Have nothing to do with the [evil] things that people do, things that belong to the darkness. Instead, bring them out to the light... [For] when all things are brought out into the light, then their true nature is clearly revealed...

-Ephesians 5:11-13

Tag Archives: Inflation

Fiscal Challenges: A Way Out

"The Course of Empire: The Savage State,&...

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(This article is a follow-up to Conjuring Magic To Cover States’ Debts.)

Economist Niall Ferguson of Harvard wrote an article entitled “Complexity and Collapse” for the March/April issue of Foreign Affairs, a publication of the Council on Foreign Relations. Ferguson uses the visual image of a series of paintings by Thomas ColeThe Course of Empire, which currently hangs at the New York Historical Society, to illustrate his point that every society goes through five stages. He says that Cole “beautifully captured a theory of imperial rise and fall to which most people remain in thrall to this day.”

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The Fed is Caught in its Own Trap

The Federal Reserve Bank of Boston building vi...

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The much-anticipated, long-awaited pronouncement from the Fed yesterday confirmed what nearly everyone else expected: Things are not going swimmingly, but they’re ready to help further if the patient continues to drown.

The Federal Open Market Committee said that “the pace of economic recovery is likely to be more modest in the near term than had been anticipated … [but] to help support the economic recovery in the context of price stability, the Committee will keep constant the Federal Reserve’s holdings of securities at their current level.”

Translation: Nothing we have done yet has worked, so we’re developing some more plans just in case they are needed.

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Behind Friday’s Jobs Report: The Real Numbers

Confusing numbers

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Buried in Friday’s employment report from the Department of Labor Statistics were two key numbers that reflected the slowdown in the economy so long denied by the administration: “private sector employment edged up over the month (+71,000). Thus far this year, [such] employment has increased by 630,000, with about two-thirds of the gain occurring in March and April.” (Emphasis added.) The other appeared in the final paragraph of that report: “The change in total nonfarm payroll employment for May was revised from +433,000 to +432,000, and the change for June was revised [downward] from -125,000 to -221,000.” (Emphasis added.)

Taken together, these two numbers reflect the slowing of the economy that has occurred ever since Vice President Joe Biden predicted back in April that “some time in the next couple of months we’re going to be creating between 250,000 and 500,000 jobs a month.”

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Maine Eyes Social Security for Pension Bailout

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Instead of asking for a federal bailout, Maine is considering shifting part of its underfunded pension plan liabilities to Social Security. Without the proposed fix, the pension liability the state currently faces is “going to rip the guts out of our budget,” according to Peter Mills, the state Senator who initially suggested the plan.

Most states provide their workers with a state pension plan as well as support their participation in Social Security. But several states such as Maine opted out of Social Security based on projections that monies invested in the state-run plan would provide more generous benefits to its beneficiaries. As the economy turned down and revenues declined, states like Maine are finding it increasingly difficult to make the contributions necessary to keep their pension plans solvent.

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Double Dip Evidence Piling Up

Double Dipped Cones

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When John Hussman, in his Weekly Market Comment, noted that the Economic Cycle Research Institute’s (ECRI) Index “has slumped to the lowest level in 44 weeks and has now gone to a negative reading,” he was confirming other recent signals that the economy was giving off, notably here and here, that the possibility of a double dip recession continues to increase.

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National Debt at Tipping Point?

Tea Party

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The Wall Street Journal took another look at the $13 trillion national debt written about here last week and announced that, according to a study by economists Carmen Reinhart and Kenneth Rogoff, the economy has now reached the tipping point, the Reinhart-Rogoff Line, better known as the point of no return.

“Once a developed nation’s debt crosses it, its annual growth [tends to be much] lower.” The best estimate is that, once that point is reached, the GDP will be reduced by one-third, with little chance of regaining normal economic output for the foreseeable future.

In their book, This Time Is Different, Reinhart and Rogoff state:

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Economic Forecast: Summer of Discontent

Frowny

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After six straight months of gains in consumer spending the April numbers showed no change from March, according to the Commerce Department. This was a surprise to some who have been tracking such things as the University of Michigan’s index of consumer confidence (higher), consumers’ expectations on the economy over the next 12 months (higher), moderate real job creation (higher), savings rate (higher) and manufacturing activity (higher).

Others remained sanguine, holding that “We do not expect household spending to flatline in the coming months,” according to Michelle Girard, senior economist at RBS in Stamford, Connecticut.

Consumers themselves, however, are not a happy lot. According to Rasmussen Reports, only 35 percent of Americans are planning to take a summer vacation this year, and those who are, aren’t planning on spending as much as they have in the past.

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Attack on John Birch Society Backfires

John Birch Society

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The recent article in Politico.com by Charles Postel hinting at “dark forces” influencing the Tea Party is another in a recent and growing series of unsuccessful attacks on The John Birch Society. Rachel Maddow’s attacks on the JBS were exposed when she issued falsehoods and innuendos last December, and Karl Rove gave the back of his hand to the Society in a recent op-ed piece in the Wall Street Journal.

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Latest Unemployment Numbers: Shoveling Snow?

