| By Bill Bonner Thursday, July 15, 2021 YOUGHAL, IRELAND – As we saw yesterday, inflation has not gotten on the bus yet. At a 5.4% annual running rate, consumer prices are now rising about as fast as they did in the mid-1970s. Producer prices are rising at an even faster pace – 7.3% year-on-year. Here's Federal Reserve Chairman Jerome Powell, speaking to the House Financial Services Committee yesterday: Right now of course inflation is not moderately above 2%, it is well above 2%. It's nothing like "moderately." What's ahead, reporters wanted to know? Here's Powell again... It will depend on the path of the economy, it really will. It's just a perfect storm of high demand and low supply. And it should pass. Unless we think there's going to be a multi-year shortage of used cars in the United States, we should look at [high inflation] as temporary. Used cars… used tractors (as we saw yesterday)… and used houses are all rising in price. New cars are scarce on dealer lots; used cars are especially in demand, trading for 10.5% more in June than the previous month. | Recommended Link | | Fmr. Dock Worker Turns Millionaire...Warns Americans This video is going viral… A former NY loading dock worker – who rose to the top of Wall Street in just 3 years – blasts Congress and reveals nasty truths about America… Now, in his latest video, he shares a fiery warning for all Americans… His videos have often been blacklisted by major networks… But this one is posted for free – on an independent website – so you can make your own decision. Do you think this message should be banned? | | | -- | Catch-22 But Powell did not mention where all that demand comes from… or why it might not go away anytime soon. Say's Law – named after French economist Jean-Baptiste Say – tells us that real demand comes from real people who produce real goods and services. They sell their output for money, which they can then use to buy other peoples' goods and services. This demand does not increase prices, because it only arises as the quantity of goods and services available also rises. Powell must know that his money-printing creates a whole different kind of demand – one that brings forth no corresponding goods or services… and thereby, causes prices to rise. He has created a bubble economy, in other words – inflated by fake money. He knows, too, that the Fed has put itself in the Inflate and Die trap. It has to keep the fake money flowing… or the fake boom will collapse. But if it keeps the money flowing, consumer prices will continue to rise… and Powell may be forced (at least, according to the mainstream narrative) to restrain them. [Featured: Shameful! See What Biden and the Democrats Just Did To YOUR Money] No Escape Which leaves inquiring minds with a giant question mark. This from Mohamed El-Erian, writing in the Financial Times: What is clear to me is that we are moving irresistibly closer to a critical question for the economy and markets, and not just in the US: is there still the possibility of an orderly exit from what has been a remarkably long period of uber-loose monetary policies? You already know the answer to that, don't you, Dear Reader? The elite control the government. The government controls the money. The whole economy – notably the wealth, power, and status of the elite themselves – now depends on more and more money-printing. Ergo, there will be no exit – orderly or otherwise – from the Fed's uber-loose monetary policies. But staying the course will not be orderly, either. Bubbles blow up and burst… in a disorderly way. And then, central bankers… presidents… members of Congress… economists… investors… and columnists panic, causing more disorder and chaos. | Recommended Link | | U.S. Treasury Secretary Mark Zuckerberg? Mayer Rothschild once said, "Give me control of a nation's money supply and I care not who makes its laws." Now, the U.S. government is handing over control of its currency to one of the most powerful companies in the world. This could be the biggest disruption to the U.S. dollar we've seen in a century… And the technology behind it will change the world in ways you can't imagine. | | | -- | Subsidized Gambling But let us look at what Powell et al. have wrought. Then, we will see what an exit from their uber-loose policies would mean. Currently, house buyers can get a mortgage at a negative real interest rate. A cursory Google search turns up rates under 4%, while consumer prices rise at least 100 basis points faster. At these interest rates, it is no wonder house prices are going up so fast. Wall Street speculators are also able to get super-cheap money. They can now borrow money at zero real cost. In an honest economy, speculators have to pay to play. Interest rates serve as a kind of ticket price for gamblers entering the casino. But today, the doors are wide open. The "cost of carry" – the charge speculators pay to gamble with someone else's money – is less than zero. In other words, it is as if they were being paid to make reckless bets. [Featured: Have a Visa or Mastercard? Get Ready To Shred Them!] Major Shock Getting back to normal would be a major shock to the marketplace. Let's see, if the "cost of carry" suddenly went up to 5%... or 8%... the rank speculation would quickly come to an end. Investors would toss aside the riskiest stocks as if they