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Wednesday, June 11, 2008

Inflation globalisation and cycles

Over the last 7 years CRB has risen almost 150% that would in a simplified context brake down to a 20% per year inflationary trend. The official inflation flips around 2,5% for the same 7 years (shadow inflation around 6% for the Clinton administrations adjustments - there is another one under Reagan which brings the number even higher).
Wage increases for White households from 1995-2006 is around 11% for the entire time (annualy 1%), Black households 12% and Hispanic households 30% averaging for all households around 14-15% or in annually terms 1,3% whereby this is the overall rise the highest income group do have disproportionately higher income increases which dilute the numbers. The regular guy has effectively less as one can see at the static minimum wage.
The real buying power of earned dollars have been reduced more than inflation since benefits have been reduced in the same period so he needs to pay for more services and items (health). In real terms the average American had a negative spending power but still consumed more due to more credits based on fictive house wealth effects. Now we enter the contraction phase with even lesser spending power due to rising inflation, negative wealth effects (homes , stocks, low interest) and almost no credit access.

The globalisation has several effects - first it opens all markets for purchase and sale of service and goods, which is for service and labor an arbitrage process narrowing the labor cost for the corporation. In a geographic context hikes the income in the poorer countries and lowers the one in the richer countries over time. The basic effect at first is deflationary since production cost decrease but swings over to an inflationary process later ( which we have right now ) as the improving life style of former poorer countries has a substantial effect on the demand side. The so called BRIC states upswing has an substantial inflationary effect since a rising middle class demands luxury in simple consumption things (meat TVs cars) gearing up to other areas but also the broad populations demand for food increases and goes upscale (food).
The Bush administration were a catalyst to the global inflationary surge by their strange eagerness to save the people of Iraq from a tyrant and fight the source of all terror ( actually the CIA has build up Saddam and Bin Laden) and they saved Russia by that ( the former biggest enemy) after Reagan had spend so much money to get them down on their knees. Russia was bankrupt in 1998 and only the rising oil price saved them from disaster - that makes them the biggest suspect for the 9/11 attack. On the other hand the most passports of the attackers were from the Kingdom of Saudi Arabia ( the royals are dear friends of the Bush family - since father Bush is an adviser to them) who also had a huge profit from their oil riches - reminds me of the nasty things J. R. used to do to keep up the oil price.
In any case oil went from 11 to 138 in 10 years and as Gazprom called on its way to 250. The US administration was buying all the way up to strengthen the oil reserves ( I always thought there job is to be anti-cyclical. But that are artificially generated effects (manipulation) which have an effect on the basic momentum in the same manner the so called index funds who control big portions of the long positions of the rising commodity prices do have a catalytic effect not to mention the Biofuel craze. Globalisation has put on the negative effects

read the section 'Decline&Fall Of the USA which includes comments to Europe and China as well.
Basically from an astrological point of view we are heading for a crucial world changing phase within the next 3-4 years which will be marked by a severe economic downturn globally and just by adding up all the facts we know today about the financial crises we can gather easily the inevitable consequences - everything happens in cycles and we have entered a down-cycle.

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