For years now, I’ve been harping on the imbecility of our national bankers seeking to raise inflation. Japan, Europe, the US all have inflation targets, as if a certain inflation rate would make things right.
Before I go on, I would note that there is an ideal inflation rate ….. sort of. It is entirely dependent upon what else is going on in the certain economy. Each is different, yet, all of our national bankers seem to believe a 2% inflation rate is just right, regardless of what else is going on.
Well, Japan edged closer to their sweet spot target! Except ……..
TOKYO (AP) — Japan’s inflation rate rose slightly in November, though lower household spending and incomes slowed progress toward a sustained recovery for the world’s third-largest economy.
The consumer price index was up 0.3 percent from a year earlier, though down 0.3 percent from October, the government reported Friday.
The government has made scant progress toward its goal of a 2 percent inflation rate it has said is needed to ensure a “virtuous cycle” of rising demand and rising production, partly due to the sharp drop in global crude oil prices.
Figures released Friday showed that core inflation excluding food prices was 0.1 percent, while household spending in November fell 2.9 percent from a year earlier. Excluding food and energy, the consumer price index rose 0.9 percent.
Incomes fell 1.4 percent from the year before, suggesting companies are not heeding appeals by Prime Minister Shinzo Abe and other leaders to raise wages and increase investment inside Japan.
Japanese companies have tended instead to invest their surging profits, thanks to massive monetary stimulus, in faster growing markets overseas.
Friday’s data also showed that Japan’s jobless rate edged higher in November, to 3.3 percent from 3.1 percent in October. But companies have tended to add overtime or hire temporary help instead of raising wages to attract new staff.
So, inflation went up a bit. This is good, why? Consumers have to fork over more money for their goods and services. Yet, in Japan, they have less money to fork over. How grand for the Japanese! If they could have just gotten to that 2%, boy! Then things would have been great!
As an aside, I emboldened the next to last paragraph because this also demonstrates Suyts Spaces superior acumen in things economic over the central bankers of the world. As stated many times here, the various central bankings QE/stimulus efforts lands in the markets, not the various nations/entities. The monetary policies invoked have helped nothing.
I wonder if anyone has ever done a study on the value of the money invested in the stock markets and commodities vs the value exacted from the various markets (especially after the IPOs). Today, I would suspect it’s a net negative. Other than a total collapse of a currency, these are one of the few places one can place money/value in, and get absolutely nothing back in return.
On a different economic, but for US oil industry extremely important topic:
Since November Iran is allowed to sell half a million barrels of oil a day.
WTI Chart: Notice start of steep downward slope beginning NOV 2015.
And here’s the kicker. 3 months after that, beginning FEB 2016, Iran will be allowed to sell TWICE that much daily. This is part of the Iranian nuclear talk. Iran also just sent a bunch of partially enriched Uranium to Russia. Russia will enrich it to nuclear fuel quality to be used in Iranian nuclear reactors (so while Western media vilify Putin every way they can he’s obviously trusted enough to not give the Mullahs nuclear bombs, imagine that.)
Get ready for 20 USD a barrel.
The big banks have underwritten hedges for US oil producers, meaning the oil producers are protected from dropping oil price as long as the hedge is running – the oil producer sold his product forward when prices where still at 100 USD a barrel. The big banks are currently bleeding like mad due to this, while the oil producers are protected. This will change over the coming months as the hedges expire and the risk shifts from the banks to the oil producers. They will fail – but this will be a new risk to the banks as they have financed the oil producers and their credits will go bust.
Deutsche Bank today has sold a 3 bn stake in a Chinese bank, saying they were so happy with the development of the stock that it’s time to cash in. Well… I think they’re in trouble and they need to sell grandma’s jewelry to survive… Maybe the oil hedges are the cause. Expect more bank heart attacks, followed by oil producer bankruptcies… followed by more bank cardiac arrests…
Deutsche bank all time chart
In serious need of resuscitation…
Yes, it was part of the nuclear talks. Another interesting aspect to this is that the US is going to open up our oil trade to allow US oil to freely sell to the rest of the world ….. though, I don’t know who would buy it.
One of the biggest economic fallacies out there is that there *is* an inflation rate. There isn’t. Inflation is an alteration of the supply of and/or the demand for money such that the *perceived* purchasing power declines. Prices will follow as the actors make their decisions. Mathematics does not apply here. Deflation, like inflation is an alteration of the supply of and/or the demand for money. Deflation would be where the alteration results in perceived increase in purchasing power. Prices will also follow
There are two things that need to be done with respect to banks. 1. Get rid of central banking, and 2. never allow lending against demand deposits (aka fractional reserve banking). Why? Central banking precludes the natural interbank competition and, since governments either allow it or force it, bankers will demand fractional reserving in exchange for a loss of liberty and hope that the power acquired from becoming government agents will keep them from paying the price of failure.