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alstry (35.70)

WHY this time IS VERY DIFFERENT!!!!!!!!

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June 11, 2009 – Comments (21)

INFLATION...

In the seventies, we were a big chunk of the world's pruducer of goods....so when the price of goods rose....we were able to pass it on to our workers through wages increases......so as the price of inputs rose.....our wages grew in the same direction....

This time we are primarily consumers but wages constrained by international wage pressures......as a result as the price of inputs go up, we are unable to increase wages and in many cases jobs are being cut and/or wages reduced due to lower profitability.

UNEMPLOYMENT

Currently, U.S employers are hiring at record LOW rates.....so when one loses a job, it is very difficult to find a replacement....especially one of equal wages due to the migration to lower paying jobs......so when government releases unemployment figures, it is releasing a deceptively low number due to the fact it ASSUMES are historical job creation environment in its figures(Birth/Death adujstments) which is not present.

WAGE REDUCTIONS/UNDEREMPLOYMENT

Right now, are record number of Americans are receiving substantial wage cuts or working only part time when they want/need to work full time......due to profitability constraints from inflation and other factors....the only place employers can effectively cut is jobs, wages, and benefits.....and it is currently happening at a record rate affecting tens of millions of workers.

DEBT...

Never before has America's citizens, businesses, real estate, and governments been so burdened by so much debt........as a result, simply interest payments are consuming a record amount of money.....as the government pursues an inflationary monetary policy, it will drive up interest rates and down wages and decrease sales causing debt to consume an ever growing percentage of the GDP.  This process will continue until debt is consuming practically our entire GDP...Zombulation.

Add together an incredibly high debt burden, with rising interest rates, with increasing prices, and decreasing wages, high unemployment and falling profits leading MUCH LOWER tax reciepts due to evaporating incomes and sales....and we will see tax receipts to  government EVAPORATE!!!!

Government spending is about $6.5 Trillion dollars....or half the economy....if our private sector is not spending and now our government is forced to cut way back......our economy will shrink to a prune against an unsustainable burden of debt payments forcing massive defaults and driving us into the worst depression in history.

As a nation we are rapidly approaching Z Day...the day where we as a people will be forced to confront whether we continue to pursue a destructive inflationary policy destroying profitabilty and wages and jobs or whether we choose to restructure our debt and wages to sustainable levels.

Let's see how this unfolds.....it is a mess.

Now ask yourself...why would your government leaders pursue a policy they know will destroy their own economy and citizens???

21 Comments – Post Your Own

#1) On June 11, 2009 at 10:07 AM, 4everlost (30.26) wrote:

Now ask yourself...why would your government leaders pursue a policy they know will destroy their own economy and citizens???

1) I'm not certain that they know!

2) If they do, it is to centralize power, gain more control and usurp the means of production.

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#2) On June 11, 2009 at 10:10 AM, alstry (35.70) wrote:

If Alstry knows, and now you know, we know they know because it is their policy.  What is amazing is how few others know.

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#3) On June 11, 2009 at 10:12 AM, atarigod (< 20) wrote:

This makes no sense. I should buy every triple levered etf right now. Did this market forget about the blood bath that will be coming at 1pm today?

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#4) On June 11, 2009 at 10:50 AM, jesusfreakinco (29.61) wrote:

Alstry,

It sounds like you are taking posts from a year or two ago that were posted by our dear friend Jim Sinclair (www.jsmineset.com).  Jim produced a formula a few years back that predicted this information.  If you guys like Alstry, you'll really like Sinclair.  I read him daily.

Al - Glad to hear you are waking up to the reality of inflation / hyperinflation and the Weimar experience.  Where do you park your money in that environment to preserve your wealth?  GOLD and FOREIGN CURRENCIES, not the USD.  Still waiting for comments on whether others believe they should park their wealth - I have publicized my bets.  What are yours?

JFC

 

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#5) On June 11, 2009 at 10:53 AM, jesusfreakinco (29.61) wrote:

Sinclair's formula - Chris / TMFSinchy did a great job of recapping.  A must read for everyone!

JFC

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#6) On June 11, 2009 at 11:02 AM, amassafortune (30.01) wrote:

I don't see that this is much different from the stagflation of the late 70's. The nearly 7 million people receiving continuing unemployment benefits, including 2.2 million receiving federal extended benefits confirms stagnation. Rising oil and commodity prices with high debt levels indicates inflation may be gaining traction. Younger investors can do a search for "misery index" because it will be a common term again by 2010.

The U.S. may have a slower-than-normal recovery. CA will run out of money in 50 days. OH today is expected to report revenue levels are running at least 5% lower than expected. The Ohio constitution requires it to run on a balanced budget. For CA, OH, and other states, significant cuts are needed (have been needed for eight months) and will be made in the coming months. Along with auto-related cuts, expect little employment improvement this summer. 

While I do not think this recession is "very different", I grant you that the record levels of corporate leverage, personal debt, and public debt issued as the economic solution, add a wild card that will prolong recovery by several years.  

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#7) On June 11, 2009 at 11:04 AM, jesusfreakinco (29.61) wrote:

Link - sorry:

http://caps.fool.com/Blogs/ViewPost.aspx?bpid=201490&t=01006124249416869148

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#8) On June 11, 2009 at 11:27 AM, alstry (35.70) wrote:

amass,

It is very different....

Wages are crashing.....NEVER has this happened in American History........period.

