October 23, 2018 - Latest: What has happened to markets this year? by Darius McDermott
1st January 1999
somebody should be asking that question over here to Mervin, inflation – its all temporary mate!
always is but it happens and we who can’t ask for bankers bonuses get it in the neck every time.
TPTB are just not caring , they’re alright Jack!
Surely it is not only US inflation which is understated? That statement is even more true of the UK numbers. There has been a gradual drip-drip process going on for decades now, where every trick officials can think of is used to manipulate inflation numbers downwards. All Western countries have been at it and it is directly due to the instruction of politicians, desperate to attempt to hide the inflation which they have generated.
I have observed previously, part of the obligatory tool-kit for part government financing by use of debasement in any democracy is the need for the manipulation downwards of officially published supposed inflation numbers. Without that facility it becomes too difficult for political parties to get re-elected. Their stealth theft on top of all their taxation plundering if fully visible and understood angers electorates.
There have been for example in the UK senior retirees from the ONS who have stated post retirement that pressure was put on them by successive governments to find statistical tricks to achieve lower inflation numbers than reality, during their tenure; they have claimed that if they failed to obey that instruction they were threatened with being sacked and losing their pensions. Clearly they obeyed these instructions, and you do not have to look very hard to find numerous examples of how they achieved them. The methods have spread widely and have been copied shamelessly throughout the West.
Inflation here comes in insidious ways.. an example of which I noticed last night when I bought a box of spaghetti noodles: it usually cost $1.00 and was 16oz (1lb)– but today I noticed the box was only 13.5oz yet the price remained the same. On the bright side, over time, perhaps our obesity problems will subside if this continues ? Gas here in Minnesota is $3.89/gal and pretty much everyone expects over $4.00 this summer, and I’m in agreement. On the coasts, regular gas is already over $4.00; my sister lives in the San Francisco Bay area and paid $4.19 yesterday.
Isn’t there a tipping point where it becomes so blindingly obvious to even the most diehard manipulator that a country’s debt burden is too great even factoring fantastical growth rates? It would seem to me to be akin to a company which makes nothing anymore going to shareholders every month for fresh capital which is then used to pay off a fraction of the outstanding debts. Even restructuring the debts won’t have the desired effect; at some point a winding up order will be issued.
As for UK inflation, you can only pick pockets for so long, eventually you will get caught. Anyone involved in a weekly or monthly shop knows full well inflation is rampant with costs going up at almost every visit, and that’s if you can afford to put fuel in a car to get there.
I think history will consign Merve’s reputation to that of Trichet and our ex Iron Chancellor! I don’t think our present one is any better neither!
Hi Shaun, great post as always.
About the restructuring of the Greek debt, it is not clear how it would proceed, even if Greece is not solvent. Provopoulos, the director of the Bank of Greece, has pointed out several times (the first one many months ago) that a large proportion of the Greek government bonds is held by Greek institutions. These are banks, as well as pension and insurance funds. So, a haircut on the bonds would have horrible direct consequences for the people in Greece. Then there is the problem of the primary budget balance, which is not clear where it stands now (Greece had something like a 6-8% primary deficit a year ago). If Greece still consumes more than it produces, it needs to keep borrowing. This has not exactly sunk in, I’m afraid.
So, any restructuring that could benefit Greece will have to be accepted by the creditors and it will probably involve a reduction in interest rates and a lengthening of the loan terms. But this would also come with a requirement for further belt-tightening in Greece, which looks politically more and more difficult.
By the way, speaking of Greece (and inflation), there appears to be another country that, in the words of PIMCO’s Bill Gross, is trying to out-Greek the Greeks.
cheers (or something like it),
Did you get Standard and Poors on the case? More seriously I have felt that in comparison to the Euro zone the United States has a federal government and an overall fiscal policy as its main advantages. I think that there are some gains from being the world’s reserve currency but have thought it had been somewhat overplayed in importance.
But with talk of a new type of private finance initiative in the UK there are issues almost everywhere I look….
Speaking of Greece: http://www.zerohedge.com/article/greek-bonds-freefall-ecb-intervention-absence-raises-concerns-greece-now-doomed
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