November 17, 2010, iTulip

Rising October retail sales numbers are being reported as a sign of economic recovery, especially auto sales, but the stock market knows better. We’ve been tracking producer price inflation increases since early 2009 on the expectation that six months to a year after input costs rise in response to monetary policy, consumer prices will rise disproportionately to rising demand as the economy recovers. Retail sales data are not inflation-adjusted and our analysis indicates that the widely reported increase in retail sales to consumer is in fact largely inflation. Consumer price inflation is finally arrived and the stock market doesn’t like it one bit.   More …

November 9, 2010, iTulip

World Bank chief surprises with gold proposal

The world’s largest economies should consider gold as an indicator to help set foreign exchange rates, the head of the World Bank said on Monday in a proposal that threw open the acrimonious currency debate just before a summit of G20 nations.

Writing in the Financial Times, World Bank President Robert Zoellick called for a new monetary system to replace the floating rates adopted in 1971 known as Bretton Woods II.

AntiSpin: On January 3, 2006 I started a site called The Fourth Currency where I asserted:

A return to the Bretton Woods international gold standard created in 1944 is inevitable.

Thirty-seven years ago the world’s economies started on the circular track back to Bretton Woods. We will sooner or later be back where we started, with international transactions guided by a fixed gold price.

So there’s your answer. It was inevitable to me in 2006. Still is.

America’s free ride is almost over. Thank the leaders of both parties who built the FIRE Economy on the foundation of the Dollar Cartel since 1971.  More …

More bad craziness from our economic policy leadership. This is Smoot-Hawley version 2.0.

The Smoot–Hawley Tariff Act of 1930 turned a major recession into The Great Depression by launching a trade war in the middle of a global downturn. World trade fell by 66% between 1929 and 1934. As Milton Friedman said, governments never learn.  More …

Have Real Estate industry subsidies been good for the country? No, they’ve been a disaster. It’s time to roll them back.

Today I received the following email from a conservative friend. As a small L libertarian, what do I think of the new real estate tax? I’m glad she asked for my opinion but I’ don’t think she’s going to like my answer: it’s time to cut taxes on productive economic activity and raise them on non-productive pursuits.  More …

Soros Calls Gold the ‘Ultimate Bubble’
Sep 15, 2010

Billionaire George Soros, whose hedge fund, Soros Fund Management LLC, has been heavily invested in gold and gold-mining companies, told Reuters on Wednesday that gold prices might continue to rise after printing record highs this week, but warned that the precious metal is the “ultimate bubble.�

Reuters: “Gold is the only actual bull market currently. It just made a new high yesterday. In the present circumstances that may continue,� he said at a Thomson Reuters Newsmaker event.

“I called gold the ultimate bubble, which means it may go higher. But it’s certainly not safe and it’s not going to last forever,� he said.

According to Reuters, Soros also said that “after asset classes set new highs there are almost always immediate reversals that disappoint investors.�

Spot gold on Tuesday set a new all-time high of $1,270 per ounce, well above the previous all time high of $1266.50 per ounce.

The gold price Wednesday has traded as high as $1,273.50 and as low as $1,266.80.

AntiSpin: Soros joins a long line of “expertsâ€� on gold who did not identify the bottom of the gold market and buy at $270 in 2001 when we did but entered the market recently after gold had already increased more than three fold in price. Gold cannot have been a bubble for the past nine years. The idea is patently absurd. Gold did not suddenly turn into a bubble just because Soros or anyone else happened to start to notice in 2008 what we noticed and acted on nine years ago, that the gold price was due to rise. Our price target of $2500 to $5000 made then when gold traded at slightly more than 1/10 to 1/20 of that price sounded insane at the time. Now that it sounds likely it’s parroted by a small army of gold market tourists.  More …

August retail sales up 0.4 pct., best in 5 months
Sept. 14, 2010WASHINGTON (AP) — Retail sales rose in August by the largest amount in five months, adding to evidence that a late spring economic swoon was temporary and not the start of another recession.

