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The more things change in the USA casino capitalism the more they stay the same

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“When the capital development of a country becomes a by-product
of the activities of a casino, the job is likely to be ill-done.”

John Maynard Keynes

"Life is a school of probabilities."

Walter Bagehot

Neoliberal economics (aka casino capitalism) function from one crash to another. Risk is pervasively underpriced under neoliberal system, resulting in bubbles small and large which hit the economy periodically. The problem are not strictly economical or political. it is  ideological as in "greed is good" slogan.  Like a country which adopted a certain religion follows a certain path, the USA behaviour after adoption of neoliberalism somewhat correlate with the behaviour of alcoholic who decided to booze himself to death. The difference is that debt is used instead of booze.

Hypertrophied role of financial sector under neoliberalism introduces strong positive feedback look into the economic system making the whole system unstable. Any attempts to put some sand into the wheels in the form of increasing transaction costs or jailing some overzealous bankers or hedge fund managers are blocked by political power of financial oligarchy, which is the actual ruling class under neoliberalism for ordinary investor (who are dragged into stock market by his/her 401K) this in for a very bumpy ride. I managed to observe just two two financial crashed under liberalism (in 2000 and 2008) out of probably four (Savings and loan crisis was probably the first neoliberal crisis). The next crash is given, taking into account that hypertrophied role of financial sector did not changes neither after dot-com crisis of 200-2002 not after 2008 crisis (it is unclear when and if it ended; in any case it was long getting the name of "Great Recession").

Timing of the next crisis is anybody's guess but it might well be closer then we assume. As Mark Twain aptly observed: "A thing long expected takes the form of the unexpected when at last it comes" ;-):

This morning that meant a stream of thoughts triggered by Paul Krugman’s most recent op-ed, particularly this:

Most of all, the vast riches being earned — or maybe that should be “earned” — in our bloated financial industry undermined our sense of reality and degraded our judgment.

Think of the way almost everyone important missed the warning signs of an impending crisis. How was that possible? How, for example, could Alan Greenspan have declared, just a few years ago, that “the financial system as a whole has become more resilient” — thanks to derivatives, no less? The answer, I believe, is that there’s an innate tendency on the part of even the elite to idolize men who are making a lot of money, and assume that they know what they’re doing.

As most 401K investors are brainwashing into being "over bullish", this page is strongly bearish in "perma-bear" fashion in order to serve as an antidote to "Barrons" style cheerleading. Funny, but this page is accessed mostly during periods of economic uncertainty. At least this was the case during the last two financial crisis(2000 and 2008). No so much during good times: the number of visits drops to below 1K a month.

When will the next crash occur ?

There is no doubt that it will occur. But the question is whether the market in 2021 is ripe to the crash?  If the answer is yes, you better trip your stock holdings. Especially if you are over 60 and has sizable 401K savings.

Can the stock market go another 20-50% up. No double it can. But a more interesting question is: "Can it go down 50%?" from the current level.  The situation when some financial assets are grossly overvalued is called a bubble. Few understand that bubbles are not accident or the result of actions of "evil does" but a logical development of investing in financial  capitalism, which logically creates so called "Minsky moment".  See also  a book “Boom and Bust- A Global History of Financial Bubbles,” by William Quinn and John Turner of Queen’s University Belfast in Northern Ireland.  Rather than regarding overvalued assets as a bubble, the authors view them as a fire.  “Boom and Bust” looks closely at 300 years’ worth of market manias using the metaphor of “the fire triangle.” (oxygen, fuel and heat). Remove one factor, and you can prevent or put out a fire.

The key lesson of previous bubbles is that financial markets, however, can easily heat up fivefold or even 10-fold and then collapse at least 50% in a flash, burning millions of speculators and sometimes charring entire economies. Here is one review from Amazon:

Trey Shipp, 5.0 out of 5 stars The 3 elements you need for a bubble
Reviewed in the United States on December 26, 2020. Verified Purchase

Quinn and Turner prefer to use the analogy of a "fire" to describe speculative bubbles. A fire is "destructive, self-perpetuating and difficult to control once it begins." And just as a fire needs oxygen, fuel, and heat, a speculative bubble needs assets that are easy to trade (i.e., oxygen), plenty of money and credit (fuel), and speculation (heat). It also needs a spark, which usually comes from government action or new technology.

The authors describe how these key elements played out in 11 speculative booms since the 1700s:
• French Mississippi Bubble (1719 to 1720)
• British South Sea Bubble (1719 to 1720)
• British Emerging Market Mines Bubble (1824 to 1826)
• U.K. Railway Mania (1844 to1846)
• Australian Land Boom (1886 to 1893)
• The U.K. Bicycle Mania (1895 to 1898)
• U.S. Roaring Twenties (1920 to 1931)
• Japanese stock and real estate bubble (1985 to 1992)
• U.S. Dot-Com Bubble (1995 to 2001)
• U.S. and European Subprime Bubble (2003 to 2010)
• the 2007 and 2015 Chinese stock bubbles.

Some of the many interesting facts they uncover include:

• The word "bubble" originated from Shakespeare in the 'All the world's a stage' speech from his comedy "As You Like It." He uses 'bubble' to mean "fragile, empty or worthless, just like a soap bubble." Beginning in 1719, with the South Sea Bubble, writers like Daniel Defoe and Jonathan Swift used "bubble" to describe new companies that were worthless.

• Charles Mackay's 1841 book "Extraordinary Popular Delusions and the Madness of Crowds", which gives a vivid account of the foolish speculation during the South Sea Bubble, is mostly fiction: almost none of the anecdotes can be substantiated.

• In 2008 The Economist described the British Railway Mania as "arguably the greatest bubble in history."

• During the British Railway Mania of 1848, railway shares rose from constituting 23 percent of total stock market value to 71 percent. So many new speculators began buying railway stocks that 15 new stock exchanges opened in England during the mania to meet the demand. (Half of them shut down when the mania ended.)

• Fueling the railway bubble was the Bank of England's low discount rate. At 2.5 percent in 1844, it was the lowest it had ever been in the 150 years of the bank's history. Investors bought railway stocks to earn a higher yield.

• The Japanese government deliberately sparked the land and stock bubbles during the late 1980s to create a boom. Japan lowered interest rates, gave tax breaks to real estate developers, and allowed banks to accept land as collateral, which increased the amount of lending they could do, which was usually plowed back into more land and stocks.

• The authors believe that the Dot-com bubble during the late 1990s had many good economic benefits, despite the 8-month recession that followed it. The bubble directed a lot of money into innovative companies and motivated smart entrepreneurs to create new companies. It also supplied the capital needed to build internet communications, which have been so critical for our lives today.

• Between 2000 and 2008 in both Ireland and Spain, more than one new home was built for every new inhabitant in the country.

• In the U.K., the bank Northern Rock marketed "Together mortgages," which allowed individuals to borrow up to 125 percent of their home value, targeting borrowers who could not afford to buy a home or even furnish it.

• The Chinese stock market bubbles resembled the South Sea and Mississippi bubbles of 1720, where the bubbles were created deliberately to offload government debt onto stockholders.

The main lesson from the book is that while bubbles can be blurry during the heat and smoke of a speculative fire, we should look for three key elements: asset marketability, speculation, and leverage.

In proportion to market size—which weights giant tech stocks heavily—the companies in the S&P 500 recently traded at 21 times expected earnings over the next 12 months, according to Matarin Capital Management, an investment firm in New York. That’s about 24% higher than their average over the past quarter-century.  This can go higher (probably to mid 30th) or crash to Earth.


