Inflation Accelerates; Dividing Society Benefits Politicians; Oil Policy Has a Different Goal

March 16, 2012

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"We do not desire at all that the great masses shall become well off. . . . How could we otherwise rule over them?" Friedrich von Gentz.

Ad hominem: "an attempt to negate the truth of a claim by pointing out a negative characteristic or belief of the person supporting it. Ad hominem reasoning is normally described as a logical fallacy.”

One of the five rules of power politics: "depend on as few of people as possible" – Bruce Bueno de Mesquita

Politically, It’s ideal to have a nation dependent on you, which necessitates taking from others. – HS

A big financial crisis "is often due to policies that prolong the economic cycle while avoiding necessary structural changes." Andy Xie

#Research shows more price persistence for downgrades than upgrades Ravenpack

Central banks:

“Sufficiently large monetary injections will materially relieve the government’s budget constraint, permitting tax reductions or increases in government spending without increasing public holdings of government debt. Effectively, the fiscal channel is based on the government’s substitution of the inflation tax (a tax with little or no deadweight loss in a deflationary environment) for direct taxes such as income taxes.” – Ben Bernanke (2002)  HistorySquared

"When you think about it, when you borrow money, all you’ve done is you’ve accelerated consumption. All that really does, is, at some point in the future cause you to lessen your consumption so you can pay off that debt." Wil VanLoh

  • Everyday Price Index, made up of things everyone purchases regularly, like toothpaste, up 8.0%. AEIR
  • “Core intermediate prices are up 1% in Feb, showing firms are moving to pass higher fuel costs to customers downstream. … @joebrusuelas:
  • Central bank cartel breaking apart: Eric Sprott

Goldman Sachs: "Fed to launch QE3 soon" Seeking Alpha. It’ll likely be Mortgage Backed Securities; Bernanke has pushed for more measures to increase inflation in the housing market, while many portfolio managers, like Pine River and Hayman Capital, have been buying MBS for months.

Allan Meltzer tells it like it is $Fed CSPAN (video)

  • ‘Government can’t go to congress to get more money, so they are getting the Fed to print.’
  • “Productivity is falling, (and inventories rising), implying inflation is coming."
  • "Bubbles are caused by people getting out of money." – Alan Meltzer
  • "#Inflation is like a banana, once you see one brown spot, it’s too late." central banker Henry Wallich

Amity Shales: "Watch Bernanke’s" Little Inflation" Capsize: bloomberg

  • "The thing about #inflation is that it accelerates." Amity Shales,
  • #Inflation went from 1 percent for 1915 to 7 percent in 1916 to 17 percent in 1917.
  • In 1945, inflation was 2 percent, at least officially. Within two years that level hit 14 percent.
  • All appeared calm in 1972, too, before inflation jumped to 11 percent by 1974, and stayed high for the rest of the decade

"The whole political model since World War II is about making and giving people promises that end up with economies running out of money." Trafalgar’s Lee Robinson

US:

President Obama wants more low skilled manufacturing jobs in the US because he doesn’t think some people are capable of doing more. Only if you believed someone was incapable, would you argue for handouts while relegating people to low end manufacturing jobs. It’s sad. Low skilled manufacturing jobs are going away no matter what the administration wants; Foxconn has 10k robots now and is scheduled to add 1 million more in the next few years. For those thinking investment, Foxconn is building the robots in house. Increasing health care costs on employers, while promoting these jobs merely prices in the robotic technology sooner. People are resilient; they go through a retraining period, fill the millions of jobs for which people are unqualified. Four out of ten companies cannot find qualified workers; 99 weeks of unemployment merely enables, while their skills deteriorate. This is why it’s desirable for prices to deflate during the retraining period, not inflate, which creates stagflation. People will inevitably seek retraining for higher skilled jobs, like nursing for example, raising the standard of living for society in the long run.

  • The Robots Are Coming to Hospitals WSJ
  • Stanford’s Carol Dweck says people have either a growth mindset or a fixed intelligence believe system. google

Big firms get artificially cheap credit via Fed, provided competitive advantage for big companies over small, misprice risk, creating a bubble in junk bond. Health care, tax, and compliance regulations are fixed costs that hit aspiring entrepreneurs and smaller companies hardest. These policies make it easier for the government to control firms and stuff their debt in banks, satisfying one of game theorist Bruce Bueno de Mesquita’s rules that guide political decisions: “depend on as few as people as possible.” #operationnewbubble – Big Think

  • Bank of America: 70% of high yield investors reported being overweight credit, close to the record (71%) #operationnewbubble.

