Cheap imports won't drive down prices on US consumer goods -- at least as long as the Fed continues to print more and more money at historically high volumes.
The money (M2) supply is growing at the fastest rate in 20 years. Between January 1990 and January 2000, it grew from $3,163 billion to $4,633.3 billion. Between 2000 and July 2012, it more than doubled to an unprecedented $9,992.7 billion.
According to an analysis by the American Institute for Economic Research (AIER), this rate of growth in the money supply is the major contributor to consumer prices. "With a huge wall of money waiting to flood the economy, the U.S. needs to find its own measures to control inflation," Steven Cunningham, AIER Director of Research and Education, noted in a report. "The U.S. can't look to cheap import prices to control domestic inflation."
AIER, a Great Barrington, Mass.-based independent think tank, based its analysis on data collected by the Bureau of Labor Statistics since December of 2003. It found:
Chinese Imports: The Consumer Price Index (CPI) declined even as the cost of Chinese imports increased. Each 1% increase in the cost of Chinese imports, AIER economists found, was accompanied by a 0.14% drop in the CPI.
Canadian Imports: Canada is the United States' largest trading partner. Price increases of Canadian goods had an almost negligible impact on the CPI, with each 1% increase of Canadian imports accompanied by a 0.007% increase in the CPI.
Latin American Imports: Each 1% increase in the cost of Latin American imports, meanwhile, was accompanied by a very modest 0.04% increase in the CPI.
European Imports: Each 1% increase in the cost of European imports, the analysis found, resulted in a 0.11% increase in the CPI.
Oil Imports: Even the price of petroleum imports appeared to have less impact than people assume, with each 1% increase in the price of petroleum-related imports resulting in a mere 0.02% increase in the CPI.
Cunningham reported that increases in the money supply, which more than doubled between 2000 and 2012, have a greater impact on prices. In fact, the AIER analysis found that a 1% increase in the growth rate of the money supply was followed almost immediately by a 0.19% increase in the CPI.
What do you think? Is the bloated money supply the biggest contributor to consumer prices? Can we accurately call increases in M2 a significant contributor to inflation?
The Bailouts made through TARP,etc were a waste of Taxpayer money.
Instead if they would forced the Banks to take the losses and raise Capital to account for Hits to their Balance Sheets;Our Economy would have healed much faster than where it is today.
We have just become like Japan today-Muddling along.
More Importantly from a Moral Hazard point of view,It would have taught the Bankers a massive-massive Lesson.
Right now,they are simply going about their Merry way just like normal while rest of the country suffers.
But then the Big Issue is that the Federal Reserve is owned by these Banks only.And if you look at who the Biggest Contributors to the Obama or Romney Campaigns its very clear that they are owned by the Banks too.
So who's gonna do something against the Banks???
Nobody.Just Buy Gold ,Guns and Land.Move outside the System entirely and let it collapse.
Nobody is perfect. Mr. Buffett has billions of investment at WFC, USB, BOA, and GS during 2008 crisis. Sure it will make his opinion skewed.
I still think bailout was necessary at that time. But the goverment shall not let these greedy bastards get away from the crime scene so easily. DOJ shall start serious investigation of these high level management team at Lehman, BearStern, Moody, S&P, etc. Many of these people shall serve their terms in prison, instead they got the Golden Parashute and have a wonderful life.
Honestly I lost a lot of respect for Buffet when he simply started cheerleading for Bailout of all the Bankers(without forcing them to take any of the losses caused by their irresponsible behavior in 2008) and also when he said Gold is a Useless Asset.
I actually did suggest the solution to all your woes in my previous post.
You have to be able to think outside the Box,Be Nimble and Take Tough Decisions.
My Dad had a very good phrase which he drilled into me from the time I was very small-"You have a choice in Life-Either you control Money or Money controls you".
It is not that easy. In 2007, I had no position in either big banks or Mortgage related companies, but I still lost (paper) money because I held Index fund, I need to buy food and gas, my own house's price dropped. On top of all these, every law bidden citizen needs to pay more tax so Fed can bailed out these crony capitalist elite.
Don't blame the Game-Don't trade,Don't invest in the markets,Don't keep Money with the Heavily Leveraged Banks ,Setup Solar and Windpower to power your homes,Become more energy Efficent and Grow your own Food.
If you own Gold and Silver-Own only Physical Metal.
Own Property overseas in a different jurisdiction.
There are so many things you can do today-If you want to beat the crony capitalist elite at their own Game.
The market is behaving in the last one week as if there is not going to be any QE3 annouced this weekend at Jackson Hole.
But what if QE3 comes as Europe breaks in September/October?
That will be enough to give Inflation a nice Spike upwards.
I don't thing that it should happen as I am against QE3 but that does'nt mean it won't happen.After all the Fed is there to benefit the Crony Capitalist Elite much more than You and me.
And the only way the crony capitalist elite can make money is through QE3.
They know it and We know it and They know that We know it.
If the situation in Euro and China continue to deteriorate, the stream of hot money can become torrent some time in the future. Luckily, it seems that Fed decided to give up QE3. We shall see the inflation pressue eases next few months
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