Think about this for a minute or two.....then add in massive debt and rising prices for big expenses such as fuel and insurance.

Never in American history have we had so many so distressed....and tens of million more waiting in line once government is forced to slow spending.

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#9) On June 11, 2009 at 12:14 PM, mliu01 (< 20) wrote:

Alstry: Great post. You solved one of the myth of higher inflation will lead to higher wage bs.

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#10) On June 11, 2009 at 12:24 PM, jesusfreakinco (29.61) wrote:

Alstry - ditto to mliou01 - great post and breaking the myth of what will lead to inflation.   Not higher wages as in the 70s, but a lower dollar and higher import prices.  People don't realize that we don't manufacture anything in the US any longer.  Virtually everything we but (less food that is grown here) is imported. 

I'd be curious to know how much of our food is imported.   Any one have any idea?

JFC

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#11) On June 11, 2009 at 12:38 PM, mliu01 (< 20) wrote:

jesusfreakinco: I think we are net exporter of food. But in CA, the water shortage are stopping some farmers from planting this year.

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#12) On June 11, 2009 at 12:40 PM, russiangambit (29.94) wrote:

> Alstry - ditto to mliou01 - great post and breaking the myth of what will lead to inflation.   Not higher wages as in the 70s, but a lower dollar and higher import prices. 

Exactly. That is the cause of inflation in every 3rd world country. Not rising wages ( you rather should ask what wages?).

I think we saw this imported inflation during 2000-2007 when dollar fell so much against Euro. What saved us that Chines and Japanese held their currencies down so we didn't have much of imported inflation. We were buying goods from Chinese and Japanese (European were too expensive) , but food did get more expensive and oil eventually did too. At the same time Greenspan was worrying about deflation and keeping interest rates at 1-2%, and the official CPI as well.

So, on the inflation/deflationa argument we have to see how much of imported inflation we will have. Oil will be more expensive, as well as food and comoodities (raw materials). What about Chinese goods and Japanese cars? We will have inflation in imported goods and deflation in local goods, when you sum up and average those two forces, the end result depends on the weight of imports vs. local.

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#13) On June 11, 2009 at 12:42 PM, russiangambit (29.94) wrote:

I want to clarify that in my previous post, I should've referred to inflation as "price increase". Theoretically, inflation is an increase in money supply. Increase in prices isn't necessarily directly correlated to the money supply. But for an average person, price is what matters, and increase in prices called inflation.

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#14) On June 11, 2009 at 12:46 PM, StopLaughing (< 20) wrote:

Alstry   This is one of your better posts. It has a lot more logic and reasoning in it and less flambouyancy.  That makes you more believable.

Good Work. 

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#15) On June 11, 2009 at 2:11 PM, alstry (35.70) wrote:

Guy,

If you go back and read all of my blogs....they have been remarkably consistent with this one....the only difference is Alstry chose to put it in a different wrapper....

Think about that as you read the news.

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#16) On June 11, 2009 at 6:16 PM, mliu01 (< 20) wrote:

Alstry: Stop padding your blog talking about what other people saying. If we believe them, we won't be here reading yours.

 And stop the bragging  blogs. I know you are great. so don't waste my time to remind me that.

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#17) On June 11, 2009 at 6:34 PM, alstry (35.70) wrote:

mliu,

It is hard to be humble when you are giving away so much good stuff for free.....

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#18) On June 11, 2009 at 8:18 PM, AdirondackFund (< 20) wrote:

I've shorted the phone book here in my Caps account, and continue to do so everyday.  Even though the market moves higher, I'm 'beating the market', as they say, nearly everyday.  The exact phenomena isn't well known, but the bottom is coming out from underneath the market, even as the market narows and moves higher. 

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#19) On June 12, 2009 at 11:26 AM, mliu01 (< 20) wrote:

Alstry: yah. hahahaha

I was joking.

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#20) On June 12, 2009 at 1:24 PM, alstry (35.70) wrote:

And I was serious.....????

 

;)

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#21) On June 17, 2009 at 12:06 PM, Crosshair (92.72) wrote:

The Government is not looking to inflate our way out of this mess. It is acting to prevent a deflationary spiral and avert the overall collapse of our financial institutions. The fact is, the Federal Reserve is monitoring inflation quite closely. Mr. Bernanke has expressed on numerous occasions there is sufficient slack in the economy to absorb the purported inflationary pressures. Currently, the monetary and fiscal stimuli are mildly affecting CPI. Once inflation picks up, having eaten through the slack it faces now, the economy will be in a state of recovery, which will signal the authorities to remove the stimuli.The purpose of the stimuli is to boost aggregate demand, while allowing private firms to shore up their balance sheets and cut costs. The fallacy of composition is at work and needs to be understood before making sense of the recent government efforts. It goes something like this: In a recessionary environment, it is true that private firms need to shore up their balance sheets and make appropriate cuts to control costs. In effect, at a micro level, firms are doing what they need to be doing in light of this crisis. However, at a macro level, something is terribly wrong, aggregate demand has swung way to the left, placing downward pressures on prices. This is where the government needs to come in and spend when nobody else is willing to, i.e. it needs to shift aggregate demand to the right until business is ready and able to resume spending and defend the economy at potential output levels. Once business is on a healthier footing, government is in a position to collect larger tax amounts and repay its debts. The goal is to smooth out the ebbs and flows of markets.This is the aim of government efforts. So far, we are seeing evidence that monetary and fiscal policy is working.

 

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