Posts Tagged ‘rising prices’

Nearly 1 In 5 Americans Have No Money To Put Food On The Table

August 22nd, 2012

Mac Slavo: While economists, government officials, and mainstream media experts argue about whether a recovery is finally taking hold, the evidence on the ground provides a clear insight about where the country is headed. Read more…


The Falling Bottom Line

May 12th, 2011

Children are taught it and adults repeat it. In the Western world, “religion” is the knee-jerk response as to why wars in the distant past were fought. It’s any easy way to explain away complex issues. By drawing God into conflicts that are entirely man made, initiators of the violence absolve themselves of all responsibility.

Though the uprisings in the Middle East were initially, and correctly, attributed to high unemployment, widespread poverty, lack of opportunity, rising prices and rampant corruption, it would not take long for the script to change from implicating politics and economics to implicating God.

Shortly following the downfall of Hosni Mubarak, western politicians, the media and analysts sounded the alarm: “Beware, here comes the Muslim Brotherhood.” Yet, two months later, polls showed only 10 percent of Egyptians would vote for the leader of the Brotherhood as president.

And if the Brotherhood wasn’t a frightening enough group to use as a pretext to blame religion for the troubles, there was always an endless supply of faceless, nameless, Islamic extremists lurking in the shadows, waiting for the opportunity to set up Sharia Law and threaten governments around the world.

But it was not religion that sparked the conflagrations. As “the good book” has it, “money is the root of all evil.” (1 Timothy 6:10)

It was neither God nor Allah that would take the world into “The 1st Great War of the 21st Century.”  It was the falling bottom line.

In 2011, all across Europe, the bottom continued to fall out of the bottom line. Like Greece and Ireland before it, the Portuguese government, after religiously vowing never to ask for a bailout, asked for a $118 billion bailout from the European Union.

Bailouts were not gifts, but debt traps – loans at interest rates lower than the private sector but still unmanageably high. Endlessly piling new un-repayable debt on top of old un-repayable debt would not solve the underlying problem, If fact, it would worsen it. By imposing forced austerity measures and draconian spending cuts in order to service the debt, the bailed-out nation would reduce its productive capacity and its ability to compete in the global market.

Moreover, the indebted nations would be required to privatize valuable resources and industries to service the debt, with the profits going to creditors, often in foreign countries.

In layman’s terms, “bailout” is a euphemism for state sponsored loan-sharking. Precious national assets are sold at bargain basement prices to political insiders, robbing the nation of its wealth.

How did the bailouts of Portugal, Ireland and Greece figure into the Great War? It was the same bottom line issue that brought on the “Arab Spring.” Apart from nationalities and languages, the provocations were the same: high unemployment, restless youth, rising prices, etc. – and, of course, corruption.

But it wasn’t the stereotypical Middle Eastern-style corruption of vulgar Arab sheiks doing dirty deals behind closed doors with shifty business moguls. In Europe, corruption was refined, honorable, prudent and openly practiced. It was called “banking.”

Legal, state-sanctioned European financial corruption that made more billions for billionaires and mega-millions for multi-millionaires had crashed or crippled many EU member countries.


Gerald Celente
for The Daily Reckoning

[Editor's Note: The above essay is excerpted from The Trends Journal, which is published by Gerald Celente. The Trends Journal distills the ongoing research of The Trends Research Institute into a concise, readily accessible form. Click here to get the full story in, learn more about, and subscribe to The Trends Journal.]

The Falling Bottom Line originally appeared in the Daily Reckoning. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas. Bill Bonner, the founder of the the Daily Reckoning released his latest book Dice Have No Memory: Big Bets & Bad Economics From Paris to the Pampas in April 2011.

Read more here:
The Falling Bottom Line

The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.


He Who Begins to Count Begins to Err

February 24th, 2011

“If you spend more than 13 minutes analyzing economic and market forecasts,” the famous investor, Peter Lynch, once remarked, “you’ve wasted 10 minutes.” Oskar Morgenstern (1902-1977), a professional economist, probably would have agreed with Lynch.

I found myself thinking about Morgenstern over breakfast recently as I was skimming financial headlines in the newspaper. He was a “numbers guy” who understood the limitations of numbers.

Today’s papers carry lots of angst over rising prices, commonly called inflation. “Global Price Fears Mount,” reads one Wall Street Journal headline. “New Push at Fed to Set an Official Inflation Goal,” reads another.

Within these articles are a number of “facts.” I want you to go through these and see if you can tell what the unifying fallacy is:

“Annual inflation in China is almost 5%…”

“Last month [in Europe], inflation unexpectedly jumped to 2.2% in the eurozone from 1.9%, the first time in more than two years it has exceeded the ECB’s target of just below 2%. Some economists say it will rise about 2.5% in the next two months”

“Inflation [excluding food and energy] was still weak at 1.1% in December”

“UK inflation is approaching 4%…”

“The Fed informally has said its goal is inflation of around 2%”

“Forecasts cluster around 1.75% and 2%.”

