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Our Economy: ‘storm clouds, lightning, flooding ahead’! Why?

February 1, 2015

The next six (6) months should produce many new ‘data’ points which will startle and psychologically shock our elite Central Bank authorities (who seem rather complacent and confident of their control as of today). Those who are informed on our global economic situation now recognize that a new trend has started in 2015 called DEFLATION…and this trend is gaining momentum as I write. In addition to the trend towards global DEFLATION, we have new ‘data’ points emerging from recent changes in the political situation in Russia, Greece, Ukraine, Venezuela, Cuba, Nigeria, Iraq, Iran, Israel, China, the U.S.A. and the entire Eurozone area. Even Germany, the strongest of the weak, is now experiencing some Deflation and political stress. All these forces, now at work daily, will create huge new ‘data’ points (the words now used by our elite policymakers for policy actions) which will change our markets dramatically in 2015!

2015 will create many new Data Points for our elite policymakers! Watch as events change significantly!

The situation over in Russia will soon become extremely serious and ominous as their economy will be entering a huge depression in 2015. Their currency has collapsed and their growth will collapse if oil prices remain suppressed (which is highly likely). The Ukraine situation is a total basket case and their economic depression will worsen as they fight a losing war with their neighbor, Russia. Greece has voted in new elite’s (leaders) which will only worsen the economic and political situation within this country and later the entire Eurozone. Portugal, Spain, and Italy are waiting in the wings to follow the mindset of the new thinking expressed by the leadership in Greece. All these changes will produce many new ‘data’ points for Yellen, Draghi, Carney, Kuroda, Nabiullina, Xiaochuan, etc. to focus upon and act upon. Expect major changes in policies within the next few months due to many major changes in our ‘data’ points (debt, interest rates, prices, bankruptcies, insolvencies, derivative stress, cyber wars, etc.).

The most dramatic change for 2015 is our ubiquitous cyberspace currencies (now representing the vast majority of our monies used for legal tender). Gradually, I am witnessing a growing awareness (among our financial pundits) that our currencies are now much different from those of our past. When I first wrote about the ‘nature’ of our currencies in 2008, most (some 98+% of my readers seemed to lack an understanding on this issue). Today (2015) I witness a small group of pundits (and readers) who seem aware that cyber currencies are much different from our ‘printed’ currencies (of the past). Some media pundits (and financial commentators) are switching their views to the issue of DEFLATION (from their prior views of ‘inflation’) as they are beginning to comprehend the ‘nature’ of what has happened with our currencies and our banking system. Let’s briefly review!

Financial commentators (including most economists) have traditionally viewed our currency units as ‘printed’ units (implying paper notes). This concept of a ‘printed’ paper note as our money unit produces (within our mind) the idea that additional units (all the so-called Central Bank ‘printing’) must lead to more INFLATION down the road. It only makes sense that new paper notes (in the trillions $$$) entering the overall economic marketplace would lead to ‘inflation’ (when Central Bank QE operations were so substantial and persistent). Also, all the ‘excess reserves’ entering the marketplace must also eventually lead to more ‘inflation’ and potentially ‘hyperinflation’ one would think (as these units get multiplied via our fractional reserve credit system). This mindset seemed logical and obvious to pundits who viewed our currencies as ‘printed’ paper. This mindset, however, is now changing gradually! Why? Let’s think about the ‘nature’ of our cyber currency units! Why are cyber currencies different from historical currencies?

Cyber currencies are not physical/material currencies. A cyber currency is merely a symbol, number, and name. This means that our cyber dollar ($) is created ‘out of nothing’ and is ‘no thing’. Our cyber dollar gets inputed into our marketplace via a computer entry (key) and derives from the mind (consciousness) of a banker. This unit (being non-physical) and not within our space/time universe should be viewed as a spiritual and/or metaphysical unit (of information). What a cyber currency represents is a ‘unit’ of information entered into cyberspace via a computer key (typing). The unit then circulates from computer to computer and never gets exposed to the vast group of consumers who ‘spend’ these units. Most of the units created via the operation we call QE get stored in cyberspace as ‘excess reserves’ (not lent or borrowed by our consumers…the 70% who do all the spending). Consumers do not even SEE these units (with their eyes)!

Furthermore, these units generally go to select recipients (say commercial banks, primary dealers, and the super wealthy) who spend/invest these cyber units for their special projects and their safe haven investments (stocks/bonds/derivatives)…and not for general merchandise and durable goods (as the 70% of our consumers do). This means that these cyber units (now within our computer screens) get spent, invested, and distributed much differently from prior excess ‘printing’ schemes of our bankers (like within Zimbabwe in 2010, Venezuela today, or nations which have not converted fully to our new cyberspace banking). This lack of ‘printed’ notes in the hands of consumers is part of the explanation for the emerging DEFLATION which we now experience! The concept of ‘velocity’ declining within the overall marketplace also explains the trend towards price deflation! Our Keynesian model is based on fast credit and fast spending!

In addition to this, our robotic industry (which now produces most of our goods) has grown exponentially in recent years and this trend along with our nano technology and our computer technology has allowed goods and stuff (consumer items) to grow much faster than consumer demand. Witness all the stuff in our retail stores which now gets produced by machines and not by people! All these factors have created huge changes in production patterns and spending patterns. And finally, demographics have changed in recent years. The Baby Boom generation is now down sizing and desiring less in the form of material possessions. This huge demographic group is now retiring and scaling down. We witness this in all our retirement communities in my area of the country. All these factors mean that DEFLATION is now a trend in motion for many years. These Data Points are starting to emerge in most of our Western based markets (especially)!

The stress of excess student debt, excessive corporate debt, excessive local/state/national debt also plays into this trend towards deleveraging and deflation. Deflation is anathema for our Keynesian economic model which is BASED upon asset appreciation and continual inflation! All these factors above will mean that our ‘data’ points will change substantially in 2015 and this means GREAT change for all our markets going forward. Base commodities (copper, iron ore, lumber, etc.) will experience downward prices in 2015. Apparel and consumer durables should also experience downward prices. Housing could experience serious difficulties in 2015 and auto loans are now in a bubble. Food stamps, however, should be in a contrarian trend in 2015. The issues ahead of us are dynamic and changing daily. Get ready for storm clouds, lightning, and flooding (my metaphor) for the GREAT changes now emerging! Good luck! I am:

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