, but not as poor on the other stock market indexes. That is because the tech heavy NASDAQ is made of more growth stocks rather than value stocks and higher interest rates signal a shift from growth investing to value investing and the traders (or algorithms or bots) are making those moves.
Precious metals are also down on price due to the higher interest rates (I won't speculate on price manipulation at this time) and the traders/algorithms/bots predicting that increased treasury interest rates will lead the Fed to raise interbank interest rates to fight inflation and save stock market valuations. This is what they have done in the past and historical indicators all point in that direction. Why could that be wrong?
Two reasons . . . the debt held by Americans (federal government debt, corporate debt, or personal debt of any sort) is higher than it has ever been by every factor measurable. If the loan interest rates are raised, then everyone has a harder time making the minimum payments and paying off the massive amounts of money that they owe. Treasury interest rates only affect the federal government’s interest rates, though the longer term rates (10-year and 30-year) do correlate well with the interest required to finance a car or a home, but only indirectly. Second, the Fed has said over and over that they want inflation to rise and will not do anything to stop it.
Therein lies the issue. Are the Fed and the Federal government truly separate entities? They are supposed to be. Recent evidence (quantitative easing, federal debt monetization, Former Fed Chair Yellen now the Sec. of Treasury) seems to point to the fact that they are joined at the hip. Those in power appoint others into powerful positions and why would the government appoint bankers to the Fed that are going to try and reign in the government in any way? Better to appoint people that are in alignment with what you want to do.
If the Fed and the Government were truly separate, the Fed would use this opportunity to force a government debt crisis and reign in spending for the health of the overall economy. However, this current policy set has been going for decades and we all know politicians and sycophants . . . rather than admitting they were wrong, they double down on failed policies until something breaks and forces them to stop.
Given this knowledge, it is reasonable to expect the Fed to allow “the economy to run hot” which means to allow the CPI to go above the target rates of 2% for a while to allow an average rate of inflation of 2%. Looking at month-to-month numbers 2% inflation (on an annualized basis) has only been exceeded in 10 of the last 149 months. So in order to average that, the value will need to go well above 2% and start moving that average up. Note that there is no reference to how far back the averaging calculation will look in order to make up the average. The farther back they go, the higher the immediate rate needs to be to pull the average up.
The piece that very few are talking about is the statistic that the government and the Fed are using to measure inflation - the Consumer Price Index or CPI. This is a value that the government puts out every month to measure the increase (or decrease, HA!) in the price of goods and services across the country.
Let’s dive a little deeper though.
The last time that inflation was really an issue was in the 1970’s and into the early 1980’s. The CPI was running at 12-15% regularly. It was corrected when the Fed Chairman at the time raised rates and brought inflation to heel. From 1981 to 1985, inflation (the CPI) fell from 15% to below 3% and everyone remembers the 80’s as a time of economic growth and excess.
Subtle changes started happening in government statistics as well. Items were removed from the calculation of the CPI over time and the baseline value of the metric began to change. It was still being reported as “the standard of the measure of inflation” but the calculation was changing and this made historical comparisons meaningless.
I wrote the previous paragraph to say this. The latest CPI came out recently, reporting the inflation value for February. It was at 1.7%. So the Fed, even with all of its money printing, quantitative easing and everything, still can’t get inflation above its average value and must continue to try and do things to raise it.
However, can any of you that have bought anything in the last two months say the same? Can you fill up your car for the same amount as you could this time last year? Can you get out of the grocery store for under $100? Does your paycheck stretch as far as it used to? Inflation is obvious to those of us living in the real world . . . so why does the Fed say that we need even more?
It’s because they changed the metrics they are using to evaluate inflation and they are trying to push the new metric past the targets for sustained, healthy growth when calculated with the old measures. I will link to the website Shadow Stats below. They have a very informative graph that shows the officially reported CPI value along with the CPI value if the government kept measuring it the way they did in 1980 and the way they did in 1990. What’s the difference? Well, we know the current value of CPI is 1.7%. If we measured with the 1990 method, it would be a little above 5%. If we measured with the 1980 method it would be 9%!! We are 60-75% of the way to the runaway inflation of the 1970’s (12-15%) if we measure by the same metrics and the Fed is saying that we need to have more inflation to meet their targets? Draw your own conclusions from that.
