Tag Archives: Monetary Policy

Re The Lefty Twit Called Zuck, by David Stockman

He looks like a twit, sounds like a twit, and acts like a twit. Mark Zuckerberg is assuredly a twit, and he can’t buy himself out of that. From David Stockman at davidstockmanscontracorner via lewrockwell.com:

We have no use for Donald Trump, but even less for the arrogant lefty twit, Mark Zuckerberg, who joined a conspiracy of Silicon Valley Robber Barons on January 6th to ban a then sitting president of the United States from their social media platforms.

Yes, we know they are private companies. So they can do anything they damn will please, including thanking the Donald for the $160 million of ads his campaign bought from Facebook in 2020 by kicking him off the platform.

But this isn’t really about free speech narrowly; it’s about the malign societal impact of free money from the Fed and the manner in which the vastly overvalued companies in the tech space have enabled the callow wokesters who run them to subordinate profit-maximization to left-wing virtue-signalling.

After all, there is not a snowball’s chance in hell that YouTube, Twitter or Facebook were losing customers, revenue and profits owing to the Donald’s massive presence in social media. The Trump haters were always free to not follow or unfollow him, or to trash his posts if that’s what got their jollies off; and the Trump lovers in their tens of millions actually brought massive incremental traffic to these platforms, and therefore positive ad metrics, revenues and profits.

The abrupt, nearly simultaneous canceling of the Donald’s privileges by all three platforms on the afternoon of January 6th, therefore, is surely a trifecta of the dumbest business decisions of all time. And if it weren’t for the political correctness of the matter, it would make for a classic Harvard Business School case study (which won’t happen) on the corporate harm that results from elevating the extraneous divertissements of corporate executives over the dollars and cents of business advantage.

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The Plutocrats of Wall Street and Silicon Valley Are Scamming America, by Ryan McMaken

Very few ostensible capitalists have any ideological loyalty to capitalism. They’ll crawl into bed with government any time it’s in their interest to do so. From Ryan McMaken at mises.org:

In recent years, it seems that the nation’s CEOs and billionaires are increasingly willing to drop the pretense that they are politically neutral entrepreneurs who simply want to go about their business.

Last week, for example, more than a hundred CEOs met to plot ways to punish the people of Georgia by “stopping investments in states” that pass laws unapproved by the billionaire class.

This comes in the wake of a decision by Major League Baseball—a collection of billionaire-owned sports teams—to punish residents of Georgia for the fact a tiny number of politicians there passed legislation designed to lessen voter fraud. In retaliation, MLB decided to move the league’s all-star game so as to deny the residents of Atlanta the economic benefits of hosting the game.

This comes only a few years after Apple CEO Tim Cook led a corporate campaign to boycott Indiana after Cook and Marc Benioff (the CEO of Salesforce) demanded the people of Indiana be punished. This was because the Indiana legislature passed a law which some billionaires decided was insufficiently pro-LGBT.

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Bulls, Bears, and Beyond: In Depth with James Grant, by Kevin Duffy

Since 1983, James Grant has published an outstanding newsletter (Grant’s Interest Rate Observer), focused on economics and finance. Reflecting its value, an annual subscription of 24 issues will set you back $1295. This interview is a rare opportunity to hear what Grant has to say for free. From Kevin Duffy at mises.org:

James Grant is editor of Grant’s Interest Rate Observer, which he founded in 1983. He is the author of nine books, including Money of the Mind, The Trouble with Prosperity, John Adams: Party of One, The Forgotten Depression, and more recently Bagehot: The Life and Times of the Greatest Victorian. In 2015 Grant received the prestigious Gerald Loeb Lifetime Achievement Award for excellence in business journalism. James Grant is an associated scholar of the Mises Institute.

Kevin Duffy is principal of Bearing Asset Management, which he cofounded in 2002. The firm manages the Bearing Core Fund, a contrarian, macro-themed hedge fund with a flexible mandate. He earned a BS in civil engineering from Missouri University of Science and Technology and has a passion for financial history, Austrian economics, and pithy quotes. He also publishes a bimonthly investment letter called the Coffee Can Portfolio. Duffy attended Mises University in 1990 after seeing Lew Rockwell on CNN’s Crossfire in 1989.


Kevin Duffy interviewed James Grant for his newsletter Coffee Can Portfolio. It is reprinted with permission.

KEVIN DUFFY: 2020 has been part dystopian fiction, part tulip mania. How do we reconcile the two?

JAMES GRANT: I’m not sure there’s much distinction. To me, the current form of dystopia is the bubble form, so I think this is the year of the dystopian bubble.

KD: There has been a worship of authorities. For the past thirty-seven years you’ve focused mainly on the Fed, but this year we’ve seen a reverence for medical authorities. Who has done more damage?

JG: The medical authorities remind me of the economic authorities. Both pretend to draw a bead on the future. Let’s compare them both to the meteorological authorities. The National Weather Service spends over a billion dollars a year and takes tens of millions, if not billions, of discrete observations of wind, weather, tide, temperature, what have you. But notice the five- and ten-day forecasts on your trusty iPhone are ever changing. This is the weather. Temperature gradients don’t have feelings, they don’t get jealous of the millionaire next door, they don’t watch CNBC, yet our forecasting ability goes out, maximum, ten days. Even so, the economists think nothing of calling next year’s GDP.