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[May 13, 2021] Investors brace for test of nerves as inflation worries mount

Weak analysis. The fundamental factor is the price for energy, not some trivia like used cars and trucks. Teh second dot com bubble will deflate but it is unclear when and whether this is a crash or gradual deplation of worthless junk stocks which enjoyed "profitless" IPOs.
With rising energy prices it is more difficult to keep interpreting high CPI numbers as temporary. But like in the past the USA will fight the rise in energy prices tools and nail. With the full power of their global neoliberal empire.
May 13, 2021 | www.ft.com

... prices for used cars and trucks jumped 10 per cent in April alone, accounting for a large slice of the gains in the overall index.

"It looks like Wall Street is climbing the wall of worry," said Gregory Perdon, co-chief investment officer at private bank Arbuthnot Latham. "The bears are constantly looking for signs that the world is going to end. They come up with all the potential excuses. The reality is that the only question that matters is whether the reopening is going OK or not.

... Notably, while 10-year US yields did rise on Wednesday after the inflation data release, they did not hit new highs.

[May 13, 2021] Inflation Doesn't Have to Mean High Interest Rates - WSJ

May 13, 2021 | www.wsj.com

Inflation is back. The U.S. consumer-price index surged to a 13-year high of 4.2% in April, official data showed Wednesday. The eurozone's figure is a weaker 1.6%, but still a two-year high. The global bond market isn't panicking yet. The pandemic led many distressed companies to slash prices in 2020. Investors always knew that, as the economy reopened, some year-over-year increases would be huge.

The prices of most products haven't changed much . CPI gyrations are mostly down to a few items particularly affected by lockdowns and travel restrictions, such as airfares and restaurant prices, as well as commodities. Excluding food and energy, U.S. inflation in April was just 3%.

... Over the past few decades, for example, CPI figures have mostly been the results of a concatenation of "temporary" trends in different sectors -- the costs of education and healthcare rose nonstop, while the prices of many goods continuously fell. It was different in the 1970s, when an idiosyncratic squeeze in the supply of oil fueled an inflationary spiral that pushed all costs up.

[May 13, 2021] Investors Double Down on Stocks, Pushing Margin Debt to Record

This was in December 2020 but the same was true in March of 2020. Now chicken might come to roost
Dec 29, 2020 | www.wsj.com

Investors Double Down on Stocks, Pushing Margin Debt to Record : Chasing bigger gains, some have exposed themselves to potentially devastating losses through riskier plays, such as concentrated positions and trading options.

[May 12, 2021] Stock market and the issue of finite resources

May 12, 2021 | www.moonofalabama.org

Paul , May 12 2021 22:35 utc | 67

In my youth I worked as a very junior financial reporter and I have a continuing interest. While markets are crashing around the world there is a commodities boom, particularly in copper and critical minerals needed for green energy like cobalt, manganese, tin and rare earths.

China was an exporter but is now the worlds biggest importer. These resources are actually finite.

https://www.theage.com.au/business/markets/commodity-boom-adds-to-confusion-about-the-outlook-for-inflation-20210512-p57r6v.html

The markets are agog at the price of iron ore. While the US wastes trillions of borrowed money and blood in the desert sands of the Middle East on behalf of the bandit state, China builds and produces goods for export.

The US has lost the trade war, but no one ever wins a trade war. It's the last man standing. Uncle Shmuel is looking punch drunk. While the tribal cabal running the US is drunk with power.

Because the US has gone bankrupt and owes China the national debt the elite cabal seem hell bent on war with China as an exit to the financial quagmire they have created.

[May 12, 2021] What is the nature of current round of inflation in the USA; after all wages are stagnant

May 12, 2021 | www.moonofalabama.org

paulmeli , May 12 2021 18:50 utc | 21

"Inflation" in the US is mostly profit-taking and speculation (scalping)

[May 12, 2021] The Most Hyped Corners Of The Stock Market Come Unglued - ZeroHedge

May 12, 2021 | www.zerohedge.com

Authored by Wolf Richter via WolfStreet.com,

Once upon a time last year, there was the EV startup hype-boom that found its way to the SPAC hype-boom, and the two combined and generated miraculously swift and spectacular results; and their collapse has been equally swift and spectacular.

And they're joined by the IPO hype-boom stocks, including the spectacularly hyped highflyers that got shot down, such as Zoom (-49% from peak), Coinbase (-29%), or Airbnb (-35%), and they're in turn joined by the ARK Innovation ETF (-34%). This whole thing has come unglued.

The EV SPAC boom-and-bust is reflected in the WOLF STREET EV SPAC Index, which has collapsed by 57% since its peak on February 17. The index tracks seven EV-related companies that have gone public via a merger with a SPAC: Nikola, QuantumScape (batteries for EVs), Canoo, Lordstown Motors, Romeo Power (batteries for EVs), XL Fleet (EV drive systems for fleets), and Lucid Motors. Since February 17, these seven stocks combined have shed $35 billion in value, which they should have never had in the first place. Easy come, easy go, except when it's your money (data via YCharts ):

[May 12, 2021] Cathie Wood's ARK Wasn't Built for a Flood - WSJ

May 12, 2021 | www.wsj.com

...Ms. Wood's "disruptive innovation" jargon may be somewhat novel. What her investors are experiencing isn't. Fund managers like Gerald Tsai in the 1960s who rode Polaroid and Xerox to stardom or various dot-com visionaries in the late 1990s wound up doing poorly for clients who discovered them after they became hotshots. The culprit is unrealistic expectations and reversion to the mean for the bubbly sectors that got them there. Analyst Meb Faber points out that not one of the five Morningstar "fund managers of the decade" through 2010 even managed to beat the market in the next 10 years. The best of the bunch, Bruce Berkowitz's Fairholme Fund, became the worst.

Star managers can be dangerous to your wealth.

Write to Spencer Jakab at spencer.jakab@wsj.com

[May 11, 2021] Jim Grant- The Fed Can't Control Inflation

May 11, 2021 | www.zerohedge.com

...As Peter Schiff put it, CPI is a lie . Grant used the evolution of the toothbrush into its electric form as an example. How do you measure the clear quality improvements in the toothbrush? The government uses hedonics to measure these changes, but as Grant pointed out, this is "inexact and not really a science."

Grant believes that the economy can only tolerate 2.5% real rates. If that is breached, he thinks the Fed will have to resort to yield-curve control. If it does actually try to shrink its balance sheet and sell bonds, it will drive bond yields even higher. Fed bond-buying is the only thing propping up the bond market right now.

In fact, the Fed is propping up the entire economy. There is a sense that the Fed will always step in and save the markets. As a result, we have bubbles everywhere, from the stock market, to real estate, to cryptocurrency.

"These are strange and oppressive markers of financial markets that have lost moorings of valuation," Grant said.

I think the astounding complacency toward, or indifference of, the evident excesses in our monetary and fiscal affairs I think the lack of concern about those things is perhaps the most striking inflationary augur I know of."

Meanwhile, the Fed continues to create money. M1 annual growth is 350%; M2 is growing at approximately 28%.

"Never before have we had monetary peacetime growth this fast," Grant said.

"Tell me who cares."

Grant said central bankers like Powell are guilty of hubris. They suffer from the delusion that they can actually control everything. Grant called the Fed "un-self-aware."

Despite Jay Powell's credentials, he knows nothing about the past and believes he knows everything about the future."

Grant talked about gold , saying it is an investment in "monetary disorder."

To me, gold isn't a hedge against monetary disorder. It's an investment in monetary disorder, which is what we have. We have floating-rate currencies. We have manipulated exchange rates. We have manipulated interest rates. When the cycle turns, people will want gold and silver, and they will want something tangible ."

[May 11, 2021] 11 Plunging Stocks Are Badly Burning Cathie Wood's ARK Invest

May 11, 2021 | finance.yahoo.com

C athie Wood's ARK Invest is still red-hot, but now in the opposite way: It's getting burned by many collapsing stocks including some in the S&P 500.

