Jim Cramer on deflation. Anyone got whiplash yet?

Houses down.
Oil down.
Gold down.
Corn down.
Wheat down.
Used autos down.
Everything down.

Hmmm...

May you live in interesting times...

Come on everyone - get on the dancefloor and party like it's 1977!!!

You should be dancin' yeah!

(and waiting in gas lines, and experiencing rampant inflation, and suffering under one of the worst presidents of all time, ...)

HousingPANIC Stupid Question of the Day

So, with the election looming, should we count on gas prices plummeting and a couple terror alert warnings again?

(Add those two to the $600 checks from Big Daddy Government and stupid-low interest rates, and those crafty little incumbents might be able to live another day after all...)

Peter Schiff mocks the idiots on Kudlow & Co.

Schiff was right on housing. He was right on gold. He was right on foreign stocks. And now he's right on the run-away inflation that's taking over the world.

What, you didn't think we could keep spending like this with no repercussions, did you? Silly Americans.

Remember when you're at the gas station and grocery store this weekend to consider the hundreds and hundreds of billions we've wasted in Iraq. Remember to consider why we as a nation put two free spending oil men with military industrial complex connections into the White House. And remember to think about our $53 trillion debt, and who we owe it to.

And then take another look at the prices you're paying. And the price our country paid. And take a look around at the kids. You know, the ones who end up getting stuck with your bill, the ones who'll hate you one day.

And maybe then it'll all come together for you.

Here's a good piece in the IHT for your consideration by Bernie Sanders, the Independent Senator from Vermont. Add him to the HP short list of politicians who are allowed to stay in DC. We need more "Independents" in the Senate. Don't forget that it took both corrupt political parties to get us into this mess, and keep us there for so long.

"Every gun that is made, every warship launched, every rocket fired, represents, in the final analysis, a theft from those who hunger and are not fed, who are cold and are not clothed. This world in arms is not spending money alone. It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children."

- Dwight D. Eisenhower, 1956

A budget U.S. taxpayers can't afford

Today, Bush's military budget is $515 billion, more than half of all discretionary spending. This is in addition to the $200 billion a year being spent on the war in Iraq, and another $16 billion spent on nuclear weapons.

Meanwhile, as military spending explodes, the middle class in America is shrinking, poverty is increasing and the gap between the very rich and everyone else is growing wider. While we now spend $94 billion more on defense than three years ago, poverty and hunger are increasing, 47 million Americans lack health insurance, and an entire generation of young people wonders how to afford college.

Got Inflation?

If REAL inflation is running at 7% to 11%, doesn't that mean that the US economy growing at only 0.6% really signals a pretty massive recession? And that "flat" US average incomes are actually plummeting? And doesn't that mean that the 12.7% reported fall in home prices is more like 20%?

One more time - if you believe the government's inflation number, you are a fool. But it's really not a question of whether you believe it or not, just go to the grocery store and gas station. The real inflation report can be found there.

April 7, 2008 Special Edition: Welcome to RicePANIC. Seriously. Now we have rice panic. And it's gonna get ugly.

So rice prices have soared over 50% in the past few weeks, and the basic food staple of billions is now at risk.

Housing panic is meaningless versus rice panic. Screwed homedebtors can just walk away and rent. Screwed rice eaters, well, they die.

Thank you Ben Bernanke. Thank you Alan Greenspan. Thank you corrupt communist leaders of China. Thank you Wal-Mart shoppers. Thank you McMansion buyers. Thank you Hummer & SUV buyers. Thank you people who put food in your car's gastank. Thank you politicians who encourage farmland to be used to grow fuel instead of food.

One day people will wise up on the interconnectedness of man. They'll better see the repercussions of their actions. That day is coming closer.

Fears of unrest rise across Asia as rice price surges 30% in a day

Rice prices jumped 30 per cent to a record high yesterday, raising fears of fresh outbreaks of social unrest across Asia, where the grain is a staple food for more than 2.5bn people.

Global rice stocks are at their lowest since 1976. While prices of wheat, corn and other agricultural commodities have surged since late 2006, the rice prices increase started in January.

The view from the UK: We went to war based on bad intelligence, now the US cut interest rates based on bad jobs data. Can't say I disagree...

The credibility of the United States of America continues to plummet.

When, oh when, will we no longer be run by corrupt and incompetent monkeys, justifying decisions on suspect or sexed-up data?

The big question now is will Bernanke and the US Fed fix their bad-data mistake (and raise rates at the end of the month), or will they be like Bush, who insists on compounding his bad-intelligence f*ck-ups?

UK Telegraph: Fed based rate cut on false jobs data

The 12 members of the Federal Reserve may be rethinking their 0.5pc interest rate cut last month after key jobs data that their decision was partly based on was revised.

