We are not seeing inflation because across the global economy, the marginal value of debt is now negative. If you think of debt as a factor of production, rates of return have equilibrated with artificially low interest rates, so the expected rate of return for either speculation or production now does not exceed the costs of debt (interest and debt repayment). In fact, present debt burdens, having been incurred at a far faster rate than underlying economic growth, are onerous, especially debt incurred for consumption, for which there is no economic return.

So most private economic entities are trying to either reduce their debt or at least not incur more of it. The only entities still aggressively increasing debt are central banks and governments, who are insensitive to economic considerations. For their debt to have expansionary economic effects, private entites must be willing to expand their debt. The Fed buying up government bonds (actually exchanging its fiat debt for the government's fiat debt) can only increase nominal economic activity and prices if the bank reserves it creates serve as a basis for loan expansion in the real economy. That is not happening now, or is only happening at an anemic rates depending on the country, which is a primary reason economic activity is weak and there has not been the oft predicted resurgence of inflation. When total debt actually begins to contract, which has either started or will soon, it will be deflationary. Commodities prices since mid-2014 are the leading edge, just as house prices were last time. In both cases deflation began in one of the economies most leveraged, or indebted, sectors. That is typical of debt deflations.

For more, see the Debtonomics Archive on SLL.

And I am sick of it. I am trying to get a job and
get off Social Security. I never wanted to be on it.

Ditto here, sir.

do not know where you hang your hat, but i will be in san fran friday with girlfriend, then saturday to saturday in the wine country for a week of wine tasting...hot air ballooning...and mud baths...come taste some wine if you get the chance...

I've watched others my entire life, trying to understand what's going on in their minds and thought processes. It looks as if the mental effort to focus on a single idea or thought is either too great an effort, or that they find the results of the focus taking them into areas or realizations that make them uncomfortable, even frightened and they back off, or that being pulled away from emotional reactions and feedback makes them feel as if they're losing their safety net.

I often think that I'm the odd-ball in the crowd--just wired differently than others. Odd that it gives me a sense of freedom, even excitement that I don't see in others.

In order to have inflation, the public needs to respond to government incentives the way government wants them to. If, instead of spending, they save and/or pay down their debt, then you'll get DEflation, in which the government will respond with more funding. To get inflation, the public must SPEND, not save or reduce debt.

Just posted an article and link to a comference video taking place tomorrow evening about the feds thinking about going back on the gold standard.

That would probably bring gold to 10K an ounce.

It's worth a listen, they may do it, they may not but it does say something about how our fed is thinking. The article states that they would sell bonds in return for gold...interesting, worthless paper for something of intrinsic value...makes one want to go Hummmmmm.

so true ...and others will be encouraged to turn "hoarders" in...get a part of the take...

i will just try to stay under the radar...trying to get my girlfriend to find an "isolated" cabin somewhere...

The progressive left is always demanding that the US become more like countries in Europe. No longer a problem as we're quickly becoming Greece.

Probably doesn't matter if you plan or not. Once the fit hits the shan, the gummint will come and confiscate the savings of those who did plan. People who hold out will be called hoarders.

Preparing taxes (aargh!) now, will have an explanation in a day or two.

Have you heard of the Electric Universe theory? There are some fascinating videos on it here: https://www.thunderbolts.info/wp/

Thanks Straight,

What is your explanation for why we are not seeing inflation?

Part of it seems to be lying about the actual inflation to me. However, that does not seem to be the complete explanation.

In the case of Japan, the central bank did not start monetizing the national debt until recently (??) So I think that explains why Japan did not experience significant inflation.

Is the inflation being created by the Fed buying up government (and other) bonds and retiring them, being overwhelmed by bad loans that have not officially been written off.

What are you thoughts?

then they have drastically scale back all the entitlements...will voter reaction cause a revolt or a crackdown by the powers that be...

but end result will be a much lower standard of living for all who do not plan....

Some debt will get paid off, most will get rescheduled, repudiated, or written off.

another excellent expose on "the emperor's clothes" of govt finance...so...
in your opinion...can the massive debt be reversed...and if not...how does this turn out???

There is more real-life experience in the game of Monopoly than what is being done with world finances. We have all agreed, it seems, that certain printed paper has a value that is emblazoned upon them and that value is both real and redeemable. That is either delusional or simply a lie. The world is playing a game with rules that change on a daily basis that both affect and will affect the lives of everyone in the USA and also everyone in the world. How long it will last before some cosmic alarm clock goes off and wakes up the world to a destructive catastrophe worse than any bomb conceived by man is beyond my foreseeing. I only know, that it will happen if we stay on the path we are merrily dancing down hoping to find the Wizard.

Thanks again. Odd that many people prefer mental inactivity to activity; they must have higher boredeom thresholds.

Thanks.

I agree that this is the paramount issue to be dealt with at this time. If the money collapses, we all collapse. Rioting will take over when the entitled people cant get their EBT cards. Check out Venezuela to see how it goes. There is a modern day example of the failure of statism (yet the people there are STILL in favor of it)

Another excellent article Robert. Great research and explanation of the economics. Thanks again, love the writing.

txs Robert, I'll check it out. I love Horton Ratcliffe's writing on similar subjects.

It is hard to get others to pay much attention--I think its the resistance to the use of reason over emotion and mental comfort. Leaves one with not many to be able to discuss such topics. One of the reasons I enjoy your writing so much.

Thank you. Seeing as how we have this page to ourselves, have you ever read The Theory of Elementary Waves: A New Explanation of Fundamental Physics, by Lewis Little? It is, as its name implies, a different take on physics. It is not a long book and would probably be a short read for someone of your background. It's proving to be a longer read for someone of my background. However, it's pretty interesting and it deals with a lot of the logical conundrums built into contemporary physics. You might want to take a look; it's on Amazon.

Fools and Pixie Dust--appropriate.
Txs Robert