There are more, but this sampling is large enough to make my point. The underlying fallacy here essentially boils down to the idea that government officials can calculate a true inflation rate to within one-tenth of one percent. And that’s not all! Government officials can also dial inflation up or down to within tolerances of one-tenth of one percent.

This is where Oskar Morgenstern comes in. Morgenstern was a German-born economist, educated in Vienna. When Adolf Hitler took over Austria, Morgenstern happened to be in the US. He decided to stay. Good move. Morgenstern is most famous today for his work with John von Neumann in founding game theory.

I was thinking of him because of a famous essay he wrote entitled, “Qui Numerare Incipit Errare Incipit” (“He Who Begins to Count Begins to Err”). He is not the only one to take economists to task for their abuse of statistics, but his thoughtful analysis stands out in my mind.

Essentially, Morgenstern’s point is that we need to be more aware of the errors in such numbers. He criticized the way in which people report and use these numbers. They purport an accuracy that does not exist.

Here is an extended quote from his essay, which gives us a small list of sins:

“Changes in consumers’ total spending power down to the last billion or less (i.e., variation of less than one-half of one percent) are reported and taken seriously. Price indexes for wholesale and retail prices are shown to second decimals, even though there have been so many computing steps that the rounding-off errors alone may preclude such a degree of precision. Unemployment figures of several millions are given down to the last 1,000s (i.e., one-hundredths of one percent ‘accuracy’), when certainly 100,000s, or in some cases perhaps the millions, are in doubt.”

Yet, despite the huge error in such numbers, people treat them very seriously. Wage increases, in some cases, are based on changes in price indexes. People plan and make big decisions based on such poor data.

“Economics is not nearly so much of a science,” Morgenstern writes, “as the free use of allegedly accurate figures would seem to indicate.” He suggested such figures report estimated error rates. For example, inflation might be 2%, plus or minus 2%.

Doing so would make the following statement look entirely hollow and devoid of meaning, as it essentially is: “Inflation unexpectedly jumped to 2.2% in the eurozone from 1.9%.” And you would laugh at a statement such as “Forecasts cluster around 1.75% and 2%.”

As an investor, you ought to look at the whole constellation of economic numbers with doubt and skepticism. They are not accurate. They can never be accurate.

Far worse is the idea that we should target a certain inflation rate. I am simply beside myself that anyone can believe that an “inflation target” is anything other than ridiculous. We can’t even measure it, but the Fed thinks it’s going to control it! And not only control it, but thread it with precision to 2%!

As investors, I think it is a great mistake to sit around thinking about things like unemployment, GDP, price indexes and the whole lot of garbage that gets reported and commented on by nearly everyone. The whole thing is a fraud. I think you could be a very successful investor and never parse a consumer price index in your life. In fact, they may do you harm by making you afraid to invest when the economic picture seems dim… or reluctant to sell because it is so bright.

Official inflation in the US may be reported as 2%, but it may well be four times as high. Directionally, it’s enough to know that prices are rising. You don’t need the consumer price index to tell you that the dollars in your pocket are buying less, just like you don’t need a thermometer to tell you that it’s freezing cold.

When inflation really gets going, the economists will be the last to know.


Chris Mayer
for The Daily Reckoning

He Who Begins to Count Begins to Err originally appeared in the Daily Reckoning. The Daily Reckoning has published articles on the impact of quantitative easing, bakken oil, and hyperinflation.

Read more here:
He Who Begins to Count Begins to Err

The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

OPTIONS, Uncategorized

Inflation ‘Round the World

February 4th, 2011

Faithful and unfaithful readers alike will have noticed a recurring theme in our recent reckonings. We refer, of course, to inflation; that insidious, noxious tax which appears to be gushing out of every economic orifice in the land, but that, somehow, fails to register as even a drip on the government’s official inflation-o-meter. Curious, no?

Regular reckoner, Chris Mayer, identified inflation as the “wrecking ball” of 2011 in his column “Inflation’s First Phase”. Eric Fry addressed it in both “When Stock Market Rallies Validate Effective Monetary Policy” and “Tracing the Fed’s Vital Role in the Decline of the US Dollar”. And our Reckon-in-Chief, Bill Bonner, touches on it in some fashion, on most days.

In fact, most people in possession of at least one of the five basic human senses seems to see, feel, hear, taste or smell inflation’s foul presence. Which means that those trained specifically to keep an eye (ear, nose, etc.) out for it – and who so adamantly deny its existence – are either blessed with a sixth “masking” sense to which the rest of us are not privy…or that they are simply senseless morons, blinded by the light of their own academic brilliance.

Most likely, inflation will continue to be…and not to be. In other words, those manning the controls in the government’s “Ministry of Information” will continue to churn out numbers that agree with whatever qualitatively-eased, policy-of-the-month they are pursuing. Meanwhile, the rest of us will continue to weather the adverse consequences of these econo-commands as they express themselves in the form of everyday higher prices.

