Inflation Poised to Roar as Producer Prices Rise More Than Expected

By Thomson Reuters – Re-Blogged From Newsmax

U.S. producer prices rose more than expected in October, driven by a surge in the cost of services, and there were also signs of steady increases in underlying wholesale inflation.

The Labor Department on Tuesday said its producer price index for final demand increased 0.4 percent last month after a similar gain in September. In the 12 months through October, the PPI jumped 2.8 percent, which was the largest increase since February 2012. The PPI rose 2.6 percent year-on-year in September.

Image: Inflation Poised to Roar as Producer Prices Rise More Than Expected
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Hypocrisy Most Foul. . .

By Michael Ballanger – Re-Blogged From http://www.Gold-Eagle.com

As you all know by now, I have absolutely zero knowledge of anything related to the “blockchain” technology, which translates into “I don’t own Bitcoin and would not touch HIVE Blockchain Technologies Ltd. (HIVE:TSX.V; PRELF:OTC) with a barge pole.” That also means that I am constantly being reminded, primarily by those considerably younger than me, that geriatric anchoring is costing me (and my readers) a great deal of money by avoiding the space which, as you can see from the chart below, has been absolutely true.

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GOP Tax Plan Increases the Most Insidious Tax

By Ron Paul – Re-Blogged From Ron Paul Institute

Last Thursday, congressional Republicans unveiled their tax reform legislation. On the same day, President Trump nominated current Federal Reserve Board Governor Jerome Powell to succeed Janet Yellen as Federal Reserve chair. While the tax plan dominated the headlines, the Powell appointment will have much greater long-term impact. Federal Reserve policies affect every aspect of the economy, including whether the Republican tax plan will produce long-term economic growth.

President Obama made history by appointing the first female Fed chair. President Trump is also making history: If confirmed, Powell would be the first former investment banker to serve as chairman of the Federal Reserve. Powell’s background suggests he will continue Janet Yellen’s Wall Street-friendly low interest rates and easy money policies.

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Central Banks Start Major Change

By Mark O’Byrne – Re-Blogged From http://www.Gold-Eagle.com

– Bank of England raised interest rates for the first time in ten years
– President Trump announces Jerome Powell as his choice to lead the U.S. Federal Reserve
– Most investors outside the US Dollar and Euro see gold prices climb after busy week of central bank news
– Inflation now at five-year high of 3%
– Inflation, low-interest rate, debt crises and bail-ins still threaten savers and pensioners

This week has been a significant week for central banks. The Bank of England raised interest rates for the first time in ten years, the Federal Reserve indicated that a December rate hike may happen and President Trump named Powell as his choice for leader of the Federal Reserve.

Gold reacted positively to Trump’s announcement as markets see little change ahead with a Powell-led Federal Reserve.

The interest rate decision is arguably the most interesting at present. Announcements on both sides of the pond suggest that the age of easy money is coming to an end, albeit slowly.

Since the financial crisis central banks have flooded markets with easy money, kept interest rates near zero and bought trillions of dollars in government and corporate bonds. Now most central banks (excluding Japan) have indicated that the party must soon stop.

The problem is, no one is sure how economies will cope when the moreish juice of central bank assistance will be taken away. None of the financial centres have managed to meet inflation targets which they were all so vocal about. Instead, they are suddenly aware that the encouraged financial excesses of the last ten years may well lead to another crash and something must be done to curb their enthusiasm.

Adding to the uncertainty is the issue that three of the world’s four most important central bank chiefs are nearing the end of their terms and may be well replaced. The jump in the gold price and fall in the dollar is just the first indication with how markets feel about such changes.

But is the age of easy money really coming to an end and are interest rate hikes a sign that central bankers have confidence in the economic recovery? Yesterday’s drop in the pound suggests markets aren’t buying it. They weren’t helped by Mark Carney’s dovish comments regarding the UK’s post-Brexit future.

All in all, anyone hoping they might finally earn some interest on their savings, see a slowdown in the devaluation of their wealth or a reduction in the counterparty risk their cash is exposed to, needs to think again. The UK along with the rest of the world remain very vulnerable and will take investors along for the ride.

A Whole New World With Little Hope

Here in the UK a whole generation of homeowners are waking up to a world where interest rate rises can really happen. There are 8 million homeowners, many of whom will have bought in the last ten years and as a result have never experienced a rate rise in their adult lives.

Bloomberg explained how much the world has changed since the Bank of England last increased interest rates:

The world was drastically different the last time the Bank of England hiked interest rates: the iPhone was less than a week old; Gordon Brown was Prime Minister; the average price of a home in London was £261,000 (it’s now  £470,632).