Bureau of Labor Statistics

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When the Bureau of Labor Statistics announced last Friday that the economy lost only 36,000 jobs in February, the usual choristers took that as good news. Christina Romer, the Chairwoman of the White House Council of Economic Advisers said, “Today’s report on the employment situation is consistent with the pattern of stabilization and gradual labor market healing we have been seeing in recent months.”

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Will the U.S. Be Able to Pay its Debts?

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An Associated Press writer says “the crushing weight of its debt threatens to overwhelm everything the federal government does,” even under the best-case scenario. This theme of unsustainable debts and deep holes has been reviewed elsewhere on this site, and it’s small comfort that it is now making headlines in the controlled mainstream media:

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Bernanke’s Kudos, Criticisms Miss the Point

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A preliminary vote today for Ben Bernanke’s reappointment to a second four-year term as chairman of the Federal Reserve is expected to clear the way for a final favorable vote by the Senate.

Bernanke’s first term record was subjected to criticism and praise during confirmation hearings in December, and  he was selected as Time magazine’s Person of the YearTime magazine’s Michael Grunwald was kind to a fault, calling Bernanke “our mild-mannered economic overlord” (a reference, no doubt to Superman’s mild-mannered Clark Kent), and “the most powerful nerd on the planet.”  In that lengthy tribute, Grunwald summarized the Fed’s role:

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What Part of “No” Doesn’t He Understand?

Pelosi Showing Obama Health Care

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This change allegedly reflects the impact the Brown win in Massachusetts last week had on politics in general, but also that it had not been anticipated by Obama or the Democrats.

“The entire political community was caught a little bit unawares on that one,” said David Axelrod, White House senior advisor. The impact of Brown’s win on Obama’s healthcare bill was significant in that it deprived the Democrats of the opportunity to push the bill through the Senate without a Republican vote.

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Weak Dollar Obama’s Fault?

Various Federal Reserve Notes, c.1995. Only th...

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According to Newsweek, the dollar isn’t weakening, and even if it is, it isn’t Obama’s fault. On Tuesday, Daniel Gross iterated all the reasons that, according to conservatives, the American dollar should weaken. Conservatives, he said, blame the actions of the Federal Reserve with the lowering of interest rates to zero, printing money, and expanding the monetary base. They also blame the Obama administration for running up huge deficits in its efforts to restart the faltering economy.

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Stock Rally Owing to Plunge Protection Team Conspiracy?

Polar Bear Plunge 2008

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The 60 percent gain in stocks since March was largely caused by secret government purchases of stock-index futures, the CEO of TrimTabs claims.

The Plunge Protection Team (PPT), otherwise known as the Working Group on Financial Markets, has been the target of conspiracy theorists ever since an article in the Washington Post in 1997 first shed light on the operation. The Working Group was created by Executive Order following Black Monday’s market crash on October 19, 1987, when the stock market declined more than 20 percent in a single session. Its purpose was to give recommendations for legislative and private sector solutions for “enhancing the integrity, efficiency, orderliness, and competitiveness of financial markets and maintaining investor confidence.”

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The Fed’s New Tool to Fight Inflation

WASHINGTON - APRIL 17:  Federal Reserve Chairm...

Last Monday, the Federal Reserve unveiled its new “term deposit facility” as another tool to fight inflation.

It was reassuring to note that the Fed has finally defined inflation’s causes properly: as a continuing rise in the general price level usually attributed to an increase in the volume of money and credit relative to available goods and services.

With the enormous increase in money and credit that the Fed has engineered over the past year, concerns are being raised about the coming rise in the general price level.  These concerns are being reflected in the recent declines in the bond market as investors appear to be demanding higher interest rates to offset some of that anticipated rise.

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Is Social Security a Ponzi Scheme?

Mug shot of Charles Ponzi (March 3, 1882 – Jan...

More than $16 billion of investors’ money evaporated in Ponzi schemes in 2009, according to the Associated Press. Although the names Bernie Madoff and Allen Stanford were in the headlines in 2009, many other Ponzi schemes were uncovered as the economy declined, making continued payouts to investors impossible.

As Warren Buffet said, “Only when the tide goes out do you discover who’s been swimming naked.”

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Bernanke Claims Economy Recovering

Ben Bernanke
Federal Reserve Chairman Ben Bernanke told the Economic Club of Washington that the economy is recovering, even as it confronts “formidable headwinds.”

He also promoted the Federal Reserve, and the job he is doing as head of the Fed) in an op-ed piece he wrote recently in the Washington Post where he assured readers (and Congress) that “the Fed played a major part in arresting the [financial] crisis, and we should be seeking to preserve [the Fed’s] ability to foster financial stability and to promote economic recovery without inflation.”

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Inflation? What inflation?

Huff and puff and...

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We dont have to hire historians to see where deficit spending will take us. We have only to look around now. Since the end of World War II, some of history’s greatest national disasters have taken place right here in the Americas. North Americans used to laugh or shake their heads at the economies of the south that seemed always on the brink of collapse.  Banana republics, we derisively called them. We’re not laughing now.

Here are some examples he provides of inflation lag time:

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Many of the articles on Light from the Right first appeared on either The New American or the McAlvany Intelligence Advisor.