Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Gold & Silver Begin New Advancing Cycle Phase - 6th May 21
Vaccine Economic Boom and Bust - 6th May 21
USDX, Gold Miners: The Lion and the Jackals - 6th May 21
What If You Turn Off Your PC During Windows Update? Stuck on Automatic Repair Nightmare! - 6th May 21
4 Insurance Policies You Should Consider Buying - 6th May 21
Fed Taper Smoke and Mirrors - 5th May 21
Global Economic Recovery 2021 and the Dark Legacies of Smoot-Hawley - 5th May 21
Utility Stocks Continue To Rally – Sending A Warning Signal Yet? - 5th May 21
ROIMAX Trading Platform Review - 5th May 21
Gas and Electricity Price Trends so far in 2021 for the United Kingdom - 5th May 21
Crypto Bubble Mania Free Money GPU Mining With NiceHash Continues... - 4th May 21
Stock Market SPX Short-term Correction - 4th May 21
Gold & Silver Wait Their Turn to Ride the Inflationary Wave - 4th May 21
Gold Can’t Wait to Fall – Even Without USDX’s Help - 4th May 21
Stock Market Investor Psychology: Here are 2 Rare Traits Now on Display - 4th May 21
Sheffield Peoples Referendum May 6th Local Elections 2021 - Vote for Committee Decision's or Dictatorship - 4th May 21
AlphaLive Brings Out Latest Trading App for Android - 4th May 21
India Covid-19 Apocalypse Heralds Catastrophe for Pakistan & Bangladesh, Covid in Italy August 2019! - 3rd May 21
Why Ryzen PBO Overclock is Better than ALL Core Under Volting - 5950x, 5900x, 5800x, 5600x Despite Benchmarks - 3rd May 21
MMT: Medieval Monetary Theory - 3rd May 21
Magical Flowering Budgies Bird of Paradise Indoor Grape Vine Flying Fun in VR 3D 180 UK - 3rd May 21
Last Chance to GET FREE Money Crypto Mining with Your Desktop PC - 2nd May 21
Will Powell Lull Gold Bulls to Sweet Sleep? - 2nd May 21
Stock Market Enough Consolidation Already! - 2nd May 21
Inflation or Deflation? (Not a silly question…) - 2nd May 21
What Are The Requirements For Applying For A Payday Loan Online? - 2nd May 21
How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part1 - 1st May 21
INDIA COVID APOCALYPSE - 1st May 21
Are Technicals Pointing to New Gold Price Rally? - 1st May 21
US Dollar Index: Subtle Changes, Remarkable Outcomes - 1st May 21
Stock Market Correction Time Window - 30th Apr 21
Stock Market "Fastest Jump Since 2007": How Leveraged Investors are Courting "Doom" - 30th Apr 21
Three Reasons Why Waiting for "Cheaper Silver" Doesn't Make Cents - 30th Apr 21
Want To Invest In US Real Estate Market But Don’t Have The Down Payment? - 30th Apr 21
King Zuckerberg Tech Companies to Set up their own Governments! - 29th Apr 21
Silver Price Enters Acceleration Phase - 29th Apr 21
Financial Stocks Sector Appears Ready To Run Higher - 29th Apr 21
Stock Market Leverage Reaches New All-Time Highs As The Excess Phase Rally Continues - 29th Apr 21
Get Ready for the Fourth U.S. Central Bank - 29th Apr 21
Gold Mining Stock: Were Upswings Just an Exhausting Sprint? - 29th Apr 21
AI Tech Stocks Lead the Bull Market Charge - 28th Apr 21
AMD Ryzen Overclocking Guide - 5900x, 5950x, 5600x PPT, TDC, EDC, How to Best Settings Beyond PBO - 28th Apr 21
Stocks Bear Market / Crash Indicator - 28th Apr 21
No Upsetting the Apple Cart in Stocks or Gold - 28th Apr 21
Is The Covaids Insanity Actually Getting Worse? - 28th Apr 21
Dogecoin to the Moon! The Signs are Everywhere, but few will Heed them - 28th Apr 21
SPX Indicators Flashing Stock Market Caution - 28th Apr 21
Gold Prices – Don’t Get Too Excited - 28th Apr 21
6 Challenges Contract Managers Face When Handling Contractual Agreements - 28th Apr 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Fed Conflates Inflation with Growth

Economics / Inflation Feb 24, 2012 - 07:11 AM GMT

By: Michael_Pento

Economics

It is a sad situation when everything the man in charge of our central bank professes to understand about inflation is wrong. Mr. Bernanke does not know what causes inflation, how to accurately measure inflation or the real damage inflation does to an economy. He, like most central bankers around the globe, persists in conflating inflation with growth. The sad truth is that our Federal Reserve believes growth can be engendered from creating more inflation.