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Peter Schiff: The Federal Reserve Has Handed the US Government a Blank Check

Like many other central banks, the Fed’s primary mission has become to finance the government. From Peter Schiff at schiffgold.com:

On Wednesday, Federal Reserve Chairman Jerome Powell called for a “society-wide” commitment to reaching full employment, calling for “contributions from across government and the private sector.” He said getting people back to work would require “continued support from both near-term policy and longer-run investments.” He also dismissed concerns about debt saying the focus needs to be on the economy’s immediate needs. As Peter Schiff put it in his podcast, Powell handed the US Treasury a blank check.

Peter said Powell’s comments were among some of the most dovish he’s ever heard.

I know I’ve said that before, except every time Powell speaks, he exceeds his prior level of dovishness. So, he’s getting more and more dovish as time goes by.”

The markets didn’t show much response to Powell’s comments. Peter said that leads him to believe that a lot of people still don’t understand the significance of what Powell is saying.

Powell was most revealing during the Q&A. He took a number of questions about inflation. As Peter noted, there are signs of exploding prices everywhere. But Powell said he’s not worried and doesn’t see signs of significant inflation.

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The Sum of All Broken Promises, by James Howard Kunstler

Debt is being destroyed faster than it can be created by the Federal Reserve and the government. From James Howard Kunstler at kunstler.com:

The restless public, cooped up and idled in springtime’s flowering, have watched Wall Street doing just fine while they see the approaching sunset of their own much more modest Paycheck Protection Program and coronavirus relief checks. Late last week, the Dow Jones shot up 455 points the same day that the government announced the worst unemployment numbers since the lows of the Great Depression. Are there two economies in this country? One for people who expect to work for pay, and another for bankers who play shady games with money and receive extravagant bailouts when their games don’t pan out?

Kind of looks like it, a little bit. That tangled pile of cognitive dissonance is liable to catch fire soon like an overactive compost heap as the promised opening-up of America commences and tens of millions of able adults discover that their old jobs, vocations (and paychecks!) will never re-open, not to mention health care plans and pensions. God help us if the stock markets are still chugging up when that recognition sweeps the land.

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America’s Economic Experiment Won’t End Well, by Bill Bonner

There’s more to life than staying alive. From Bill Bonner at bonnerandpartners.com:

SAN MARTIN, ARGENTINA – That does it for us. Now we’re convinced. America’s war against the COVID-19 virus is being run by morons.

People have been shaking hands for about 3,000 years.

It is a sign of good intentions, as in friendship or sealing a deal. It is just one of the many vernacular customs and manners that mark civilized life.

But Dr. Fauci seems to think that the only thing that matters in life is not getting sick.

If all we cared about was staying alive…

…we would give up sex. God knows what kind of STDs you might get… or have a heart attack from the exertion, like Nelson Rockefeller, in 1979.

…if Pearl Harbor is bombed again, we would immediately surrender. Fighting wars is dangerous.

…we wouldn’t play football… or go skiing…

…we wouldn’t have any farmers (one of the most dangerous occupations) or lumberjacks, or firefighters, or deep sea divers… or dozens of other hazardous occupations…

…and we would lower the speed limit to 20 mph.

And if staying alive were the only goal in life, we would all stay home… all the time.

Like business magnate Howard Hughes, we would shuffle around our houses with Kleenex boxes for shoes… and use Kleenex tissues to pick up things for fear they might have germs on them.

Did that prolong Hughes’ life?

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The Solvency Problem, by Doug Noland

Central banking—socialized credit—has blown up history’s biggest credit bubble, not capitalism. Now that the bubble is popping, its is crucial that the blame is correctly assigned. From Doug Noland at creditbubblebulletin.blogspot.com:

Being an analyst of Credit and Bubbles over the past few decades has come with its share of challenges. Greater challenges await. I expect to dedicate the rest of my life to defending Capitalism. One of the great tragedies from the failure of this multi-decade monetary experiment will be the loss of faith in free market Capitalism – along with our institutions more generally.

Somehow, we must convince younger generations that the culprit was unsound finance. And it’s absolutely fixable. Deeply flawed, experimental central banking was fundamental to dysfunctional markets and resulting deep financial and economic structural impairment. The Scourge of Inflationism. If we just start learning from mistakes, we can get this ship headed in the right direction.

Over the years, I’ve argued for “rules-based” central banking that would sharply limit the Federal Reserve’s role both in the markets and real economy. The flaw in “discretionary” central banking was identified generations ago: One mistake leads invariably to only bigger blunders.

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We’re All Currency Manipulators Now, by David Stockman

With universal fiat currencies backed by nothing, every government is a currency manipulator, including the US government. From David Stockman at lewrockwell.com:

Call it the monetary theater of the absurd. After all, here is what a determined currency manipulator did between September 2002 and July 2008.

