Warning From Across the Pond
I know I’ve been writing a lot on the economy lately. I think we are at a very scary moment, and I’m not sure it’s really being addressed by either political campaign. Barclays Bank in London put out a report this morning, calling out Bernanke and the Fed.
Barclays Capital said in its closely-watched Global Outlook that US headline inflation would hit 5.5% by August and the Fed will have to raise interest rates six times by the end of next year to prevent a wage-spiral. If it hesitates, the bond markets will take matters into their own hands. “This is the first test for central banks in 30 years and they have fluffed it. They have zero credibility, and the Fed is negative if that’s possible. It has lost all credibility,” said Mr Bond.
When they say the bond markets will “take matters into their own hands”, we should realize that to some extent they already have. Even though the Fed Funds rate has held steady for three months, the ten year Treasury Bill has move up almost 100 basis points. 
The real problem, as I tried to point out in March, is that inflation in food is going to cause global political instability. Our faithful correspondent Rachel sends on a post from a Zimbabwean blogger, Bev Clark. This is what real inflation is like.
The last time I went shopping it took me longer to pay for my few purchases than to shop for them. The swipe machines have a limit of Z$9 billion. So go figure if you want to buy a small packet of meat,which at today’s price is, Z$151billion. Yesterday I bought a chicken for $26 billion. It looked rather strange. All bent and buckled but I bravely bought the bird needing a change from my usual beans and rice.I left it out last night to defrost and I must say that in the cold light of day it’s a bit of a sight. I threw it in the pot anyway.
With countries all over Southeast Asia blowing up from inflation, it is only a matter of time before this gets really ugly from a geopolitical point of view. When I say I don’t think either campaign is addressing the issue, I mean this. The combination of high interest rates, high unemployment, falling stock and house prices is as mean a season as you can imagine. We could quite possibly see a good number of small banks in the U.S. fail over the summer. Imagine the months just before FDR gave his first inaugural address as banks were failing–”We have nothing to fear, but fear itself”. That’s what President Obama might have to deal with.
That is the real legacy of Bush-Cheney incompetence.
Jon, it is 1992, and either McCain or Obama = Clinton. This is the obvious occam’s razor answer.
Inflation = money supply. Reducing money supply = cutting government spending and/or reducing short term interest rates. Already interest rates are being pressured up. The new president will come in and CUT social services just like Clinton (remember workfare?) to balance the budget. He will sacrifice government spending to reduce inflation and IF he does that, he will get 4 more years in office – just like Clinton.
The winner will instantly become a deficit hawk for one single reason: if the government keeps deficit spending, inflation won’t go down. And you know as well as I do, if more government comes at the cost of more inflation – it ain’t happening.
Jon, it is 1992, and either McCain or Obama = Clinton. This is the obvious occam’s razor answer.
Inflation = money supply. Reducing money supply = cutting government spending and/or reducing short term interest rates. Already interest rates are being pressured up. The new president will come in and CUT social services just like Clinton (remember workfare?) to balance the budget. He will sacrifice government spending to reduce inflation and IF he does that, he will get 4 more years in office – just like Clinton.
The winner will instantly become a deficit hawk for one single reason: if the government keeps deficit spending, inflation won’t go down. And you know as well as I do, if more government comes at the cost of more inflation – it ain’t happening.
Problems, what problems?
We have a comprehensive Energy policy, right We are using our resources as best we can, right?
Huge emerging markets are no big deal. All we have to do is put breakfast food and sugar in our gas tanks and vanquishthe flood waters in the heart land.
So what if we had a cold winter. Mankind can take care of that easy.
Well it does appear that the Arctic ice has moved to Mars or was that the Antarctic and Greenland.
Well I guess speculators are still speculating and the price of our homes is sure to rise. If all else fails we can always make it up in volume.
Global warming has gone on vacation until the next Republican Pres. in 2024, or which ever comes first.
Whoops that’s next year.