[May 11, 2021] If Everyone Sees It, Is It Still A Bubble

May 11, 2021 | www.zerohedge.com

Authored by Lance Roberts via RealInvestmentAdvice.com,

"If everyone sees it, is it still a bubble?" That was a great question I got over the weekend. As a "contrarian" investor, it is usually when "everyone" is talking about an event; it doesn't happen.

As Mark Hulbert noted recently , "everyone" is worrying about a "bubble" in the stock market. To wit:

"To appreciate how widespread current concern about a bubble is, consider the accompanying chart of data from Google Trends. It plots the relative frequency of Google searches based on the term 'stock market bubble.' Notice that this frequency has recently jumped to a far-higher level than at any other point over the last five years."

What Is A Bubble?

"My confidence is rising quite rapidly that this is, in fact, becoming the fourth 'real McCoy' bubble of my investment career. The great bubbles can go on a long time and inflict a lot of pain, but at least I think we know now that we're in one." – Jeremy Grantham

What is the definition of a bubble? According to Investopedia:

"A bubble is a market cycle that is characterized by the rapid escalation of market value, particularly in the price of assets. Typically, what creates a bubble is a surge in asset prices driven by exuberant market behavior. During a bubble, assets typically trade at a price that greatly exceeds the asset's intrinsic value. Rather, the price does not align with the fundamentals of the asset. "

This definition is suitable for our discussion; there are three components of a "bubble." The first two, price and valuation, are readily dismissed during the inflation phase. Jeremy Grantham once produced the following chart of 40-years of price bubbles in the markets. During the inflation phase, each was readily dismissed under the guise "this time is different."

We are interested in the "third" component of "bubbles," which is investor psychology.

A Bubble In Psychology

As Howard Marks previously noted:

"It's the swings of psychology that get people into the biggest trouble. Especially since investors' emotions invariably swing in the wrong direction at the wrong time. When things are going well people become greedy and enthusiastic. When times are troubled, people become fearful and reticent. That's just the wrong thing to do. It's important to control fear and greed."

Currently, it's difficult for investors to become any more enthusiastic about market returns. ( The RIAPro Fear/Greed Index compiles measures of equity allocation and market sentiment. The index level is not a component of the measure that runs from 0 to 100. The current reading is 99.9, which is a historical record.)

Such is an interesting juxtaposition. On the one hand, there is a rising recognition of a "bubble," but investors are unwilling to reduce "equity risk" for "fear of missing out or F.O.M.O." Such was a point noted explicitly by Mark:

"Rather than responding by taking some chips off the table, however, many began freely admitting a bubble formed. They no longer tried to justify higher prices on fundamentals. Rather, they justified it instead in terms of the market's momentum. Prices should keep going up as FOMO seduces more investors to jump on the bandwagon."

In other words, investors have fully adopted the "Greater Fool Theory."

Okay, Boomer!

I know. The discussion of "valuations" is an old-fashioned idea relegated to investors of an older era. Such was evident in the pushback on Charlie Munger's comments about Bitcoin recently:

" While Munger has never been a bitcoin advocate, his dislike crystalized into something close to hatred. Looking back over the past 52 weeks, the reason for Munger's anger becomes apparent with Berkshire rising only 50.5% against bitcoin's more than 500% gain." – Coindesk

In 1999, when Buffett spoke out against "Dot.com" stocks, he got dismissed with a similar ire of "investing with Warren Buffett is like driving 'Dad's old Pontiac.'"

Today, young investors are not interested in the "pearls of wisdom" from experienced investors. Today, they are "out of touch," with the market's "new reality."

"The big benefit of TikTok is it allows users to dole out and obtain information in short, easily digestible video bites, also called TikToks. And that can make unfamiliar, complex topics, such as personal finance and investing, more palatable to a younger audience.

That advice runs the gamut, from general information about home buying or retirement savings to specific stock picks and investment ideas. Rob Shields, a 22-year-old, self-taught options trader who has more than 163,000 followers on TikTok, posts TikToks under the username stock_genius on topics such as popular stocks to watch, how to find good stocks, and basic trading strategies." – WSJ:

Of course, the problem with information doled out by 22-year olds is they were 10-year olds during the last "bear market." Given the lack of experience of investing during such a market, as opposed to Warren Buffett who has survived several, is the eventual destruction of capital.

Plenty Of Analogies

"There is no shortage of current analogies, of course. Take Dogecoin, created as a joke with no fundamental value. As a recent Wall Street Journal article outlined , the Dogecoin 'serves no purpose and, unlike Bitcoin, faces no limit on the number of coins that exist.'

Yet investors flock to it, for no other apparent reason than its sharp rise. Billy Markus, the co-creator of dogecoin, said to the Wall Street Journal, 'This is absurd. I haven't seen anything like it. It's one of those things that once it starts going up, it might keep going up.'" – Mark Hulbert

That exuberance shows up with professionals as well. As of the end of April, the National Association Of Investment Managers asset allocation was 103%.

As Dana Lyons noted previously:

" Regardless of the investment acumen of any group (we think it is very high among NAAIM members), once the collective investment opinion or posture becomes too one-sided, it can be an indication that some market action may be necessary to correct such consensus. "

Give Me More

Of course, margin debt, which is the epitome of " speculative appetite," soared in recent months.

As stated, "bubbles are about psychology," which the annual rate of change of leverage shows.

Another form of leverage that doesn't show up in margin debt is ETF's structured to multiply market returns. These funds have seen record inflows in recent months.

With margin debt reaching levels not seen since the peak of the last cyclical bull market cycle, it should raise some concerns about sustainability. It is NOT the level of leverage that is the problem as leverage increases buying power as markets are rising. The unwinding of this leverage is critically dangerous in the market as the acceleration of "margin calls" leads to a vicious downward spiral.

Importantly, this chart does not mean that a massive market correction is imminent. I t does suggest that leverage, and speculative risk-taking, are likely much further advanced than currently recognized.

Pushing Extremes

Prices are ultimately affected by physics. Moving averages, trend lines, etc., all exert a gravitational pull on prices in both the short and long term. Like a rubber band, when prices get stretched too far in one direction, they have always eventually "reverted to the mean" in the most brutal of manners.

The chart below shows the long-term chart of the S&P 500 broken down by several measures: 2 and 3-standard deviations, valuations, relative strength, and deviations from the 3-year moving average. It is worth noting that both standard deviations and distance from the 3-year moving average are at a record.

During the last 120-years, overvaluation and extreme deviations NEVER got resolved by markets going sideways.

The only missing ingredient for such a correction currently is simply a catalyst to put "fear" into an overly complacent marketplace. Anything from economic disruption, a credit-related crisis, or an unexpected exogenous shock could start the "panic for the exits."

Conclusion

There is more than adequate evidence a "bubble" exists in markets once again. However, as Mark noted in his commentary:

'I have no idea whether the stock market is actually forming a bubble that's about to break. But I do know that many bulls are fooling themselves when they think a bubble can't happen when there is such widespread concern. In fact, one of the distinguishing characteristics of a bubble is just that."

However, he concludes with the most important statement:

"It's important for all of us to be aware of this bubble psychology, but especially if you're a retiree or a near-retiree. That's because, in that case, your investment horizon is far shorter than for those who are younger. Therefore, you are less able to recover from the deflation of a market bubble."

Read that statement again.

Millennials are quick to dismiss the "Boomers" in the financial markets today for "not getting it."

No, we get it. We have just been around long enough to know how these things eventually end.

[May 11, 2021] Consumers Expect Surging Inflation to Crush the Purchasing Power of their Labor- Fed's Survey - Wolf Street

May 11, 2021 | wolfstreet.com

Consumers are picking up on the rise of inflation, and the Fed, which has been trying to heat up inflation, is pleased. The Fed watches "inflation expectations" carefully. The minutes from the March FOMC meeting mention "inflation expectations" 12 times.

The New York Fed's Survey of Consumer Expectations for April, released today, showed that median inflation expectations for one year from now rose to 3.4%, matching the prior highs in 2013 (the surveys began in June 2013).