August's non-farm payroll numbers were changed by the US Labor Department to show 89,000 jobs were created, rather than 4,000 lost as it first predicted.

The predicted fall, the first decline in four years, forced global markets sharply lower and was seen as one of the major reasons why the Fed, led by chairman Ben Bernanke, cut rates, in order to stimulate economic growth.

Bernanke's panicked rate cut is purposefully destroying the dollar to try to save the banks. This will not be pretty.

It's sad watching the dollar die. Especially as an expat. Americans who scrimped and saved and planned for retirement, and didn't or don't diversify out of US$, are gonna get slaughtered. And they have no idea. It's just so easy to trick 'em, ain't it?

The stock market may go up, nominal home prices (not inflation adjusted) may drop less than they would have, but the smart people in the room will know the dirty little secret: Inflation is raging, an economic collapse is underway, and the buying power of the dollar is being purposefully and expertly destroyed.

BusinessWeek: Does the Fed Care Only for the Street?

Bernanke's belief that the central bank should slash rates at the start of a bear market is untested, inflationary, and bad for the buck

Aside from the dollar and long-term bonds, markets rose last week as the Federal Reserve demonstrated that it is more fearful of a slowing economy and banking woes than inflation. In fact, it is willing to sacrifice the dollar to save the banks. Just last month, the Fed was saying that the threat of inflation is just as great as the threat of a slowdown in the economy. Now it is cutting rates in a huge way as the Dow nears its all-time high, gold is making new highs, and the price of oil is exploding.

The Fed is obviously terrified. It means that he is gravely concerned about the state of real estate and banking in the U.S.

If the credit markets don't revitalize in the next few weeks, you can expect to see the Fed lower rates again by another 50 points at their October Federal Open Market Committee meeting no matter where the dollar, gold, or the Dow are. They have signaled that they don't give a damn about the dollar. All they care about is Wall Street.

"Ben Bernanke’s 50 basis point cuts in the Fed funds and discount rates this week may go down as the most irresponsible move in Fed history"

Peter Schiff nails Bernanke's move to the wall.

History will not be kind. Bernanke has destroyed the US dollar, and made a bad situation worse. Think mortgage rates were too high? Wait until burned foreigners start selling their US bonds, driving up interest rates even higher. Think inflation is tame? Wait until those imports you're addicted to soar in price as the dollar tanks.

When the Fed should have been raising, they lowered.

And now we're fu*cked. Here's Schiff:

Helicopter Ben Earns His Wings

Coming at a time when rate increases were needed to combat the sinking dollar and surging gold, oil and other commodity prices, Ben Bernanke’s 50 basis point cuts in the Fed funds and discount rates this week may go down as the most irresponsible move in Fed history.

To America’s creditors around the world, whose mountains of dollar reserves will be debased by lower rates in the U.S., this action amounts to the monetary equivalent of “let them eat cake.” My prediction is that rather than doing so, they will just throw it back in our faces, and refuse to continue funding our deficits.

Furthermore, a fifty basis point cut was not an act of bravery but one of cowardice. The brave thing to do would have been to raise rates and allow market forces to purge the economy of the imbalances built up during the Greenspan bubbles. It would have taken some real courage to level with the American public and let them know that our profligacy has consequences, rather than pretending it can ride to the rescue with a wave of its magic wand and a crank of the printing press.

Ron Paul on the Mortgage Meltdown, Bond Market Blowup and Incompetent Federal Reserve

"More inflation is, however, never the answer to inflation.

The truth is that business involves risk, and businesses that miscalculate risk should be liquidated, so their assets can be reallocated to businesses that correctly judge risk and make profits.

Instead, the Fed has injected $64 billion into the jittery markets, effectively amounting to a bailout that keeps these malinvestments afloat, but eventually they will become the undoing of our economy."

-Ron Paul August 2007

A HousingPANIC message to Ben Bernanke, William Poole and the Federal Reserve Board of Governors

Raise the discount rate to the moon

Thank you

-HousingPANIC

It's easy to feel richer when things you own have "soared" in price. But are you? Welcome to the world of inflation and dollar depreciation

It's a classic trait during the early stages of inflation that people feel rich as the perceived value of their assets denominated in their currency shoots up (stocks, houses, art, etc)

But then they slowly come to realize that they're indeed not rich, as the buying power of their currency ain't what it used to be. But this takes some time to sink in, especially since they're feeling so rich and flush with cash - who cares if it costs more to go out - my house doubled in value! And ESPECIALLY if the government who reports the inflation data has completely cooked the books.

So here's a standard night in London. $16 for two pints, and $22 for a burger and chips. Then to a movie, which is $20 for the ticket, $10 for the popcorn and $8 for a coke. Times two that's $152 for a cheap night out.

