Tuesday, April 14, 2009

Ben Fails: Deflation Rules The Day!

Hello All!

Its official!

We can officially call Ben Bernanke a failure when it comes to his quest of preventing a deflationary death spiral ala Japan. Deflation continues to strengthen its grip around the economies throat despite the fact that the Fed has expanded its balance sheet by trillions of dollars in an attempt to stop it. Winner? Deflation!

Gold bugs and reflation traders beware: You are about to get used and abused by the destructive power of deflation. I will explain later after showing a few examples of deflation and why it will be around for awhile.

Retail Sales Once Again Collapsed in March as the deflationary spiral deepened:


Expect the spiral to continue as the consumer continues to collapse faster than falling production:



My Take:

Hey Bubblevision! How are those "economic recovery" mustard seeds growing? It looks like they need a little more water!

Folks, I'm sorry but I need to take a few shots at all of the "hope/mustard seed" bubbleheads on Wall St after being forced to listen to their bullshit day after day on CNBC.

The reality here is deflation as a result of a tapped out consumer continues to rip apart the economy. The expectation in March was for retail sales to grow by .3% as the "economic recovery" was expected to continue. Oooops.. So much for that idea!: The consumer collapsed in March as retail sales dropped a stunning 1.3%.

The bullish argument that the "worst is behind us" is completely ridiculous when you look at the deepening unemployment in this country. Everyone got so excited in February after the consumer bounced back a tad. What these analysts need to realize is one month does not make a trend.

After March's horrific retail numbers, the downward trend seen over the past year is now firmly back in place. This should not be a surprise because the fundamentals have not changed. The consumer is still stuck with tapped out credit cards, a housing payment that he/she cannot afford, and a Hummer in the driveway that's about to get Repoed.

If you take a look at the the second chart: Crashing consumer demand is still outpacing reductions in production. This confirms that prices on assets will continue to collapse as oversupply continues to pressure prices.

Once deflationary collapses start they are almost impossible to stop. Why buy something today if its going to be cheaper next month? Why pay $300,000 for a house when it might be $250,000 in 6 months. This is the type of consumer behaviour that dominates when deflationary spirals begin.

I personally believe that Ben has officially lost out to deflation. The spiral has already started and accelerated. Look at the collapsing demand above! Its absolutely frightening to see how quickly things are falling apart. The consumer has virtually disappeared. All of this talk around a recovery is pure nonsense.

What pisses me off most about this whole thing is when push came to shove: The Fed bailed out the banks while doing practically nothing for "we the people".

I need to rant a little because my blood is starting to boil. It didn't have to be this way:

The Fed's biggest mistake was they spent our tax dollars in the wrong place. They basically pissed away trillions of dollars in taxpayer money by throwing it into financial institutions that were nothing but financial "black holes". The money just vanished because the institutions were so insolvent! They might as well taken the money and burned it. The result would have been the same. I mean can anyone show me one piece of positive economic growth that occured as a result of throwing hundreds of billions of dollars into AIG or Citi? Yeah I couldn't find any either.

Let me be blunt here folks:

THE FED AND TREASURY BASICALLY JUST PISSED AWAY TRILLIONS OF TAXPAYER $$$ BAILING OUT THEIR BANKING BUDDIES WITHOUT ANYTHING TO SHOW FOR IT. NOTHING! ZILCH! NADA!

THE REASON WHY WE ARE STILL FIGHTING DEFLATION IS BECAUSE NONE OF THIS MONEY WAS PLACED INTO THE "REAL ECONOMY".

IF THIS MONEY WAS THROWN TO THE TAXPAYER INSTEAD OF THE BANKS IT COULD HAVE BEEN USED TO STIMULATE REAL ECONOMIC GROWTH.

This is so fricking infuriating. This is Japan all over again folks! Its a spitting frickin image of Japan. We continue to sit here and prop up worthless banks instead of helping the millions that are losing their jobs. I mean Goldman gets to blow out earnings as a result of the Fed's gift while the taxpayer sits around and wonders how they are going to pay next months bills.

The Fed is nothing but a good 'ole boy network of bankers! They took care of their buddies versus taking care of America.

A few questions for these morons:

Why didn't the Fed use any of their balance sheet creating jobs? Why did they continually throw the money into worthless banks that then refused to lend it back to us? Not that we could afford to borrow it anyway. Who wants more credit when you are scared sh*tless that you might lose your job.

