When the government pumps trillions of dollars into the economy, they’re not actually printing the money. It enters as digital entries in banks across the country. It’s made the system fast, responsive, and, unfortunately, vulnerable. Now our money is no longer something we hold in our hands, but something that exists on a very susceptible network.
The so-called recovery is only built on debt and printed cash declares our own Byron King. In the long term, the only option for the government to continue financing it's operations is to print too many dollars. Money printing has it's limits, however. It's Byron's opinion that at some point, perhaps very soon, the government will have to turn to more desperate measures. Namely, capital controls. In the following featured essay, Byron outlines 4 probably ways the government will take your cash and one play you can buy through your broker to prepare today. Read on...
Americans expatriate because they want to get out of the country. Corporations expatriate for similar reasons. Clem Chambers explains...
In a 2009 article, the Huffington Post went into considerable detail about the number of people with PhD degrees in economics employed by the Board of Governors of the Federal Reserve System. This is the government’s branch of the Federal Reserve. It is not one of the 12 regional Federal Reserve banks, all of which […]
The U.S. dollar is the dominant global reserve currency. All markets, including stocks, bonds, commodities, and foreign exchange are affected by the value of the dollar.The value of the dollar, in effect, its “price” is determined by interest rates. When the Federal Reserve manipulates interest rates, it is manipulating, and therefore distorting, every market in […]
The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance or the get-rich-quick adventurer. They will die poor.– Jesse Livermore, How to Trade in StocksThe trouble with capitalism’s guardians is that they have no […]
John Foust, a Democrat running for the 10th congressional seat in Northern Virginia, is — like Gov. Terry McAuliffe and other state Democrats — gung-ho to expand Medicaid. His wife’s position is, shall we say, a bit more nuanced.Foust has slammed his opponent, Republican Del. Barbara Comstock, for her opposition to expansion. He has spoken […]
The midterm election season is upon us, and it’s a tossup whether the Republicans will win the Senate, or if President Obama, seemingly oblivious as conflict flares up around the world, will, through his continuous campaigning, keep Harry Reid in his majority leader seat.The only thing we know for sure is that sociopaths will be […]
Alexander Hamilton was America’s first Secretary of Treasury under President George Washington. When he first entered office in 1789, America was an agricultural nation of just 4 million still broke from its financially costly victory over the British Empire in the Revolutionary War.The states had accumulated relatively massive debts to finance that war, which mostly […]
A great technology solves a problem that we didn’t know we had. It makes us aware of deprivations we didn’t know existed until we discover the new thing. Once discovered, we can’t go back.People in the 1950s, for example, never missed the smart phone. They were pleased to have a phone at all. But today, […]
Fifty years after the 1929 crash, a group of money managers and investment thinkers put together a collection of essays looking back at that experience. The result was a distillation of some pretty fine investment wisdom. Timely, I think, to review now.One of the contributors was Arthur Zeikel, then with Merrill Lynch. The title of […]
Although the mainstream media have turned its attention away from the wreckage of Obamacare, don’t think for a second that all is well.As the politicos in D.C. focus their attention on the midterm elections in November, now is a great time to study, prepare, and seek out the most affordable, accessible, and highest quality options […]
Turn on the tube and economic ignorance seems to be everywhere. There is constant shilling for more government. Business is demonized. Man is said to be trashing the environment. “Workers and women are oppressed” is the constant mantra.And members of the clueless media nod their heads in unison.Only John Stossel has provided the fresh air […]
In early July 1944, delegates from 44 countries gathered at the Mount Washington Hotel in Bretton Woods, New Hampshire. A three-week summit took place, at which a new system was agreed to regulate the international monetary and financial order after the Second World War.The U.S. was already the world’s commercial powerhouse, having eclipsed the British […]
In the minds of many people around the world, including in the United States, the term “capitalism” carries the idea of unfairness, exploitation, undeserved privilege and power, and immoral profit making. What is often difficult to get people to understand is that this misplaced conception of “capitalism” has nothing to do with real free markets […]
