When will the Money Creation End?

That’s the big question, isn’t it after all?

“But there’s no inflation!” say those who accept official numbers, whose fund performance requires to look as good as possible and so on. “Au contraire!” say those who actually buy their food energy and don’t get paid to affect blindness, “It’s running at 5-10-15 (pick your percentage) !”

What can we do with this problem?

Here is one analyst’s quirky view....

That’s the Nikkei above, so it is, all 30+ years showing the final months of the Japanese bull, and the lost decade ... uh oh  ... the lost three decades.

Now let’s have a look at the S&P which is surely totally different from the sorry tale of Japanese stocks shown above. Here it is:

It’s shown in red for clarity later.

Yep, just look at that HUGE bull market in the US! Totally different from Japan. Right?

Well how about this for a comparison between the two bear markets?

The relative more bullish US bear is clear, compared to the decline in Japanese stocks.

The price and time axis are not shown because I played around with them a bit. You see the US high came rather later than the Japanese high so December 1989 (Japan) is lined up beside March 2000 (US). I placed 13 years of S&P on top of 30 years of Nikkei, so this is about the character of the period rather than a precise day to day, or week to week comparison. It is to be looked at for similarity of form only, as the action-reaction sequence of Japan was at a slower rate than that of the US under Ben Bernanke, as I'll now explain.

I detect a sort of similarity, not exact of course, but nonetheless the larger swings seem to be present in both indices. The notable differences are the smaller swings vary, and the Nikkei trended down more strongly than the S&P which went sideways for the lost decade.

Mr. Ben Bernanke was a student of the 1930’s depression and he didn’t want deflation, so he got printing fresh money very quickly indeed, to replace the credit which evaporated during this period. The Japanese on the other hand stuck with a stronger Yen policy than the US did, and really only began to print fresh money pretty late in their depression.

So this means that the US index is being priced in a weakening dollar. Hmmm. If I detrend by using the CPI, I use a tainted inflation data in my work due to all the "special adjustments"  which subvert this index from it's purpose. I could use the CRB to detrend, but well, you know, western Central Banks and commodity prices have this little thing going between each other that nobody below the level of TBTF CEO is supposed to talk about, and then only behind closed doors while drinking champagne and eating caviar!

“Oh well”, says I to myself “What about matching the two stock indices up and seeing how much adjustment it takes to do make that work?”

So I detrended the S&P until it lined up with the Nikkei over the earlier period. It took at 55% decrease in the SPX to do this, which is over a 13 year period which would be about three and a half percent per year of inflation difference between the two countries.

Here is the result in the S&P price chart for the past 15 years:

It looks worse this way by quite a bit, eh? But that’s a slanted or skewed display of the S&P.

Next I overlaid it on the Nikkei ...

... and a certain correlation now emerges visually. So maybe those central Banks are not so different from each other after all. The recent upturn in the Nikkei is representative of the  introduction of Abenomics, or “QE” which used to be called “money printing”. I guess Bernanke would say that the 55% extra in US stocks is all the difference in the world, and he deserves credit for that. Maybe not from those who are on the hook for it though. But he took charge of a dire situation, and we are all still here, for whatever it's worth.

Given the correlation visible after my adjustment of the data, I would say it is clear that neither the US nor Japanese stock markets are out of their downtrend, after inflation is adjusted. They may have stopped falling in real inflation adjusted terms, but as stocks rise, the currency they are denominated in falls at the same time. So the benefit which remains is due to leverage of currency within the stocks, or the corporations themselves, and I suggest, (but without proof) that this leverage will someday unwind.

So if they are still in a downtrend in real terms, is there any chance that QE, Abenomics, or money printing will cease in the short term? I doubt it. There is a problem. It is now abundantly clear that money printing does not work to end depressions. How the central bank heads will overcome this remains to be seen, but they represent the financial services industry’s interests whether that is known or not, and since deflation is disastrous to fractionally leverage banks survival prospects, and since they are very aware of that, they will attempt to justify continued money printing as long as they can in my view.

But they won’t be allowed to print as freely as before. The days of trillions of easy money for the elite to go gangbusters buying up everything is sight are coming to an end. That leaves on the table one option: a continuance of money printing, but in reduced quantity, which seems to now be called “tapering”, but  to me is just money printing at a reduced rate.

I assume the recipients of the money still to be created may be vetted somewhat more than during the past decade, and a certain small element of fairness will arrive, after all the politicians can see their popularity ratings plummet and are not so stupid as to omit a reaction to this. They have alternatives: war for increased control of voting public, or fair policies as an alternative defusing mechanism. We should expect a mix of both of these, I think.

