Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Will Fed‘s Cap On Interest Rates Trigger Gold’s Rally? - 30th May
Is Stock Market Setting Up for a Blow-Off Top? - 29th May 20
Strong Signs In The Mobile Gaming Market - 29th May 20
Last Clap for NHS and Carers, Sheffield UK - 29th May 20
The AI Mega-trend Stocks Investing - When to Sell? - 28th May 20
Trump vs. Biden: What’s at Stake for Precious Metals Investors? - 28th May 20
Stocks: What to Make of the Day-Trading Frenzy - 28th May 20
Why You’ll Never Get Another Stimulus Check - 28th May 20
Implications for Gold – 2007-9 Great Recession vs. 2020 Coronavirus Crisis - 28th May 20
Ray Dalio Suggests USA Is Entering A Period Of Economic Decline And New World Order - 28th May 20
Europe’s Coronavirus Pandemic Dilemma - 28th May 20
I Can't Pay My Payday Loans What Will Happen - 28th May 20
Predictive Modeling Suggests US Stock Markets 12% Over Valued - 27th May 20
Why Stocks Bear Market Rallies Are So Tricky - 27th May 20
Precious Metals Hit Resistance - 27th May 20
Crude Oil Cuts Get Another Saudi Boost as Oil Demand Begins to Show Signs of Life - 27th May 20
Where the Markets are heading after COVID-19? - 27th May 20
Silver Springboards Higher – What’s Next? - 26th May 20
Stock Market Key Resistance Breakout Is Where the Rubber Meets the Road - 26th May 20
5 Ways To Amp Up Your CFD Trading Today - 26th May 20
The Anatomy of a Gold Stock Bull Market - 26th May 20
Stock Market Critical Price Level Could Soon Prompt A Big Move - 25th May 20
Will Powell Decouple Gold from the Stock Market? - 25th May 20
How Muslims Celebrated EID in Lockdown Britain 2020 - UK - 25th May 20
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20
China’s ‘Two Sessions’ herald Rebound of Economy - 22nd May 20
Signs Of Long Term Devaluation US Real Estate - 22nd May 20
Reading the Tea Leaves of Gold’s Upcoming Move - 22nd May 20
Gold, Silver, Mining Stocks Teeter On The Brink Of A Breakout - 21st May 20
Another Bank Bailout Under Cover of a Virus - 21st May 20
Do No Credit Check Loans Online Instant Approval Options Actually Exist? - 21st May 20
An Eye-Opening Perspective: Emerging Markets and Epidemics - 21st May 20
US Housing Market Covid-19 Crisis - 21st May 20
The Coronavirus Just Hit the “Fast-Forward” Button on These Three Industries - 21st May 20
AMD Zen 3 Ryzen 9 4950x Intel Destroying 24 core 48 thread Processor? - 21st May 20
Dow Stock Market Trend Analysis and Forecast - 20th May 20
The Credit Markets Gave Their Nod to the S&P 500 Upswing - 20th May 20
Where to get proper HGH treatment in USA - 20th May 20
Silver Is Ensured A Prosperous 2020 Thanks To The Fed - 20th May 20
It’s Not Only Palladium That You Better Listen To - 20th May 20
DJIA Stock Market Technical Trend Analysis - 19th May 20
US Real Estate Showing Signs Of Covid19 Collateral Damage - 19th May 20
Gold Stocks Fundamental Indicators - 19th May 20
Why This Wave is Usually a Market Downturn's Most Wicked - 19th May 20
Gold Mining Stocks Flip from Losses to 5x Leveraged Gains! - 19th May 20
Silver Price Begins To Accelerate Higher Faster Than Gold - 19th May 20
Gold Will Soar Soon; World Now Faces 'Monetary Armageddon' - 19th May 20

Market Oracle FREE Newsletter


Inflation Hysteria And The Revenge Of Central Banksters

Economics / Inflation Apr 06, 2014 - 04:27 PM GMT

By: Andrew_McKillop


Christine Lagarde Wants “Low-Flation”

Lagarde has been rightly ridiculed and accused of “jabberwockery”, for example by David Stockman who also says that what she calls plain good sense, is “pure Keynesian claptrap”. She opines that one of her sincerest and enduring concerns for the global economy moving forward, is that “low-flation” especially in the Eurozone countries will or might suppress growth and jobs. So of course she is rooting for more Fed-style and ECB-style and BOJ-style, and BOE-style monetary easing. Print and forget!

To be sure, Christine Lagarde was a highly rated French swimming champion although never quite making Olympics-grade, before she turned to swimming in New Economic claptrap, but she first needs to show she has serious and real knowledge of what inflation means. What is it? Do you find it in those near-Olympic swimming pools, what the French call a “serpent des mers” or mystic animals that jump out of nowhere at your throat?