But wait the median earnings growth expectations 12 months from now was only 2.1%, and remains near the low end of the spectrum, a sign that consumers are grappling with consumer price inflation outrunning earnings growth. The whoppers were in the major specific categories.

[May 10, 2021] How many times can a declared "expert" be wrong before they are not an expert anymore!

Apr 15, 2021 | www.zerohedge.com
lwilland1012 1 hour ago

How many times can a declared "expert" be wrong before they are not an expert anymore!

INTJ Economist 1 hour ago

Ask an economist. Wrong more than 50% of the time and still fully employed. When was the last time an economist got fired for being wrong?

[May 10, 2021] Many layers of leverage stacked on top of each other increase the probability of dollar collapse

Notable quotes:
"... "It's just unbelievable that central banks are actively encouraging this." ..."
"... Good point. Many times we look at charts and say WTF but once you normalize to inflation, maybe this is not as bad as originally it appeared ..."
"... reminds me of an abusive husband telling his beaten wife, "See what you made me do!" ..."
"... Hussman says the right way to do that is to look at margin debt to GDP ration, which is a record. GDP is doubling rate is about every 20 years now at nominal 3.5% ..."
"... That description applies to most Wall Streeters and banksters, whose titanic egos are amazing given the fact that most are parasites that contribute less than a woodlouse to society. Still, I dread the coming US debt collapse discussed in this website, which I would term a debt explosion as all of the bubbles start to pop and so many debtors and former creditors (like lessors, banks, etc.) become publicly known to be legally insolvent. ..."
"... I have invested carefully but we will all lose much or most of our savings. ..."
"... It is very irritating to think of the trillions that the banksters' deceptively named, "Federal" Reserve has been transferring to its ultra-rich owners for decades. They will probably even avoid most taxation again. ..."
Apr 26, 2021 | wolfstreet.com

YuShan Apr 18, 2021 at 3:13 am

Exactly. It is way more scary than even Wolf's charts suggest because there are so many layers of leverage stacked on top of each other.

People taking out margin debt on stock portfolios that they bought by re-mortgaging their bubbled houses to buy stocks with record corporate debt, collaterised (if at all) with bubble assets, at record valuations driven itself by leverage etc etc

It's just unbelievable that central banks are actively encouraging this.

historicus Apr 18, 2021 at 5:06 am

"It's just unbelievable that central banks are actively encouraging this."

Indeed. It's QUITE believable that the politicians love the free money and would never be bold enough to say .

"Hey Fed. Your mandates say you are to FIGHT inflation (stable prices) NOT PROMOTE inflation."

Moosy Apr 17, 2021 at 6:13 pm

The amount of margin debt is not a WTF amount if you use the prices-double each 11 year rule of thumb.

This 11 year period is strikingly accurate if you take the price of the New York Times since 1900 (I have a booklet with frontpages of each year and discovered this when looking at the selling prices). Having said that, the current 800B is the same as the previous inflation corrected peaks of 2009 and around 1999.

So yes, Wolf is 100% correct with the prediction on what is coming. It is just not a WTF amount but a history-repeats-itself moment

ru82 Apr 17, 2021 at 11:45 pm

Good point. Many times we look at charts and say WTF but once you normalize to inflation, maybe this is not as bad as originally it appeared

cas127 Apr 18, 2021 at 5:06 am

"normalize to inflationary, maybe not as bad as originally it appeared"

I know what you mean, but then the (major) problem is that the inflation itself shouldn't be viewed as "normal". Kinda reminds me of a gvt program defending doubled budget over 8 yrs because of "inflation" when in point of fact it is likely that G printing/policy has *created* the inflation in the first place (to help fund the program now pointing at inflation).

Also, reminds me of an abusive husband telling his beaten wife, "See what you made me do!"

Old School Apr 19, 2021 at 6:08 am

Hussman says the right way to do that is to look at margin debt to GDP ration, which is a record. GDP is doubling rate is about every 20 years now at nominal 3.5%

K Apr 17, 2021 at 9:10 pm

That description applies to most Wall Streeters and banksters, whose titanic egos are amazing given the fact that most are parasites that contribute less than a woodlouse to society. Still, I dread the coming US debt collapse discussed in this website, which I would term a debt explosion as all of the bubbles start to pop and so many debtors and former creditors (like lessors, banks, etc.) become publicly known to be legally insolvent.

It is unfortunate that it may happen at the worst possible time, when we face an adversary worse and more powerful than the Soviet Union or Nazi Germany ever was. I have invested carefully but we will all lose much or most of our savings.

It is very irritating to think of the trillions that the banksters' deceptively named, "Federal" Reserve has been transferring to its ultra-rich owners for decades. They will probably even avoid most taxation again.

I do not like to even think how many Americans will wind up. Remember the saying "There but for the grace of god, go I." Many of us will be saying that a lot in the coming years if we are very fortunate.

[May 10, 2021] Expecting crash "really soon" and Generalized Anxiety Disorder (GAD)

May 10, 2021 | www.moonofalabama.org

Jörgen Hassler , May 5 2021 16:19 utc | 40

"Generalized Anxiety Disorder (GAD) is characterized by persistent and excessive worry about a number of different things. People with GAD may anticipate disaster and may be overly concerned [...]. Individuals with GAD find it difficult to control their worry. They may worry more than seems warranted about actual events or may expect the worst even when there is no apparent reason for concern."

Seems like the perfect profile for an [CIA] operative. ;)

[May 09, 2021] CPI Is A Lie! We can't trust CPI to tell us the truth about inflation by Peter Schiff

Highly recommended!
Notable quotes:
"... The CPI is calculated by analyzing the price of a "basket of goods." The makeup of that basket has a big impact on the final CPI number. According to WolfStreet , 10.9% of the CPI is based on durable goods (computers, automobiles, appliances, etc.). Nondurable goods (primarily food and energy) make up 26.6% of CPI. Services account for the remaining 62.5% of the basket. This includes rent, healthcare, cellphone service etc.) ..."
"... The things the government includes and excludes from the basket can make a profound difference in that final CPI number. Back in 1998, the government significantly revised the CPI metrics. Even the Bureau of Labor Statistics (BLS) admitted the changes were "sweeping." ..."
"... In 1998, the BLS followed the recommendations of the Boskin Commission. It was appointed by the Senate in 1995. Initially called the "Advisory Commission to Study the Consumer Price Index," its job was to study possible bias in the computation of the CPI. Unsurprisingly, it determined that the index overstated inflation " by about 1.1% per year in 1996 and about 1.3% prior to 1996. The 1998 changes to CPI were meant to address this "issue." ..."
"... As Peter pointed out, there is a lot of geometric weighting, substitution and hedonics built into the calculation. The government can basically create an index that outputs whatever it wants. ..."
"... Peter said there is a bit of irony in government officials and central bankers constantly complaining about "not enough inflation." ..."
"... They're the ones that are cooking the books to pretend that inflation is lower than it really is. Because what they're really trying to do is get the go-ahead to produce more inflation, which is printing money." ..."
"... And there are other things that hide inflation. For instance, shrinking packaging so there is less product sold at the same price, or substituting lower quality ingredients, or requiring consumers to assemble items themselves. ..."
"... They find different ways to lower the quality and not increase the price, and I'm sure that the government is not picking up on any of that. If the quality improves, yeah, yeah, they calculate that. But they probably ignore all the circumstances where the quality is diminished." ..."
"... The bottom line is we can't trust CPI to tell us the truth about inflation. ..."
May 04, 2021 | www.zerohedge.com

Via SchiffGold.com,

We've been talking a lot about the specter of inflation. Despite the Fed's assurances not to worry because any price increases we're seeing are transitory, some people are indeed worried. A former JP Morgan managing director warned about inflation and echoed Peter Schiff's view that the central bank is powerless to fight it.