The reality of the situation is not that the Fed is gearing up to fight inflation, they have already said that they won’t. They have changed the baseline of the measurement so that those that aren’t very well informed just see the acronym CPI going back to the early 20th century and assume we are fine because the CPI is only at 1.7% and nowhere near the levels of past economic crises. The metric has been changed in the background to keep you from being afraid and to keep you from questioning those in power making these decisions.
Inflation is the ultimate inequality generator. Those that already have the resources to thrive do not have to worry about even high levels of inflation, because they have tools and financial devices that they can use to hedge and protect their wealth from being eaten away. Those living from paycheck to paycheck or those on fixed incomes are the ones that suffer the worst as their purchasing power is eroded from beneath them. So, these government spending excesses are monetized by the Fed, the printed money goes into the system and makes everything cost more and the ones that truly suffer are the poorest among us and the elderly on fixed incomes. It’s a stealth tax on the exact people that the current administration is supposed to be most in favor of! It should be said that the other side does the exact same thing. This has been going on for decades with both sides at fault.
So, to recap – the Fed is printing money to try and force much higher inflation. They have changed the CPI calculation over the years to make it look like inflation is really low and implying that current values can be compared historically on equal terms. THIS IS FALSE. If we used the original calculation we are already 60-75% of the way to the inflation levels of the 1970’s with those in charge of us promising more to come.
The good news is that the best inflation hedges ever, gold and silver, just happen to be at some of their lowest prices in a long while. There are still a great number of people in the market who believe that the Fed will fight inflation and are going off of historical data and models that are now false. The current circumstances have the precious metals market depressed and it’s a great time to get in if you aren’t already!
If you have dollars that are sitting around in savings and you plan to keep them there for a year or more, why not pop down to your local dealer and buy some bullion. I did yesterday and even talked a friend of mine into getting a little too. If you end up needing the cash back, then you can always go and sell it again. People are going to start realizing what I believe is actually happening soon. Precious metal prices will begin to rise as they do. Several very smart people are surprised it hasn’t already happened and are taking advantage of this price drop to “buy the dip” and get in before the price takes off.
This is one of the hedges that the rich folks use to protect themselves from the possibility of inflation on the horizon. But, it doesn’t take a million dollars to do it. An ounce of silver from a dealer right now costs $30-$32 . . . now, if you took it back and sold it to him the next day, you would lose $5-$6, but if you keep it until the end of the year, I believe the odds that it will be worth $40 or more are very high. If you keep that $30 in the bank for that time and the 9% inflation metric is real (and doesn’t go up like they are trying to force it to do) then your $30 is worth a little more than $27 by the time 2022 rolls around. Stealth tax in effect! Why not protect yourself?
I’ll be honest . . . until the middle of 2020 . . . I had no idea that this was even an option. My family did not involve themselves heavily in investing or hedging or paying attention to markets, governments, pricing and inflation. We all found our mutual funds for our 401k’s (if we had them) and just did what was easiest. For several decades, this worked. The time may be coming where this process breaks down and isn’t effective any more.
Please ask questions or make comments as you see fit below. The first few comments by me will contain links to items I have read this week that are pertinent to this and some links to some really good information sources if you want to learn on your own. Thanks for reading this far and have a great week!
P.S. – we are hoping Chairman Powell announces Yield Curve Control in full by the Fed this week. That will bring the Treasury rates down, the stock markets up (temporarily at least) and precious metal prices soaring because it means unlimited money printing and inflation has been confirmed. I do not expect him to do so however, the Fed has always been reactive and not proactive, so I believe he will wait until treasury yields get high enough that all of the stock markets start dropping (not just the growth heavy NASDAQ) and THEN announce Yield Curve Control in a future month. So you may still have time to get some of that bullion before the up-trend starts!! Good luck!
