Tag Archives: Stagflation

Housing Pricing up 11% !?!?!?

Does anyone question why housing prices increased nationally 11% year over year as reported last week? How could this be amidst such high unemployment? How could this be when American wages increased a mere 1.6% this year?

Where is the demand coming from? Where are the dollars coming from as more than a third of our housing is being paid for with 100% cash? Could it be that some of the trillions of dollars that have been pumped into the world to sustain the bubble are now coming home to roost?

Is it possible that even as Americans’ wages stagnate, being kept low by high unemployment, our cost of living will now begin to escalate wildly? Has our policy of quantitative easing finally begun to see the first noticeable leak in the dam?

In Darryl Schoon’s article:


He points out an extremely insightful context that Japan’s substitution of borrowing-based government spending to make up for the loss of private demand, while not repairing their economy, did hold a deflationary spiral at bay, but only because its economic implosion occurred during an historic, credit-derived spending bubble of EurAmerica that supported Japan’s export strategy.

He also points to the obvious conclusion that the worldwide bubble has run its course and has exhausted its ability to maintain world pricing. Therefore, Japan’s strategy will no longer work and the world that has embraced Japan’s solution is now in for an abrupt awakening. Darryl now suggests that we could experience an extreme depression while experiencing extreme inflationary pricing simultaneously, a stagflationary depression.

Housing prices up 11%…..

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Filed under Economic Crisis, U.S. Monetary Policy

In the World’s High Stakes Game of Chicken, Bernanke May Have Just Blinked

In Ben Bernanke’s first ever news conference, he stared down reporters with his boldface rejection of a QE3, but my guess is that in this international game of chicken, Bernanke will soon blink. He disclosed that he will not begin a QE3 after QE2 finishes on June 30, and that the Fed funds target rate may buoy from its near zero rate. His reasons for this decision were that his concerns for inflation have overtaken needs to prime the sluggish economy, and that QE2 has been “effective” and “successful”. With Bernanke’s finger on the button of the world’s economy, has he really forsaken quantitative easing?

Pumping a previously unimaginable $1.5 trillion into the economy certainly had to be “effective” on some level but unfortunately, not on the level that would ease anyone’s mind that America, or the world for that matter, has dodged imminent danger. With all of the stimulus and quantitative easing that encouraged it, the U.S. economy crawled ahead 1.8% in the first quarter of 2011, well below the rate of a normal recovery. Meanwhile, unemployment claims are edging higher as a quarter of the U.S. suffers unemployment or underemployment, and the recent moderate gains in housing prices have peaked and are retreating once again.

The recent rise in commodities signaled the expected results of America’s monetary intervention, inflation. America’s consumer’s goods consumption is import driven and those prices are going up. If Bernanke actually holds true to the promise he gave America prior to testing his monetary theories, and pulls dollars from the economy in response to rising prices, America’s economy will turn down a more diligent path of squeezing out its excesses through a hard double dip recession combined with inflation.

The combination of Japan’s recent tragedy and a continued potential for a downturn in the U.S. may lead to a softening in the growth of worldwide demand, thereby reducing the potential for real demand inflation. However, as the unprecedented flood of dollars multiply in the market, we will see the lagging effect of a continuing drop in dollar purchasing power that will more than offset the soft economy to produce inflation. Commodity prices are the leading indicator of future general inflation as the QEs work their way through the economy.

America will then have stagflation similar to that caused by the currency expansion and oil embargo of the ‘70s. Our import consumer goods prices will accelerate higher, while our domestically captive service prices will drift lower leading to reduced wages and higher unemployment, as commodity inflation saps the energy out of our service driven domestic economy.

Bernanke has the choice of funding a QE3 to pay for rising interest rates that are bound to occur as a result of previous government intervention, or of pulling the plug on this bad monetary experiment and potentially having some frustrated economist coin a phrase with his name in it to mean a “really really bad stagflation”. My guess is that rather than be known for the Bernanke Splits, he will blink and a third, perhaps more moderate, round of QE3 will begin to assist inflation even higher.

That’s my take, what’s yours?

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Filed under American Governance, Federal Reservre, U.S. Monetary Policy