History tells us that hyperinflation is always and without exception caused by the government [acting in concert with a Central Bank] and never by consumers, unions or companies, which is apparently understood only by few people.
The effect of the one TRILLION increase in the monetary base depicted above, was recently analyzed by Mike Whitney in his article, Bernanke's Shell Game, where he explained,
…Former hedge fund manager Andy Kessler sums it up in a recent Wall Street Journal article, "The Bernanke Market". Here's a clip:
"By buying U.S. Treasuries and mortgages to increase the monetary base by $1 trillion, Fed Chairman Ben Bernanke didn't put money directly into the stock market but he didn't have to. With nowhere else to go, except maybe commodities, inflows into the stock market have been on a tear. Stock and bond funds saw net inflows of close to $150 billion since January. The dollars he cranked out didn't go into the hard economy, but instead into tradable assets. In other words, Ben Bernanke has been the market."
And here’s what this really means,
“It means the revered professor Bernanke figured out a way to circumvent Congress and dump more than a trillion dollars into the stock market by laundering the money through the big banks and other failing financial institutions. As Kessler suggests, Bernanke knew the liquidity would pop up in the equities market, thus, building the equity position of the banks so they wouldn't have to grovel to Congress for another TARP-like bailout. Bernanke's actions demonstrate his contempt for the democratic process. The Fed sees itself as a government-unto-itself.
Over at Zero Hedge, Tyler Durden did the math and figured that the recent 45 per cent surge in the S&P 500 had nothing to do with the fictional economic "recovery", but was just more of the Fed's hanky panky. Durden noticed that the money that's been sluicing into stocks hasn't (correspondingly) depleted the money markets. That's the clue that led him to the truth about Bernanke's 6 month stock rally.
Zero Hedge: "Most interesting is the correlation between Money Market totals and the listed stock value since the March lows: a $2.7 trillion move in equities was accompanied by a less than $400 billion reduction in Money Market accounts!”
Where, may we ask, did the balance of $2.3 trillion in purchasing power come from? Why the Federal Reserve of course, which directly and indirectly subsidized U.S. banks (and foreign ones through liquidity swaps) for roughly that amount. Apparently these banks promptly went on a buying spree to raise the all important equity market, so that the U.S. consumer whose net equity was almost negative on March 31, could regain some semblance of confidence and would go ahead and max out his credit card. Alas, as one can see in the money multiplier and velocity of money metrics, U.S. consumers couldn't care less about leveraging themselves any more."
So, you see folks, all the talk we’ve heard of “green-shoots” and “recovery” are little more than high-stakes sleight of hand on the part of Mr. Bernanke’s Federal Reserve and his captive, agent-banks. ~snip
Here's the link to Bernanke's Shell Game: http://www.counterpunch.org/whitney08042009.html
Check out the info on the shell game going on by scrolling down to "The Fed Buys Last Week's Treasury Notes." If you still have any money in the market, now would be a good time to take it off the table. It may take a month or a few months, but eventually this market has to have its RENDEZVOUS WITH REALITY.
Zero Hedge: "Most interesting is the correlation between Money Market totals and the listed stock value since the March lows: a $2.7 trillion move in equities was accompanied by a less than $400 billion reduction in Money Market accounts!”
NVDave - what do you think?
Duh, the government is the creator of money ~ of course it’s easy to blame the government.
Probably both inflation and deflation at the same time.
Inflation on imported goods, because of the drop in the value of the dollar on exchange. But that will be restricted by drying up of demand.
Deflation in wages, due to shortage of jobs.
Deflation on price of domestically produced products due to soft demand and job cuts.
BUT, all of this depends on how long Obozo can stay in office. If he is removed, this could turn around quickly.
The Palin / Bolton ticket will shoot that down.
SO WHO WERE THE PRIMARY BUYERS?
Who's in on this deal? Goldman? Soros?
>>Check out the info on the shell game going on by scrolling down to “The Fed Buys Last Week’s Treasury Notes.” If you still have any money in the market, now would be a good time to take it off the table. It may take a month or a few months, but eventually this market has to have its RENDEZVOUS WITH REALITY. <<
Interesting. I am literally doing my Investools training as I read this. (investools.com)
>>Check out the info on the shell game going on by scrolling down to “The Fed Buys Last Week’s Treasury Notes.” If you still have any money in the market, now would be a good time to take it off the table. It may take a month or a few months, but eventually this market has to have its RENDEZVOUS WITH REALITY. <<
If we end up with wild inflation, would that not very much be reflected in stock prices?
I've read that exactly the same has happened in China with their stimulus money...it's all being 'gambled' in the stock market.
So the understanding is that what we’re heading for in the immediate future is hyperinflation with deflation, but not both at the same time?
bookmark
Why take it off the table? If you know it's going to tank in a month or two, it would be a good time to short the S&P or Russell.