were used face masks. Zombie businesses, that can only pay the interest on their debt by borrowing more, would collapse. Asset prices, generally, would drop, and probably come to rest at only half of today's levels. Mortgage rates are usually 2.5% to 3% above inflation. Today's rates would have to double to get there. What would that do to house prices? As for the Fed's key funds rate – now at 0.25% – it would have to go up by more than 500 basis points, just to pull even with consumer price increases. Jobs lost, businesses failed, households bankrupted, investments wiped out – welcome to the end of the uber-loose monetary policies. | Recommended Link | | The Millionaire with a Double Life And His Next Big Discovery In the photo on the left, (in the red shirt) he's like Indiana Jones in Myanmar. He jumped crocodile infested waters in South America in search of "hidden" investment ideas. Last year he closed out 12 plays. Ten of them were winners with GRAND SLAMS like 4,942% and 2,805%, in one of his research services. On the right, he's on the streets of Denver... Ready to unveil his next HUGE investment he calls a tech "Master Key". You'll want to put aside any skepticism because this will seem controversial. But it could be responsible for a staggering amount of wealth in the coming months. This is the ground floor. | | | -- | Inflate and Die Trap And here, we see clearly how the Inflate and Die trap works: The higher inflation rates go, the bigger the shock to the economy needed to bring them under control. And this shock wouldn't be limited to home buyers and stockholders. The biggest borrower in the world is the federal government. And the biggest lender in the world is the Fed. Thanks to Fed buying, a 10-year Treasury note – the building block of all federal debt – now trades at a yield of about 1.4%. At last month's CPI reading (5.4% year-on-year), that yield is negative by 400 basis points (4%). "The trouble with trouble is that it starts as fun," a dear reader reminded us. And if bond buyers demanded a real return (above inflation)… the interest charged on new bond issues would quadruple. The fun would be over. All of a sudden, more stimulus would be out of the question. The big, new "infrastructure bill" (at $3.5 trillion), too. And those unemployment "toppers," that pay people more for not working than they earned on the job? History! Exiting in an orderly way? Nah… Prepare for le deluge. Regards, Bill
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Casey Daily Dispatch editor Kris Sayce explores why rising inflation is anything but temporary. Read about his predictions for gold assets and crypto, and what steps you can take to profit during this period... MAILBAG Dear readers are weighing in on Bill's essay from Tuesday regarding COVID-19 lockdown policies... Why is it never mentioned all year about South Dakota? They never did any mandates. They rode in rodeos, businesses stayed open. Life just went on as usual. –Richard S. I believe the turn by the U.K's. Boris Johnson government was not caused by sudden sanity and seeing real facts and unbiased science, but rather fear of losing their seats in the next election. The recent massive demonstrations in London, involving thousands of people, against government COVID-19 measures (especially coerced vaccinations) were visible from miles away and shared on social media by attendees. The MPs in Westminster must have seen it, too. The non-reporting by the BBC and other news media made it more damning and loud. They are still looking after their own short-term self interests by changing policy to appear to be empathetic with the people. –Elaine S. Bill, the conclusions that your essay has come to seem to coincide with the "Great Barrington Declaration" which was published in October 2020. One of the conclusions was to lock down people 65 years and older, as they are the most fragile, and that everyone else should take precautions but still go to work. Apparently, the elite can't read – or was unwilling to absorb and implement what it stated. So the great American experiment worked for the elite, while the middle class suffers and, as usual, pays the bill for their dishonesty, stupidity, and greed for money, control, and power. Where do we go from here? Nowhere, except in the direction of the "New Consciousness," which is alive and gaining momentum. Thank you for your thoughts; you bring some sanity to the insane world of today. –Scott S. If things "return to normal" and a major market shock happens, how will you be financially ready? Used cars, used houses, and used tractors are in high demand and low supply… which is sending their prices higher. What other prices are going to rise? Write us at feedback@rogueeconomics.com. IN CASE YOU MISSED IT… MISSING: Bill Bonner's LAST and Most Important Book Recently, Bill Bonner published a new book, which details his final warning to investors. But shortly after it hit bookstore shelves, it disappeared, without a trace. Today, you'd be lucky to find a used copy online for $79. While some suspect Bill's book has been "shadow-banned" by major retailers… the truth is far more interesting… and urgent. For the full story – including how you could claim a copy, free as part of this limited-time offer – click here. 
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