Repost from June by Request – Several people have written to CTH for an economic review of our current status. Below this post are two primary precursor articles [Primary One and Primary Two] which outline the economic dynamic in play, and how we can look forward with accuracy to what is likely to happen. Despite the deflective talking points by the professional financial pundits, this massive spike in inflation is entirely predictable due to Biden economic policy and Biden monetary policy.
Keep in mind, the FED already said in April they would “support inflation”, that’s because – while they will not say it openly, they know there’s no way to stop it. The massive inflation is a direct result of the multinational agenda of the Biden administration; it’s a feature not a flaw, and it has nothing whatsoever to do with COVID. Also keep in mind the first group to admit what is to come are banks, specifically Bank of America, because the monetary policy is the cause.
There’s no way around this. Despite the pundit and financial class selling a counter-narrative, home prices will crash and unemployment will go up. I know this is directly against the current talking points, but the statistical reality is clear. CTH was the first place that said months ago that new home sales will plummet, that is starting to happen right now. There’s no way for it not to happen, the big picture tells us why.
You might remember, when President Trump initiated tariffs against China (steel, aluminum and more), Southeast Asia (product specific), Europe (steel, aluminum and direct products), Canada (steel, aluminum, lumber and dairy specifics), the financial pundits screamed at the top of their lungs that consumer prices were going to skyrocket. They didn’t. CTH knew they wouldn’t because essentially those trading partners responded in the exact same way the U.S. did decades ago when the import/export dynamic was reversed.
Trump’s massive, and in some instances targeted, import tariffs against China, SE Asia, Canada and the EU not only did not increase prices, the prices of the goods in the U.S. actually dropped. Trump’s policies led the largest deflation in consumer prices in decades. At the same time, Trump’s domestic economic policies drove employment and wages higher than any time in the past forty years. With Trump’s policies we were in an era where job growth was strong, wages were rising and consumer prices were falling. The net result was more disposable income for the middle class, more demand for stuff, and ultimately that’s why the U.S. economy was so strong.
♦Going Deep – To retain their position, China and the EU responded to U.S. tariffs by devaluing their currency as an offset to higher prices. It started with China, because their economy is so dependent on exports to the U.S.
China first started subsidizing the targeted sectors hit by tariffs. However, as the Chinese economy was under pressure, they stopped purchasing industrial products from the EU, that slowed the EU economy and made the impact of U.S. tariffs, later targeted in the EU direction, more impactful.
When China (total communist control over their banking system) devalued their currency to avoid Tariff price increase, it had an unusual effect. The cost of all Chinese imports dropped, not just on the tariff goods. Imported stuff from China dropped in price at the same time the U.S. dollar was strong. This meant it took less dollars to import the same amount of Chinese goods; and those goods were at a lower price. As a result, we were importing deflation…. the exact opposite of what the financial pundits claimed would happen.
In response to a lessening of overall economic activity, the EU then followed the same approach as China. The EU was already facing pressure from the exit of the U.K. from the EU system; so when the EU central banks started pumping money into their economy and offsetting with subsidies, they essentially devalued the euro. The outcome for U.S. importers was the same as the outcome for U.S-China importers. We began importing deflation from the EU side.
In the middle of this there was a downside for U.S. exporters. With China and the EU devaluing their currency the value of the dollar increased. This made purchases from the U.S. more expensive. U.S. companies who relied on exports (lots of agricultural industries and raw materials) took a hit from higher export prices. However, and this part is really interesting, it only made those companies more dependent on domestic sales for income. With less being exported, there was more product available in the U.S for domestic purchase…. this dynamic led to another predictable outcome, even lower prices for U.S. consumers.
From 2017 through early 2020 U.S. consumer prices were dropping. We were in a rare place where deflation was happening. Combine lower prices with higher wages, and you can easily see the strength within the U.S. economy. For the rest of the world this seemed unfair, and indeed they cried foul – especially Canada.
However, this was America First in action. Middle-class Americans were benefiting from a Trump reversal of 40 years of economic policies like those that created the rust belt.
Industries were investing in the U.S., and that provided leverage for Trump’s trade policies to have stronger influence. If you wanted access to this expanding market, those foreign companies needed to put their investment money into the U.S. and create even more U.S. jobs. This was an expanding economic spiral where Trump was creating more and more economic pies. Every sector of the U.S. economy was benefiting more, but the blue-collar working class was gaining the most benefit of all.
♦ REVERSE THIS… and you now understand where we are with inflation. The Joebama economic policies are exactly the reverse. The monetary policy that pumps money into into the U.S. economy via COVID bailouts and ever-increasing federal spending drops the value of the dollar and makes the dependency state worse.