Retail sales increased 0.4 percent last month, the Commerce Department said Tuesday. It was the second straight monthly increase and the biggest gain since March.

Excluding a decline in autos, retail sales increased 0.6 percent. That followed two relatively flat months and a sharp drop in May.

AntiSpin: Today’s retail sales numbers are misleading. Consumers are not buying more stuff, they are paying more for it. Consumer price inflation is rising. That’s why gold prices spiked from $1250 to $1270 on today’s retail sales news.  More …

August 3, 2010, iTulip

Good news, bad news, and another word of caution for the housing bubble hopeful

I started iTulip.com in 1998 to warn readers that the technology bubble was not just an investor “party� or a neat way to force technology onto the market but was an efficient way to savage the heart and soul of the American economy. In 2005, five years after the bubble collapsed, I was at a Stanford investment conference moderating a VC panel hopefully titled “The Money’s Back.� It wasn’t.

Five years later it still isn’t. Today Thomson Reuters published its PricewaterhouseCoopers/National Venture Capital Association MoneyTreeâ„¢ Report and Data: only three technology market segments show positive growth over 1999 investment levels with the remaining segments still off 13% to 98% more than a decade after the bubble peak.  More …

July 29, 2010, iTulip
Six years ago today the Brookings Institution released a report Sustained Budget Deficits: Longer-Run U.S. Economic Performance and the Risk of Financial and Fiscal Disarray that speculates the outcome that we outlined in our 1999 theory of a final asset price deflation and reflation cycle that pushes the U.S. economy over the edge into a debt and currency crisis. Where are we six years later?  More …

November 30, 2011, iTulip

• Why did stocks markets plummet more last week than during any Thanksgiving week since 1942?
• Why are oil prices rising as the global economy slows?
• Why did global central banks buy more gold in Q3 than any period since the collapse of Bretton Woods in 1971?

How can the U.S. use this new crisis to escape its Output Gap Trap? I argue that the U.S. will over the next two to three years undertake a bold program of new infrastructure development in response to a new energy crisis arising from a regional conflict in the Middle East. The political attitude toward inflation will shift to a level of tolerance of inflation reserved for wartime. New Energy Crisis economic policy will replace the policy of Print and Pray in place since early 2009 to produce an output surplus that finally closes the output gap created by The Great Recession.  More …

October 26, 2011, iTulip

I attended last week’s small, invitation-only conference “Long-Term Effects of the Great Recession” hosted by the Boston Federal Reserve on Atlantic Avenue to hear what a dozen influential economists like Martin Feldstein, Donald Kohn, and Simon Johnson have to say about the state of the economy two years after the so-called Great Recession, and meet members of the media.

Here is what I learned.  More …

Essential Trends - Part I-A: Gold in an Era of Global Monetary System Regime Change - Eric Janszen

October 13, 2011, iTulip
This six part series explores the five of the major macro-economic trends of our time.

Each part covers one major trend, then we pull them all together in Part VI.

Monetary Regime Change, American Debt Deflation, and Peak Cheap Oil are updates to previous analysis and are already familiar concepts to long time readers, although they will be explained in this new series simply to help new readers to quickly grasp the concepts.

The Great Wall of Money expands previous analysis of China’s unsustainable economy into a more fully formed theory of the Chinese economy. A key element is the idea that the distinction between the balance sheets of China’s commercial banks and its central bank are so blurred that they may be considered from a monetary policy viewpoint as a single, gigantic balance sheet. The implication is that while the crash we forecast back in October 2010 to occur in Q4 2011 is proceeding as expected, it is unlikely to be the end of the road for the Chinese system. 

