Category Archives: Economy

We Have Entered the Eye of Davos’ Storm, by Tom Luongo

Will we have elections next year if it’s clear the Democrats will be routed, even with all the help they’ be getting from the illegal aliens they’re letting in? From Tom Luongo at tomluongo.me:

Congress recessed for the summer passing neither the infrastructure nor spending bills that were the focus of all of Washington’s attention for weeks thanks to Krysten Sinema from Arizona. She personally torpedoed the Biden Administration’s signature piece of legislation that took months to wrangle to that point and then gave the whole thing a big John McCain-like thumbs down.

The debt ceiling suspension put in place under Trump has not been renewed. We are currently more than $6 trillion over it as I type this.

Fungal President Joe Biden stopped looked up from his jello cup long enough to implore Congress to extend the eviction moratorium for those behind on rent and mortgage payments which has been in place for more than a year. Estimates are 6.5 million people will now face eviction who are behind on their rent.

U.S. tax-cows have drawn down their savings at an alarming rate while facing this eviction cliff. But, hey, your per child tax credit is now showing up as a monthly check as long as the Post Office stays on the job. By the way, they are refusing to go along with Biden’s plans for forcing all government employees be vaccinated against a virus which isn’t killing anyone anymore.

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Fed’s Lowest Lowball Inflation Measure “Core PCE” Spikes Further. Highest 3-Month Rate since 1982, by Wolf Richter

Don’t worry, inflation is transitory, even if there’s no end in sight to the monetary policy that’s producing it. From Wolf Richter at wolfstreet.com:

“Way above target”: Fed Chair Jerome Powell.

As push came to shove toward the end of the FOMC press conference on Wednesday, Fed Chair Jerome Powell, fidgeting on the hotseat of inflation and struggling with “transitory” and “temporary,” admitted that the recent rate of inflation was “not moderately above” the Fed’s inflation target but “way above target.” Today, the inflation measure that the Fed uses for this inflation target, annual “core PCE,” spiked further.

The Fed uses the “core PCE” inflation measure because it is the lowest lowball inflation measure that the US government provides. It excludes food and energy, which can be volatile, and it is structured differently than the Consumer Price Index, and it is nearly always below “core CPI.”

This Personal Consumption Expenditures price index without food and energy jumped by 0.45% in June, from May, after having jumped by 0.5% in May, 0.7% in April, and 0.4% in March, according to the Bureau of Economic Analysis today. This lowest lowball inflation measure available in the US was up 3.5% from June last year, the highest year-over-year rate since May 1991:

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Countdown To The Next Lockdown: Biden Says “In All Probability” US Will See More Restrictions, by Tyler Durden

If at first, second, third, etc. you don’t succeed, try the same thing again. The difference this time is that people see through the bullshit and they’re completely fed up with it. From Tyler Durden at zerohedge.com:

By now the narrative has gotten so absurdly grotesque and stupid, it’s as if a platoon of monkeys or, worse, woke SNL writers put it on the back of a shampoo bottle.

Today, when we discussed how US consumers have already burned through almost all of their savings from Biden’s fiscal firehose…

… just as the next burst of inflation is about to come and unleash a stagflationary recession or worse, we said that “there is just one event that could short circuit what appears to be a near-certain recession heading into 2022 and mid-term elections which would be devastating for Democrats faced with an imploding economy: another multi-trillion stimulus, just enough to kick the can by another 4-6 months. But for that to happen, the US economy needs to be shut down again which will only happen only once there is enough covid Delta-variant fearmongering. Which should also explain everything that’s happening right now.”

Well, guess what: after the CDC’s legendary flipflop which has steamrolled the credibility of “science”, and concurrent narrative whiplash it has made even the head of ultra-left liberals spin, today the president who earlier needed an aide to tell him he has “something” stuck to his chin, laid out the Delta endgame when he said that the US will, “in all probability,” see more guidelines and restrictions amid rising coronavirus cases…

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The Latest Lie from on-High: An “Independent Federal Reserve”, by Matthew Piepenburg

Central banks are never independent from the governments that create them. From Matthew Piepenburg at goldswitzerland.com:

Earlier in July, U.S. President Biden came away from a meeting with Fed Chairman Jerome Powell and calmly announced that in addition to inflation being “short term,” we should fear not, as Biden also “made it clear to Chairman Powell that the Fed remains independent,” but “will act as needed.”

Whewwww. Where to even begin in unpacking the lighthouse of reality behind so much verbal fog?

When it comes to market analysis, no one wants to hear political opinions within finance reports, left or right.

We get this.

