KVH needs an urban plunge without her SUV, credit cards, designer clothing, or body guards. Maybe her perspective would transform while getting a whiff of urine filled alley ways where the homelesss sleep in most unbran centers; but then again, that would require breaking away from her inside-the-beltway tour, which includes white-tie dinners, sniffing the arse of the DNC and Obama, and playing the powerful women while sweeping crumbs off the table to the rest of us.

Since she is the product of corporate hegemony, did you expect anything less? She has to keep those interest payments on her trust fund flowing with the rest of the banksters.

Hedges, Mckibben, and Jensen walk their talk. Try investigating their lives. Nader has not owned a car any time in his life, although he does own a substantial share in a Fidelity fund; nevertheless, his entire life has been of service to humanity, when most were married to their wealth. No man's life is predicated on one single issue.

Teddy, I agree. What are we going to do about it?

GwNorth,

You are correct. What are you (we) going to do about it. I hear the outrage in your comment. Are you not compelled to take action?

Oct 30, 2009

Inflation by stealth
By John Browne

Over the past two years, the United States government and the Federal Reserve have dispersed trillions of public dollars, run up enormous deficits, and kept interest rates at zero. In just about any economic textbook, this combination of policies would be described as the perfect recipe for inflation.

Yet, with the exception of the usual increases in healthcare and education, prices by and large are not rising. Many have concluded that our economic leadership has simply outsmarted the textbooks.

The benign Consumer Price Index (CPI) figures are serving as a rallying point behind which the financial talking-heads are forming

a parade of optimism. The low CPI is their "proof" that inflation is not a pressing concern. This view is two dimensional.

Inflation is classically described simply as an increase in the money supply. Although these changes will impact price levels, it doesn't necessarily follow that prices will rise when inflation is high. Instead, inflation may merely result in stable prices at a time when prices would otherwise be falling.

In the popular mentality, however, inflation is simply defined as prices rising. After decades of steadily rising prices, people seem to have forgotten that prices sometimes fall. In light of the bursting of a number of record-breaking, government-fueled asset bubbles, prices should be declining across the board (as they did in the Great Depression). The fact that prices are stable, or have even rallied in some sectors, indicates that inflation is already spreading across the economy.

After falling to just 6,547 in the months after the crash, the Dow has rallied past the 10,000 mark. This should strike even novice investors as unjustified. Jobs are still being lost, a massive healthcare entitlement and carbon tax are winding through Congress, and no one with at least one foot in the real world has a palpable sense of imminent recovery. Corporate earnings have fallen far behind the rally in shares prices, stretching valuation multiples to pre-crash levels.

While not quite as frothy, home prices are now moving up for all the wrong reasons. The seminal Case-Shiller Index of home prices is now up for the fourth month in a row. The index's designer, Professor Robert Shiller, has stated recently that the current upward trajectory is unsustainable. In fact, the levels are still above the 50- and 100-year trend lines.

In the worst economic climate since the Great Depression, and after the largest housing bust on memory, single-family home prices should be falling well below the trend lines. But with a doubling of the monetary base and special interest programs like the homebuyers' tax credit, home prices have stabilized and even increased in some markets. That's the work of inflation.

With gross domestic product growth now returning to positive territory, many inflation hawks ask why inflation has yet to truly manifest. The explanation can be found in the difference between monetary base and money supply.

The latest US$1.9 trillion injection of government money was composed of some $900 billion of stimulus, of which only about 20% has been distributed. However, in its attempts to stabilize the financial system, the government has already spent some $1 trillion of Troubled Asset Relief Program (TARP) type funds.

The TARP money, financed by an increase in the monetary base, has been provided to the banks at zero cost. And for the first time, the Fed is paying interest on bank reserves. Therefore, the banks can lend money to the Fed and to the government via Treasury securities at an interest rate spread of some 3% to 4% without risk. Given these incentives, it makes no sense to lend to anybody else. So, despite a massive increase in the monetary base, credit remains tight and price levels flat.