With the FED pumping money into the U.S. system, the dollar value plummets. At the same time, JoeBama dropped tariff enforcement to please the Wall Street multinational corporations and banks that funded his campaign. Now the value of the Chinese and EU currency increases. This means it costs more to import products, and that is the primary driver of price increases in consumer goods.
Simultaneously, a lower dollar means cheaper exports for the multinationals (Big AG and raw materials). China, SE Asia and even the EU purchase U.S. raw materials at a lower price. That means less raw material in the U.S. which drives up prices for U.S. consumers. It is a perfect storm. Higher costs for imported goods and higher costs for domestic goods (food). Combine this dynamic with massive increases in energy costs from ideological policy, and that’s fuel on a fire of inflation.
Annualized inflation is now estimated to be around 8 percent, and it will likely keep increasing. This is terrible for wage earners in the U.S. who are now seeing no wage growth and higher prices. Real wages are decreasing by the fastest rate in decades. We are now in a downward spiral where your paycheck buys less. As a result, consumer middle-class spending contracts. Eventually, this means housing prices drop because people cannot afford higher mortgage payments.
Gasoline costs more (+50%), food costs more (+10% at a minimum) and as a result, real wages drop; disposable income is lost. Ultimately this is the cause of Stagflation. A stagnant economy and inflation. None of this is caused by COVID-19. All of this is caused by economic policy and monetary policy sold under the guise of COVID-19.
This inflationary period will not stall out until the U.S. economy can recover from the massive amount of federal spending. If the spending continues, the dollar continues to be weak, as a result the inflationary period continues. It is a spiral that can only be stopped if the policies are reversed…. and the only way to stop these insane policies is to get rid of the Wall Street democrats and republicans who are constructing them.
Hope that makes sense, and love to all.
~ Sundance
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From a financial blogger who is not typically a perma-pessimist like so many are:
“Temporary” Inflation Is Turning into Inflation Spiral – 11 Jul 2021
Dollar’s Purchasing Power Gets Zapped. It’s Permanent – 1 Aug 2021
Ok if you agree that the housing bubble, the wrecked economy, the supply lines purposely dried up, anti-MAGA administration and a FED with a balance sheet out of control, not to mention the WEF, NWO, NATO taking over Norfolk Naval base and the ever forging ahead Covid Bullshit, how does it happen?
In other words, what’s the order? Shots fired in anger and the Kent State type killing of Americans or No avaliable food supply, maybe the dollar becomes worthless and you can’t buy things? Or will it be 1st the tracking and elimination of you ability to function in society by Gov. and big tech or maybe lock downs and Gov. brown shirts at a neighbors door until it’s your turn. Or will it be a Yougoslavian Maidan Square type of 1st domino to fall.
What happens 1st and what’s the order that they have planned for us?
All of the above. Be prepared in every way. Start stocking up yesterday.
Thanks for the response 47Y and Dutchman. I’ve done all that I can think and was blessed to do and the CTH was my guide, (reading Sundance and you guys and gals questions, answers and wonderful links)!! My question was to game this out with different view points and go with my gut to prepare for their tipping or our tipping point.
I believe I know where I am in this “over throw” of our Constitution, at least my circumstances, and have my h t d o. I was just thinking ahead, gaming their game and asking for input from ya’ll as to what that is, What is their next move? Does a currency collapse come first or does a false flag white supremacy bring in UN troops on American soil? See what I’m asking?
SD said live the best life that you can and I’m doing just that. Just asking smarter people than me how to best prepare for what comes next.
For instance when I hear someone say the FED said, I hear JP Morgan, BoA, Fidelity and is it City Group? The biggest 4 banks have a board of director on the FED and the FED only has 7 BoD.
My personal opinion is a dollar collapse then a false flag and un troops on American soil.
Ya’ll have a blessed day and “live the best life that you can” best lesson ever from Sundance!!
DEPENDANCY is, I think, a key goal,…”by any means neccesary”.
Yes, they would LIKE to take our guns, but know that can’t happen,…YET.
Firstly, use any and every means to make the citisenry DEPENDANT on the Federal govt.
From Universal basic income, ‘subsidised’ housing (no doubt their ‘answer’ to the pending, manufactured housing crises) to covid jabs and Universal healthcare, they figure if the majority of citisens are dependant on govt for the essentials; food, housing, jobs to pay for neccesities, HEALTHCARE, Education, etc. then WHO will stand up and say “No!”
Just look at K-12 education. Its been getting failing grades, for 50-60years.
