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Now that the consumer price index for 2013 is complete, let's look at the long-term trend of the annual percent change in the average annual CPI.


Click to enlarge.

Ten Questions for 2014

1. How many decades will we be stuck in ZIRP?
2. Will it be as many decades as Japan?
3. Why is the Fed tapering?
4. When will the Fed ramp up QE again?
5. How much more poning can the hyperinflationists take?
6. Why am I so willing to hold long-term TIPS to maturity?
7. Where have all the "bond vigilantes" gone?
8. What are they doing with all their profits?
9. Sears? (It's a rhetorical question.)
10. Why must I use the sarcasm label in nearly every post?

Source Data:
St. Louis Fed: Custom Chart

The following chart shows construction and manufacturing payrolls as a fraction of nonfarm payrolls.


Click to enlarge.

That sure looks like a fish ladder to me. The only difference is that the fish aren't supposed to be heading downstream. Down 19% and temporarily holding!

Fish Ladder


Oh oh. Sounds like a faulty dam. What went wrong?


Click to enlarge.

Craziest monetary god dam design ever! That's what! Who in their right mind would put the monetary floodgate below the fish ladder?



I said in the past that some posts are mostly for the puns. How could I pass up this post's title once it got stuck in my head? Hahaha! Sigh. I sigh because the data is ugly, especially over the long-term. Gallows humor can't fix that.

See Also:
The "Recovery"

Source Data:
St. Louis Fed: Custom Chart
St. Louis Fed: Monetary Base

The following chart shows the number of child day care services employees.


Click to enlarge.

That's some recovery we've got there. It's strong and resilient. Yes, sir.

In my opinion, the Japanese should have patented massive economic busts and ongoing zero interest rate policies as effective birth control medicines. Just think of the royalties!

April 17, 2013
Japan's population suffers biggest fall in history


January 8, 2014
CDC: U.S. Fertility Rate Hits Record Low for 2nd Straight Year; 40.7% of Babies Born to Unmarried Women


Source Data:
BLS: Employment

Click to enlarge.

The line in blue shows the 5-year CD rate at commercial banks (left scale).

The line in black shows wages and salaries divided by deposits at commercial banks (right scale).

Here's the theory.

A lender's ability to lend is generally determined by the amount of their deposits (fractional reserve banking notwithstanding).

A lender's desire to lend is generally determined by the stable income streams of the borrowers (NINJA loans notwithstanding).

When wages (a bank's desire to lend) grow slower than deposits (a bank's ability to lend), then all things being equal (which they rarely are), the interest paid on deposits should fall (clearly seen in the chart). It's simply supply vs. demand. Not enough wages. Too many deposits.

Unlike nearly every financial expert on CNBC, I am not a believer that we're in a rising interest rate environment over the long-term. Wage growth is not keeping up with deposit growth. There are no signs of that trend changing any time soon (as seen in the declining black line in the chart). Why would I expect higher CD rates when there is a growing wage famine (nonfarm payroll employment) relative to a growing deposit glut (CPI adjusted deposits)? As seen in the following chart, note that this is a new development that began in February of 2000 (the peak in wages divided by deposits). In hindsight, Y2Katasrophe for the win!


Click to enlarge.

Inflation (or the lack of it) isn't really going to alter the dynamics much in my opinion. Banks aren't going to pay higher CD rates just because food costs more. I would be the last to argue that they're nonprofit food banks (Jamie Dimon sarcastically notwithstanding).

This is not investment advice. If it was, I would have written this post in Japanese as a tribute to Japan's popping housing bubble in the early 1990s and 20+ years of its ongoing low interest rate aftermath.

Source Data:
St. Louis Fed: Custom Chart #1
St. Louis Fed: Custom Chart #2

The following chart shows the natural log of real disposable personal income per capita. Once again, constant exponential growth shows up as a straight line when using natural logs.


Click to enlarge.

There are at least a few things worth considering.

1. Due to rising income inequality, the typical person isn't doing nearly as well as this chart would suggest.

2. As automation takes on more and more human work, how will billions of people find employment? How much of this is seen in the chart?

3. The trend is definitely not a straight line. It is curving downwards with a very high correlation of 0.993. If the current trend continues, then we'll peak in 2058 (45 years from now). That's a big if. If I'm alive to see it, I'll be 94 years old. That's another big if.