This time last week, we heard from some of our frontline reporters across the United States. Fellow reckoners wrote in from grocery stores and gas pumps around the country to lend some of their own boots-on-ground perspective.

Alas, this academically-defined non-inflation is also pushing up prices in other parts of the world. But fear not. We have eyes (ears, noses, etc.) in those parts, too. And so, without further ado, we present a handful of reader mail from some international Daily Reckoning reader posts…

First up, here’s what reader B.L. had to say:

“I currently live in Singapore and travel throughout Asia Pac, Central Europe, ANZ, and was back in the US over Christmas/New Year’s. I see food inflation everywhere I go. [In] Singapore the prices have risen noticeably since I’ve been living there, which was April of 2010. When I was in the US – North Carolina – I was shocked by the food prices when I bought groceries for two families for New Year’s Eve and day. Combine the food prices with the fuel price rise and I can see why so many American families are getting support for food from good ole Uncle Sam.

“In places like China or India, where food makes up a huge % of a families cost to live – over 50% versus less than 10% for the middle class in the US – they are really feeling the pinch.

“Lots of reasons, but very scary for those of us that have to eat – oh wait, that is all of us last time I checked on the human condition.

“Keep up the good work.”

Sticking in the East for a bit, here’s what another reckoner had to say:

“Here in Thailand, inflation is running high.

“On January 1st, 7/11 mini-marts, of which there are thousands across the country, increased all their prices by 10%.

“Hotel rates, mostly in the 4 and 5 stars categories, are going through the roof, 25 to 50% higher than a year ago.

“Restaurants of all kinds regularly increase their prices.

“Overall, the national inflation rate is certainly in the double digits.”

Thailand? But why would prices be rising in Thailand? Another reckoner, based in that (offensively gorgeous) part of the world offers some thoughts:

“The millions of dollars flowing into Thailand form your neck of the woods is causing real problems with food prices and more noticeable is the increase in washing powder, soap etc. These too are increasing due to the raw material costs.

“Cambodia and Vietnam are feeling the winds of change also. I live here in Thailand 6 months a year then go home to shitty Britain to fish for trout. I was in Cambodia last week. My friend has just opened a small guest house there and we both went to see friends in Vietnam. Same problem; big inflows of money.

“I hope this adds a new thinking to your insight into inflation.”

But what about Japan, the leader in all things DEflationary? Reckoner Gary?

“I live in Japan, and have observed over the past year, food prices have gone down. In fact, prices have been about the same for many years. Last year flour was about Yen 230 a kilo, this year about Yen 150. Living on a fixed income, I must say, I like DEFLATION much more than INFLATION. So tell me, why is Bernanke trying to increase my food costs – doesn’t he have my interests at heart?

“The US system is broke, financially, economically, morally, education, etc. And with all the partisan fighting in government, Republican vs. Democrats, secret agendas, it isn’t going to get better. I think the best solution is to just let all those banks and zombie companies crash and burn, and we start over again.”

Hmm…but what about this… Another email from The Land of the Setting Sun? This one from Reckoner Matthew:

“One small slab of mozzarella cheese imported from Germany costs about 600 Yen, or 7.26 US doll hairs. A small pack of blueberries from Chile costs about the same. These items have become extravagances for consumers.

“How about gasoline? Just filled up my car with a tank of the stuff. Converting liters to gallons and Yen to USD, I paid 6.64 dollars/gallon (high octane, mind you) at today’s exchange rate.

“Try guessing what will happen to the USA when prices get to this point? Here in Nipponville, everyone’s numb to it all.”

And in Australia, Reckoner Ronald:

“The cost of our city-supplied water has tripled in the last ten years. In the last 29 years, the local daily newspaper has quadrupled in price and the TV weekly magazine is up 625%. But petrol (gasoline) is ‘only’ up 308%.”

How about in Europe? Reckoner Paul?

“After taking 2 weeks holiday around Christmas, I returned to my commuting routine to my office in Hamburg, Germany. Between the station and my office, I usually pick up breakfast at one of many bakeries. Between 18 Dec. 2010 & 3 Jan. 2011, my breakfast cost went up on average 3%. Oh My! 10 cents more for my apple turnover or chocolate croissant!”

And finally this observation from Buenos Aires, where your editor experiences daily the effect of government-induced non-inflation…

“Argentina is a good example of food inflation. Meat (main food for most locals) is now 100 % more expensive than a year before, as a result of government controls and policies against production, just in order to maintain local prices in line. Result: less production, less consumption and less exports of an Argentine symbol. Is this a recipe to be applied in other countries?”

A big thanks to everyone who wrote in with frontline reports on the effects of inflation that, we are told, doesn’t exist.

Joel Bowman
for The Daily Reckoning

Inflation ‘Round the World originally appeared in the Daily Reckoning. The Daily Reckoning recently published an article looking at the impact of quantitative easing.

Read more here:
Inflation ‘Round the World

The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.


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