Bloomberg Article from March 7 2021 that goes into some of the same points I have here (paywall is possible) - www.bloomberg.com/opinion/articles/2021-03-07/niall-ferguson-fed-doesn-t-fear-inflation-but-the-rest-of-us-should?fbclid=IwAR3HNM-qRMaB459-bOF83LihrJgSXf0Jk2Hum7q0lx5T5hC1AX0saStRl3g
Shadow Stats Link for Un-adjusted CPI values as promised - www.shadowstats.com/alternate_data/inflation-charts?fbclid=IwAR0oWF281VGoAyWTPgYrIeqbpi7N9aaZXeA3_djTodrLytIpUxvNcUohH3E
-------------
Commenter #1 - The biggest creditors make the rules and pick the Fed/Treasury admins. So rules will be such that creditors balance assuring loans are re-paid in valuable currency vs loan defaults. I think we will continue along the same tight-wire we've been on. Yield Curve Control looks likely so expect low interest rates for a long time. Dollar might devalue more than low interests would normally suggest. Before we truly escape this monetary era, creditors will have to be over-ruled and dollar will have to significantly devalue. Supplementary Leverage Ratio suspension ends on April 1 unless Powell extends it. Banks are already gorging on cash deposits. Stimmy checks + re-instating SLR will cause banks to be even more reluctant to hold savers' deposits. I've heard negative rates or penalties on deposits could be coming. If we see negative interest rates on our savings accounts, a lot of people will choose holding paper cash or buying silver/gold. I think there is a worldwide excess of debt and shortage of dollars needed to repay it. Money is tight and there isn't much bank lending. Bank lending is the only way dollars are really "created". Our economy would be healthier and more resistant to central banker trickery if the general public held 10% of their savings in physical gold and silver.
Several things have happened and are going to happen in the coming days. The $1.9 trillion stimulus package has been approved and the first checks are hitting bank accounts. More will continue to do so into next week and to the end of March. I won't go into my thoughts on this bill, but if you have ever read any of my posts before, you will likely be able to guess my stance.
Additionally, and not as commonly known, treasury yields (interest rates) are spiking and this coming week brings a Federal Reserve Bank (The Fed) meeting and an address from chairman Powell on the path that the Fed will take in the coming few weeks.
Interest rates spiking has had a poor effect on the NASDAQ, but not as poor on the other stock market indexes. That is because the tech heavy NASDAQ is made of more growth stocks rather than value stocks and higher interest rates signal a shift from growth investing to value investing and the traders (or algorithms or bots) are making those moves.
Precious metals are also down on price due to the higher interest rates (I won't speculate on price manipulation at this time) and the traders/algorithms/bots predicting that increased treasury interest rates will lead the Fed to raise interbank interest rates to fight inflation and save stock market valuations. This is what they have done in the past and historical indicators all point in that direction. Why could that be wrong?
Two reasons . . . the debt held by Americans (federal government debt, corporate debt, or personal debt of any sort) is higher than it has ever been by every factor measurable. If the loan interest rates are raised, then everyone has a harder time making the minimum payments and paying off the massive amounts of money that they owe. Treasury interest rates only affect the federal government’s interest rates, though the longer term rates (10-year and 30-year) do correlate well with the interest required to finance a car or a home, but only indirectly. Second, the Fed has said over and over that they want inflation to rise and will not do anything to stop it.
Therein lies the issue. Are the Fed and the Federal government truly separate entities? They are supposed to be. Recent evidence (quantitative easing, federal debt monetization, Former Fed Chair Yellen now the Sec. of Treasury) seems to point to the fact that they are joined at the hip. Those in power appoint others into powerful positions and why would the government appoint bankers to the Fed that are going to try and reign in the government in any way? Better to appoint people that are in alignment with what you want to do.
If the Fed and the Government were truly separate, the Fed would use this opportunity to force a government debt crisis and reign in spending for the health of the overall economy. However, this current policy set has been going for decades and we all know politicians and sycophants . . . rather than admitting they were wrong, they double down on failed policies until something breaks and forces them to stop.