The approach taken in the analysis is to frame each trend between two forces that are the key processes drivers. In the case of Euro Zone Fracture the force of increased federalization on one side opposes the force of increased tribalism on the other, with credit committee negotiation complexity and time constraints the greatest impediment to resolution. In the case of American Debt Deflation the political strength of special interests to maintain the flow of payments to repay bubble era debt opposes the political tension created by high unemployment and weak economic growth that deflation causes. By framing each trend process between two opposing forces, all five can be combined in ways that allow us to explore their interaction and propose likely outcome scenarios and impacts on asset classes on a time line. We attempt to keep this all simple enough that readers don’t get lost in the language and minutia. read more …

September 2, 2011, iTulip
It’s 1938 all over again

• Mid-gap recession arrives• We’re all goldbugs now
• Our ten-year-old gold plus Treasury bonds portfolio melts up
• The slow stop before the sudden stop
• Get ready for Emergency Measures

I warned in my 2010 book The Postcatastrophe Economy: Rebuilding America and Avoiding the Next Bubble that the US was in a race against time to get its economic house in order. The window of opportunity to get the economy back on a strong growth track was approximately two years starting in the second quarter of 2009.By the time my book came out in the fall of 2010, I was warning in book tour interviews that recovery policies were taking us in the wrong direction, that attempts to restart the FIRE Economy — the economy oriented around the finance, insurance, and real estate industries — will fail at the expense of the Productive Economy — the economy of goods and services produces that employs over 90% of consumers.If policy makers persist with this wrong-headed approach, I warned, the result will be persistent high unemployment, a depreciating dollar, rising consumer price inflation, falling home prices, and rising budget deficits.Congress did not understand the urgency of the mission to restructure the economy toward productive activity and away from finance-based activities, if they understood that as the mission at all.They argued and experimented, as if we had all the time in the world to exhaust all other options before doing the right thing.Now, as Q3 2011 winds down and we head into the fall, it’s apparent that our two-year deadline has come and gone — and the stock market knows it.  More …

August 13, 2011, iTulip
Mike (Mish) Shedlock sent me an email today to let me know that he’s mentioned me in his latest column, “Yes Virginia, U.S. Back in Deflation; Inflation Scare Ends; Hyperinflationists Wrong Twice Over.” Here is my response.

Dear Mike,

First of all, please try to spell my name correctly. I’m an electrostatic loudspeaker Janszen, not a swimsuit Jantzen. You know, the name all over my web site and on the cover of my book?

Not so hard to find.

Second, you’re doing what the mainstream media does: framing the debate between two false extremes without the context of a chain of causation that led up to the event in question.

Deflation versus hyperinflation was a junk debate before the deflation case was disproved. Now, after the deflation case has been disproved, persisting with it is simply ludicrous. As there is no possibility of deflation, the only valid topic for debate is and always has been since we got into this in 2006: What kind inflation are we going to have?

But if you insist, here is the argument yet again, after the fact, hopefully for the last time, although I don’t see why it’s necessary to rehash it. Your argument for a depression and deflation spiral was flat out wrong. Events have already proven out my argument that we won’t have a deflation spiral and that we’ll instead experience a form of stagflation as the dollar weakens, food and energy prices rise, but the jobs market remains awful. That’s what is happening now.  More …

August 2, 2011, iTulip

“All these leaders understand, but never admit, that the motivation and incentive for Americans to resolve these critical problems—to improve our education, health care, and energy systems; to control our debts, live within our means, and so on—have been gradually reduced by the U.S.-dominated global speculative financial system that they themselves have helped create.”
- The Big Bet, by Eric Janszen and an anonymous investment banker, January 2006

• A Show About Nothing
• Debt ceiling as official meme management
• Genius is a rising bond market
• Mining memes for money
• Gold gallops as silver stalls
• iTulip.com’s 10-year gold purchase anniversary

CI: So you did not think a US government debt default was ever imminent. The Wall Street Journal and every major US media outlet is blaring the message “Default looms as Congress haggles over debt limit.� Why?
EJ: The debt ceiling debate reminds me of that old Seinfeld episode, “A Show about Nothing.” It was a manufactured crisis, right up there with weapons of mass destruction and the Iraq War. There is no question in my mind that the probability of a bond crisis over the debt ceiling was zero. The only question is, To what purpose?  More …