And we're seeing rising prices all over the place, from the grocery store to the gas station. Even the government numbers flash warning signs . But as Peter Schiff explains in this clip from an interview with Jay Martin, it's probably even worse than we realize because the government cooks the numbers when it calculates CPI.

The monthly rises in CPI through the first quarter show an upward trend. The CPI in January was up 0.3%. It was up 0.4% in February. And now it's up 0.6% in March. That totals a 1.013% increase in Q1 alone. The question is does this really reflect the truth about inflation? Peter doesn't think it does.

The government always makes changes to their methods of measuring things, whether it's GDP, or inflation, or unemployment. And they always tweak the numbers to produce a better result as a report card. "

https://www.youtube.com/embed/lnPrsBzIZsw

Imagine if students in a school had the ability to change the metrics by which they were graded or the methodology the teacher used to calculate their grades.

Would it surprise anybody that all of a sudden they started getting more As and Bs and fewer Cs and Ds? The government always wants to make the good stuff better, like economic growth, and the bad stuff better, like unemployment or inflation. So, they want to find ways to make those numbers little and the good numbers big."

The CPI is calculated by analyzing the price of a "basket of goods." The makeup of that basket has a big impact on the final CPI number. According to WolfStreet , 10.9% of the CPI is based on durable goods (computers, automobiles, appliances, etc.). Nondurable goods (primarily food and energy) make up 26.6% of CPI. Services account for the remaining 62.5% of the basket. This includes rent, healthcare, cellphone service etc.)

The things the government includes and excludes from the basket can make a profound difference in that final CPI number. Back in 1998, the government significantly revised the CPI metrics. Even the Bureau of Labor Statistics (BLS) admitted the changes were "sweeping."

According to the BLS, periodic changes to the CPI calculation are necessary because "consumers change their preferences or new products and services emerge. During these occasions, the Bureau reexamines the CPI item structure, which is the classification scheme of the CPI market basket. The item structure is a central feature of the CPI program and many CPI processes depend on it."

In 1998, the BLS followed the recommendations of the Boskin Commission. It was appointed by the Senate in 1995. Initially called the "Advisory Commission to Study the Consumer Price Index," its job was to study possible bias in the computation of the CPI. Unsurprisingly, it determined that the index overstated inflation " by about 1.1% per year in 1996 and about 1.3% prior to 1996. The 1998 changes to CPI were meant to address this "issue."

As Peter pointed out, there is a lot of geometric weighting, substitution and hedonics built into the calculation. The government can basically create an index that outputs whatever it wants.

I think this period of "˜Oh wow! We have low inflation!' It's not a coincidence that it followed this major revision into how we calculate it."

Peter said there is a bit of irony in government officials and central bankers constantly complaining about "not enough inflation."

They're the ones that are cooking the books to pretend that inflation is lower than it really is. Because what they're really trying to do is get the go-ahead to produce more inflation, which is printing money."

Peter said the CPI will never reveal the true extent of rising prices.

And there are other things that hide inflation. For instance, shrinking packaging so there is less product sold at the same price, or substituting lower quality ingredients, or requiring consumers to assemble items themselves.

They find different ways to lower the quality and not increase the price, and I'm sure that the government is not picking up on any of that. If the quality improves, yeah, yeah, they calculate that. But they probably ignore all the circumstances where the quality is diminished."

The bottom line is we can't trust CPI to tell us the truth about inflation.

[May 09, 2021] 4 surprising stocks Goldman Sachs thinks could triumph over inflation by Brian Sozzi

Notable quotes:
"... "In a highly inflationary environment, we like the auto parts space with its unique ability to pass-through higher costs to customers given the non-discretionary nature of the category," says Goldman Sachs analyst Kate McShane. "For instance, in 2019, telegraphed prices increases to offset cost pressures arising from tariffs provided an incremental benefit to same-store sales growth and most auto parts retailers cited between 150-300 basis points of tariff-related inflation." ..."
May 05, 2021 | finance.yahoo.com

If you are seeking stocks that could perform well during the inflationary environment the U.S. looks to be headed into as it recovers from the depths of the COVID-19 pandemic , Goldman Sachs suggests parking some money in auto parts retailers.

Yes, auto parts retailers.

The investment thesis is pretty straightforward. With mobility across the country picking up (see chart below) as people get vaccinated, cars will likely need more maintenance. That leaves auto parts retailers such as O'Reilly ( ORLY ), Genuine Parts Company ( GPC ), AutoZone ( AZO ) and Advance Auto Parts ( AAP ) in the enviable position of being able to pass inflation in everything from tires to car wax on to consumers and then post strong profits.

"In a highly inflationary environment, we like the auto parts space with its unique ability to pass-through higher costs to customers given the non-discretionary nature of the category," says Goldman Sachs analyst Kate McShane. "For instance, in 2019, telegraphed prices increases to offset cost pressures arising from tariffs provided an incremental benefit to same-store sales growth and most auto parts retailers cited between 150-300 basis points of tariff-related inflation."

McShane rounds out her bullish thesis on auto parts retailers by noting the main sector plays sport price-to-earnings multiples below historical averages. Of the four aforementioned auto parts retailers, AutoZone has the lowest forward price-to-earnings multiple of 18.7 times, according to Yahoo Finance Plus data .

Mobility is back on the move higher as people get vaccinated for COVID-19.

As for which name McShane is most bullish on, that award goes to Advance Auto Parts in the wake of a recent analyst day. McShane made the rare Wall Street move of upgrading her rating on Advance Auto Parts to Buy from Sell.

"Our double tier upgrade " from Sell to Buy " is predicated upon

McShane says.

[May 09, 2021] Inflation Risk Intensifies With Supply Shortages Multiplying

May 09, 2021 | finance.yahoo.com

Signs of inflation are picking up, with a mounting number of consumer-facing companies warning in recent days that supply shortages and logistical logjams may force them to raise prices.

Tight inventories of materials as varied as semiconductors, steel, lumber and cotton are showing up in survey data, with manufacturers in Europe and the U.S. this week flagging record backlogs and higher input prices as they scramble to replenish stockpiles and keep up with accelerating consumer demand.

As commodities become increasingly expensive, whether faster inflation proves transitory -- or not -- is the biggest question for policy makers and markets. Rising prices and the potential for a response from central banks topped the list of concerns for money managers surveyed by Bank of America Corp.

Many economists and central bankers, from the Federal Reserve on down, maintain that price gains are temporary and will be curbed by forces such as virus worries and unemployment. Investors remain skeptical, with businesses including Nestle SA and Colgate-Palmolive Co. already announcing they’ll need to raise prices.

U.S. Treasury Secretary Janet Yellen, a former Fed chair, entered the debate on Tuesday when she ruffled markets with the observation that rates will likely rise as government spending ramps up. She later clarified she was neither predicting nor recommending an increase.

The Bloomberg Commodity Spot Index, which tracks 23 raw materials, has risen to its highest level in almost a decade. That has pushed a gauge of global manufacturing output prices to its highest point since 2009, and U.S. producer prices to levels not seen since 2008, according to data from JPMorgan Chase & Co. and IHS Markit. JPMorgan analysts also estimate non-food and energy import prices in the biggest economies rose almost 4% in the first quarter, the most in three years.

“Risk clearly leans to the upside in the current environment,†said John Mothersole, pricing and purchasing research director at IHS Markit. “The surge in commodity prices over the past year now guarantees higher goods-price inflation this summer.â€

[May 09, 2021] The Dynamics Behind America's Ugly Amount Of Empty Office Space

May 09, 2021 | www.zerohedge.com

The epicenters of work-from-home show the biggest drops in office occupancy rates, according to Kastle’s “Back to Work Barometer†at the end of April: in San Francisco, the occupancy rate was at 14.8% of the pre-Pandemic level, in New York City at 16.2%, and in San Jose at 18.0%.

