The Dollar Is Being Wrecked

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[Go here now to get the urgent details on this fast-moving story.]( The Dollar Is Being Wrecked [Jeffrey Tucker]Dear Daily Prophecy Reader, The world of finance and punditry awaited September’s inflation numbers with a great fear that it could be worse than we think. Instead the numbers were just about as bad as everyone already knew. The annualized Consumer Price Index was 5.4%, higher than August, but about the same as this summer, which was a record high. That’s how it goes these days. Unless the news is shockingly terrible, it is widely considered to be pretty much fine. It’s all about perceptions. What’s not about perceptions are the prices that consumers are facing in real time right now. The CPI tells you about the past, not the present. In the present, absolutely everything is galloping up in price. This is only an indication of what producers and retailers believe that they can get away with passing on to consumers. A much more pressing problem is visible one step backwards in the structure of production. As a result, there is almost no news about the producer price index, which is already showing a 20% annualized increase in the most recent numbers, but is most assuredly much higher right now. Remember: these data are always and everywhere historical and subject to the exigencies of data collection and manipulation. They are an approximate rendering of what happened 30 to 45 days ago. They say nothing about the present moment. Here is the PPI chart that the Wall Street Journal will not publish. [PPI by Commodity] What’s become a fun game is the journalism surrounding all of this. The WSJ explains every single bit of the inflation with a series of circumstantial events. You can take your pic: the worker shortage, supply chain breakages, chip shortages, pandemic fears, travel restrictions, trade conflicts with China, and you name it. There’s always the old standby: the weather! What none of these stories actually say — and this is truly bizarre — is that the problem might trace to The Fed and its monetary expansionism. Even after centuries of experience, Nobel prizes, thousands of books, endless conferences, the press still can’t seem to bring itself to name the real problem. For them, The Fed is always the solution, never the source of the problem. Until we can get this right, we’ll be floundering around for years seeking to understand how and why the dollar came to be wrecked. 04ghd74j - 3b95 - dt38 - 43vg - g7sp38gt See this 32-digit code? While it’s just for illustrative purposes, it’s the prototype for a brand-new digital infrastructure that is set to replace the “old internet” as we know it. Act now to be early on the “new internet”… [Continue Reading >>Click Here<<]( The Threat to Treasuries As the press was doing its twisted dance to avoid assigning blame where it belongs, I had a close look at a scary [new report]( from the Institute for International Finance. Based on the inflows and outflows of forieign purchases of the U.S. Treasury debt, the report says the conditions are beginning to ripen for US treasuries to stop being the go-to safe haven for world assets. They discern this based on a little-noticed pattern from last spring: For a few scary days in early March 2020 – at the height of the first COVID wave – US Treasuries stopped trading like a safe haven asset, with 10-year yield shooting up as the S&P 500 was tumbling. In subsequent weeks, it took $1.5 trillion in emergency QE by the Federal Reserve to stabilize the market, in what has now been written off as a market “plumbing” episode. Of course, micro “plumbing” issues played a role, but this episode has many things in common with any number of EM crises: (i) leverage to boost carry; (ii) a large, unexpected shock; and (iii) liquidity that evaporates when it is most needed. The significance of such an event has alarming implications. It would mean an end to the ability of the US Congress to keep passing these multi-trillion dollar spending packages, while facing no serious consequences in the short term. It would cause rates and inflation to soar. It would fundamentally change US economic standing in the world. It seems unthinkable for a whole generation of policy makers. But now the IIF is saying it is ever more likely. We present evidence from flows that points to markets revisiting the safe haven character of US Treasuries. Treasuries in 2020 saw foreign selling, while traditional safe havens like Germany and Japan saw inflows. Our data are far from definitive. But because a change in how markets see Treasuries would have far-reaching consequences, the US macro picture deserves far greater consideration in the debate around what happened to US Treasuries in 2020. The report concludes: A clearer understanding of investor sentiment towards US government debt is urgently needed, given how much this has impacted issuance – which at the height of COVID skewed to short-dated bills (Exhibit 3) – and how much foreign flows into Treasuries have fallen since the aftermath of the Global Financial Crisis. The Stag Word In its report on the new inflation numbers, the New York Times has started throwing around a world not heard in decades: stagflation. It’s a combination of slow growth plus inflation. The new word was coined in the 1970s because the combination is supposed to be a wild and inexplicable anomaly, at least according to Keynesian theory. Inflation and unemployment are supposed to work inversely, not in tandem. Something similar is indeed happening now: The difference is that we don’t have high unemployment, but that’s because so many people have dropped out of the workforce. We have very low employment. As mentioned before, 3 million people seem to have gone missing due to the lockdowns and mandates. Meanwhile, some measures of inflation are at a 30-year high. Absolutely no one in any position of power today has any clue about how to stop it. Regards, [Jeffrey Tucker] Jeffrey Tucker These Ticking Time Bombs could Kill a Post-Pandemic Recovery A former hedge fund manager and respected economist wants to give you a [stark warning.]( According to him, there are no fewer than three ticking time bombs that could derail Joe Biden's highly popular "rescue plan" for America. It's not the message the media wants you to hear. It's not what Joe Biden wants you to believe. 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