Got a little ahead of myself. My bad.
That terrible unjust war being fought in Iraq. Oh! My
To get out of debt, we can either grow our way out, Tax our way out, or Monetize it? I don’t know, darts anyone?
Not to worry though Obama, will be here soon and he’ll kiss and make it all better.
“W” you and Dick get in here right now, you’re going to time out.
Now where did I put my Ritalin?
Problems, what problems?
We have a comprehensive Energy policy, right We are using our resources as best we can, right?
Huge emerging markets are no big deal. All we have to do is put breakfast food and sugar in our gas tanks and vanquishthe flood waters in the heart land.
So what if we had a cold winter. Mankind can take care of that easy.
Well it does appear that the Arctic ice has moved to Mars or was that the Antarctic and Greenland.
Well I guess speculators are still speculating and the price of our homes is sure to rise. If all else fails we can always make it up in volume.
Global warming has gone on vacation until the next Republican Pres. in 2024, or which ever comes first.
Whoops that’s next year.
Got a little ahead of myself. My bad.
That terrible unjust war being fought in Iraq. Oh! My
To get out of debt, we can either grow our way out, Tax our way out, or Monetize it? I don’t know, darts anyone?
Not to worry though Obama, will be here soon and he’ll kiss and make it all better.
“W” you and Dick get in here right now, you’re going to time out.
Now where did I put my Ritalin?
We are not currently in danger of a hyperinflationary spiral, a la Zimbabwe. That seems to be the only problem we aren’t facing at this point, other than an outbreak of cholera or a swarm of locusts.
The problems we do have are quite bad enough, and many of them are likely to last throughout the next president’s term.
We are not currently in danger of a hyperinflationary spiral, a la Zimbabwe. That seems to be the only problem we aren’t facing at this point, other than an outbreak of cholera or a swarm of locusts.
The problems we do have are quite bad enough, and many of them are likely to last throughout the next president’s term.
Re: “That is the real legacy of Bush-Cheney incompetence.”
Nope it wasn’t incompetence but on purpose and with the help of their mindless followers who voted them into office not once but twice…Nor will Obama do any better except to make things a whole lot worse…
Re: “That is the real legacy of Bush-Cheney incompetence.”
Nope it wasn’t incompetence but on purpose and with the help of their mindless followers who voted them into office not once but twice…Nor will Obama do any better except to make things a whole lot worse…
Jolly problem solvers here…
Looks like brains have frozen in fear and paranoia.
I said it here months ago…a Manhattan project for alternative energy. Forget Mars, forget Iraq, screw GM and their trucks and Hummers. Get busy here and blanket the country with solar and wind energy farms.
Nanosolar over the hill from me is printing solar panels at under $3.00 a watt…and they’re selling them mostly to Germany. What’s wrong with this picture?
Jolly problem solvers here…
Looks like brains have frozen in fear and paranoia.
I said it here months ago…a Manhattan project for alternative energy. Forget Mars, forget Iraq, screw GM and their trucks and Hummers. Get busy here and blanket the country with solar and wind energy farms.
Nanosolar over the hill from me is printing solar panels at under $3.00 a watt…and they’re selling them mostly to Germany. What’s wrong with this picture?
“Nor will Obama do any better except to make things a whole lot worse…”
Ditto!
RT: Leadership, see above.
“Nor will Obama do any better except to make things a whole lot worse…”
Ditto!
RT: Leadership, see above.
@Rick Turner
“…a Manhattan project for alternative energy. Forget Mars, forget Iraq, screw GM and their trucks and Hummers. Get busy here and blanket the country with solar and wind energy farms.”
________
I’m with you there. btw, L.A. Times has an article up today speculating on “life at $200 a bbl oil.”