However, if the Fed stops paying interest on bank reserves or otherwise "persuades" the banks to lend, the $1 trillion will be leveraged up by the banks and spewed out into the economy. Fractional reserve banking will transform a $1 trillion monetary base injection into a $9 trillion increase in money supply. When that happens, prices for everything will go through the roof.

So for now, inflation is like a ninja stalking our economy. It's lurking in the shadows but can't easily be seen. But once its strikes, it will be fast and deadly.

John Browne is senior market strategist, Euro Pacific Capital. Euro Pacific Capital commentary and market news is available at http://www.europac.net. It has a free on-line investment newsletter.

(Copyright 2009 Euro Pacific Capital.)

Inflation fears threaten US creditworthiness
Oct 27, '09

Scourge of commodity inflation returns
Sep 18, '09

In hindsight, that is an easy but condescending position for you to assume.

Beyond your exaggerated example, do not forget that many of the loans were obtained on the basis of Realtors and appraisers using very real and assuring market comps and double digit appreciation to justify the home values and the loans.

Also, for the mortgagees, there was little reason to believe their jobs and retirement funds were in jeopardy, that making the loan payments would be a problem, or that selling the home would become a difficulty. To the contrary, I know Realtors whom specifically told prospective homebuyers they could easily sell their home if things didn't work out, and at the time that seemed to make sense to everybody involved. I also know Realtors and mortgage brokers that told mortgagees they would be able to easily refinance when their ARMs kicked in, because of the expected appreciation of their property. Do you really think all of this would have happened if that wasn't actually the case - or is everyone just as stupid as you put it?

Realtors and appraisers helped create the prior artificial inflation of real estate that encouraged as much as 125% financing of real estate. Why doesn't anybody talk about that? And the banks mentioned in this article are hardly the only players involved. The whole thing was/is a cruel scam, and we need to focus on the people that perpetrated the scam instead of ridiculing the unwitting dreamers caught in the web of deception.

Re NMBill October 29th, 2009 1:28 pm

That's a vicious slur on communism. Jesus (the first communist---see "loaves and fishes") and I object.

Corporate feudalism is more like it. Or we could stick with the classic definition, as propounded by Benito Mussolini (who was in a position to know): fascism.

Of course ICELAND is NOT just one of the TROPHY "privatization capitalism" examples of US led economics that collapsed:

IRELAND too, ALSO ESTONIA and LATVIA..the TROPHIES of the "triumph of capitalism"

NOW virtual BASKET CASES that ran to China or RUssia for LOANS to float themselves up....because the IMF that GAVE them their prescription medicine at the behst of the USA - wouldn't lend to them.........

"The Modern "rulers" have this perfected to an art form."

The current ruling class are no better than previous ruling class. There reaches a point where a society enters an anger flashpoint, or critical mass if you will. When the peasants are starving and angry, no matter what sacrifices the elite make, and unless meaningful restitution is made, there is, and always has been blood to be paid. Let them eat cake (or sleep in the streets), and let the revolution begin.

This manipulation is much about the illusion of "belonging"(and thereby feeling superior). There seems to be an infinite supply of dolts who have no hope of bettering their economic status (in large part because our society in general does not educate our children in money matters at all) who are ripe for seduction by being made to feel that they are part of the "in crowd" by the regurgitators of wing nut crap (limburger- Beck et al). This lack of economic skills, combined with NO background at all (not even a concept of what is meant by, critical thinking).

Climb a few rungs on the economic ladder and find many who have immense, ill gotten, wealth. They inveitably desire social acceptance. (Perfect example: Joe Kennedy --father of the recent tragedy prone generation of Kennedys in government). Their acceptance became his.(Not to even mention the even more recent Bush crime family) Ergo - politicians in general go there from a background most often littered with moral terpitude. It is not a pretty picture.

Spiritgirl

I'm also focused on pushing for answers. I am angry at what I see and most alarming is that my fellow citizens are in a fog, yes "unconcious",distracted by the lack of real reporting in the media and the false contest between Republicans and Democrats, liberals and conservatives. They are responding with fear to the series of false crises created by the Corporatocracy. They can't see the forest from the trees. We don't have 2 party system, its a one party system.

