And yet the Mainstream Media (MSM) never talks about it
It’s been 6 years now since the US real estate market first began to collapse in 2007. It’s been over five years since the stock market crashed in the fall 2008. And yet here we sit today in the same recessionary stew pot that eight Bush years and five Obama years have created.
There has been no forward movement to speak of toward economic recovery. There has been lots of backward movement, especially for the American middle class. Their lot in life has never been so depleted for so long since WWII. Alarmingly, things continues to move in the wrong for so many, yet government seems oblivious to their worsening plight.
Were you to read the major newspapers of record you would not even get a glimpse of the plight of the common man. Neither do you hear the talking heads address the financial adversities faced by a growing majority throughout the country. Except for very few alternative news media, you rarely hear about the threesome scourge that has made its presence felt throughout the land.
Which is it? Inflation, Deflation, or Stagflation
It’s Actually All Three
You don’t have to be a Harvard-trained economist to know that the worldwide marketplace is experiencing inflation, deflation and stagflation at the very same time.
• Asset deflation has been ongoing since the real estate market collapsed in 2007.
• Price inflation has ramped up with the implementation of Quantitative Easing.
• Economic stagflation began when consumer confidence waned after the Stock Market Crash of 2008.
There’s no debate here — just the obvious effects of disastrous US fiscal policy and even more catastrophic Federal Reserve monetary policy.
How can there be real confidence in the system when interest rates have been kept artificially depressed for so many years?
When this is the case, savings are discouraged. Conservative investors then move their money to much more speculative investments. Ultimately much of this capital ends up being redistributed to the top 1%. The 1% are all insiders who know how to play the game — a game that is stacked against the little guy.
The current institutional arrangements are designed to favor the large pension funds, mutual funds, insurance companies, hedge funds, sovereign wealth funds and other large trading blocks. The barriers to entry, particularly access to the required data which would allow an investor to make informed decisions, are so great because of the “corporate-contrived accounting code” which obfuscates virtually every balance sheet and income statement out there.
Inflation, deflation, and stagflation are mutually reinforcing each other
The immediate challenge isn’t just addressing each of these three trends. The real problem is that they tend to mutually reinforce each other, particularly the longer they are allowed to trend in the wrong direction.
Price inflation is proceeding unchecked, and has been since the 2008 Crash. So is asset deflation. Economic stagnation is the only byproduct that could be expected.
• Especially when government fails to reform the tax code and endlessly looks to raise taxes on an already burdened citizenry.
• Especially when government neglects to pass a budget which addresses the burgeoning national debt and ongoing budget deficits.
• Especially when government enacts costly legislation like the fatally flawed Obamacare during the deepest recession since the Great Depression.
• Especially when government allocates an increasing portion of revenue toward transfer payments like food stamps and other forms of welfare that drain the treasury.
The government has failed woefully in advancing those initiatives which would give a fishing pole to the jobless and unemployed. Instead, they give away fish without formulating any coherent job formation policy or genuine economic recovery programs. This entrenched pattern of failure to formulate any targeted and deliberate economic policies on the part of the Obama Administration, along with the escalation of corporate welfare, has resulted in deadweight losses to the the national economy which can continue for only so long.
Perhaps the greatest consequence of this unparalleled willful neglect by Obama et al. are the massive opportunity costs associated with each of the counter-productive policies which are currently in place. The longer they are continued, the greater the likelihood this will all end very badly. With another Debt Default Date always lurking in the shadows, the investment climate will always be full of apprehension and anxiety. Consumer confidence will likewise dip and stay depressed given the reality of diminishing discretionary income. Tax revenue will then suffer, as will capital formation, which will then perpetuate this downward spiral.
Hyperinflation is the real threat
The bogus debate that rages on so many financial and economic websites between the two camps of inflation and deflation is not a moot issue. The current downward deflationary trend being experienced by real estate coupled with the insidious upward march of inflation will ultimately end in one way. That would be an unprecedented phase of hyperinflation not seen since the days of the Weimar Republic.
With so many unresolved fiscal issues and problematic monetary policies, what else could be expected. The unceasing financial fiascos breaking out in the open every week in tandem with the multitude of systemic defects within the overall economy only further contribute to the current state of dis-ease.
Waning consumer confidence and insecurity within the investment community have given everyone reason to sit tight in their cash positions. Money is not flowing freely anywhere right now, and that will not change for the foreseeable future. The realistic potential for a hyper-inflationary period is most unsettling, even for the big investor.
As a result, economic stagflation is the unintended consequence of so much indecision and so many bad decisions being made at the top. By failing to effectively address the many systemic flaws and institutional defects throughout both the government budgetary process and corporate finance, the entire Money Matrix is poised to experience a unprecedented reset.
The many trading floors and market exchanges provide daily testimony to this new normal. A new normal defined by volatility, unpredictability and unseen counter-intuitive trajectories which can only be explained away by the ‘Invisible Hand’.
State of the Nation
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