The Age of Inflation Is About to Begin

inflation

Today’s screens are full of green numbers (things going up).

Investors may breathe a sigh of relief.

‘Whew! Glad that’s over…’ they are likely to say.

But it’s way too early to relax…and way too late to worry about it.

New Fed hack

Greenspan, Bernanke, and Yellen at the Fed have seen to that.

And now, the incoming Fed chairman, Jerome Powell — a Fed hack, like Yellen — will get his chance.

We predict that he will do more harm than all of them put together.

Not intentionally, of course. He will be trapped by circumstances…a victim of history, like poor Gideon Gono, Zimbabwe’s central bank chief between 2003 and 2013.

Faced with bills to pay and a desperate economy, what choice did he have?

All he could do was add zeros to the nation’s currency…until we ended up with a 10 trillion Zimbabwean dollar note in our wallet. (Worthless, of course.)

Easy money fraud

But that is still in the future.

In the present, finally, The New York Times has noticed. The world-as-we-have-known-it is coming to an end.

‘World braces as an era of easy money draws to an end,’ is the front-page headline this morning.

The world-as-we-have-known-it was created by the aforementioned trio — Greenspan, Bernanke, and Yellen.

Over the last 30 years, they aided and abetted the adding of trillions in new chips — fake money, borrowed at fake rates — to the nation’s gambling stock.

And now, according to the popular narrative, they are taking it back. (The foolishness of letting traders know what’s coming deserves special comment. Stay tuned.)

But the defining feature of the Easy Money Era was fraud. The money was counterfeit. Interest rates were phony. As a result, asset prices were falsified.

And almost everything said by central bankers was either an outright lie, grossly misleading, or hopelessly stupid. 

Age of inflation

At least here at the Diary, we take comfort — amidst the Sturm und Drang of mad volatility, and the political bombshells bursting in mid-air — in the fact that there are some things we can still depend on.

Fraud, of course.

There is no chance — none — that the Fed will follow through on its ‘normalisation’ of interest rates.

Instead, when the stock market crashes…and the economy goes into recession…the Fed will quickly turn back to the tried-and-true panacea: the old miracle elixir, that snake oil known as EZ money.

But…there’s a catch.

In the coming crisis, monetary policy alone will not be enough; the Fed doesn’t have enough room to cut interest rates.

As we predicted when Mr Trump was elected, the critical fraud is shifting from monetary policy to fiscal policy (government deficit spending).

Yes, the Age of Inflation is coming. Fiscal stimulus. Big spending by both parties.

Indeed, the feds are already laying the groundwork. Here’s the Associated Press story from yesterday:

The Senate’s top leaders announced Wednesday they have sealed agreement on a two-year budget pact that would shower the Pentagon and domestic programs with almost $300 billion above existing limits, giving wins to both GOP defense hawks and Democrats seeking billions for infrastructure projects and combating opioid abuse.

The agreement is likely to be added to a stopgap spending bill that passed the House on Tuesday, aimed at averting a government shutdown Thursday at midnight. Democratic leader Chuck Schumer of New York called the Senate agreement “a genuine breakthrough.”

It is a breakthrough of sorts.

In the past, Republicans fought (often haplessly and half-heartedly) for lower spending and smaller deficits.

Now, they are right there…in line with the Dems and the Deep State…in favour of tossing more of the nation’s wealth to their favoured crony industries and zombie supporters.

Deep State victory

In yesterday’s Diary, we pointed out how partisan politics — like football and war — is a win-lose business.

If you pay attention at all, it captures your critical judgment…and your emotions. You soon begin to care who wins.

And while you are rooting for one team or the other, the real news passes unnoticed.

This is the real story…the headline you won’t read anywhere but here: Deep State Victory Bus Has Republicans and Democrats Both on Board.

And here’s another headline you won’t find in the mainstream media: Bipartisan Budget Deal Dooms US Economy to Debt Explosion.

Stay tuned for more headlines…tomorrow.

Regards,

Bill Bonner,
For Markets & Money

Bill Bonner

Bill Bonner

Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities.

Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind Markets and MoneyDice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill's daily reckonings from more than a decade: 1999-2010. 

To have Bill's reckonings delivered straight to your inbox subscribe to Markets and Money for free here.

Read more

Bill Bonner

Latest posts by Bill Bonner (see all)

Leave a Reply

Be the First to Comment!

avatar
  Subscribe  
Notify of
Letters will be edited for clarity, punctuation, spelling and length. Abusive or off-topic comments will not be posted. We will not post all comments.
If you would prefer to email the editor, you can do so by sending an email to letters@marketsandmoney.com.au