Thus, rather than run the risk of offending the left, right or center, I’ll be frank in confessing my foundational view that nearly all politico’s (and Fed Chairs) have been universally comical when it comes to math, history or blunt-speak.

In short, the math, facts and warning signs rising by the hour (and outlined below) make it easy to be an equal-opportunity cynic when it comes to fiscal leadership or political “truth.”

So, let’s get back to Biden’s recent observations…

Deconstructing Biden-Speak

As for inflation being “short-term,” we’ve written ad nauseum about our stance on this fiction many times elsewhere.

But as for Biden’s declaration about the Fed being “independent,” let me wipe the coffee I just spilled on my shirt and speak plainly: That’s a lie.

First of all, if the Fed were as “independent” as Biden claims, then how can Biden be so certain they “will act as needed”?

Aren’t “independent” actors supposed to act as they, rather than the politicians, decide or “need”?

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Things Get Ripe, by James Howard Kunstler

The official story on Covid-19 is unraveling by the day. What that will mean as more people realize they been fed nonstop lies remains to be seen, but don’t expect it to add to comity and a benevolent social order. From James Howard Kunstler at kunstler.com:

Besides trying to just live their lives in these days of socioeconomic meltdown, which, Gawd knows, is hard enough, the people can barely sort out the seemingly malevolent intentions of the folks in-charge of the monster that government has become. And so, the question arises: are they actually trying to kill us all, or are they so corrupt and stupid that everything they touch falls apart?  In other words, is it mastermindery or clusterfuckery?

On the former side, you have that gallery of international villains out of the James Bond playbook: Bill Gates, Klaus Schwab, and George Soros — megalomaniacs armed with mega-money, a sho’nuff recipe for trouble — representing the emergence of a world-saving regime, in concert with lackey national leaderships. Their narrative goes like this: humans have over-replicated, like maggots in a trash can, they’re wrecking the planet and gobbling (our) resources, and we must find a way to get rid of them that looks like a natural catastrophe so the hidden powers-that-be don’t get blamed for pulling a global Auschwitz. Hence Covid-19 and the sketchy vaccinations. (“The Great Reset.” You will be dead and you will like it!)

I must say, I don’t go for that story, even if that trio have played their parts in some wicked doings du jour. Rather, I subscribe to the latter scenario: the likelihood that we’re in a pile-up of quandaries that we can only pretend to manage, and that all our pretenses of control and management only make things worse, while making a mockery of human ingenuity. This does not rule out an element of personal greed and attempted power-mongering, but look, for instance, at where all that has left the hapless Dr. Tony Fauci.

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Game Over, by Sven Henrich

Central banks have put themselves in a bind from which they cannot extricate themselves. From Sven Henrich at northmantrader.com:

Game over. Occam’s Razor: The simplest explanation is often the best one. Central banks will never extract themselves. Whether they ultimately end QE is besides the point. They won’t reduce their balance sheets. They can’t. Powell’s “performance” yesterday was not an accident. He’s been running on the same theme of offering absolutely zero specifics. Why? 3 reasons: 1. There are none as there is no plan. 2. To maintain flexibility and not to be held accountable or anything 3. To not upset markets.

We saw this recently when he actually got challenged on MBS and QE. He couldn’t and wouldn’t offer a rationale as to what is actually economically accomplished by it:

More importantly.

He doesn’t know. And why would he? There is zero precedent for this much combined liquidity from the fiscal and monetary side along with a rapid economic reopening with consumers’ pockets stuffed with free money from the government.

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David Stockman on Why Money Printing Doesn’t Generate Economic Growth

How can the simple act of printing out scrip or making an electronic bookkeeping entry generate anything real, like increased productivity or real economic growth? From David Stockman at internationalman.com:

Fed stimulus

To understand the Fed’s culpability for the inflationary disaster afflicting the American economy, it is necessary to start with the Big Lie that underlies all of its destructive machinations: the claim that market capitalism gravitates toward cyclical instability, recession and chronic shortfall from its potential Full Employment path.

From this presumption, there flows an alleged requirement for continuous central bank “stimulus.” Deft action by the central banking arm of the state is purportedly needed to compensate for the inherent prosperity-retarding imperfections of the free market.

If Fed policy has actually been reducing cyclical instability and pushing the $21 trillion US economy ever closer to its Full Employment potential, then productivity growth should be rising over time commensurate with the Fed’s more aggressive deployment of its “stimulus” policies.

In this context, it should be noted that productivity growth is a purer measure of monetary policy impact than total real GDP growth. That’s because the latter is in part driven by long-run demographics and the annual growth of the labor supply.