To wit, it pumped about $200 billion of new dollar liabilities into the world financial system, thereby expanding the Fed’s balance sheet by 26%. Clearly, global traders and US trading partners didn’t welcome that flood of freshly minted fiat currency because during the same period, the traded-weighted dollar exchange rate plunged by 25%.

Moreover, there can be little doubt that the severe slump in the US dollar shown below was deliberate. During much of that period, the Fed conducted an aggressive campaign to slash interest rates, goose domestic growth and perk-up the inflation rate. The last objective in particular was the brain child of newly appointed Fedhead Ben Bernanke, who falsely warned Greenspan & Co. about the dangers of an imminent “deflation” that never remotely happened.

Needless to say, the impolite word for a policy of suppressing domestic interest rates and goosing inflation is trashing your own currency. All things being equal, foreigners will lighten their dollar holdings and trade the dollar down when authorities promise to reduce its purchasing power and to push yields lower relative to alternatives abroad.

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Will Policy Makers Turn a Global Economic Slowdown Into a Crisis? by Daniel Lacalle

This is a far better description of how the economy actually works than anything you’d get out of economics textbooks. From Daniel Lacalle at mises.org:

The recent macroeconomic data of the leading economies point to a widespread slowdown. What is more concerning is not just a logical moderation in the path of growth, but the acceleration in the weakening of economies that were supposed to be stronger and healthier. It is even more concerning that this aggressive worsening of key leading indicators in China, the EU, and most emerging economies happens at the peak of the largest monetary and fiscal stimulus in decades.

It is easy to blame this widespread weakening on political headlines, trade wars, and — of course —Trump, but it would be disingenuous to believe those are the real factors behind the negative economic surprise.

The pace of global recoveries since 1975 has been slower and weaker, consistently, according to the OECD. Recoveries take longer and happen slower. At the same time, periods of crisis are less aggressive albeit more frequent than prior to 1975.  Another interesting evidence of the crises and recoveries since 1975 is that almost all economies end the recession period with more debt than before.

These factors are all concerning, but the evidence also shows that economic progress has continued regardless and that the main factors of wellbeing have improved dramatically. I had the opportunity of meeting Johan Norberg, author of “Progress” and we discussed all the positive elements we have seen in the past decades. In the same period, from 1975 to 2018, extreme poverty has been reduced to all-time lows. Hunger, poverty, illiteracy,  child mortality… all those terrible problems have been dramatically reduced to the lowest levels in history. That is the positive.

However, recognizing the positive is important, but ignoring the risks is dangerous. Global debt has ballooned to all-time highs, more than three times the world GDP. For those elements of progress to continue improving, we must stop the race of perverse incentives created by the wrong analysis of the origin of crises and the solutions that are often proposed in mainstream economics and politics.  I agree with Johan Norberg that the two main factors that have driven the phenomenal progress we have seen are free markets and openness. The freedom to innovate, experiment, create and share must come with the right incentives.

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The Recession of 2019, by Charles Gave

A number of indicators with good (albeit not perfect) records are pointing towards a recession next year. From Charles Gave at evergreengavekal.com:

“While the Trump administration may crow endlessly about how swell the economy performed last quarter, that 4.1% GDP print will quickly become a wistful memory.”
-BERNARD BAUMOHL, Economist at the Economic Outlook Group

INTRODUCTION

Towards the tail-end of July, the Commerce Department reported that Gross Domestic Product (also known as GDP), or the total value of goods and services produced in the US, increased at an annual pace of 4.1% in this year’s second quarter. As expected, President Trump took a victory lap around these numbers, which were the highest GDP growth results since 2014. (However, lost in the fanfare was the fact that the first quarter GDP number was revised down from 2.9% to 2.3%.)

In an equally anticipated move, the President went on to predict that this is just the start of a long-term trend, and that these numbers are “very, very sustainable” and are “going to go a lot higher.” With all due respect to the Trumpeter-in-Chief, the Evergreen Gavekal team is not nearly as confident. In fact, we would argue that there is a glaring black hole in his economic outlook.

Particularly, we believe that three unstainable factors led to this inflated higher-than-expected GDP number: tax cuts, a surge in government spending, and a rush to ship exports out of the country as the result of the trade war. We believe all three factors are based on high-risk policies that will eventually turn from a catalyst to a drag on the economy in the medium- to long-term—perhaps right around, if not before, President Trump seeks re-election in 2020.

This week’s Gavekal EVA comes from one of our most admired partners, Charles Gave. Charles also sees danger brewing on the economic horizon, both in the US and globally. In fact, he even goes so far as to postulate the exact year this brewing will turn into a full-fledge storm: 2019. In this week’s EVA, Charles explains his reasoning for making this bold, timestamped prediction. His forecast is based on several macro-economic factors that are already letting-on to a slowdown in the mostly elusive synchronized global expansion.

However, Evergreen itself is still holding off on issuing a call for the next recession, one we haven’t made since 2007. We admit, though, that the expansion clock is nearing midnight, which shouldn’t come as a surprise since this party has been going on for almost nine years. Keep dancing at your own risk!

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