As for stocks? The S&P is entering it’s third rotation correction since the 2009 low. The 2009 low saw a switch of smart money from bonds to bond-like dividend paying stocks and utilities. The first rotation, was a correction between April 2010 and November 2011, and this saw cyclicals absorb the capital coming out of the then more expensive defensive dividend paying stocks. The cyclicals then ran up. The second rotation was a minor correction in Q2 2013 saw mid caps take up the running and wider indices than the Dow begin to outperform. It’s likely that the correction we are seeing take place at the moment, which still has a couple of weeks to go, will see smart money leave in quantity and the public enter whether as individuals, or in some state mandated form, to take ownership of those stocks currently being distributed to smaller hands.

So how long can it last? Assuming it picks up after the present correction, or rotation, the final wave up could last a year if the public get lured in and push it. A more equitable disbursement of money printing to the people rather than the elite seems to be likely and that is a material factor if it works out. I have periods of July 2015 up to January 2016 which I am very interested in for this process. It seems a long way away, but that's the trouble with life, we crawl through big events one day at a time.

The smart money is not going to wish to play in the market much after mid 2014. Where will it go next? I believe rising soft commodities are already showing the early footprints of this invisible elephant, and there will be a rotation from softs to hard commodities. For now the precious metals are completing their bases and testing lows to demonstrate (or not) that their bear market is ending/ended and softs look good during Q1 2014. When softs are higher and no longer offer exceptional value, and alternatives are required to rotate into as the public spends their money and inflation manifests itself at the retail level, the time for PM markets will have arrived.

Argentus Maximus

The author posts daily commentary on the gold and silver markets in the TFMR forum: The Setup For The Big Trade. More information about the author & his work can be found here: RhythmNPrice.

This is not investment advice, but rather educational material for discussion, and entertainment. Readers are expected to obtain professional advice from a qualified member of the financial services industry before risking their assets in the financial markets. All the above ideas and discussion should be prefaced with the words: "in my humble opinion and as best I can tell from what I see at the moment ...."

42 Comments

sierra skier's picture

1st

Wow it has been a while. Now for the read.

The way you present the combined charts with inflation adjusted dollars is a strong representation of the loss of value in the US through inflation that isn't supposed to be there. The MSM continually rants oh the recovery with the proof in the markets awesome rise month after month. With that rise to new highs in deflated value dollars there is no true increase in value.

Thanks AM for a great post that gives us an easy to understand representation of the failure of federal reserve and banking policies.

Dr. Fix's picture

2nd, and some charts that make sense.

It is nice to see a direct correlation between money printing, and equities, which brings us back to your original question, “when will the money printing end?" We should all know by now, that amounts to the $64 trillion question, and even if we don't know when it will occur, we certainly know what it means.

The end of the world as we know it.wink

SaratogaPrepper's picture

I even read it

First.

Excellent as always Argentus!

​Edit: Bummer 3rd

Dagney Taggart's picture

Four

Blood moons.

So long Mystery Babylon.

Dagney Taggart's picture

Satellite Skip

Sorry for wasting space. Now I'll try to unwaste it....

Unfunded liabilities, lenders, fixed income, and home-equity borrowers about to be smacked with cheap paper going home from abroad. Hope we are all cozy in inflation-protected real and mobile assets.

Tide going out. Sorry guys but I'm not naked.surprise

AlienEyes's picture

Top Ten

Again

"They may have stopped falling in real inflation adjusted terms, but as stocks rise, the currency they are denominated in falls at the same time. So the benefit which remains is due to leverage of currency within the stocks, or the corporations themselves, and I suggest, (but without proof) that this leverage will someday unwind."

So will a pigs tail but nobody knows exactly when.

Fred Hayek's picture

The Military Industrial Complex kept the Peace Prize Winner from

So . . we as a nation have gone totally down the rabbit hole.  Read the amazing excerpt written by Seymour Hersh from over at David Stockman's site:

http://davidstockmanscontracorner.com/2014/04/13/seymour-hershs-blockbuster-obama-on-the-red-line-and-on-the-rat-line/

Our pretentious dimwit great leader and his coterie of pretentious dimwits were absolutely intent on going to war in Syria in a huge, shock and awe way but, reading between the lines, were talked out of it by the joint chiefs of staff.

John Kennedy felt the military industrial complex was trying to push him into war with Cuba twice.  And they got sociopath LBJ to go to Nam for them.  Now we have the stupefying circumstance of our Nobel Peace Prize winner president, captain self-congratulation, having to be talked out of an insanely pointless attack on Syria by . . . the official heads of the military industrial complex.  When a war is too stupid even for these people to back it up . . . !

argentus maximus's picture

@AlienEyes: I gave certain

@AlienEyes:

I gave certain dates further down in relation to this.