This in fact is what Lagarde is flirting with, but in blissful ignorance, of course. Maybe somebody at the IMF building can clue her in. We hope.

No Such Thing as Low-Flation

There is no such thing. There is either inflation or deflation. The supposed “third option” of totally unchanging prices and currency values, is impossible. Another useful thing for Lagarde to learn, is that both inflation and deflation have full stops. They not only can end, but do end. She might be tempted by sci-fi New Age dreaming, that “low-flation” can be like cosmic expansion or inflation of the Universe, also called Universal expansion, but she will regret that.

For 100% sure and certain Lagarde and most anybody else in the glove puppet “economic expert” business will always shift the storyline to prices – only. Currency values do not count. Forget about the price or exchange value of gold. That is all old hat. Keynesian jabberwockery is the only show in town, and deliberately sets out to make it impossible for around of 95% of persons to know what is being discussed. That 95% probably includes would-be but failed Olympics-grade swimmers

Typically, the inflation = prices storyline goes like this. We have regression models of the economy in which we have  mysterious and arbitrarily-defined things called demand aggregates each with their own price indices, sometimes inflated (only a joke) to become The CPI. This is the ultimate serpent des mers, is politically dangerous, and has to be kept sweet and low. Over 30 years of New Age Neoliberal tinkering and claptrap has made that quest a traditional cottage industry for elite-friendly and employable economists. For Lagarde, and her bankster clique headed by Yellen, Draghi, Kuroda, Carney the sweet and low officially manufactured CPI is a ticket to ride the serpent des mers and turn the fiat money printing presses.

Almost any major briefing by these central bank governors and presidents will include hand-outs for the press showing that the CPI is no longer sweet and low – but threatened by contraction, negative growth, deflation, call it what you like. Even better, the briefings can include hand-outs showing rather impressive price growths for the 95% unwashed masses, among certain aggregates, some sectors and price bands but for sure and certain this is never, ever anything to do with the value (or “purchasing power”) of money going down. That is unthinkable, and Goldman Sachs, JPM, Barclays, BofA, Soc Gen and the others have been instructed to talk down the price of gold anytime they can, to show that paper money rules, OK..

Using the crackpot logic of Lagarde & Co, if the value of money only grows, prices can only fall, so one of their missions is to make the value of money fall and get “Low-Flation”. Being schizophrenic, they also want gold prices to be sweet and low, or very low, to maintain or increase fiat paper currency values. Do not blame me for elite madness, because I say throw them all to the sea serpents. Land ones will also do.

If She Has Time

Lagarde could do a little backtracking on a simple question with no answers. What is inflation? My own argument is that inflation – which was not even a defined economic concept until the late 19th century – was and is a heroic battle,  by and between elites, to see what breaks first. Also I contend that the first real “modernish type” of inflation was monetary inflation. The value of money fell, so prices rose. But if there was more money around, circulating, this didnt matter too much to the 95%, while it mattered an awful lot to the 5% and the 1% of them who think they own and control everything. Called central bankers, today.

She could try the early history of the Bank of England, in fact a New Age tale with Governors who usually lasted only a few months, and quite often “disappeared' by assisted suicide, hanging or flight over the horizon (with no need for a Malaysian jetliner). They had let The Money deflate, to use a handy term, and they paid for that political error.

Keynesian jabberwockery makes a point of shifting the storyline to things like inflation making the “opportunity cost” of holding money too high, because of “uncertainty about future inflation”, and a loss of interest in investment and savings, and even the hoarding of goods due to “fear of inflation”. Deflation in pure theory only, should be the exact opposite, so Lagarde & Co should be delighted the Eurozone is in deflation. But they aren't. We do not need to keep jabberwocking with the “pushing on a string” thesis or “monetary trap” thesis, that is money supply growth causing further deflation, because Lagarde & Co have got that and the bottom line, for them, is that if gold prices can be held low, printing money and handing it to the playtime elite operating the stock market casino can keep going.

Keynesian one-liners on inflation, deflation and money are certainly not New Age, but 1930s style New Age and can be contradicted and discredited by so many simple, basic observations that the Austrian School has a permanent field day exploding those one-liners. One key bone of contention is the subject of new or enlarged, or decreased, forms of credit and money used by Milton Friedman in his own soothsaying on the “velocity of circulation” of money, but among the schools of thought on inflation-deflation we often find the concept of the economy's output capacity – with Keynesians such as Christine Lagarde's IMF and the central bankers always claiming there is lurking under-capacity and under-output in the economy. When or if “low-flation” appears on the horizon, everything will be fine, because their reading of the tea leaves is that  rising prices, of course moderately rising prices, show the economy is humming.