Some people are saying it is just what the doctor ordered. Others are saying that the cure is worse than the disease.The Affordable Care Act? Reengagement in Iraq? Tea Party bullying in the GOP?Not this time. Just as protracted in the corridors of Congress and the White House is the debate over the proposed reform […]
In 2012, money mandarins running the European Union chose stagnation over restructuring. Here’s a consequence of that choice: expectations for a self-sustaining economic recovery keep getting crushed.Two years ago, European Central Bank (ECB) chief Mario Draghi promised to do “whatever it takes” to hold the eurozone together. He bluffed nervous investors into believing in a […]
People jacked up about income inequality can find a new hobby. The 1% are victims of a doomsday machine, and the countdown is ticking. Machine, thy name is “family.”This came to mind as I was reading a preview of Columbia Professor Andrew Ang’s forthcoming, must-read book on Asset Management. Ang is that oxymoron, an exciting […]
It might sound like the latest new product from Apple, but IPAB is actually the newest major legal challenge to Obamacare.Recently, a three-judge panel in the 9th Circuit Court of Appeals in San Francisco heard arguments about the Independent Payment Advisory Board, or IPAB, a 15-member panel created by the Affordable Care Act and empowered […]
Americans have come to believe that the IRS and the income tax are inevitable parts of our lives. After all, most everyone alive today has lived his entire life under federal income taxation.It wasn’t always that way. For some 125 years, the American people lived without having any tax imposed upon their income.The obvious question […]
Here’s a fun fact: Although we all hate the U.S. dollar, as it continues to hemorrhage wealth, its foothold as the world’s reserve currency isn’t going to disappear overnight.A Russian gas deal with China won’t change that — as we’ll highlight below.But before we get to the nitty-gritty, let’s dive into a story that’s right […]
Franklin Delano Roosevelt famously used the term “forgotten man” in a 1932 speech to describe those at the bottom of the economic pyramid who, he felt, government should aid.But the originator of the phrase “forgotten man” had a whole different meaning in mind. He aimed to expose the seeming good intentions of government to reveal […]
The Keynesian disaster recovery plan has been to lower rates, force people to take more risk in search of yield, and entice others to borrow and spend and, magically, more jobs will be created. If people won’t buy stocks, central banks will.Back in 2011, Ben Bernanke, when asked if QE2 was driving up stock prices, […]
I want to share some insight and give you a front-row seat to America’s next big shale play.Let’s get to it…Over the past 10 years, the U.S. has turned the ship around, quite literally.We’ve gone from a country that was expecting to import massive amounts of oil and gas — to a country that’s sitting […]
Whatever your views on the role of government, one thing is clear: There will be no way to pay for it if the economy doesn’t grow. And I’m not talking by a measly percentage point or two. If we can’t find our way back to 5% annual economic growth or above soon, America’s accumulated federal […]
According to the Bureau of Labor Statistics, consumer prices are rising at a 2.1% annual rate. This suggests to us that the current stock market boom will die with a bang, rather than a whimper.Fed economists say they don’t think inflation rates are rising. They think the most recent reading is a fluke. But why […]
Politicians love raising the minimum wage because they don’t have to ask voters to pay more in taxes. They just dump the costs onto shop owners. But they don’t act like politicians and go into debt to pretend like they have all the money in the world. They face real world situations. And sometimes that means replacing workers with more affordable options...
We live in parallel universes. Federal Reserve Chairman Ben Bernanke is said to have a healthy concern about deflation. McDonald’s franchisees, on the other hand, not so much.
The chain of Golden Arches fame will give up its Dollar Menu after 11 years, renaming it “The Dollar Menu & More” next month. It turns out you simply can’t make a buck selling burgers for a buck. It must be hard to give up on such an amazing marketing gimmick, generating one-seventh of all sales since its inception. But as Derek Thompson describes in The Atlantic, the Dollar Menu is an anchor “enraging franchisees who can’t make any money selling 2013 processed cow meat at 2002 prices.”
If Ben Bernanke is paying attention, he is no doubt thrilled to hear about rising price pressures.