"I have periods of July 2015 up to January 2016 which I am very interested in for this process. "

Though you say nobody knows when, and I admit it seems a long time to wait, those are not random picks, and I don't mean any time between the two.

And as always we must wait and see .....

AlienEyes's picture

so true, AM

As always, the devil is in the details....and the White House.

I'm still looking for the excrement to strike the impeller before 2015.

Urban Roman's picture

When will Money Creation End?

It will end exactly here:

When it no longer increases the power of the money men to control the rest of the people.

DeaconBenjamin's picture

Seymour Hersh on Benghazi

So what Seymour Hersh is stating -- without giving credit -- is that Glenn Beck was right about Benghazi with Beck's reporting back before the 2012 election.  Quelle amusant!

Turd Ferguson's picture

Live stream from the UN

MODERATOR

very interesting stuff

brokerk22's picture

Argentus

I am assuming you are expecting more new highs in the market after this correction is over.  Is that correct Argentus?  If so, judging by your chart, you are expecting the market to go higher for quite a while longer.

Lintltj5's picture

It Wont.....

If this is what college education gets you nowadays.

Funny but sad.

wouldyoubelieve...'s picture

wow

just wow, after seeing that I know all is lost, excuse me, I need to go play with my nail gun now...

Dr Jerome's picture

Wow

And to think I used to teach for that school! Is this my fault?

atarangi's picture

dr. jerome

The blame game is irrelevant. We are all part of a cycle that can not be changed. Nobody is at fault. We are all doing our best. Your contribution to the gift of life is an inspiration to all of us!

atarangi's picture

dagney

I don't mind that you are not naked. You still turn me on.

atarangi's picture

Why are we here

Who needs silver or gold. Life is the gift.                                                                                                                       images?q=tbn:ANd9GcRm-Eeq1qWWtNe0XdM37Vw

AgNovice's picture

Wells Fargo

I went to the ATM today to drain a bit more from the system and noticed that they're now dispensing $50 bills in addition to $20's. At first I thought someone filled the machine with the wrong denomination (woo hoo!) but upon the count, I realized that the machine is capable of counting correctly.

I guess Wells Fargo realizes that the greenback aint worth what it used to be.

ivars's picture

Another Fibo check on EUR RUB

Another Fibo check on EUR RUB bubble ( due to events in Ukraine) . Now it looks that resolution ( Russia Chinese mega deal) may come as late as July, or rather , latest in July; it can of course happen earlier. Also, by that time all nasty things in Ukraine would be already counted in in rubble value. Basically, Russia has to secure East and South Ukraine ( and west will step back) as soon as July. By South I mean separating West Ukraine from the Black sea totally, connecting East Ukraine-Herson-Crimea-Odessa-Transdnistria. It may be that Russians will Federalize Ukraine into East Ukraine as far as Kiev- left bank of Dnieper. 

The nasty thing about this Ukraine stuff is that the USA provoked this action KNOWING it will lose, without the support from EUR, so it was a deliberate step by Obama administration to further damage the USA international image and power projection. How nice for Roths and planned Chinese debt Empire No 2. 

Boswell's picture

$50's the New $20's?

I got one from a customer and another from the market (like she wanted to get rid of it?) last week. Never used to get 'em.

Reminds me of the comedian's story who was opening for Sammy Davis Jr. in Vegas...

He asked Sammy for change for a $20...

Sammy says: "Man, That IS Change!"

4 oz's picture

RE: $50's the New $20's?

Donno Boswell---seems to me I been using $50's as a $20 at the pump for like eight years now....

koan's picture

Hello silver, is that a FUBM

Hello silver, is that a FUBM in your pocket or are you just pleased to see me?

Marblesonac's picture

Dr. Jerome

I received an Econ degree from that school surprise

buzlightening's picture

Willie=Here come the judge or MARTIAL LAW!

Jim Willie – U.S. Economy on Brink of Systemic Failure   39 MIN AUDIO

from FinanceAndLiberty.com:     http://sgtreport.com/2014/04/jim-willie-u-s-economy-on-brink-of-systemic-failure/

agNau's picture

The "Crimea".....

will be viewed in non "Orwellian" history books, as the turning point for America, and the world. As the Russia/China soundly slapped America in the head. As it continues, the slapping continues. As the world watches the dazed Americans losing at every turn, they will join the exit from the "American" system....quickly and quietly....as they, lacking the firepower of the largest of the BRICS, will be harassed and threatened by the bully.
(As I said long ago, the room would empty once someone broke ranks and fled the dollar. Simple to see now.)