... ... ...

A survey by Accenture of 400 North American financial-services companies found that 80% of the executives would like for workers to spend four or five days in the office post-Pandemic. Many of them think that working at home makes training younger employees more difficult and is hurting company culture.

But employees are looking for flexibility, now that they have proven that they can be productive at home.

“You’ve seen the senior executives sitting in their office and there’s nobody behind them,†Laurie McGraw, head of Accenture’s capital markets industry team in North America, told Bloomberg . “And then you see the entry-level folks starved for in-person interaction because they need to be coached on a more regular basis. And then there’s the vast middle that’s content to be home.â€

The work-from-home year 2020 generated record profits for banks, proving that work-from-home can be managed, and many employees question the need to commute every day. According to Rob Dicks, Accenture’s talent and organization head for capital markets, employees are likely to push back against a full-time return.

Despite whatever executives would like, the reality of the cost-cutting aspects of working from home has already set in. According to Accenture’s survey, of the same executives:

Financial firms have been all over the place with their plans.

Goldman Sachs, in an internal memo seen by Bloomberg , told its US employees that they should be prepared to report to the office by June 14, according to an internal memo seen by Bloomberg.

Vanguard Group, which employs about 17,300 people, is planning a hybrid model for most of its staff, with many employees able to work from home on Mondays and Fridays.

Bridgewater Associates is going for the hybrid model as well and will allow their employees to work from home at least part of the time.

Deutsche Bank, which employs about 8,000 people in the US, is planning to let its staff work from home for up to three days a week. Separately, the bank had said that it wanted to reduce its office foot print to cut costs.

Deutsche Bank is offering “flexibility†as an inducement for hiring and retention. A survey had found that 90% of its employees wanted the opportunity to work from home at least part of the time after the Pandemic. Office space will be reconfigured to accommodate the hybrid model.

JPMorgan Chase told its employees in a memo to report back to the office by early July on a “consistent rotational schedule†that would allow staff some flexibility.


[May 09, 2021] Kolanovic Warns Most Money Managers at Risk of Inflation Shock

May 09, 2021 | finance.yahoo.com

Money managers who’ve spent the bulk of their careers profiting from deflationary trends need to quickly switch gears or risk an “inflation shock†to their portfolios, warns JPMorgan Chase & Co. chief global markets strategist Marko Kolanovic.

“Many of today’s investment managers have never experienced a rise in yields, commodities, value stocks, or inflation in any meaningful way,†Kolanovic wrote in a report Wednesday. “A significant shift of allocations towards growth, ESG and low volatility styles over the past decade, all of which have negative correlation to inflation, left most portfolios vulnerable.â€

After staging a powerful rally since November amid vaccine rollouts and government stimulus, bets tied to inflation -- rising Treasury yields, cyclical stocks and small-caps, to name a few -- have taken pause in recent weeks. While that has sparked debate over how long the trend will persist, Kolanovic urged clients to adjust to the new regime amid the reopening of the global economy.

“Given the still high unemployment, and a decade of inflation undershoot, central banks will likely tolerate higher inflation and see it as temporary,†he wrote. “The question that matters the most is if asset managers will make a significant change in allocations to express an increased probability of a more persistent inflation.â€

The way Kolanovic sees it, as data continue to point to higher prices of goods and services, investors will be forced to shift from low-volatility plays to value stocks, while increasing allocations to direct inflation hedges such as commodities. That trend is likely to persist in the second half of the year, he wrote.

Based on JPMorgan’s data, professional investors have yet to fully embrace the reflation trade. Take equities, for instance. Both computer-driven traders and hedge funds now hold stocks at levels below historical averages.

“Portfolio managers likely will not take chances and will reposition portfolios,†Kolanovic wrote. “The interplay of low market liquidity, systematic and macro/fundamental flows, the sheer size of financial assets that need to be rotated or hedges for inflation put on, may cause outsized impact on inflationary and reflationary themes over the next year.â€

Story

[May 08, 2021] What's Behind the WTF Spike in Used-Vehicle Prices- My Gut Says, it Can't Last. But if it Lasts, It's Scary-Crazy Inflation -

May 08, 2021 | wolfstreet.com

And if it doesn't last after the stimmies are gone, dealers will sit on massively overpriced collateral, which could get messy.
By Wolf Richter for WOLF STREET .

This has been going on for months: Used-vehicle prices spiking from jaw-dropper to jaw-dropper, and just when I thought prices couldn't possibly spike further, they do.

Prices of used vehicles that were sold at auctions around the US in April spiked by 8.3% from March, by 20% year-to-date, by 54% from April 2020, and by 40% from April 2019, according to the Used Vehicle Value Index released today by Manheim, the largest auto auction operator in the US and a unit of Cox Automotive. All heck has broken loose in the used vehicle market:

The price spike has now completely blown by the prior record spike over the 13-month period through September 2009, which included the cash-for-clunkers program that removed a whole generation of serviceable older vehicles from the market.


makruger May 8, 2021 at 1:31 am

Curiously, the St. Louis Fed says used car prices have been pretty much flat for the last 25 years. While the last year of data shows a notable jump in prices, it's apparently been bludgeoned a little with some old fashioned hedonic quality adjustments.

Wolf Richter May 8, 2021 at 8:55 am

makruger,

I'll help you out since I've been covering this for years. So here is the correct link that explains it all, new vehicle CPI and used vehicle CPI (which is what you cited), plus "hedonic quality adjustments."

https://wolfstreet.com/2021/04/13/yup-dollars-purchasing-power-dropped-to-record-low-again-but-more-sharply-and-its-worse-than-cpi-shows/

And some relevant charts from that article:

Reply
Scott May 8, 2021 at 1:34 am

I can see how the supply for these auctions will be tight for some time given that business travel and the resulting car rental usage is way down. In addition, I would expect a lot of corporate car purchasing is down considerably as many sales reps have worked remotely which stalled corporate car purchasing schedules.

[May 08, 2021] Inflation Is More of a Threat Than the Fed Says - WSJ

May 08, 2021 | www.wsj.com

Naples, Fla.

Messrs. Levy and Bordo allude to the sharp drop in the velocity of M2 after the 2007-09 crisis. The actual decline is startling. In the first quarter of 2007 M2 velocity was 1.99, by the first quarter of 2020 it had fallen almost continually to 1.38. In other words, the money stock went from turning over twice a year to under 1.4 times a year. This is the primary reason for the very low inflation over the period.

me title=

Because of the Covid lockdowns, M2 fell even further to 1.13 by the fourth quarter of 2020. As the authors point out, conditions are much different today than in 2007-20 because of boosted bank reserves, households with substantial savings ready to spend and commercial banks in good shape and eager to lend. Unless an economy-wide lockdown occurs, these are very good reasons to believe the velocity of money will increase significantly, just as the 27% surge in M2 since the outbreak of the pandemic works its way through the economy.

This is a prescription for major inflation, perhaps 4%-5% in the next two years. When people say "no way," I remind them that in the early 1980s hardly anyone believed that interest rates would ever return to 1950s levels. While many individuals prefer to trend forecast, never underestimate how inflation (and interest rates) can swing back and forth in ways that amaze.

Em. Prof. Stephen Happel

Arizona State University

Tempe, Ariz.

Messrs. Levy and Bordo might have made an equally compelling case about the Fed being in total denial about the more troubling risk: that its policies have been contributing to a global asset-price and credit-market bubble.

By maintaining ultralow interest rates and by continuing to expand its balance by $120 billion a month, even when the economy could soon be overheating and U.S. equity valuations are close to their all-time highs, the Fed risks further inflating the asset-price bubble. By so doing, it is heightening the chances of a hard economic landing when the Fed is eventually forced to slam on the monetary-policy brakes to meet its inflation objective.

