Regarding inflation vs. deflation

There is an ongoing debate about what the US is going thru and what it will go thru: inflation or deflation?

Martin Armstrong says we are in a deflationary monetary cycle. And in the big picture, he is right.

However,

Groovygirl has always said, it depends where you are. And gg has always said, it doesn’t matter how cheap a product/service is, if you don’t have any money to buy it. It is always about can your wages buy the necessaries or not? It really doesn’t matter the actual price, it’s the relation. Can you pay cash to buy a car or must you borrow? Can you borrow? Can you afford the monthly payment? A house? College? Health care? What percentage of your monthly income is spent on debt? 10%, 25%, 50%? If your wages go down, it could turn into 75% overnight?

I remember my grandfather talking about the Depression. He said he was much better off than many people because he had a steady job. He didn’t get a raise for 10 years, but he could save money and buy a car, because prices were low or relatively lower than before 1929/1930. He didn’t have to go in debt to survive. He could pay for food and rental housing and some extras like a car. And he wasn’t ever unemployed during that time.

People were in trouble during the Depression, because they couldn’t get a job, couldn’t earn enough (Farmers) to buy food and shelter, or couldn’t keep a steady income over that 10-year period and fell into debt to buy necessities. So, prices were expensive to them and many were starving and homeless.

It’s the relation of wages (employment) to prices. That’s why people are protesting for a higher minimum wage.

(That’s why people are leaving California with its high state income taxes and high property taxes for the Midwest. That’s why seniors are flocking to states, like Florida, that have no state taxes. People that can move are moving. They can do math and they can save 10-30% simply by moving to a different state and might get a better or steady job.)

But in Germany in the 1930’s, it was all about inflation. But inflation in prices didn’t keep up with wages (because of the country’s debt and their short-term solution of currency manipulation). It was still about the disconnect between wages and prices, but this time is was an inflationary macro environment.

So, structure investments, jobs, and assets to bring in income/gains that will keep up with prices in your home currency. And don’t forget about taxes. Income taxes and other taxes were not as extensive in the 1930’s as they are now. They must be considered in the “price” of living and assume they will go up.

John Williams with shadowstats.com

John Williams has his latest real stats out. You pay for the detail, well worth the money, but here is the punch line:

– Strongest Signal for a Recession Since September 2007
– January Real Retail Sales Activity Plunged by 0.6% for the Month
– Unadjusted Monthly January 0.4% CPI Inflation Squashed to 0.1% by Seasonal Adjustments
– January Annual Inflation: 1.6% (CPI-U), 1.7% (CPI-W), 9.2% (ShadowStats)

John uses the original inflation index formula, before gov started jacking with it. Did your wages/income go up by 9% to meet the real inflation index? groovygirl’s didn’t. Who needs hyperinflation when wages are down or flat or zero because you are unemployed coupled with a 9% real inflation rate and climbing? In the main street household, that can feel like hyperinflation pretty quick. At the very least, it means less consumer spending, saving, and debt for big purchases like houses, cars, and student loans.

John Williams with shadowstats.com

Summary of John Williams’ real stats:

– Inflation Picks Up as the Economy Slows Down
– December Annual Inflation: 1.5% (CPI-U), 1.5% (CPI-W), 9.1% (ShadowStats)
– Real Retail Sales Declined by 0.1% in Industry’s Flagship Month of December; Slowing Annual Growth Signaled Recession
– Real Weekly Earnings Declined in December

gg says: quite a disconnect between inflation formula of today and inflation formula of the pre-1980’s. If you don’t like the number, just change the formula! Did your wages and/or investments go up 9% after taxes?

Excellent Interview on Gold for 2014

This interview from a Switzerland perspective on gold/precious metals with Egon von Greyerz. Click here. About 25 minutes.

One important thing he states is that what he thought would happen (collapse of the dollar and its impact on global fiat money system/precious metal investments) is taking longer than he thought. He didn’t think that people would take the huge amount of printed money from all central banks, not just the US, as actual money. gg agrees, she certainly wouldn’t. But not everyone invests as gg would. Short-term profits rule at the moment, no question about it.

And the very important thing he says : “People should prepare themselves to the best of their ability and then just continue to enjoy life.” Excellent advice. Very good interview.

• European, and particularly Switzerland, perspective.
• This person advises very wealthy people, probably mostly Europeans, so he mentions things like art, diamonds, etc. So, not everything will apply to the Main Street investor.
• This person has been in the business/economics for a very long time. When he talks about the fall of the dollar (especially vs the Swiss Franc), it is on a 50-year time line.

Latest Blog Post from Martin Armstrong dated August 11, 2013

Click here for Martin Armstrong’s latest blog post entitled Defining Hyperinflation: The Coming New Currency dated August 11, 2013.

Very important post. There is major disagreement in economics about the true definition of hyperinflation. Martin spells out his definition of hyperinflation and why he thinks we will not get to that point. in the US Dollar.

Martin does advocate that before hyperinflation, we will have an international 2-tier system. A virtual reserve and international trading e-currency and a national “dollar” currency. From Martin’s post:

Some define hyperinflation as merely the cumulative inflation rate over three years approaching or exceeding 100% with an annual rate above 25%. The reason I do not agree with that definition is because many countries have had brief periods of inflation at that level, survived, and even the currency lives for another day. The USA experienced about 20%+ going into 1980.

gg says: Groovygirl still wonders where all the global dollars will go. Can they really all be absorbed by the new e-currency? She thinks some must flow back to the national dollar currency. It is still possible of a dislocation after (or a panic before?) the e-currency international set up. GG is not confident that they can fore-see all consequences.

There is also the issue of the widening gap between wages and living expenses (and of course, higher taxes). Baby boomers are and will be on fixed incomes. Any, any uptick in monthly and annual expenses whether inflation or additional taxes or individual medical expenses, and it sure looks like hyperinflation to individual on the ground.

I don’t know about you, but gg remembers the 70’s inflation. It was no picnic. Baby boomers will be in a completely different place in their economic and income-producing life if that should happen again. I do not think they will be that forgiving at the voting booth.

Interview with John Williams

Another great interview with John Williams of shadowstats.com. Click here. He explains why the official stats have no basis in reality and we are approaching a hyperinflation situation.

Next phase

Jim Sinclair makes a good case for hyperinflation or currency induced cost push inflation. Click here.

John Williams with shadowstats.com

His summary is free:

– Official Quarterly Production Growth Rates for Second-Half 2012 Were Weakest Since Recession Trough in 2009
– Corrected for Understated Inflation, Real Retail Sales and Production Show
Post-2009 Stagnation Turned into Contraction in Second- or Third-Quarter 2012
– December Year-to-Year Inflation: 1.7% (CPI-U), 1.7% (CPI-W), 9.4% (ShadowStats)
– December Housing Starts Gain Still Not Statistically Significant
Despite Some Boost from Hurricane Damage

Real year over year inflation is 9.4% vs. the official 1.7%.

John Williams with shadowstats.com

Latest update from John Williams from shadowstats.com. You pay for the detail, but here is the summary:

– Merrily We Roll Along, Towards Hyperinflation
– U.S. Sovereign-Solvency Concerns Could Resurface Quickly in Global Markets
– December Retail Sales Gain Was Statistically Insignificant;
Activity Was Blurred by Storm Impact and Unstable Seasonal Adjustments
– Despite Stable Oil, December PPI Was Hit by Lower Food and Gasoline Prices

Interview with John Williams of shadowstats.com

Here is the latest interview with John Williams via usawatchdog website.