So, in the spirit of pushing for answers, I see the first critical task is to wake up America by exposing what is really going on. I see a fantastic opportunity to do so by pushing our congress to pass HR 1207 and S604, a call for the full audit of the FED. Most of the electorate think the FED is a government entity, not the totally unchecked private enterprise that it is. Most people would assume that the FED is audited and when they discover there is not oversight on the 10s of trillions of our dollars manipulated by the FED, they will be angry. We can watch where the opposition to these bills is coming from because the corporate/banking elite will do everything they can to kill or water down these bills. Those that oppose these bills can be exposed for their true agendas and patrons. Perhaps this could be the mechanism to wake up Americans and begin to check the systematic dismantling of our liberty. So I am starting by contacting my rep and senators, urging others to do so as well - to compel our so called representatives to get behind this legislation. If I had independent wealth, I'd hire an army of investigators to track this legislation, and investigate the influences on anyone that oppose it and I'd publish the results exposing the corrupted. perhaps this will begin to wake up America - the first step to reversing the dangerous path we are on.

What do think Spiritgirl?

I'd like to think that the American people will wake up just like that but there will have to be a reverse conditioning strategy in the works. People are just as angry today as they were back during the French Revolution but their anger has been craftily misdirected by the ruling class. The question remains as to who will be able to correct the misdirection and how.

"However when it becomes apparent that the haves are no longer accepting new members into their lair, the have nots, hopefully begin to stir from their coma."

The haves always find a way to throw a bone to the have nots to pretend "inclusion". The trick is to get the have nots to avoid falling for the bait and it can be a tough task.

"That's why we have only 2 parties, both of which "just happen to be" big-business parties; and why any alternative to this arrangement (for example, a party organized to represent the interests of working people) is outlawed."

They're not outlawed but they have to jump through more hoops and are marginalized by the duopoly to the point of being nearly nonexistent. The only way I see parties actually representing the working class winning is if more people open their hearts and minds to the issues and judge the candidates by what they really stand for and/or have supported and opposed in the past. It appears that getting the electorate to do that will be as easy as herding cats. Most who voted Democrat appear to be sticking to voting that way and ditto for the Republicans with most swing voters simply alternating between D and R with very few showing signs of going third party. It really stinks !

By the way, thank you for writing a perfect analysis on John Nichols back in August. I cannot stand it when the writers apologize for the Democrat Party without rhyme or reason.

The older I get, the more certain I become that the corporatocracy will not allow us to avoid complete impoverishment and/or enslavement through the use of any safe, clean, morally pure mechanism, such as voting in a third party. They will force us to do it the hard way, the messy, dangerous, morally questionable way, or not at all.

Jethro Tullamore, I'm all for "teachable moments" but I question, as have those already commenting, on WHAT will be taught during this moment. Will we learn that, as there are banks "too big to fail," they are as well too big to be held accountable for their failures? Did anyone else notice the omission of Goldman Sachs from van den Heuvel's list of to-be-investigated firms? Was this an oversight or an indication that the biggest cheese of all in the rat's nest of Wall Street corruption is just too big (being that it owns the U.S. Treasury and a big slice of the presidency) to be held accountable? We've had plenty in the past of "investigations" in which those lower in hierarchies of power take the rap for malfeasances of those higher up the ladder, and it takes a persistent cuss like Senator Ervin or Howard Baker, to keep asking of the higher-ups: "what did they know and when did they know it?" I'm afraid we'll just learn all over what we already knew about the corruption in our political lives. But maybe I'm wrong and an Ervin or Baker or Sam Dash or Robert Welch will appear; and maybe, just to dream big, that a Bernstein or Woodward might come out of the "journalistic" woodwork.

I totally agree. The so-called "investigations" are pointless jokes. As long as those big cronies are being bailed out with our tax dollars and destructive policies rigged to safeguard them at our expense, no amount of investigating will change a thing. Congress looks more like a circus hall anyway that they'd might as well carry out their lame dumbshows on The Daily Show with Jon Stewart to lead them.