Those who could afford it, rejected public ed, in favor of private schools.
But, the vast majority of working families sent their kids to public schools (they were DEPENDANT on public schools.)
Medical care sucks, but we are (or THINK we are) DEPENDANT on our healthcare system.
Look how far they have come: we are now ‘Dependant’ on the government to “let” us come out of our houses (or NOT) travel, open our businesses (or NOT) engage in group worship or ANY group activity.
Govt policy ALWAYS has the effect of “picking winners and losers”; thats why selective enforcement is so insidious and destructive, and can not be tolerated in a free society.
And they are openly and hypocritically engaging in it, on numerous fronts.
They HOPE that Covid will be “the gift that keeps on giving” and that they will continue to use it to squeeze us, forcing more and more dependancy on us.
I HOPE they are wrong, and their well will dry up,..lets see what happens,..
Hey Dutchman see my answer to 47Y above, LOL, hope we can have a beer somewhere along the way. I’m buying!!
This: No avaliable food supply, maybe the dollar becomes worthless and you can’t buy things?
Read the history of the Weimar Republic and the consequences of printing more money. Also look at at Zlotys in Poland. The results are always dictatorial control demanded by a lied to populace to change things. Change. Sound familiar?
Deflation is the friend of the American middle class and the event of central banking.
Enemy of central banking
PDJT’s America First policies destroyed a long standing myth, a key part of the FED Reserve mandate.
The myth is that inflation is inevitable, and the Feds job, in part is to MANAGE inflation, so that it is gradual, instead of sudden.
To manage the RATE of inflation.
Given what we have seen during PDJT’s first 3 years, reasonable to ask WHY the Fed policy isn’t directed towards DEFLATION?
As good as that 3 years was, it was obvious the Fed wasn’t supporting Maganomics, and was doing everything it could to try to block it.
IF they had done as PDJT implored them to do, the Trump economic train would have been even stronger.
With Congress, the Fed, “his own party” (NOT) and all the rest (media, big tech etc.) it IS truly amazing he was able to accomplish as much as he did.
He was relentless. I miss him.
Well if get are getting inflation, (all other things being equal) wouldn’t home prices go up? I suppose Sundance is making the point that inflation, and trade policy reversal is going to crash the economy or at the very least eat up purchasing power ergo the crash in home prices/sales.
Home prices don’t track inflation but are a result of spendable income and low interest rates. Inflation and job loss eats up spending, inflation must be addressed by raising interest rates, and simple consumer confidence is a big factor in whether people get out and buy homes.
Traditionally there is a home price decline as we go into winter. Most people are 6 months behind real estate trends so expect to see more inventory at high prices initially with less demand causing a spiral down this fall and winter if the Joemalla trend continues..
I spoke with a local former sweet corn farmer. They switched to corn for ethanol which is subsidized and thus, much more lucrative. This switch will result in feed for livestock going through the roof as well as other grains and vegetables as those fields also changed to corn. By fall harvest, look for food prices to continue to skyrocket.
That switch you describe started well over a decade ago, when the greens teamed up with AgThugs like Monsanto. Monsanto, the company that sells seed that is sterile, requiring farmers to buy new every planting season (instead of plowing under annually).
I am a neophyte when it comes to economics. Thanks to SD for another easy to understand explanation.
My bigger question here is, who has figured out how to massively profit from the destructive effects of hyper inflation?
Just like short sellers have found a way to win when someone else looses, I suspect that several individuals or large multinational organizations learned how to use inflation that destroys us to massively profit off our misery. Like how Soros almost broke the Bank of England but got massively wealthy from his actions.
I suspect this is planned and not incompetence. Some kind of sophisticated money game.
It is only a pet theory, YMMV.
Suggest you go to the archives, to learn a LOT MORE about inflation.
First, go up to this article, and click on “primary one” and “primary two”.
At the end of those articles, and before comments section, there will be links to other related articles, and those articles will have links to still others.
And, there is the search function that can be used to search the archives, as well.
This should lead you to articles which put things in context, when you see “lemons or widgets” comparisons, and the term “exfiltration of wealth” you will know “you are there”
The articles explain how it is, that “trillions are at stake”, and how multinational corporations manipulate markets.
And, how PDJT was breaking up the system.
And yes, with him out of office, they are reinstituting and expanding the system, trying to break US, so that our ‘ilk’ can never rise, again.
Complete the reading, understand the material, and you can say you have a MAGAnomics degree, from Sundance University!
Thanks Dutch.