New Age Economics

Why rising prices should show the economy isn't producing enough, or just enough, and this is hunky dory is more elite schizophrenia, mainly because to them moderate inflation means The Money is safe, although moderately menaced, therefore needing elite care and attention. The disconnect with what's called the real economy is as we guessed, massive and permanent. Taking simply and only the official CPI's of G7 countries, these are in fact indicators of global economic change, not price indexes.

As we know, if you pack the CPI with cellphones, flat screen TVs, PCs, cars, shoes, clothes, bicycles, solar collectors, ocean freight rates, iron ore and plenty of other things (even natural gas in the US!) you will get deflation in a big way. To be sure, not too many consumers directly buy iron ore or a trip on a Greek supertanker, but constantly growing swaths of world manufacturing are in overcapacity.  Prices are falling because the real economy is overperforming, there is too much stuff around.

Cellphones, whether smart or stupid, 4G or not, are an ultra-classic example. World output capacity is probably now more than 1.6 billion per year, meaning the entire world population of human beings could have at least 1 cellphone, each, in 4 years. Why shouldn't their prices deflate? To be sure Apple is doing its heroic best to pump up the complexity and the “apps” it packs and sells to persons with more money than sense in its overpriced output - to keep it overpriced - but world cellphones are in structural oversupply.

Also completely outside the crazy world of elite inflation hysteria – panicking when there is no inflation and panicking when there is real inflation – increasing money supply should drive down prices. To be sure this is ceteris paribus-mutatis mutandis and all the rest, and a nice theme for PhD's grappling for a job in the IMF, but the history of inflation shows that monetary supply shocks, historically, resulted in grave decreases in the value of Official Money, already fiat or near-fiat, while prices of the stuff people buy only increased in that Official Money. They did not increase in Alternative Money terms.

The first major documented example of this process dates to the 1560s and the premonitory run-up to the Bank of England's foundation, specifically to defend the Official Money. Counterfeiters were beheaded and their heads placed on wooden spikes atop the Royal Mints of Olde England. As a warning to others. But consumer prices in Alternate Money – gold from the Caribbean and Latin America brought ashore by romantic pirates – declined. In that heroic era when the word “inflation” didn't exist, but inflation did, Kondratieff claimed that continental Europe received about 50 000 tons of gold in the 50-year span of 1550-1600. Official Money phased down and out, in a hyperinflation bubble for Official Money. Not much later on the English had Oliver Cromwell, a kind of English Saddam Hussein or Napoleon Bonaparte..  The Germans got Adolf Hitler from a later variant of the same story.

Too Complicated for Lagarde

The storyline is surely too complicated for her and her ilk. Maybe she should go back to swimming? Deflation in the Eurozone or anywhere else is among other things, a signal that Official Money is losing its charm, its utility. Official money is therefore self-depreciating, but due to its stranglehold on exchange, and due to custom and habits, people go on using it. The Revenge of the Bankers is of course sure and certain, and Lagarde knows all about it. They will pump up the jam and Quantitatively Ease until they get hyperinflation. Then they will disappear from the scene, maybe replaced by Adolf Hitler or Darth Vader.

The political solution is the only one possible. Lagarde and the IMF, and the central banksters have to go. They have proven, time after time, that they can only act with schizophrenic irresponsibility, bringing down The Fire from Heaven (or conjuring up the serpents from the sea) that they always claimed they were preventing.

Their claim that “low-flation” is urgently necessary is poppycock. They have totally misread the massive changes in output capacity of the global economy, and are drugged with semi-mythical Keynesian one-liners and comfort theory, but Keynesianism is 1930s New Age economics. Time has moved on to Darth Vader's Skywalker economics and time is out for Lagarde and her ilk. Keep your antique sea serpents for yourself!

By Andrew McKillop


Former chief policy analyst, Division A Policy, DG XVII Energy, European Commission. Andrew McKillop Biographic Highlights

Co-author 'The Doomsday Machine', Palgrave Macmillan USA, 2012

Andrew McKillop has more than 30 years experience in the energy, economic and finance domains. Trained at London UK’s University College, he has had specially long experience of energy policy, project administration and the development and financing of alternate energy. This included his role of in-house Expert on Policy and Programming at the DG XVII-Energy of the European Commission, Director of Information of the OAPEC technology transfer subsidiary, AREC and researcher for UN agencies including the ILO.

© 2014 Copyright Andrew McKillop - 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 advisor.

Andrew McKillop Archive

© 2005-2019 - 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

6 Critical Money Making Rules