In interest rate terms how much has changed? Very little. The rise merely cancels out the cut that happened following the Brexit referendum.

It’s likely the hike in interest rate could do more harm than good. Previously savers, pensioners and investors suffered as a result of (arguably) negative real interest rates. Now the rate hike makes little difference to their current situation but propels debtors into further issues.

Those on variable mortgages will be facing rate hikes whilst the millions who have personal, unsecured loans will also be facing increased payments. All to contend with against a backdrop of rising inflation, pressure on wages and a slowing economy.

No Change, Nothing To See Here

A decade of damage by easy monetary policy has caused unforeseen damage which cannot be undone by a few quarter-percent hikes over the next two years.

Low rates have created problems for savers and pensioners around the globe. Pension funds are in trouble with rising levels of unfunded liabilities. Consider the 2016 PWC report that found pension fund deficits have expanded by £100bn over the past year to total £700bn. This gives a “debt” of £26,000 per UK household.

Debt levels continue to rise from unsustainable to even more unsustainable. Here in the UK we are facing a £1 trillion crisis as pension deficits and consumer loans snowball out of control.

And lest we forget how low rates have distorted financial markets and created asset price bubbles in shares, property and investments across markets.

Easy monetary policy came at a time when governments should have been implementing policies that dealt with an ageing population. Instead they have increased inflation and discouraged conservative money management –  creating incentives in totally the wrong direction.

The rise in inflation to 3% today also means that even those who have opted to keep cash in the bank have seen its value slowly eaten away. Those who chose to embrace low rates are inevitably in a debt-hole that is increasingly difficult to climb out from.

No Faith In Post-Brexit Britain

Interest rate hikes are ideally supposed to be an indicator that a central bank has faith in the economy’s recovery but the Bank of England statement yesterday suggested this wasn’t the case for post-Brexit Britain.

Carney expressed his concerns over the strength of the UK’s economic recovery heading into and following our departure from the EU. He is also likely to be considering the risks the weak exchange rate poses to Britain’s ability to finance its current account deficit.

So bleak is Carney et al’s outlook that they are only considering a two further rate rises by the end of 2020. Even this might not be guaranteed. Consider the state of the global financial system and where that could drag the UK.  Last time the BoE increased rates, it was soon forced to cut  them by 4.75 percentage points in the following 18 months as the global financial crisis dragged the UK into a recession.

Little Hope For Savers

The EU has already set the precedent of official negative interest rates, but in truth inflation combined with low rates does mean we are already in negative territory. Now, a 0.25% interest rate hike to 0.5% won’t do much to contend with the forces of excess money supply and falling value of the pound.

Add to this the ongoing threat of bail-ins, courtesy of the EU government. Even if interest rates were hiked up to levels of the early 1990s then savers’ cash is still not safe.

Investors need to be prepared for the ongoing threats that exist in our banking system whether thanks to Brexit or our own governments.

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America’s Stagflation

By Alasdair Macleod – Re-Blogged From http://www.Gold-Eagle.com

The accumulation of monetary policy errors by the Fed is increasingly certain to culminate in the credit crisis that always marks the end of the credit cycle. Credit crises are the result of globally coordinated monetary policies nowadays, so the timing of the forthcoming crunch is not only dependant on the Fed’s actions, but is equally likely to be triggered from elsewhere. Candidates for triggering a global credit crisis include economic and financial developments in Europe, Japan and China.

The next crisis is set to be more serious than the global crisis of 2008/09, given the greater level of debt involved, and the exceptionally high rate of monetary inflation since. It is a story I have covered elsewhere. This article will concentrate on the prospects for the US economy ahead of the next credit crisis, and the implications for the dollar and its associated financial markets.

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Rob From The Middle Class Economics

By Gary Christenon – Re-Blogged From http://www.Gold-Eagle.com

Much of our financial world functions as a “Rob from the Middle Class” economy. The system robs from the middle class and poor via “money printing” and inflation of the currency supply!

The rich get richer and the poor get poorer.

Mazda Crossovers For Moms

After a 15 year love affair with my Mom SUV, it’s time to think about another. I attended the Houston Auto Show to try on cars like shoes.

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Buffett: Dow One Million

By Daniel Amerman – Re-Blogged From http://www.Gold-Eagle.com

In a recent speech, Warren Buffett came down boldly on the side of optimism when it comes to both the economy and financial markets. What he said was “being short America has been a loser’s game…  And it will continue to be a loser’s game.”

And to throw down the gauntlet against some the current negative talk in the markets, Mr. Buffett boldly predicted something quite extraordinary – which was that in 100 years “the Dow will be over a million.”

Is that even remotely believable, or is Mr. Buffett getting carried away by his own optimism?

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