As you may (or should) know, the Federal Reserve has been printing up cash (M1) at the rate of 10.8% over the last year, and during the last three months that rate is just a shade under 16% annualized (15.9%).
What this means, if you’re a foreign buyer of American assets, like China, the cost of buying America is coming down, but to a domestic US investor,; the effect is driving up of prices which is why – in large part – why the prices of stocks seem to be setting new highs, except you can’t buy as much with the money.
Is this is a great economic program, or what?
Say something was worth $86.28 last year. A monetary argument might be made that because US dollars are so cheap presently, that a foreigner holding US dollars might pay as much as $100 for it this year and still buy the same asset.
The price seems to have gone up. But, in reality, the utility value of the asset hasn’t gone anywhere. But the money has been cheapened.
How much?
(At last, we arrive at this morning’s first economic thought!) Well, enough so that the headlines are screaming that the dollar is down to a 6 1/2 month low.
It’s a neat dance to watch, too.
If you’re wondering why the price of gold has not broken to new lows (especially because there are less people working in the most recent reporting month by the Labor Department’s own number) the answer is simple: With the US dollar sliding, it takes more dollars to buy a real asset.
Hence, gold which is an economic truth detector , has remained in the $1,300 area. Had the Fed not stepped up printing, it would likely be close to $1,122 right now…but such is the magic of printing money.
The currency machinations don’t just impact gold, silver, or commodities like oil, either. Globally there is a lot of deflation about making it hard for foreign companies to find enough good ways to spend their money.
And this gets us to the second key economic thought of the morning: the Consumer side osf Merck (New Jersey, USA) is being purchased by Bayer, AG of Germany. Why?
Again, look at what cheaper dollars means. Because Bayer is buying cash flow and earnings. A year ago, even using the smaller 12-month M1 currency factor, the cost of buying the cash flow from Merck consumer goods just dropped about 11 percent in one year.
Companies (like Bayer, but basically all of them) are constantly trying to answer the simple question “Where can I get the biggest bang for our bucks – and marks?”
The Answer this morning is Buy American. And another US taxable income stream….but I’ll let you work out the details of the impact on the corporate tax base.
I’ve told you many times over the past 17-years of this column that one of the major distinctions between the Second Depression and the Great Depression will be the role of global competitive currency revaluations.
Just yesterday, Dave Hodges Common Sense Show explained in some detail (here) how “World War III has already been lost and the Chinese are in the process of Occupying Amerika.”
Concurrent with this, the US government has been trying (stupidly) to play both sides against the middle. We were off selling financial assets to China, but China took the US bonds, mixed in some drug cartel money, and put together massive funds which have been buying up huge assets in North America.
And, in case you didn’t follow developments in foreign markets this week, please note that the Chinese Hang Send was down another 1.28% in trading overnight and is well under the 22,000 level.
Not that China has to worry: We keep hearing reports about how Chinese interests are buying up lands in or around many of the US national forests in places like Arkansas. But, says the Arkie rumor mill, they’re not even coming to the US to look at what they purchased. They just send money and buy.
China is in a different game than Germany. The Deutschers are looking to add cash flow to existing companies. China, on the other hand, is looking to invest in future resource (like timber) other goods their 1.3 billion or whatever it is, people will need in the future.
But that’s the game right now: Foreign companies are fighting over the scraps of America, and because of the sins of both political parties in the past, the raptors are now starting to pick over the bones of America. And the attacks on private gun ownership, the ever-increasing and all-pervasive electronic surveillance of even those citizens who are “pure as driven snow” is all designed to ensure the raptors get their fill. Undisturbed.
Aided and abetted by a packed Supreme Court which has put America’s electoral process on the block so the corporate stranglehold on the future can’t be broken.
And that’s why tomorrow’s Peoplenomics report will update you on the Growing War on Cash. the reason for this? People will eventually be reduced to voting with their wallets. But if you control the banks (check) and you can see what people are buying in near-realtime (check) then you can have a massive police state (check) where the Internet can be controlled (bye bye net neutrality…another campaign lie) and the raptors are just starting to get on pace.
The most money we print, the lower the buck will fall, the cheaper we become and the fatter the raptors.
What would once have gone by another name – treason – has gotten respectable using a different alias.
Business.
Balance of Trade
The new Balance of Trade figures were just released in the past few minutes.
Not at all surprising, despite the efforts of congress and the White House, the country is still down another….well, you read it:
The U.S.