The dollar creation never ended, only hidden from view by the controllers. One must merely apply the above thought process to the question of "When will the money creation end?" How long will someone hold a PONZI when they are totally aware of it's future? Nearly 100% of the population does not understand money. However considerably more(though not all)do understand that the money in their pocket does not buy what it used to buy. When the simple math before them begins to click in enough brains(tipping point)then confidence fails. Then the real printing begins. So...IMO we are a ways off measured in amount of printing......but I think rapidly closing on a time basis. The universal consensus is that we are the reserve currency, and therefore cannot end as Zimbabwe in example...with massive hyperinflation. Noted above in "the turning point" is we no longer are(reserve currency status has ended)....as an exit door has been opened.

"Beauty is Truth, Truth Beauty.."

I might add....The road to freedom is lead by truth. Until we have real money, we will never truly be free.

The ONLY altering to the thought path/outcome would be war. It has happened before.

tyberious's picture

SILENT WEAPONS FOR QUIET

SILENT WEAPONS FOR QUIET WARS

APRIL 14, 2014 JC COLLINS LEAVE A COMMENT

Contributed by BGSV

Global Control

(Note:  Even though the document titled Silent Weapons for Quiet Wars gives evidence of a systemic and intentional enslavement of civilization on all levels, economic, political, social, entertainment, legal, etc…, I have been reluctant to reference it or discuss it openly over the years for the simply reason that I feel it removes responsibility for our own actions and distracts us away from finding the solution within ourselves first. 

External projections of our inner failures and nature is exactly the type of human characteristics which the form of sociological engineering, as described in Silent Weapons for Quiet Wars, feeds on and takes advantage of. 

There is much controversy over its origins and legitimacy, but nevertheless, what is written in the document is the blueprint from which our centralized civilization is emerging.  Time has proven its validity.  But our battle begins within first.  – JC)

In order to achieve a totally predictable economy, the low-class elements of society must be brought under total control, i.e., must be housebroken, trained, and assigned a yoke and long-term social duties from a very early age, before they have an opportunity to question the propriety of the matter.
In order to achieve such conformity, the lower-class family unit must be disintegrated by a process of increasing preoccupation of the parents and the establishment of government-operated day-care centers for the occupationally orphaned children.
The quality of education given to the lower class must be of the poorest sort, so that the moat of ignorance isolating the inferior class from the superior-elite class is, and remains, incomprehensible to the inferior class. With such an initial handicap, even bright lower class individuals have little if any hope of extricating themselves from their assigned lot in life.
This form of ‘slavery’ is essential to maintain some measure of social order, peace, and tranquility for the ruling upper-class.
Politicians hold many quasi-military jobs, the lowest being the police which are soldiers, the attorneys and C.P.A.s next who are spies and saboteurs (licensed), and the judges who shout orders and run the closed union military shop for whatever the market will bear. The generals are industrialists. ** The “presidential” level of commander-in-chief is ‘shared’ by the international bankers.**
… … society becomes a well-regulated animal with its reins under the control of a sophisticated computer-regulated social energy bookkeeping system. (IMF)
In order to achieve such sovereignty, we must at least achieve this one end: that the public will not make either the logical nor mathematical connection between economics and the other energy sciences, or learn to apply such knowledge.
In the interest of future world order, peace, and tranquility, it was decided to privately wage a quiet war against the American public with an ultimate objective of permanently shifting the natural and social energy (wealth) of the ‘undisciplined and irresponsible many’ into the hands of the self-disciplined, responsible, and worthy few.

This document represents the doctrine adopted by the Policy Committee of the Bilderberg Group during its first known meeting in 1954. … The following document, dated May 1979, was found on July 7, 1986, in an IBM copier that had been purchased at a surplus sale.

In short, the entirety of what the IMF (elites) have planned in 2014 was drafted years ago (global taxation), and is discussed in this paper. It may stun you, but it is a must read.

Silent Weapons … for Quiet Wars

PDF Format
http://www.stopthecrime.net/docs/SILENT%20WEAPONS%20for%20QUIET%20WARS.pdf

Read Aloud Format

http://www.youtube.com/watch?feature=player_embedded&v=s_38tsQ4p0I

http://philosophyofmetrics.com/2014/04/14/silent-weapons-for-quiet-wars/

Dr Jerome's picture

That school

Some of my friends graduated cum laude, others graduated summa cum laude, but I graduated Laude how cum.

College is what you make of it. some students sneak through, buying term papers online, rarely reading the book, getting by because they are intelligent and too many teachers rely on multiple choice tests.  They major in something the think will get them a job, not what they love, and they minor in partying.

The fact is that when students appear who are eager to learn, most teachers are pleased and give them all we can. A very good education is possible at nearly every college and a lousy education is possible at a very good college.

ivars's picture

(No subject)

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