America’s stagflation

https://www.goldmoney.com/research/goldmoney-insights/americas-stagflation?gmrefcode=gata

Jim Rogers Sees Devastating Stagflation, Would Quit If He Was A Bond Portfolio Manager

This illustrates why one can be correct--and still lose money.  Being early requires conviction.


http://www.zerohedge.com/news/jim-rogers-sees-devastating-stagflation-would-quit-if-he-was-bond-portfolio-manager

Now that we already had one notorious bond bear in the house with a late afternoon appearance by Bill Gross, who in a very polite way, apologized and said that while he may have been wrong in the short-term, he will be proven correct eventually, it is now time for the second uber-bond bear to make himself heard. In a CNBC interview with Jim Rogers, the former Quantum Fund co-founder, who back in July said he was had shorted US Treasurys, exhibited absolutely no remorse, instead reiterated a 100% conviction in his "bond short" call: "Rogers said when there is a bubble, such as the one being experienced in U.S. Treasurys, prices could go up for long periods of time. Bill Gross of Pimco, who also had a bearish view on Treasurys, threw in the towel earlier this year. But Rogers is sticking to his opinion that Treasurys will eventually fall. "Bernanke is obviously backing the market again and the Federal Reserve has more money than most of us - so they can drive interest rates down again. As I say they are making the bubble worse." The reality is that while Bill Gross has to satisfy LPs with monthly and quarterly performance statements (preferably showing a + sign instead of a -), the retired and independently wealthy Rogers has the luxury of time. And hence the core paradox at the heart of modern capital market trading: most traders who trade with other people's money end up following the crowd no matter how wrong the crowd is, as any substantial deviation from the benchmark will lead to a loss of capital (see Michael Burry) even if in the longer-term the thesis is proven not only right, but massively right. Alas, this means most have ultra-short term horizons, which works perfectly to Bernanke's advantage as he keeps on making event horizons shorter and shorter, in the process killing off any bond bears which unlike Rogers can afford to wait, and wait, and wait.

Raging Stagflation: Inflation Higher As Empire State Mfg Index Tumbles, Confirms Contraction

http://www.zerohedge.com/article/raging-stagflation-inflation-higher-empire-state-mfg-index-tumbles-confirms-contraction

Inflation, Deflation, and Stagflation, Japan and the US

http://jessescrossroadscafe.blogspot.com/2011/06/inflation-deflation-and-stagflation.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+JessesCafeAmericain+%28Jesse%27s+Caf%C3%A9+Am%C3%A9ricain%29

Housing Starts Plummet To Second Lowest Ever At 479K, Finished Consumer Food PPI Jumps By Highest Since 1974

http://www.zerohedge.com/article/housing-start-plummet-second-lowest-ever-479k-finished-consumer-food-ppi-jumps-highest-1974

Stagflation, bitchez!

That's a quote--not my words, so save the rotten tomatoes.

Mohamed El-Erian Says We Can Not Assume The Dollar Will Retain Its Reserve Currency Status

Even the co-head of PIMCO, the world's largest bond fund, is issuing a warning for the USDollar losing its global reserve currency status.  'Bout time...

http://www.zerohedge.com/article/mohamed-el-erian-says-we-can-not-assume-dollar-will-retain-its-reserve-currency-status

"It is a warning shot to America that we cannot simply assume flight to quality, flight to safety. That people are starting to worry about the fiscal situation in the U.S., worrying about the level of debt and what they're hearing about states and municipalities. I would take this as a warning shot that we cannot assume that we will maintain the standing of the reserve currency as we have in the past." - Mohamed El-Erian, PIMCO CIO

What Does UK Stagflation Mean For US And Western Economies

"Stagflation" replaces "contagion" as the watchword for 2011.

http://www.zerohedge.com/article/what-does-uk-stagflation-mean-us-and-western-economies

High inflation, jobless growth

Just as independent thinkers like my friend Dick have been predicting (thanks to him again for submitting this article), the exploding monetary base would cause producer prices to rise, and eventually hit consumers in the wallet (call this the multiplier effect due to an increasing money supply). Merge that with a jobless "recovery", and you have a lethal combination of stagnant growth and inflation, or "stagflation", a term coined during the disastrous economy in the 1970's.

http://www.cnbc.com/id/35457298

Notice the last paragraph in the CNBC article:

In the claims report, the four-week moving average of new claims, which irons out week-to-week volatility, fell 1,500 to 467,500, the Labor Department said. The number of people still receiving for benefits after an initial week of aid was unchanged at 4.56 million in the week ended Feb. 6.

This measure has held below the 5 million mark for eight straight weeks and analysts believe it is starting to reflect an improvement in the labor market rather than people merely dropping off rolls because they have exhausted their benefits.

That last bit of editorial inserted by CNBC, a financial media outlet, sure looks like political spin based on no facts. Which "analysts" have come to this inane conclusion? It's not included in any of the other news releases that I've seen. As always, the devil is in the details of a press release, or footnotes in a financial statement and SEC filing.

Bernanke and interest rates

While the printing of dollars may prove to be our economy's undoing, one of the charters of the Fed is to avert an economic disaster. So dropping interest rates was something Bernanke had to do (at least politically). The economy was tanking, and dropping interest rates is usually the right prescription.

The problem is that the economy is fractured already, and the Fed faces a conundrum--increase rates to stave off inflation, which puts us into the black hole of deep recession, or drop rates and run the risk of runaway inflation. Volker took the more prudent but less popular route in the early 80's, and willed us into a deep recession in doing so, but it allowed us to recover structurally stronger (excesses were drained out in the process). We had to take our medicine, much like we have to pay today for our penance in the aftermath of the subprime gluttonous orgy.

Bernanke doesn't have the will to do that--mainly because he doesn't have Bush's blessing to drive us deeper into recession. But, it does look like cronyism, as he is saving a few of his buddies on Wall St., by bailing out big banks, and temporarily staving off a deep recession. He's only delaying the inevitable, which may heighten the severity of an economic downturn. But in doing so, he may have induced a stagflation type scenario which hasn't been seen since the Carter years. Either way, we are looking at at least a few years of real damage. Stay liquid and pounce on oversold opportunities.

In other words, Bernanke is screwed if he does, and he's screwed if he doesn't. He inherited an economy that was based on smoke and mirrors, and whose structural cracks were masked by easy money, but now the truth is coming out, albeit way too late. A strong economy can withstand financial shocks, but ours was too weak to survive the magnitude of the subprime earthquake. Frankly, Bernanke may be a weak steward of our fiscal ship, but I'm not sure the best captain in the world could do much better. We are so screwed that only time will get us out of this mess.