Given this knowledge, it is reasonable to expect the Fed to allow “the economy to run hot” which means to allow the CPI to go above the target rates of 2% for a while to allow an average rate of inflation of 2%. Looking at month-to-month numbers 2% inflation (on an annualized basis) has only been exceeded in 10 of the last 149 months. So in order to average that, the value will need to go well above 2% and start moving that average up. Note that there is no reference to how far back the averaging calculation will look in order to make up the average. The farther back they go, the higher the immediate rate needs to be to pull the average up.
The piece that very few are talking about is the statistic that the government and the Fed are using to measure inflation - the Consumer Price Index or CPI. This is a value that the government puts out every month to measure the increase (or decrease, HA!) in the price of goods and services across the country.
Let’s dive a little deeper though.
The last time that inflation was really an issue was in the 1970’s and into the early 1980’s. The CPI was running at 12-15% regularly. It was corrected when the Fed Chairman at the time raised rates and brought inflation to heel. From 1981 to 1985, inflation (the CPI) fell from 15% to below 3% and everyone remembers the 80’s as a time of economic growth and excess.
Subtle changes started happening in government statistics as well. Items were removed from the calculation of the CPI over time and the baseline value of the metric began to change. It was still being reported as “the standard of the measure of inflation” but the calculation was changing and this made historical comparisons meaningless.
I wrote the previous paragraph to say this. The latest CPI came out recently, reporting the inflation value for February. It was at 1.7%. So the Fed, even with all of its money printing, quantitative easing and everything, still can’t get inflation above its average value and must continue to try and do things to raise it.
However, can any of you that have bought anything in the last two months say the same? Can you fill up your car for the same amount as you could this time last year? Can you get out of the grocery store for under $100? Does your paycheck stretch as far as it used to? Inflation is obvious to those of us living in the real world . . . so why does the Fed say that we need even more?
It’s because they changed the metrics they are using to evaluate inflation and they are trying to push the new metric past the targets for sustained, healthy growth when calculated with the old measures. I will link to the website Shadow Stats below. They have a very informative graph that shows the officially reported CPI value along with the CPI value if the government kept measuring it the way they did in 1980 and the way they did in 1990. What’s the difference? Well, we know the current value of CPI is 1.7%. If we measured with the 1990 method, it would be a little above 5%. If we measured with the 1980 method it would be 9%!! We are 60-75% of the way to the runaway inflation of the 1970’s (12-15%) if we measure by the same metrics and the Fed is saying that we need to have more inflation to meet their targets? Draw your own conclusions from that.
The reality of the situation is not that the Fed is gearing up to fight inflation, they have already said that they won’t. They have changed the baseline of the measurement so that those that aren’t very well informed just see the acronym CPI going back to the early 20th century and assume we are fine because the CPI is only at 1.7% and nowhere near the levels of past economic crises. The metric has been changed in the background to keep you from being afraid and to keep you from questioning those in power making these decisions.
Inflation is the ultimate inequality generator. Those that already have the resources to thrive do not have to worry about even high levels of inflation, because they have tools and financial devices that they can use to hedge and protect their wealth from being eaten away. Those living from paycheck to paycheck or those on fixed incomes are the ones that suffer the worst as their purchasing power is eroded from beneath them. So, these government spending excesses are monetized by the Fed, the printed money goes into the system and makes everything cost more and the ones that truly suffer are the poorest among us and the elderly on fixed incomes. It’s a stealth tax on the exact people that the current administration is supposed to be most in favor of! It should be said that the other side does the exact same thing. This has been going on for decades with both sides at fault.
So, to recap – the Fed is printing money to try and force much higher inflation. They have changed the CPI calculation over the years to make it look like inflation is really low and implying that current values can be compared historically on equal terms. THIS IS FALSE. If we used the original calculation we are already 60-75% of the way to the inflation levels of the 1970’s with those in charge of us promising more to come.
The good news is that the best inflation hedges ever, gold and silver, just happen to be at some of their lowest prices in a long while. There are still a great number of people in the market who believe that the Fed will fight inflation and are going off of historical data and models that are now false. The current circumstances have the precious metals market depressed and it’s a great time to get in if you aren’t already!
