muses of the moment

April 22, 2015

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.

March 4, 2014

Pensions

Filed under: Credit Derivatives, Economic Crisis, Taxes, The Banking Crisis, The Financial Crisis — totallygroovygirlfriday @ 10:14 am

Click here for a very good article describing why city, county, and state pensions could be in trouble. derivative bets. Although this article about PIMCO and the recent departure of Mohamed El-Erianas, this article goes into detail about how derivative bets are putting pressure local and state balance sheets. The first thing to be “restructured” is pensions. When cities, counties, and states are in trouble, taxes go up and services go down, and maintenance items are put on the back burner.

This paragraph from the article was very interesting. Clearly shows what will implode PIMCO:

According to the publication of Morningstar Top Holdings snapshot, about three quarters of PIMCO derivatives were
bets on European currency financial futures and the balance was on U.S.
dollar futures. Some of PIMCO holdings have a “negative cash position”
that usually represents short selling — short sale being a speculative investment that profits when prices fall. The Total Fund portfolio looks similar to leveraged hedge fund portfolio. PIMCO
derivatives seem all about “maximum return” and not very much about
“preservation of capital and prudent investment management.”

Groovygirl believes that the combination of derivative bets (balance sheet problem now coming due) and lower tax revenue from falling property values (the housing market decline) and falling sales taxes from lower economic activity coupled with long-term maintenance aged-related expenses (income sheet problem) has brought these issues to the fore-front. Every city is in involved derivatives, it is how cities kept pension funds in the black at least on paper that they raided long ago. Cities can’t print money.

You can hide a balance sheet problem with more revenue. But when revenue falls or expenses increase your balance sheet problem becomes unavoidable. This is accounting 101, but no one in government seems care. Juggling accounting, not prudent governing, seems to be just doing business. “Hiding a poor balance sheet” is not a long term business plan.

January 31, 2014

Latest Blog Post from Martin Armstrong dated January 29, 2014

Filed under: Taxes, The Federal Reserve, The Financial Crisis, US Government Debt — Tags: — totallygroovygirlfriday @ 1:55 am

Click here for Martin Armstrong’s latest blog post entitled Cycles & Obama’s Tax Free Bonds dated January 29, 2014. Groovygirl thought the creation of new bonds was the big news in Obama’s speech this week.

Martin says:

The selling of new tax-free debt long-term regains sovereignty and
eliminates the need for primary dealers who blackmail government. This
is the game changer. It is starting to recognize that there is a debt
crisis, yet do not reform the system, only further its advance. That is
why we will still crash and burn.

January 22, 2014

Hackers

Filed under: Odds 'n ends, Taxes — totallygroovygirlfriday @ 1:10 am

Hackers, the new barbarians at the gate of Rome…..

Click here for a spot on hacking the healthcare.gov site. Apparently, not only will you have to buy health insurance you can’t afford, or as the Supreme Court said, pay a tax; you will have to dole out a monthly fee for identity protection. Nice….

This should end well.

January 18, 2014

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?

December 21, 2013

Catherine Austin Fitts

An excellent video interview with Catherine Austin Fitts over at usawatchdog. This interview is from July 2013, but very important for 2014 and moving forward.

November 21, 2013

John Williams from shadowstats.com

Free summary from John Williams at shadowstats.com. He has the real stats.

– Watch Out for the Dollar
– October Annual Inflation: 1.0% (CPI-U), 0.8% (CPI-W), 8.5% (ShadowStats)
– Retail Sales Gain Was Statistically Insignificant; Recession Signal Remained Intact
Official Real Earnings Declined in October
– Existing Home Sales Declined for the Month; Annual Growth Slowed Markedly

Groovygirl looks at the spread between the real inflation rate, right now running around 8.5%, and the rates you can earn at the bank. Those are currently running better than recent months around 2%. Whoo-hoo! This gives a good idea about how far behind real people are falling. Someone living off of investments alone would have a hard time finding a consistant 8.5% return after taxes. (Maybe real estate cash flow) If you compare a business/company’s annual gain and the real inflation stats, it will give you a quick look to see if they are falling behind too. Business annual reports are more complicated, but it directs you to which businesses to investigate further. You can do this with tax revenue for states, counties, and cities, etc. If they are not bringing in at least 8.5% more, then they have to cut somewhere at some point.

Easy money and credit have hidden these truths since the dollar began to really fall in 2001. Once liquidity evaporates for good, it is all over. We have experienced liquidity evaporating twice in the last decade and numerous examples from other countries in the last 5 years. We know what happens. It should not be a surprise when it happens again and you have no excuse not to be prepared.

Chart of the Day is an updated inflation-adjusted DOW chart. We keep hitting that resistance level. Click here.

Groovygirl knows that everyone is excited about the stock market and “new highs”, but this chart of the day shows:

  • A clear winter cycle since around 2000 or the dot.com bust
  • A firm resistance level at around $15,000 (inflation-adjusted)
  • After taxes, you may have not made back your losses, even if you entered the market perfectly timed. Taxes are very important to consider in these times.
  • There were major swings in the stock market during the Great Depression as well. This is not unusual.
  • We are really in the middle of the long-term trading channel. We could go up, we could go down…..

The recent drops in this winter cycle were driven by bubbles popping and terrorist events. (dot.com pop, 9-11, and housing bubble pop) During a winter cycle, the market is very sensitive to outside forces. Confidence is easily and quickly lost and then regained. This is why buy and hold is not a good long-term strategy during a winter cycle. Groovygirl is not saying that you can’t make money during a winter cycle, it just isn’t the best time for a buy and hold pattern.

September 4, 2013

June 27, 2013

Martin Armstrong on You Tube

Several interviews with Martin Armstrong over the last few months.  Search Martin Armstrong on YouTube. (H/T to reader DB.)

But here are some of the good ones:

June 19, 2013

Latest Blog Post from Martin Armstrong dated June 18, 2013

Filed under: Dollar Crisis, Economic Confidence Model Cycle, Economic Crisis, Martin Armstrong, Taxes — Tags: — totallygroovygirlfriday @ 12:54 pm

Click here for Martin Armstrong’s latest blog post dated June 18, 2013 entitled G8 Going to Hunt Down All Capital.

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