Many see pending catastrophe. Others see multifaceted, beneficent opportunity. The solutions are largely political, not scientific/technical. See my recent post at
http://bgladd.blogspot.com/2008/04/00143.html
We must, and we can, move largely beyond fossil fuels. Given that cost drives so much, I hope the inexorably increasing cost of fossil fuels with spur us in a more sane policy direction. Obama and others are right when they observe that “we cannot drill our way out of the problem.”
@Rick Turner
“…a Manhattan project for alternative energy. Forget Mars, forget Iraq, screw GM and their trucks and Hummers. Get busy here and blanket the country with solar and wind energy farms.”
________
I’m with you there. btw, L.A. Times has an article up today speculating on “life at $200 a bbl oil.”
Many see pending catastrophe. Others see multifaceted, beneficent opportunity. The solutions are largely political, not scientific/technical. See my recent post at
http://bgladd.blogspot.com/2008/04/00143.html
We must, and we can, move largely beyond fossil fuels. Given that cost drives so much, I hope the inexorably increasing cost of fossil fuels with spur us in a more sane policy direction. Obama and others are right when they observe that “we cannot drill our way out of the problem.”
We will, no doubt, have to sacrifice to save ourselves, our country, and our planet. The problem with the mindset of most people in the developed countries today is that they do not want to sacrifice. We, the U.S. and England, are spoiled rotten. We’ve had it too good for too long, and why? Make believe money. Credit is make believe money backed by nothing.
The only solution to this problem is to only spend what you make in cash dollars. If everyone would do that, the economy would be fine, we wouldn’t have to import crap from overseas, and nobody would be getting hurt or poisoned.
But no, we have to have produce readily available out of season, and are willing to go into deep debt to “keep up with the Joneses”.
Maybe somebody just needs to kill off the Joneses. After all, they’re only 2% of our population. When I say kill off, I mean make their wealth go away. Stop putting our money into their banks, spending our money on their fuels, and buying their crap from China.
If everyone would live like we lived in times long gone, providing for ourselves and only buying what we couldn’t buy for ourselves, we would be fine.
It’s not the Fed or the Administration that has ruined us. It’s our own insatiable appetite for more, bigger, or better. GREED AND GREED ALONE is what is destroying us.
We will, no doubt, have to sacrifice to save ourselves, our country, and our planet. The problem with the mindset of most people in the developed countries today is that they do not want to sacrifice. We, the U.S. and England, are spoiled rotten. We’ve had it too good for too long, and why? Make believe money. Credit is make believe money backed by nothing.
The only solution to this problem is to only spend what you make in cash dollars. If everyone would do that, the economy would be fine, we wouldn’t have to import crap from overseas, and nobody would be getting hurt or poisoned.
But no, we have to have produce readily available out of season, and are willing to go into deep debt to “keep up with the Joneses”.
Maybe somebody just needs to kill off the Joneses. After all, they’re only 2% of our population. When I say kill off, I mean make their wealth go away. Stop putting our money into their banks, spending our money on their fuels, and buying their crap from China.
If everyone would live like we lived in times long gone, providing for ourselves and only buying what we couldn’t buy for ourselves, we would be fine.
It’s not the Fed or the Administration that has ruined us. It’s our own insatiable appetite for more, bigger, or better. GREED AND GREED ALONE is what is destroying us.
Correction to my comment: I meant “buying what we couldn’t PROVIDE for ourselves”, not what we couldn’t buy for ourselves.
Correction to my comment: I meant “buying what we couldn’t PROVIDE for ourselves”, not what we couldn’t buy for ourselves.
Rick T:
I don’t remember where I first caught Boone Pickens talking Peak Oil and promoting his new wind farms. But here’s an interview on CNBC which covers the topic.
When an iconic “oilman” like Pickens is going all-in for wind energy you know some kind of interesting inflection point is in progress.
Rick T:
I don’t remember where I first caught Boone Pickens talking Peak Oil and promoting his new wind farms. But here’s an interview on CNBC which covers the topic.
When an iconic “oilman” like Pickens is going all-in for wind energy you know some kind of interesting inflection point is in progress.