However, in reality economic growth comes from productivity enhancements and a growing labor force. Those two factors are the only way an economy can expand its output. Historically speaking, the total of labor force and productivity growth has averaged about a 3% increase per annum in the U.S. Therefore, any increase in money supply growth that is greater than 3% leads to rising aggregate prices.

That's why money supply growth should never be greater than the sum of labor force growth + productivity growth. Any increase greater than that only serves to limit labor force growth and productivity. Since Bernanke doesn't understand that simply economic maxim, he persists in his quest to destroy the value of the dollar. Perhaps that's why the Fed Head has decided to keep interest rates at zero percent for at least six years, despite the fact that the growth in the money supply is already north of 10%.

Maybe Bernanke believes that a replay of the entire productivity gains from the industrial and technology revolutions will both simultaneously occur in 2012. Or perhaps he feels that the millions of unemployed individuals laid off after the collapse of the credit bubble will all be re-hired this year. What he also fails to understand is that consumers are in a deleveraging mode because their debt as a percentage of income is, historically speaking, extremely high. So regardless of how much money Bernanke counterfeits into existence, it won't lead to more job growth or capital creation...just more inflation.

There is little doubt that global economic growth is faltering. Most of the developed world is mired in an incipient recession. Japanese GDP fell at an annual rate of 2.3% in Q4. Eurozone GDP dropped 0.3% last quarter and Greece is in a depression--GDP falling 7% as of their latest measurement. U.S. GDP is still a mildly positive 2.8%, according to the Bureau of Economic Analysis. But that's because they measured inflation in the fourth quarter at a .4% annualized rate. If inflation was reported more accurately by our government, the U.S. would also produce an extremely weak GDP figure.

But this is the age of a very dangerous global phenomenon; where central bankers view the market forces of deflation as public enemy number one and inflation as the panacea for anemic growth.

To that end, the Bank of Japan just added 10 trillion Yen last week to their 20 trillion bond buying program and adopted a minimum inflation target, much like that of the U.S. Federal Reserve. The European Central Bank is deploying their Long Term Refinancing Operation (LTRO) parts one and two. This counterfeiting scheme offers banks unlimited funds for at least three years to go out and monetized Eurozone debt. The first iteration of the LTRO dumped nearly 500 billion Euros into the economy. The second attack on the Euro currency will be launched on February 29th. And, of course, our Fed has printed $2 trillion dollars of new credit for banks to purchase U.S. Treasuries.

There is an all out assault on the part of global central banks to destroy their currencies in an effort to allow their respective governments to continue the practice of running humongous deficits. In fact, the developed world's central bankers are faced with the choice of either massively monetizing Sovereign debt or to sit back and watch a deflationary depression crush global growth. Since they have so blatantly chosen to ignite inflation, it would be wise to own the correct hedges against your burning paper currencies.

Michael Pento
President
Pento Portfolio Strategies
www.pentoport.com
mpento@pentoport.com
(O) 732-203-1333
(M) 732- 213-1295

Mr. Michael Pento is the President of Pento Portfolio Strategies and serves as Senior Market Analyst for Baltimore-based research firm Agora Financial.

Pento Portfolio Strategies provides strategic advice and research for institutional clients. Agora Financial publishes award-winning newsletters, critically acclaimed feature documentaries and international best-selling books.

Mr. Pento is a well-established specialist in the Austrian School of economics and a regular guest on CNBC, Bloomberg, FOX Business News and other national media outlets. His market analysis can also be read in most major financial publications, including the Wall Street Journal. He also acts as a Financial Columnist for Forbes, Contributor to thestreet.com and is a blogger at the Huffington Post.

Prior to starting Pento Portfolio Strategies and joining Agora Financial, Mr. Pento served as a senior economist and vice president of the managed products division of another financial firm. There, he also led an external sales division that marketed their managed products to outside broker-dealers and registered investment advisors.

Additionally, Mr. Pento has worked for an investment advisory firm where he helped create ETFs and UITs that were sold throughout Wall Street. Earlier in his career Mr. Pento spent two years on the floor of the New York Stock Exchange. He has carried series 7, 63, 65, 55 and Life and Health Insurance Licenses. Mr. Pento graduated from Rowan University in 1991.

© 2012 Copyright Michael Pento - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Michael Pento Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in