Desmond Lachman

American Enterprise Institute

Washington

Why did the money supply hardly budge in 2008, whereas now it's steadily increasing? The answer is that during the financial crisis the Fed conducted a radical experiment: It paid banks not to lend. By design, quantitative easing shored up banks' balance sheets while interest on excess reserves prevented the newly created money from circulating.

In March 2020, the Fed slashed interest on excess reserves from 1.60% to 0.10%. The benefits of sitting on funds is much smaller, which is why lending has increased.

me title=

Messrs. Levy and Bordo emphasize structural factors in the U.S. economy, such as housing and trade. These matter, but not nearly so much as policy. Inflationary pressures will continue if the Fed's asset purchases increase the broader money supply. But this depends on whether the Fed raises interest on excess reserves to prepandemic levels.

For better or worse, interest on excess reserves is now a crucial policy tool. We can't understand inflation without it.

Assoc. Prof. Alexander William Salter

Texas Tech University

Lubbock, Texas

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appeared in the May 5, 2021, print edition as 'Inflation Is More of a Threat Than Fed Says.'

[May 08, 2021] Yellen and the Fed are currently repeating one of the most disturbing episodes of U.S. economic history. It happened during the 1940s following the conclusion of WWII

May 08, 2021 | www.wsj.com

SUBSCRIBER 3 hours ago Yellen and the Fed are currently repeating one of the most disturbing episodes of U.S. economic history. It happened during the 1940s following the conclusion of WWII.

The Fed is riding a tiger by the tail and will likely have great difficulty extricating itself from a torrid monetary experiment that is reaching its limits. The U.S. M4 money supply rose an alarming 24% in March alone from a year earlier whereas M1 rose 37%. Notwithstanding these shocking numbers the Fed continues to buy $120bn of bonds each month and the total amount of money in circulation is exploding at an unprecedented 40% rate.

Professor William Barnett of the Center for Financial Stability in New York explained that today's financial collusion between the Fed and the Treasury is much like the 1940s when the Fed served as a fiscal agent for Democratic administrations. The chaotic aftermath? By mid-1947 the rate of inflation exceeded 17% per year - destroying low income households.

(Cont.)
Like thumb_up 5 Reply Share link Report D


Yellen and the Fed are currently repeating one of the most disturbing episodes of U.S. economic history. It happened during the 1940s following the conclusion of WWII

SUBSCRIBER 3 hours ago
Yellen and the Fed are currently repeating one of the most disturbing episodes of U.S. economic history. It happened during the 1940s following the conclusion of WWII.

The Fed is riding a tiger by the tail and will likely have great difficulty extricating itself from a torrid monetary experiment that is reaching its limits. The U.S. M4 money supply rose an alarming 24% in March alone from a year earlier whereas M1 rose 37%. Notwithstanding these shocking numbers the Fed continues to buy $120bn of bonds each month and the total amount of money in circulation is exploding at an unprecedented 40% rate.

Professor William Barnett of the Center for Financial Stability in New York explained that today's financial collusion between the Fed and the Treasury is much like the 1940s when the Fed served as a fiscal agent for Democratic administrations. The chaotic aftermath? By mid-1947 the rate of inflation exceeded 17% per year - destroying low income households.

(Cont.)

Yellen and the Fed are currently repeating one of the most disturbing episodes of U.S. economic history. It happened during the 1940s following the conclusion of WWII SUBSCRIBER 3 hours ago
Yellen and the Fed are currently repeating one of the most disturbing episodes of U.S. economic history. It happened during the 1940s following the conclusion of WWII.

The Fed is riding a tiger by the tail and will likely have great difficulty extricating itself from a torrid monetary experiment that is reaching its limits. The U.S. M4 money supply rose an alarming 24% in March alone from a year earlier whereas M1 rose 37%. Notwithstanding these shocking numbers the Fed continues to buy $120bn of bonds each month and the total amount of money in circulation is exploding at an unprecedented 40% rate.

Professor William Barnett of the Center for Financial Stability in New York explained that today's financial collusion between the Fed and the Treasury is much like the 1940s when the Fed served as a fiscal agent for Democratic administrations. The chaotic aftermath? By mid-1947 the rate of inflation exceeded 17% per year - destroying low income households.

(Cont.)

Yellen and the Fed are currently repeating one of the most disturbing episodes of U.S. economic history. It happened during the 1940s following the conclusion of WWII
Yellen and the Fed are currently repeating one of the most disturbing episodes of U.S. economic history. It happened during the 1940s following the conclusion of WWII.

The Fed is riding a tiger by the tail and will likely have great difficulty extricating itself from a torrid monetary experiment that is reaching its limits. The U.S. M4 money supply rose an alarming 24% in March alone from a year earlier whereas M1 rose 37%. Notwithstanding these shocking numbers the Fed continues to buy $120bn of bonds each month and the total amount of money in circulation is exploding at an unprecedented 40% rate.

Professor William Barnett of the Center for Financial Stability in New York explained that today's financial collusion between the Fed and the Treasury is much like the 1940s when the Fed served as a fiscal agent for Democratic administrations. The chaotic aftermath? By mid-1947 the rate of inflation exceeded 17% per year - destroying low income households.

(Cont.)

Yellen and the Fed are currently repeating one of the most disturbing episodes of U.S. economic history. It happened during the 1940s following the conclusion of WWII
Yellen and the Fed are currently repeating one of the most disturbing episodes of U.S. economic history. It happened during the 1940s following the conclusion of WWII.

The Fed is riding a tiger by the tail and will likely have great difficulty extricating itself from a torrid monetary experiment that is reaching its limits. The U.S. M4 money supply rose an alarming 24% in March alone from a year earlier whereas M1 rose 37%. Notwithstanding these shocking numbers the Fed continues to buy $120bn of bonds each month and the total amount of money in circulation is exploding at an unprecedented 40% rate.

Professor William Barnett of the Center for Financial Stability in New York explained that today's financial collusion between the Fed and the Treasury is much like the 1940s when the Fed served as a fiscal agent for Democratic administrations. The chaotic aftermath? By mid-1947 the rate of inflation exceeded 17% per year - destroying low income households.

(Cont.)

[May 08, 2021] President Biden and Secretary Yellen said this week there is no significant inflation

May 08, 2021 | www.wsj.com

President Biden and Secretary Yellen said this week there is no significant inflation

Carlos Lumpuy
President Biden and Secretary Yellen said this week there is no significant inflation.
On May 7 of last year, the metric standard of lumber, 1,000 board feet was $360 . Today it's $1,702 a record high. It broke $1,000 first time ever a month ago on April 7.
That's a 70% increase in lumber in just the last 30 days.
Copper was $2.33 on May 7 of last year. Today, $4.76 a record high.
Steel Rebar was $3,768 on May 7 of last year. Today: $5,483 , record high.
President Biden and Secretary Yellen said this week there is no significant inflation .
Tell that to a builder, his subcontractors, and the buyer of a newly built home this summer.
Food prices for Corn, Wheat, Soybeans, Rice, Milk, Coffee, Cocoa are up double digits in just the last two months.
Vice President Harris ignored a question about inflation with her regular everyday cackle laughing as she walked away.
We are in month four of this administration that prioritizes its war on the wind and the weather.
Figures are from Yahoo Finance
President Biden and Secretary Yellen said this week there is no significant inflation Carlos Lumpuy
President Biden and Secretary Yellen said this week there is no significant inflation.
On May 7 of last year, the metric standard of lumber, 1,000 board feet was $360 . Today it's $1,702 a record high. It broke $1,000 first time ever a month ago on April 7.
That's a 70% increase in lumber in just the last 30 days.
Copper was $2.33 on May 7 of last year. Today, $4.76 a record high.
Steel Rebar was $3,768 on May 7 of last year. Today: $5,483 , record high.
President Biden and Secretary Yellen said this week there is no significant inflation .
Tell that to a builder, his subcontractors, and the buyer of a newly built home this summer.
Food prices for Corn, Wheat, Soybeans, Rice, Milk, Coffee, Cocoa are up double digits in just the last two months.
Vice President Harris ignored a question about inflation with her regular everyday cackle laughing as she walked away.
We are in month four of this administration that prioritizes its war on the wind and the weather.
Figures are from Yahoo Finance

[May 08, 2021] In 1999, the Wall Street Journal had 286 articles on bubbles. Here are a few of the titles

May 08, 2021 | www.wsj.com

J

In 1999, the Wall Street Journal had 286 articles on bubbles. Here are a few of the titles J John Smith

Not only is this not true, the evidence shows that bubbles are called in advance. In 1999, the Wall Street Journal had 286 articles on bubbles. Here are a few of the titles,

"When the Bubble Bursts..."
"The Bubble Won't Burst"
"Bursting Mr. Geenspan's Bubble"
"Fed `Bubble' Policy: Watch, Don't Pop'"
"Fed Governor Meyer Counters Suggestions Of a Market Bubble"

And on, and on, etc., etc.

