Vigilant Investor

One rat’s been thrown overboard.  For now.

Ethonal may not make a lot of economic or environmental sense… unless, of course, you’re in the biz!

Some information is best experienced vs. discussed or explained. Set to a graph we posted some months ago from Robert Schiller’s work on home prices adjusted for inflation, above is the same graph from the view of riding the graph in a roller coaster. Watch the video first, and then review our prior post with the graph.

When holding your nose at the election booth today, we thought these two cartoons would provide a needed lift to our readers. Click the small images below for full sized cartoons at GoComics.com.

We’ve been looking in disbelief at our government debt clock on the top right of our site, as it churns away. When we put it up just a few short months ago it was barely $ 7.7 Trillion, and the government was worried about the debt limit being at $8 trillion. Suddenly the debt clock took off, and for a moment I thought it was broken. But, alas, no such luck. Today we read, “Government Spending Hits Record in March,” with the Treasury Department reporting that spending totaled $250 billion in March alone, up 13.7% from the previous year.

Congress, never the fiscally responsible ones — after all, that gets in the way of buying off the populace during elections — is incapable of contemplating anything remotely obeying the laws of economic gravity.

So long as they win their next election, what is it to them if future generations are saddled with insurmountable debt or entitlement “promises” that are by any sane measure impossible to pay? They get to be political big shots dolling out $ billions, so who cares if the dollar is debased so badly thanks to the deliberate inflating of money supply? No different than any common counterfeiter, they spend freshly minted dollars (in cahoots with an officially ordained banking cartel called “The Fed”) that are backed not by hard work, production and growth, but instead by thin air. Each cent of purchasing power gained by this swindle comes directly out of the pockets of existing dollar holders and savers.

Most folks didn’t mind when all those fresh dollars pushed up; the stock market — their brokerage and 401k statements showed that they were growing wealthy. For a time some people even quit their boring day jobs and begin day trading their way to riches.

After the bubble burst in stocks, most folks grew worried — but not for long, as money supply began driving home prices up at paces well above average, and in some areas into the stratosphere. If the stock market was no longer making people rich, their homes now were. Again, many people quit their boring old jobs and took up as real estate agents or mortgage brokers. Some even decided it would be a good idea to get into the real estate flipping business, where you could buy a house without a penny down on an adjustable rate mortgage, and sell it a year later at 26% increase. Nobody seemed to care about anything with home prices going up so fast.

In either case, nobody bothered to check beneath the surface and find out why prices would suddenly go up so fast and so extreme compared to historically normal levels. Instead they were told by investment magazines and mainstream economists, and the Fed and the Government, that the United States had arrived at a new state of economic nirvana, where the old rules no longer applied. Deficits didn’t matter. Neither did opening the floodgates of money supply. After all, so long as CPI was under control and GDP looked good enough, all was well.

As the saying goes, inflation is lots of fun on the front side, when the good prices go up. But that can last only so long until it starts hitting the prices of things that are not so fun. Today people complain about greedy oil companies as the effects of bloated money supply show up mercilessly in the price of gasoline. They demand that “somebody (e.g. politicians) ought to do something about it”, completely oblivious that politicians already have with the money supply issue. (As well, most don’t realize that their politicians — through taxes –have the largest slice of gas profits of any of the players, from oil company down to gas station owners…but I digress…). As well, prices of other items have begun their slide upward.

Expect that trend to continue. The government has promised so much in dollar terms that the only way it can deliver it by debasing the currency to pay promises with unites of currency worth only a fraction of their original value. That’s the way it’s been done in every dominant global power, from Rome, to the French to the British Empire. The U.S. will be no different. The people will demand nothing less.