Franchisees were surveyed earlier this year, and one verbalized the unhappiness with the ongoing promotion: “Every item introduced comes with unlimited coupons for FREE and a ‘suggested price point’ that is ridiculous and does not meet franchisees’ needs for profitability. It does meet the corporation’s need to keep the appearance of customer transaction counts high, pushing the stock.”
While the corporate office kept adding items to the menu, franchisees were expected to serve the new items right away. Operators lamented that they had to “do it consistently and with a smile on our face.” Adding, however, that “there’s little to smile about.”
While franchisees grinned and bore it, competitors copied the idea. In 2009, Burger King instituted a dollar-burger promotion, prompting a lawsuit from franchisees who claimed the cost of a double cheeseburger was $1.10. Burger King required all locations to take part in the promotion.
Wendy’s changed its 99-cent menu to a “Right Price Right Size” menu. The Jr. Cheeseburger Deluxe went from 99 cents to $1.19. And customers got four chicken nuggets, instead of five, for 99 cents.
In his piece for The Atlantic, Thompson commented that beef prices have done anything but lag behind other items. He writes, “the price of beef and other staples has been turbulent.” What’s angered franchisees is the price of the double cheeseburger over the cost of its ingredients.
Meanwhile in the Fed’s ivory tower, Fed economists don’t have to worry about staying in business selling burgers below cost or tinkering with portion sizes. They theorize there is an absence of aggregate demand and low interest rates and more money will solve the problem. Their friends generating numbers down the street at the Bureau of Labor Statistics claim prices have increased only 1.5% over the past 12 months. They see no inflation and don’t want to hear about it.
In The San Diego Union-Tribune, Dan McSwain articulates the Fed’s fears that “falling inflation would give way to deflation, a spiral in which generally falling prices cause consumers to delay purchases in hopes of even lower prices, which depresses prices — and wages — further.”
This theoretical downward spiral does not generate an increase in demand, but instead causes sales to dry up. Despite goods and services being more affordable, Keynesians like Bernanke believe people will stop spending money, workers will then be laid off, real estate prices will fall, foreclosures will ensue, and banks will fail. In other words, it will be 1933 all over again.
Bernanke was asked earlier this year about the Bureau of Labor Statistics’ low inflation numbers. “Does this sort of inflation performance suggest that you should be pushing harder on the accelerator?” The Fed chair answered that low inflation was bad because it “It increases the risk of deflation. It raises real interest rates. It means that debt deleveraging takes place more slowly.”
He went on to say:
“There are a number of transitory factors that may be contributing to the very low inflation rate: For example, the effects of the sequester on medical payments, the fact that nonmarket prices are extraordinarily low right now. So these are some things that we expect to reverse, and we expect to see inflation come up a bit.”
In his world, he hasn’t seen inflation yet, so the Fed will continue to buy $85 billion in securities each month for the foreseeable future. Vancouver favorite Marc Faber, editor of The Gloom Boom & Doom Report, told a CNBC crowd it’s not a matter of when the Fed tapers, but when they start increasing their purchases. He was likely only half kidding when he predicted purchases of a trillion dollars a month.
The problem for McDonald’s franchisees is they don’t buy stuff to make burgers from the BLS. John Williams over at ShawdowStats.com figures consumer inflation to be either somewhere around 5% using the methodology used in 1990 or just short of 10% using the way CPI was figured in 1980.
And if things weren’t tough enough under the Golden Arches, franchisees say Obamacare threatens their already thin bottom lines. “Obamacare is going to destroy already low profits,” one franchisee said. “McDonald’s Corp. does not seem to care. The corporation is frantically trying to increase the number of 24-hour stores regardless of lack of profitability. Add rising commodity and insurance costs and McDonald’s drive to get operators to rebuild or remodel and the future looks bleak.”
In the real world of burgers and fries, costs are increasing. In the models generated in government offices, bureaucrats worry prices are teetering precariously on the edge of a cliff.
Famed American country musician Charley Pride sang a long time ago, “It was burgers and fries and cherry pies. It was simple and good back then.”
In the world of central bank central planning, it’s anything but simple, and “QE forever” certainly isn’t good.