WAKE THE HELL UP BEN: LOOK AT THE CONSUMER DATA TODAY!

Could we be any more afraid? Look how little we are spending?

Do you need anymore proof to realize that your stupid recovery plan of bailing out the banks while ignoring the people is a total failure? Do we need to go down this road just like Japan did for 8 years before you realize that we no longer want credit anymore? Jesus Christ: Wake up!!!!

This country is going down the tubes as you continue to on throw money at the banks in an attempt to "loosen" up credit so that we can lend more easily.

Hey Ben guess what? We don't want to borrow any more damn money!

How about getting us a job? Why don't you stop throwing money at the elitist pigs of this country and take care of the taxpayer for a change? The economy is going to collapse if you continue down this path. Enough already!

Rant off.

Bottom Line:

Inflation is coming no time soon. Production needs to collapse at an even fasterer pace in order to come more in line with the tapped out consumer.

Anyone thinking this will result in an economic recovery is simply insane. The market looked terrible today and I think the bulls got a real dose of reality once the consumer numbers came out today.

I see NO signs that things are getting better. In fact, I am more concerned that things are getting worse. Prices will do nothing but drop as long as the consumer continues to be officially on strike.

Like any union worker knows: The longer any strike lasts the uglier it gets.

15 comments:

John Maynes said...

My saying: The economy/employee has been sacrificed for the banking system/banker. ARRRGGGHH!! I'm going ballistic one day. Need a gun.

Joey said...

I can't help but get the feeling you're (along with the rest of us) wasting your time ranting. Its become increasingly clear that when one slices it down, lifts up the veil of spin, the truth is They. Don't. Care.

Besides utility, they don't care about us. Why would they? IMO, they know we (98% of the population) are screwed. From their point of view, why not accumulate as much as possible so they can be on positioned richly (pun intended) when the world's economy recovers?

We're nothing more to their conscious than a quick shrugging of the shoulders.

I certainly won't care when some back-woods-nuts-job "Civil War re-enactment club" goes ape shit on the elite and their family pets. Actually, it would be rather entertaining.......Perhaps a Pay Per View special?

Jeff said...

John

I hear ya!

Jeff said...

Joey

Thats gotta be it. They just don't care. What a bunch of sociopaths.

Only pitchforks and torches will change things and I think America cares more about watching "American Idol" than they do about a bunch of mobsters that are robbing them blind.

Its amazing to me. I do believe in kharma and I think the banksters will get theirs someday.

teddy bear said...

http://www.youtube.com/watch?v=fg3tqYM5vFs

;)

jeff said...

Teddy

I don't always agree with Schiff but he nailed this one.

Homerun!

Nice catch

Anonymous said...

Joey,

It is so true! They just DON'T care! Apparently they don't mind being raped as long as they get their daily doses of American Idol or anything else on TV.

john said...

I agree with everything you say except for the coment about gold prices. Whether you are a technical trader or fundamentals-based investor, gold, silver and platinum are in long-term secular bull markets. We don't need to see inflation for this to continue. Gold and silver were the strongest performing assets during the deflation of the Great Depression.

OK, now excuse me while I go and look for my pitchfork and torch!

Jeff said...

John

Gold is a tough one for me. I don't disagree with you. Gold also trades on fear and there is plenty of that to go around. Gold beats to its own drum. It did nothing during the last recession. I still think gold should just be a hedge but that's just me.

Minton Mckarkquey said...

Damned right, Jeff. I'd had enough of this sh**. Why in the hell aren't more people pissed as hell about the destruction of the country?

Found this today btw (quite interesting): http://www.youtube.com/watch?v=4lUSsDfSG5M

Jeff said...

On the road for business tonight

I will be back tomorrow!

You can follow me on twitter for any updates.

Jeff said...

On the road for business tonight

I will be back tomorrow!

You can follow me on twitter for any updates.

teddy bear said...

http://tinyurl.com/2g9teb

revenues Yr/Yr are lower for most companies

Jeff said...

Lowest inflation numbers since 1955 today! Deflation rules the day. Bank stress tests to be made public...I am sure this charade will be a joke! The tea parties today were a start. Let's build on it!

Jeff said...

post up around 6