I read those when they were posted. I was able to comprehend what SD wrote. I understand the basics and some middle level stuff. Where I get hung up is the machinations of monetary policy and real big picture stuff. Again, I know just enough to be dangerous. I have never had a problem admitting what I do not know. My self educated, education, has some big holes.
Honestly, what Ross, Lighthizer, Kudlow and Mnuchin were doing to China was where I would get lost. I understood the basics, but am not educated enough in economics to understand the real nitty gritty.
In this I trust SD to help me learn as we go along.
BTW, Kudlow seems to be a little “off” these days. Not sure I understand why, but my spidey senses start firing when I see him on TV these days. I don’t watch FOX Bus or FOX News as a rule but if I am scanning and Kudlow is on I will listen for a little while. I am probably reading too much into what I am seeing. We will see.
A weaker dollar means “Foreign First”. If you invest a portion of your money in foreign stocks/funds you could offset the coming drop in US stocks/funds.
Even if Old Shoe Joe is replaced by Kommie, I wouldn’t predict much change in policy. If the democrats lose control of the House or Senate, it could change a few things but Joemala still has to sign any legislation.
No, the decline will gain momentum if the reconciliation and infrastructure bills both pass, and that momentum will accelerate until we have another presidential election. If they don’t pass, it will be a slower but still steady decline.
I no longer think they have any intention of replacing Joe.
HE is their exploitation of the loophole in the Presidential oath (to the BEST of my ability) and kameltoe, like many previous vp’s, is just an “insurance policy”.
Makes perfect sense to me. Well and succinctly stated in terms non-economists can understand.
On a related note, orthodox Keynesian economic theory (which virtually all economists now treat as holy writ) claims that Stagflation is not even possible because price inflation is supposedly caused by excessive consumer demand and an “overheated” economy. It’s complete hogwash which is why contemporary economic “science” is mostly magical thinking.
Does Kensian also ‘say’ deflation is BAD, and should be avoided at all costs?
Target money supply or interest rates?
Both policies now don’t apply so much. But I like policies from Milton Friedman way better than John Maynard Keynes.
And I love Thomas Sowell.
Covid was, amongst other things, a direct attack on main street, while it simultaneously benefitted wall street.
Just as Bidem people are directly reversing Trump policies like the border wall, they are reversing his economic policies that were shifting power from wall st. to main st.
Itwas NEVER about DJT’s ‘demeanor’; it was ALWAYS about the trillions at stake, as a result of his economic policies.
And with his America First agenda, ALL of his policies were economic policies.
“They are after YOU, and I am just in the way!”
Now, with him “out of the way”, they ARE ‘coming after us’….
Your last sentences: DeSantis understands this, which is why his “I don’t want to hear a blip” speech yesterday also included this formula: If you’re [up to something bad against Americans], I’m standing in your way.
Another theory as to how China replaces the US currency and replaces US Economic Sovereignty:
The IMF proposed, and the Biden Admin already agreed. 630 billion in SDRs (Special Drawing Rights) are supposed to distributed sometime in late August 2021. This is not a loan, but receiving countries should pay interest. Then what Davos type people are saying is that, out of that, the developed countries like the USA, etc. should give undeveloped countries a portion of those SDRs. That would cut down on the spread of COVID.(Same game). Also while we are at it let’s include SDRs for climate change.
So if USA says “let’s give 10 billion SDRs to developing countries”. China and other countries matches with the same amount of SDRs. Now each one of these under-developed countries can go to the IMF or their own central bank and say we want to borrow more money, because now we have more reserves. OR, here is the rub, they can now come back to the USA and say we want dollars for SDRs. The Fed is obligated to do that exchange. The Treasury borrows that money, then they print more dollars.
When they print more dollars prices go up. People will have trouble buying food. But this would be worldwide, not just here.
Now China comes in on a white horse and says: “we need stability here, stop using USA dollars as the world reserve currency, use our cryptocurrency backed by gold(China would say it is the world’s cryptocurrency, not China’s, except they own the most gold of any nation in the world.)
Then, bingo, China replaces the USA as the world economic superpower without firing a shot, by bribing our Uniparty to their benefit.
Just my thoughts. I welcome corrections or opinions to my theory, because I am not an expert by any means, just a guy on the street.
when it all comes down to it just what good is gold?just like diamonds.all they are is shiny rocks is that what you value?maybe 2000 yrs ago gold had value but i can not see putting my money in something that really does me no good.as an average joe for one i can’t afford a shitload of gold and what good would it do me?and two i can’t eat it and i can’t defend myself with it .food and bullets are gonna be worth way more then gold before too long.and don’t forget toilet paper!