4. It is mathematically impossible for this upside down parabolic trend to continue forever. There must be a failure at some point. If nothing else, I don't think any rational person would expect real disposable personal income per capita to ever fall below zero. That would happen in 2164. This would certainly not be the first failure we've seen in recent years. We live in the era of long-term trend failures.

5. Any failure would probably be to the downside, since that is the direction the data is being pulled (much like a camel's back when more and more weight is placed upon it).

6. Contrary to some, I therefore definitely believe that the long-term future is not so bright that I gotta wear shades.

“I believe in making the world safe for our children, but not our children's children, because I don't think children should be having sex.” - Jack Handey

Japan (our partner in ZIRP crime) must love Jack Handey quotes.

December 23, 2013
Japan’s Diaper Shift and Global Population Trends


For what it is worth, I'm very much a believer in the theory. In some ways, we're like locusts and the lowest hanging fruit has already been eaten (USA prosperity analogy). I know it sounds grim, but that's what I believe. The good news is that I'm thankful every day that I was born where and when I was.

As seen in the chart, I'm not at all convinced that our children's children will be quite as thankful. It isn't that I think they will be unhappy being born in America. Far from it. I simply question the timing. It's not like I would tell them to move to China. Let's just put it that way.

Source Data:
St. Louis Fed: Custom Chart

December 9, 2013
Farmers Hoard Corn as Prices Drop


Adjusted for relatively modest overall consumer price inflation as reported by the government, exported corn is currently trading at early 1990s levels (as seen in the following chart).


Click to enlarge.

For what it is worth, I think corn prices could easily go either way from here. I have no opinion other than to say that the farmers hoarding corn are definitely betting big in the casino. Good luck on that.


You think? Ben Bernanke must be very pleased to see so much risk taking though. Corn prices only go up! Every corn kernel needs a place to live! They just aren't making any more corn! Okay, maybe that last one isn't quite true. I got caught up in the housing bubble mentality. Probably read too much David Lereah. Sorry about that!

December 11, 2010
John Williams of ShadowStats Warns Hyperinflation Will Start in the Next Couple Months!


It's been 36 months so far. Took the predictions very lightly. Still am. Yawn. If anything, perhaps I should brush up on my Japanese in case we're stuck in ZIRP (like they have been) for the rest of my life. Seriously.

This is not investment advice.

See Also:
Bananas for Silver!
Hyperinflation Theories Poned Again

Source Data:
St. Louis Fed: Custom Chart

Click to enlarge.

As seen in the chart, nominal GDP took a giant leap to the left during the Great Recession. There was a dead cat bounce to the right (as the dotcom bust left the 10 year moving average) but it is now being pulled to the left yet again. Where it stops nobody knows.

If the long-term trend does continue (down and to the left in the chart), then we'll be stuck in ZIRP till the cows come home (just like Japan), and that's if we're lucky. So all this talk of Fed tapering or not tapering is nearly meaningless to me. I refuse to have the bulk of my retirement nest egg parked in short-term savings patiently waiting for the Lord of Cattle to bless me with higher interest rates. That bovine deity is much more likely to milk short-term savers for all their worth.

The Phrase Finder: Till the cows come home

They'll get home eventually though. They've got to be here once the cow tipping point is reached. I strongly suspect that is a very long time from now, perhaps even long after I'm dead and buried cremated. It's all in the timing. Rome did not fall in a day.

As a side note, I went with "their worth" over "they're worth". Both are apparently technically correct (perhaps because worth can be a noun or an adjective). Maybe. Even Grammar Girl isn't sure.

Thief #1: How much should we milk from it?
Thief #2: We should milk it for all it's worth.
Thief #1: What if it keeps its wealth in a bag? It's its worth.
Thief #2: For what it's worth, then we should milk it for all its worth!

Dizzying. Who thought this frickin' language up, anyway?

November 13, 2013
Takeover bids milk factory for all it is worth


Don't even get me started again! The milk factory's worth? Its worth?

This is not investment advice. Don't look to me for grammar advice either for that matter. I pretty much only use the math side of my brain at best. I'll end a sentence with a preposition and create sentences with single adverbs if the mood suits me. That's what moods are for. Seriously. ;)

Source Data:
St. Louis Fed: Custom Chart

The following chart shows the constant maturity rate of the 1-year, 2-year, 3-year, and 5-year treasuries.


Click to enlarge.

Bondmageddon Thoughts

1. ZIRP.
2. Yawn.

See Also:
Bondmageddon Thoughts

Source Data:
St. Louis Fed: Custom Chart