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Why Deflation Will Defeat the Fed


Don’t fight the Fed, as the saying goes. The implication is that the central bank is firmly in control of the money supply: loosen it and stocks have nowhere to go but up.  Betting on this outcome has been a big winner since the bull market took off in March 2009. However, all bull markets end, and so will this one. When it does — and there are reasons to think this has already occurred – the crackpot notion that we can borrow our way to lasting prosperity will die with it. The good news is that when capital becomes scarce in the hard times that accompany bear markets, our savings are much more likely to finance the growth of economically productive companies rather than merely increase the wealth of Wall Street hucksters.

This time around they have sold investors on the seductive idea that any company capable of exploiting a shift in the economic paradigm will make tons of money. What they have neglected to consider is that the new paradigm, as exemplified by Uber and Lyft, is so ruthlessly efficient that the hoped-for profits may never come. Instead, we get ride-hailing operators that are capable of deflating margins in a key economic sector to the vanishing point. Amazon is the biggest deflator of them all, with the potential to dominate in every area of retail, including groceries. They are hoping to vanquish #1 grocer Walmart, and I am predicting they will succeed. The reason is that Amazon’s state-of-the-art warehouses are better designed than Walmart stores to facilitate storage and delivery of food.  However, the next phase of Amazon’s grand plan — jacking up prices — could fail in a recession. Regardless, the company is genetically programmed to lay waste to competitors and will continue on that track until most of them have been deflated out of existence.

‘See Spot run!’

A headline in Monday’s edition of The Wall Street Journal offered a glimpse of the endgame:  Low-Inflation Trap That Ensnared Japan and Europe Worries Fed. To say the Fed is worried is giving the chimpanzees who are running it more credit than they deserve. Actually the ‘literary’ chimps, according to the myth, could eventually type Hamlet if you give them enough time.  The banksters, on the other hand, have succeeded only in typing Fun With Dick and Jane. Flooding the financial system with hundreds of trillions of dollars worth of funny money is just a “See Spot run!” way to inflate assets. Far from worrying, the Fed governors will continue to fake answers as they go along, arrogantly pretending they can command and control the broad economic currents indefinitely. This implies that the quadrillion dollar derivatives market that the chimps have spawned is ultimately controllable.  It is not, and when it begins to implode, the black hole of deflation this will create will be hundreds of orders of magnitude bigger than anything the banksters can throw at it. By then it will be clear that they never so much controlled the economy as surfed the tsunami they’d created.

Comments on this entry are closed.

John Jay June 4, 2019, 6:59 pm


I think whether or not you choose to shuffle off this mortal coil is your business.
The key point I made to keep clearly in mind is….
“Every man for himself now, make all you can while you can!”
If you have the money you can live in your own little world, from a gated community in Greenwich, to 700 acres of woods in rural Alabama with a real nice cabin.
One of each would be the best course of action in my opinion, I am familiar with both areas.
Live your life anyway you want!
Don’t let me influence your decisions.

Pan June 4, 2019, 11:51 am

Dear John,
Just a quick question if I may? do you think we should all slit our wrists now, you know like tonight after a few whiskeys, or at least wait a little while to see how it all pans out?

Personally I’m going to opt for the latter, because if Rick’s right and we do see a deep recession, then I really wouldn’t want to miss it.

Right now I think there’s no better way to burn off all the suffocating dead wood in this world. And as we all know, after a good throw up and the return of reality (which btw always prevails) lo and behold! ….. fresh organic growth really, truly, genuinely … DOES return : )

none June 4, 2019, 8:56 am

Money as Debt I – Revised Edition 2009 (Full Movie)


Money = Confidence

Once ‘Confidence’ is lost so is the value to which ‘valued your money’.

Ways which a society loses its confidence towards valuing their money are:

1) The changing of societies moral compass.

2) Propaganda towards or away from what ‘trend of thinking’ is in place at the time.

3) Lost of respect towards those leading major organizations, such as companies and governments, this leads to a trickling downward affect of thinking throughout all of society.

What is a ‘consent’ is the changing human behavior pattern throughout history, as to why things always stay the same.

Have a great day Rick.

John Jay June 3, 2019, 11:25 pm

Rick, you and I have debated this issue many times.
Looking at the rapidly increasing defiance of the rule of law, from the street poopers in San Francisco, to the Deep State operatives in DC, and now the mob mentality of the 2020 Democratic line up……. I see a political solution in our future. A solution that will mirror, in a distorted way, the Romanov, Manchu, Hapsburg, and perhaps even the bush league Ceausescu end.

The authority of the US Federal government is being challenged in ways not seen since 1860.
Harboring illegal aliens, which has always been a felony under US Federal statutes is now the official policy of an increasing number of State and local governments, and the Feds have lost control to regional mobs.

When Deep South governors Wallace and Faubus defied Supreme Court orders to de-segregate, Ike and JFK both sent in troops real fast to enforce the law.
Now, that defiance is increasing to the point where 15 States have decided to ditch the electoral college and order their electors to vote for the winner of the popular vote no matter who won the Presidential election in their State or what the Racist Constitution mandates.

Democrat 2020 hopefuls suggesting that pro bono Medicare to all comers, illegal aliens included is not workable, are booed off the stage.
We are rapidly approaching a complete break with law and order, Cities and States have already decided not to bother with property crimes of under $1000, there is not enough room in the jails or even the Courts to prosecute criminals
Democrats admitting impeaching Trump is a political, and not a criminal process.
Because after Obama, it was obviously “Hillary’s Turn!”

There are many possible solutions to this social and economic mess.

Yours is massive deflation, mine is to Romanov the .001% who own everything, including the trillions in derivatives.
We may both be wrong, the solution may be something like our Civil War or the Russian revolution, with death, destruction, famine, and disease never seen in this country.

From my own experience, I have never seen so many people ignoring red lights and stop signs, or leading the police on a high speed chase only to shoot it out when cornered.
Burger King get your order wrong? Kill the manger or window staffer!
Parents slaughtering their families and vice versa.

A sickly, mentally and physically ill populace that are all on one drug or another resulting in a situation where health care is almost 25% of our economy. Not to mention bankrupt States constantly doubling down on increasingly confiscation levels of taxation, driving off the last few honest, productive members of society.
An education system that even at the Ivory League level, is now equal parts, Cargo Cult, Commissar Camp and Buffet for Pedophiles.

So, you and I are both very likely wrong, and are vastly underestimating the consequences of a violent Idiocracy seizing power here.
To myself, it is beginning to look what follows this mess will be 100 times worse.
Every man for himself now, make all you can, while you can!
The AOC type mob rule is, in the long run in the USA, unstoppable!
Joe Stalin and his “Death solves all problems, no man, no problem”, looks like
a better bet than either of our predictions, now doesn’t it!

I forgot to mention the Bolton option, “Nuclear combat, toe to toe with the Rooskies!”

Probably the best outcome, over in now only 30 hyper-sonic minutes!
“No way out, no way out”

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