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One Lockdown from Disaster, by MN Gordon

The next lockdown may well be the knockout blow to the economy. From MN Gordon at economicprism.com:

The popular economic tune being played by the popular press drones on.  You know the melody by now…

That the post-pandemic boom is alive and well.  That growth is enduring.  That blue skies are here to stay.

If you listen closely, however, several notes ring sour.

The Commerce Department reported on Thursday that second quarter gross domestic product (GDP) increased at an annualized rate of 6.5 percent.  This may sound good, initially.  But economists with Dow Jones had estimated an 8.4 percent Q2 GDP increase.  Once again, extreme fiscal stimulus, at the expense of a long term debt burden, drifted off key.

The monetary policy refrain was also lacking.  This week, at the Federal Open Market Committee meeting press conference, Fed Chair Jay Powell remarked that, “we’re some way away from having had substantial further progress toward the maximum employment goal.”

Thus the Fed will continue to hold the federal funds rate near zero and will continue creating credit from thin air at a rate of $120 billion per month to purchase Treasuries and mortgage backed securities in the amounts of $80 billion and $40 billion, respectively.  By now these damaging actions have become exceedingly mindless.  The aim for maximum employment will ultimately prove to be a shortsighted calamity.

If the economy was really strengthening, the Fed would be tapering back these security purchases and even normalizing its balance sheet.  At the very least, it would be talking about tapering.

But the economy’s not really strengthening at all.  Rather, the economy and financial markets, handicapped by extreme intervention, are entirely dependent on this monetary stimulus.

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The Moment Wall Street Has Been Waiting For: Retail Is All In, by Charles Hugh Smith

If the average Joe was a good investor or speculator, the average Joe would be a lot richer than most average Joes are. As a rule, when all the average Joes are doing one thing, it’s time to do the opposite. From Charles Hugh Smith at oftwominds.com:

The ideal bagholder is one who adds more on every downturn (buy the dip) and who refuses to sell (diamond hands), holding on for the inevitable Fed-fueled rally to new highs.

Old hands on Wall Street have been wary of being bearish for one reason, and no, it’s not the Federal Reserve: the old hands have been waiting for retail–the individual investor– to go all-in stocks. After 13 long years, this moment has finally arrived: retail is all in.

If you doubt this, just look at record highs in investor sentiment, margin debt and the Buffett Indicator (see chart below). Current valuations are so extreme that the previous extreme in the 2000 dot-com bubble now looks modest in comparison.

I have my own sure-fire indicators for when retail is all-in. One is my Mom’s financial advisor recommends shifting her modest nest-egg out of safe bonds into the go-go stocks that are topping out. Back in late 1999, it was Cisco Systems and the other dot-com leaders, today it’s the FANGMAN stocks. Sure enough, my Mom just informed me her advisor recommended moving money from bonds into a FANG-dominated stock fund. Bingo, we have a winner.

Second indicator: average people who have never traded stocks are all-in and supremely confident they can’t lose. When 20-year college students are trading based on a “genius” 22-year old friend’s advice, retail is all-in. When a worker cleaning a wooden deck pauses to put $100,000 in a company he knows nothing about (yes, true story), retail is all-in.

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Save, Invest, Speculate, Trade or Gamble? by Doug Casey

The way you deploy your money will determine the quality of your retirement and probably the rest of your life as well. From Doug Casey at internationalman.com:

save, invest

For some time, I’ve been saying that the economy is in the “eye of the storm” and that when it emerged, the weather would be far rougher than in 2008. The trillions of currency units created since 2007, combined with artificially suppressed interest rates, have papered over the situation. But only temporarily. When the economy goes into the trailing edge of the hurricane, the storm will be much different, much worse, and much longer lasting than what we experienced in 2008 and 2009.

In some ways, the immediate and direct effects of this money creation appear beneficial. For instance, by not only averting a sharp complete collapse of financial markets and the banking system, but by taking the stock market to unprecedented highs. It’s allowed individuals and governments to borrow more, and live even further above their means. It may even create what’s known as a “crack-up boom”.

However, a competent economist (as distinguished from a political apologist, many of whom masquerade as economists) will correctly assess the current prosperity as an illusion. They’ll recognize it as, at best, a natural cyclical upturn – a “dead cat bounce.”

What we’re really interested in, however, are not the immediate and direct effects of QE— “Quantitative Easing”, and ZIRP—Zero Interest Rate Policy. As much as I love the way they fabricate these acronyms and euphemisms, what we’re really interested in is their indirect and delayed effects. In particular, how do we profit from them? What is likely to happen next in the economy? Which markets are likely to go up, and which are likely to go down?

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