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Jim Cook

 

RUNAWAY SOCIAL SYMPATHY

Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

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The Best of Jim Cook Archive

 

Condensed Articles

November 9, 2015

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SERIOUS INFLATION RISKS

By Adam Hamilton

(condensed)

Traders today universally believe inflation is dead, that there is no persistent decline in the purchasing power of money.  That’s what government price indexes around the world are indicating.  But this false notion is one of recent years’ main Fed-conjured illusions.  Price inflation is the result of rising money supplies, and they have been skyrocketing.  Serious risks are mounting that they will spill into price levels.

Given the extreme, wildly unprecedented, and record levels of money printing the U.S. Federal Reserve has executed in recent years, Americans are facing a major inflationary episode in the coming years.  Excessive central-bank money printing throughout history always leads to serious inflation.

Thanks to the Fed’s enormous quantitative easing of the post-stock-panic era, the monetary base has exploded from $847b in August 2008 to $4099b today!  That extreme 4.8x increase was fueled by an incredible average annual growth rate of 27.8% in the 7.1 years since the stock panic.  The critical question traders need to ask is whether such record money creation can magically have no inflationary consequences.

Price inflation is the result of money supplies growing faster than the underlying pool of goods and services in the real economy on which to spend it.  And there is absolutely no way the U.S. economy today is roughly 5x larger than it was in late 2008, like the monetary base.  That means there is a giant overhang of excess money out there threatening to flood into the real economy and drive up price levels.

The Fed intentionally injected this epic monetary inflation into the system.  It wanted to artificially lower interest rates to boost economic activity, to stop the stock panic’s wealth effect from cratering the U.S. economy.  So it bought trillions of dollars of bonds.  The Fed monetizations of U.S. Treasuries enabled the massive government overspending of the Obama years, “financing” that administration’s record deficits.

Traders have duped themselves into believing that the most extreme central bank money printing in world history will have no inflationary consequences, a ridiculous notion.  They think that these trillions of dollars of newly-created money can be magically fenced into the bond and stock markets, where they love to see price inflation.  They believe mushrooming money supplies won’t spill into the underlying real economy.

But history has proven over and over that big central bank money printing always leads to big real world inflation.  There can be no other possible outcome as relatively more money chases relatively less goods and services, bidding up their prices.  The faster the supply of anything grows, the less each unit of the existing supply is worth.  Money has never been an exception to these ironclad laws of supply and demand.