Remember when $152 for beer, burgers and a flick would have seemed insane? $152 used to be a four-course at Ruth's Chris folks. Like just a few years ago.

The dollar is quickly becoming worthless. And 99% of Americans don't think it effects them, and hey great news the Dow was up 1% last week!

Oh, won't they be in for a surprise...

The government is reporting 2.7% inflation. Anyone think that prices are only up 2.7% vs. last year? Sure, the price of homes and rents are crashing, but what about everything else? Want another hint? Just check out the price of corn, or any other commodity.

2.7% ain't even close folks. Ain't even close.

WARNING: The US Government does not want you to see these numbers

Proceed at your own risk, as ignorance is bliss... And get ready...

Here's M3 Money Supply reconstructed. Yes, the M3 that the Fed stopped publishing last year. Why did they stop publishing it? You need to ask?

And here's inflation based on the components that used to measure inflation as recently as 1990, before the government decided to change things around to hide what was really happening.

Remember, they base benefits payouts and raises based on inflation, so it's in their (and our) best interests (to avoid going insolvent, raising taxes or printing more money) to keep the "official" inflation reading low, even though we all know damn well things are WAY more expensive now than they were a year or two ago. Watch for inflation to remain tame as rents plummet with the oversupply of housing and economy softening.

An astute comment from an ignorant anonatroll

Sometimes we get comments so stupid, so ignorant, so completely clueless, that they deserve their own thread.

This is one of those cases.

This anonatroll (man, I wish the trolls would pick a user name so we could mock them later) said that you can't have inflation and decreasing asset prices.

Guess what. We do. And we will.

House prices (assets) and rents are falling, while consumable and service prices are increasing. We'll continue to see asset deflation (as they're overpriced and returning to the mean, and people sell their assets to get to cash - read manias, panics and crashes) while we see inflation on other goods and services.

Also HP'ers know the government inflation data is misleading, especially since rents are the #1 category, and rents are falling thank you housing oversupply.

Another anonatroll said don't worry about home prices - they'll increase as the dollar gets more and more worthless.

Uh, got bad news for you. House prices will fall or stay even in real terms for years to come, while the dollar tanks and true inflation roars. In other words, every day your home will fall more in true value, even if its price stays the same for 10 years.

Any other thoughts or gems of wisdom on the inflation / deflation conundrum, please post here. Here's the anonatroll - I think a pretty telling statement of the lack of financial education and knowledge in America today (that helped us get into this mess in the first place).

Anonymous said...

Can't have it both ways renters. Either there is inflation or there isn't. Can't have inflation and decreasing asset prices. So choose your loonie battle, hyperinflation or housing crash, can't have both.

HousingPANIC Stupid Question of the Day

Why is skyrocketing housing price inflation trumpeted by the MSM as a great thing, while skyrocketing gas price or banana price inflation reported as terrible news?

For those thinking Bernanke & the Fed won't let housing crash, guess you don't remember the NASDAQ crash or WIN either huh?

With the dollar tanking, inflation will rise, giving Bernanke two reasons to make the next move UP, not down. And yup, you know what that'll do to the markets and housing. So be it.

It is NOT the Fed's role to protect asset prices. It's the Fed's role to fight against inflation. Even the incompetent Alan Greenspan, Mr. Bubble himself, telegraphed how this latest bubble would end, and I think with the Alt-A and Subprime meltdowns we're now at the "investor caution" stage:

Rising house and stock prices have made many people feel more wealthy and have helped to support consumer spending, a key ingredient of the economy's good health.

Greenspan, however, said people shouldn't count on that paper wealth, which can evaporate if economic conditions deteriorate rapidly.

"What they perceive as newly abundant liquidity can readily disappear," he said. "Any onset of increased investor caution" could cause home and stock prices to drop, he noted.

A long spell of low interest rates and low risks for investors has especially encouraged investment in homes. Greenspan worried about what would happen if that climate were to change.

"History has not dealt kindly with the aftermath of protracted periods of low-risk premiums," he said.

And this on the Fed's conundrum to move up or down:

Notes from the Federal Reserve rate-setting committee’s late-March discussions, released last week, highlighted that inflation is its biggest concern and that it is leaning toward interest rate increases to curb it, but it may have other cards up its sleeve.

“The committee agreed that further policy firming might prove necessary to foster lower inflation, but in light of the increased uncertainty about the outlook for both growth and inflation, the committee also agreed that the statement should no longer cite only the possibility of further firming.”

Those nebulous comments may dredge up uncomfortable memories of the tenure of Fed chairman Paul Volcker (1979 to 1987), when he chose to curb the nation’s stagflation—characterized by high rates of both inflation and unemployment—by limiting the growth of the money supply and allowing interest rates to rise. That caused a recession in the early 1980s and unemployment levels second only to those of the Great Depression.