screwflation

[c1ue]

Re: screwflation

The pilots out there will recognize that there is another way to deal with an airplane designed with inadequate dihedral...the installation of a computerized roll-axis autopilot [a wing leveller].

I would suggest that the economic equivalent of that is called "Financial Industry Regulatory Reform". Like an autopilot, FinReg might be enough. But if either ever stops working...well, look out below [Eastern Airlines Flight 401]

We did have one. It was called Glass-Steagall.

Planes don't themselves try to get their wing levellers removed.

[ThePythonicCow]

Re: screwflation

It's like an airplane with insufficient dihedral - it'll fly, but it's not naturally stable about the roll axis

For those like me who didn't know what this was, see further dihedral (Wikipedia). The dihedral angle is the angle that the wings tilt up at the tips. When an airplane with a positive dihedral angle banks, the down wing is now closer to flat, so lifting more, while the up wing is tilted even more, so lifting less. This tends to bring the plane back to level.

[Down Under]

Re: screwflation

And the self-congratulatory governments [and many citizens?] of Australia and Canada, who have, thus far at least, avoided much of the mayhem solely due to the unique commodity and energy-export characteristic of their economies - commodities being the prime beneficiaries [other than the TBTFs] of the reflationary outcomes to date - might wish to temper their enthusiasm a tad by running a sliderule over their own bloated, overlevered and now vulnerable urban real estate and related banking sectors.

And I thought the land down under was going to come up smelling roses!!!

[ThePythonicCow]

Re: screwflation

Some have suggested that we are now in the "end game"...the "No next bubble" according to iTulip, Fleck and some others. I still think the jury is out on that. Certainly the world's Central Bankers - all of them - want to prove that wrong. And, led by Bernanke, they seem to be ready to do exactly that...or die trying.

Certainly? Not to this Conspiratorial Cow's Bovine Brain.

It seems to me that the world's Bankers are piling up Treasury debts owed (actual and promised) in the U.S., while accumulating wealth (debts receivable) in the BRIC nations, with China especially redistributing that wealth (*) as need be to the weaker nations that risk disintegrating and falling of the control of the world's Bankers.

The globalization of manufacturing we saw the last two decades is now becoming the globalization of wealth. It looks to me like a great leveling or homogenization of the world's tribes and nations, the better to control them under uniform laws and regulations, and the better to remove or co-opt the factionalisms of tribe, nation, religion and race which make world governance such a messy affair.

Then again ... anyone who would seek advice on world financial affairs from a tin foil hat wearing cow is seriously confused (grin.)

Somebody, somebody is bankrupting the U.S. Maybe, just maybe, they know full well that's what they are doing. They (having more visibility into what the Federal Reserve is doing than we peons have) certainly could know that, unless they were willfully ignorant and rather idiotic.

Ignore the excuses, lies and dissemblings they are spouting, GRG55. Look at the weight of the evidence (in this case, the weight of the accumulating debt.)

What will take a while longer, but is in the works and proceeding apace, is the globalization of living standards.

(*) What China is offering Greece is not real wealth (such as food and goods) but "anti-debt" wealth, a get out of debtors prison free card.

[ThePythonicCow]

Re: screwflation

And I thought the land down under was going to come up smelling roses!!!

I thought roses bloomed in the Northern Hemisphere, and burrowed their earthly scented roots in the Southern Hemisphere. Is that what you're smelling (grin?)

[GRG55]

Re: screwflation

For those like me who didn't know what this was, see further dihedral (Wikipedia). The dihedral angle is the angle that the wings tilt up at the tips. When an airplane with a positive dihedral angle banks, the down wing is now closer to flat, so lifting more, while the up wing is tilted even more, so lifting less. This tends to bring the plane back to level.

Or the cow, as the case might be... :-)

[Well done TPC!]

[mesyn191]

Re: screwflation

What will they be able to afford if 30% of them lose their jobs - the depression alternative at trillions of OTC derivatives come tumbling down?

Unemployment is already very high even if you fully trust the gov's U6 numbers. If you go by shadowstats its been at Great Depression-esque levels for over 2 years now.

The trick with this inflation push will be to bring on wage inflation.

The FED has stated several times that they will prevent wage inflation since they believe this is the key method by which general inflation takes hold. They believe they can pull money out of the banking system fast enough that it doesn't matter, but not out the general market place. Also allowing wage inflation would be anit-business and pro-labor, which is not some thing I would expect out of our current political system. So no wage inflation is likely to come.

At one point, EJ said he is no longer worried about the Fed's ability to do that. I'm not so sure. That will be pulling a rabbit out of a hat in a stagflationary environment.

If they really want to they could just mail checks out to everyone. Its not hard for the government to produce wage inflation, but the political will has to be there in the first place or it'll never happen.

Perhaps some personal responsibility is in order, also.