At least not all taxes are wasted: IARPA RFP: ‘create a game to train people to recognize and mitigate behavioral bias’ IARPA

Market

  • Stocks diverges from Macro data zerohedge
  • AAII Sentiment Survey: Bullish 45.6% (+3.2) | Neutral 27.2% (-1.4) | Bearish 27.2% (-1.8) AAII
  • Poll: 48% Blame Bad Economy on Bush Recession, 46% Blame Obama’s Policies Rasmussen: they are both correct.

Companies

$MSFT: Builds a Browser for Your Past: Lifebrowser uses artificial intelligence to comb through computer, create Wired. A survey asked the elderly what they would have done differently: reflecting more was one $MSFT project a possible solution. MSFT could be creating tools to enable you something like: "The Personal Analytics of My Life" by Mathematica’s Stephen Wolfram Wired

$GOOG views data farm and custom machinery as IP, builds servers in the Dark http://t.co/E7jOjCUy

US Police State:

  • CIA Chief: We’ll Spy on You Through Your Dishwasher Wired
  • Senators Demand DOJ Release Secret Spy Court Rulings Wired
  • Minority Report: "Pre-Crime Detection System Now Being Tested in the U.S." Big Think
  • NY to be 1st state to collect DNA evidence from nearly all ppl convicted of crimes. "This bill will save lives." WSJ
  • Internet providers to start policing the web July 12 RT
  • State Dept. moves to fire whistleblower who authored book detailed Iraq reconstruction waste and corruption WSJ
  • As Whistleblowing Becomes Financial ‘Industry’ ZeroHedge Note: Communists also incentived its members to turn on each other .

Oil:

“Obama reelection now a national emergency.” Zerohedge

Obama’s energy secretary is on record expressing his desire for higher prices to rise to “the levels of Europe” to price in failed alt energy bets. Meanwhile, although Bernanke’s research links oil prices to recessions, recent testimony suggests he simply believes the higher oil prices are worth it. While prices will come down, it’ll unlikely come from the administration; one could argue they want higher energy prices.

  • Poll: A February Pew poll showed a 42% to 15% margin for building the pipeline – the rest is undecided i presume Rasmussen
  • Opinion: Trading an oil bubble is tricky Calgary Herald
  • Conference speaker: Massive worldwide debt binge creates challenges for oil and gas financing – My.. mywesttexas.com
  • Natural gas replacing coal: coal generated electricity off is off 5.4% and coal transported by rail down 7% ytd. $BTU $ACH

World:

  • "From 2000 to 2008, over that eight-year period, the world added $100 trillion of debt," a trend begun in 1980 -VanLoh Quantum Energy
  • Hedge fund veteran Lee Robinson says more defaults is ‘the only conclusion’ $EURUSD investment Europe
  • Spanish Stocks Miss Rally on Rajoy Budget Gap Skepticism BloombergNews
  • Norway Joins Currency Wars, cuts rates as competitive devaluation spreads- WSJ
  • "George Soros — enemy of free speech & an utter disgrace to the memory of Karl Popper " @FriedrichHayek #soros
  • Greek charts and stats http://t.co/JhsSECTx
  • CSFB: Excluding the Bank of England holdings, foreigners now holding close to 40% of the gilt market, puts country at risk – $GBPUSD
  • UK’s 100 year bond proposal similar to 1930s War bond, which promptly plummeted amid inflation
  • Britain’s inflationary route to default $GBPUSD UK Telegraph
  • Fitch Puts U.K. Debt on Negative Outlook Days Away From Budget BloombergNews
  • "Default and the Nature of Government" http://t.co/wLznaCTA

China:

  • Chinese metaphor: guo jin min tui : "the state advances, the private sector retreats"
  • The theme for China is "deflation in things you own, inflation in things you need." – HS
  • First piece of good news in the South Sea in eons: Chinese ambassador Ma Keqing: "Pacific big enough to share," after US increased military presence in South Sea Courier Mail
  • Stratfor: China’s growing trade deficit and Beijing’s recognition that its export-oriented growth model is not sustainable ..
  • Socgen: "China’s fiscal revenue growth has been too fast to be good." –
  • China’s Foreign Direct Investment Falls for Fourth Month bloomberg Strong FDI that reverses, is a leading crisis indicator.
  • "Chinese consumers literally risk their lives the moment they consume something." – bullish on US Brands $MO $PG $JNJ
  • Hard core maoist Bo Xilai Removed from Office, Patrick Chavonec
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