If you have dollars that are sitting around in savings and you plan to keep them there for a year or more, why not pop down to your local dealer and buy some bullion. I did yesterday and even talked a friend of mine into getting a little too. If you end up needing the cash back, then you can always go and sell it again. People are going to start realizing what I believe is actually happening soon. Precious metal prices will begin to rise as they do. Several very smart people are surprised it hasn’t already happened and are taking advantage of this price drop to “buy the dip” and get in before the price takes off.
This is one of the hedges that the rich folks use to protect themselves from the possibility of inflation on the horizon. But, it doesn’t take a million dollars to do it. An ounce of silver from a dealer right now costs $30-$32 . . . now, if you took it back and sold it to him the next day, you would lose $5-$6, but if you keep it until the end of the year, I believe the odds that it will be worth $40 or more are very high. If you keep that $30 in the bank for that time and the 9% inflation metric is real (and doesn’t go up like they are trying to force it to do) then your $30 is worth a little more than $27 by the time 2022 rolls around. Stealth tax in effect! Why not protect yourself?
I’ll be honest . . . until the middle of 2020 . . . I had no idea that this was even an option. My family did not involve themselves heavily in investing or hedging or paying attention to markets, governments, pricing and inflation. We all found our mutual funds for our 401k’s (if we had them) and just did what was easiest. For several decades, this worked. The time may be coming where this process breaks down and isn’t effective any more.
Please ask questions or make comments as you see fit below. The first few comments by me will contain links to items I have read this week that are pertinent to this and some links to some really good information sources if you want to learn on your own. Thanks for reading this far and have a great week!
P.S. – we are hoping Chairman Powell announces Yield Curve Control in full by the Fed this week. That will bring the Treasury rates down, the stock markets up (temporarily at least) and precious metal prices soaring because it means unlimited money printing and inflation has been confirmed. I do not expect him to do so however, the Fed has always been reactive and not proactive, so I believe he will wait until treasury yields get high enough that all of the stock markets start dropping (not just the growth heavy NASDAQ) and THEN announce Yield Curve Control in a future month. So you may still have time to get some of that bullion before the up-trend starts!! Good luck!
Bloomberg Article from March 7 2021 that goes into some of the same points I have here (paywall is possible) - www.bloomberg.com/opinion/articles/2021-03-07/niall-ferguson-fed-doesn-t-fear-inflation-but-the-rest-of-us-should?fbclid=IwAR3HNM-qRMaB459-bOF83LihrJgSXf0Jk2Hum7q0lx5T5hC1AX0saStRl3g
Shadow Stats Link for Un-adjusted CPI values as promised - www.shadowstats.com/alternate_data/inflation-charts?fbclid=IwAR0oWF281VGoAyWTPgYrIeqbpi7N9aaZXeA3_djTodrLytIpUxvNcUohH3E
-------------
Commenter #1 - The biggest creditors make the rules and pick the Fed/Treasury admins. So rules will be such that creditors balance assuring loans are re-paid in valuable currency vs loan defaults. I think we will continue along the same tight-wire we've been on. Yield Curve Control looks likely so expect low interest rates for a long time. Dollar might devalue more than low interests would normally suggest. Before we truly escape this monetary era, creditors will have to be over-ruled and dollar will have to significantly devalue. Supplementary Leverage Ratio suspension ends on April 1 unless Powell extends it. Banks are already gorging on cash deposits. Stimmy checks + re-instating SLR will cause banks to be even more reluctant to hold savers' deposits. I've heard negative rates or penalties on deposits could be coming. If we see negative interest rates on our savings accounts, a lot of people will choose holding paper cash or buying silver/gold. I think there is a worldwide excess of debt and shortage of dollars needed to repay it. Money is tight and there isn't much bank lending. Bank lending is the only way dollars are really "created". Our economy would be healthier and more resistant to central banker trickery if the general public held 10% of their savings in physical gold and silver.