How in the world can you say this? Wages haven't kept up the cost of healthcare or housing for around a decade now, they still aren't and its getting worse not better. Saving has been discouraged by the government as well by keeping rates low ("War on Savers" remember?) and the banks have been engaging in what amounts to ursury and getting away with it for the most part. You can not reasonably expect the vast majority of people (half of which make less than $27K a year, and more than half dual income earner families make less than $55K a year) to be able to save or spend responsibly in such a economic environment. All those "responsibility" arguments are nothing more than blaming the victim.

Many people have never had to cut expenses to save, but became reliant on credit. Yes, this is devastating for the middle class - it will be cool to be thrifty and that is when everyone will change quickly.

People turned to credit to provide for necessities too, not just the extra 60" plasma and a jet ski. With decreasing wages, higher inflation, and restricted access to credit you're going to see America reduced to 3rd world status with in 10 years. AND we'll STILL be dealing with the housing bubble after effects too. You ever see those pics of the favelas next to the uber rich homes in Brazil?

That is looking more and more like America's future unless we see a sea change soon.

[mooncliff]

Re: screwflation

SteveAustin said:
"That excerpt reminds me of comments I see from Mish - gems like "common sense tells us that QE does nothing" etc....

I am aghast at how everyone is oversimplifying. No one has a more clear picture of what banks' balance sheets and their own (Fed) balance sheet looks like.

What QE is accomplishing is averting a price deflationary spiral and depression style era.

There is no other choice at this point, except of course for cutting mortgage debt as EJ has suggested and spurring some economic growth by freeing up consumer spending in that way. Yet, still I would expect major QE to also accompany it because it would be too slow in materializing tangible benefits.

What the market is hearing is that QE is supposed to stimulate economic growth. What the Fed, of course, cannot say is that the true intent is to avoid a price deflationary spiral scenario.

Too many incremental bad decisions over 15 yrs - there is no other choice now, though some smart economic policy choices could accompany this to rebuild the economy - thus far they are lacking. Asset inflation has become critical to averting something far worse, today."



Oh, I agree. The QE did a lot. I meant this thread to point out the unintended consequences and collateral damage (get it? collateral damage ) that are coming now.

I would say that things started to go really wrong about 30 years ago. The worst thing is that 30% do not graduate from high school. That will take decades to fix.

[mooncliff]

Re: screwflation

It is useful to try to see what might be coming and then try to figure out ways to dodge problems.
Once you do that for yourself, you are also in a position to do the same thing for other people because what takes the most time is figuring out what to do and then figuring out how to do it; after that, doing the same thing again often takes only a few minutes.
Since anyone on this forum must have good computer skills to get here, use that ability in every possible way to get expenses down while maintaining standards.

For example, I figured out how to order prescription eyeglasses online for $20. That took a while to figure out since I didn't understand what the prescriptions mean. Once I knew how, it was easy to order for seven other people, for a savings of about $1,500. Since these were for elderly relatives, I just gave the glasses to them as presents.

I have for years annually cleaned out the heat dissipation grill under the refrigerators of my relatives. One was so clogged, the person thought it was a felt filter. Once I cleaned that out, their electric bill dropped $200 per year... not to mention that if you don't clean it out, a friend found out it can catch on fire.

Some of my relatives do not have prescription coverage, so I showed them how to order drugs online, of course with their doctor's explicit approval of the site, and they vastly cut their drug bills.

There may also be programs for which people are eligible but are unaware.

One cousin has refused for years to get a computer and internet at home, saying it was "expensive".
I got her to refinance her mortgage. She hadn't even thought about doing that. She had quite a lot on her credit card, and instead, I told her to go to her credit union and see about a loan to pay off the card. Poof, interest on that went from 15% to 2%, and her card is always clear and paid off every month now. She used to say when I was telling her we were going to have a depression that I was scaring her. Well, yes, of course. We should be scared when the problem has not yet come and is an abstraction, and then prepare, so that when the problem does come, we can dodge it.

I took a chance and had an elastomeric coating applied to my roof instead of reroofing. No one else had done that that I knew of, so risk of screwing up was there, but I was fairly certain were were looking at a depression, so did it. Saved me $13,000 compared to a regular reroofing and cut air conditioning costs by $2,000 per year, a savings over the rest of this decade-long depression of say $23,000. Neighbors and relatives come to see the roof, and since it still seems new after 5 years, have started to do the same. I know of 7 households that did the same because they saw my roof, so I guess this is worth about $150,000? for elderly retired households.

We can't change the course of events, but we can try to guess what problems big and small there might be and then minimize them. It really is possible to get decent eyeglasses for 90% less, etc.

My next project, probably next May, right before airconditioning season, is to buy 100 LED lights and swap out incandescents in my relatives houses. A $2,000 investment on my part should we worth about $20,000 (or more when the oil shocks come since most of Hawaii's electricity is from oil) over the rest of the decade-long depression.

Actually, I really am having fun. It is like an Easter egg hunt.