In 1999, the Wall Street Journal had 286 articles on bubbles. Here are a few of the titles J John Smith
Not only is this not true, the evidence shows that bubbles are called in advance. In 1999, the Wall Street Journal had 286 articles on bubbles. Here are a few of the titles,

"When the Bubble Bursts..."
"The Bubble Won't Burst"
"Bursting Mr. Geenspan's Bubble"
"Fed `Bubble' Policy: Watch, Don't Pop'"
"Fed Governor Meyer Counters Suggestions Of a Market Bubble"

And on, and on, etc., etc.

[May 08, 2021] Dogecoin is now valued at more than Ford.

May 08, 2021 | www.wsj.com

R


Dogecoin is now valued at more than Ford. R Robert A

Dogecoin is now valued at more than Ford.
Economics?
Lunacy is more like it.
This is just more proof that the dollars are becoming more worthless.
Whistling past the graveyard.
Dogecoin is now valued at more than Ford. R Robert A
Dogecoin is now valued at more than Ford.
Economics?
Lunacy is more like it.
This is just more proof that the dollars are becoming more worthless.
Whistling past the graveyard.
Dogecoin is now valued at more than Ford. R Robert A
Dogecoin is now valued at more than Ford.
Economics?
Lunacy is more like it.
This is just more proof that the dollars are becoming more worthless.
Whistling past the graveyard.

[May 08, 2021] There is no alternative to the thrust-lifting energy jet fuel provides

May 08, 2021 | www.wsj.com

There is no alternative to the thrust-lifting energy jet fuel provides Carlos Lumpuy

⏤But Yellen said yesterday:
"I don't think there is going to be an inflationary problem.
Biden has proposed further substantial spending packages we would love to be enacted into law."

There is no alternative to the thrust-lifting energy jet fuel provides.
Daily demand is about 6 million barrels a day, a third in the USA.
Price rise is nearing a third in just the last three months.
There is no stopping an airline's largest revenue, the cargo jet planes carry; passengers above are incidental.

[May 08, 2021] he cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.

May 08, 2021 | www.wsj.com

SUBSCRIBER 3 hours ago Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters. Like thumb_up 3 Reply Share link Report D


he cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters. SUBSCRIBER 3 hours ago

Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.
he cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters. SUBSCRIBER 3 hours ago
Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.
he cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters. SUBSCRIBER 3 hours ago
Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.
he cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters. SUBSCRIBER 3 hours ago
Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.
he cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters. SUBSCRIBER 3 hours ago
Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.
he cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters. SUBSCRIBER 3 hours ago
Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.
he cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters. SUBSCRIBER 3 hours ago
Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.
he cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters. SUBSCRIBER 3 hours ago
Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.
he cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters. SUBSCRIBER 3 hours ago
Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.
he cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters. SUBSCRIBER 3 hours ago
Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.
he cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters. SUBSCRIBER 3 hours ago
Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.
he cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters. SUBSCRIBER 3 hours ago
Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.
he cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters. SUBSCRIBER 3 hours ago
Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.

[May 08, 2021] It's not the return on my money I'm concerned with, it's the return of my money that I'm concerned with

May 08, 2021 | www.wsj.com

inflation is here. Lumber is up 450% in a year. Other components are also up. Inflation metrics will eventually recognize reality.

J

It's not the return on my money I'm concerned with, it's the return of my money that I'm concerned with

inflation is here. Lumber is up 450% in a year. Other components are also up. Inflation metrics will eventually recognize reality.

J J Seders
"It's not the return on my money I'm concerned with, it's the return of my money that I'm concerned with." Will Rogers, circa 1930. How easily we all forget. V
It's not the return on my money I'm concerned with, it's the return of my money that I'm concerned with

inflation is here. Lumber is up 450% in a year. Other components are also up. Inflation metrics will eventually recognize reality.

J J Seders
"It's not the return on my money I'm concerned with, it's the return of my money that I'm concerned with." Will Rogers, circa 1930. How easily we all forget. V
It's not the return on my money I'm concerned with, it's the return of my money that I'm concerned with

inflation is here. Lumber is up 450% in a year. Other components are also up. Inflation metrics will eventually recognize reality.

J J Seders
"It's not the return on my money I'm concerned with, it's the return of my money that I'm concerned with." Will Rogers, circa 1930. How easily we all forget. V
It's not the return on my money I'm concerned with, it's the return of my money that I'm concerned with

inflation is here. Lumber is up 450% in a year. Other components are also up. Inflation metrics will eventually recognize reality.

J J Seders
"It's not the return on my money I'm concerned with, it's the return of my money that I'm concerned with." Will Rogers, circa 1930. How easily we all forget. V
It's not the return on my money I'm concerned with, it's the return of my money that I'm concerned with

inflation is here. Lumber is up 450% in a year. Other components are also up. Inflation metrics will eventually recognize reality.

J J Seders
"It's not the return on my money I'm concerned with, it's the return of my money that I'm concerned with." Will Rogers, circa 1930. How easily we all forget. V

[May 08, 2021] What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money by Greg Ip

Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 08, 2021 | www.wsj.com
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C


What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money By Greg Ip

Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C Cam Dipalo

I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy". Describing the election / selection process of political leadership in America (more than one hundred years ago), I was struck by "the certitude of the salary [provided by office] to the great multitude who in every country either fail in life, or shrink from the conflicts which the competitive system makes necessary, is very attractive; it soon converted the civil service into what has been called "spoils"; that is, booty won by victories at the polls". Roll forward one hundred years and we can only be in a worse spot: bigger, more complex problems are being addressed by even less qualified individuals. The result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I trust.
What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money By Greg Ip
Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C Cam Dipalo

I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy". Describing the election / selection process of political leadership in America (more than one hundred years ago), I was struck by "the certitude of the salary [provided by office] to the great multitude who in every country either fail in life, or shrink from the conflicts which the competitive system makes necessary, is very attractive; it soon converted the civil service into what has been called "spoils"; that is, booty won by victories at the polls". Roll forward one hundred years and we can only be in a worse spot: bigger, more complex problems are being addressed by even less qualified individuals. The result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I trust.
What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money By Greg Ip
Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C Cam Dipalo

I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy". Describing the election / selection process of political leadership in America (more than one hundred years ago), I was struck by "the certitude of the salary [provided by office] to the great multitude who in every country either fail in life, or shrink from the conflicts which the competitive system makes necessary, is very attractive; it soon converted the civil service into what has been called "spoils"; that is, booty won by victories at the polls". Roll forward one hundred years and we can only be in a worse spot: bigger, more complex problems are being addressed by even less qualified individuals. The result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I trust.
What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money By Greg Ip
Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C Cam Dipalo

I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy". Describing the election / selection process of political leadership in America (more than one hundred years ago), I was struck by "the certitude of the salary [provided by office] to the great multitude who in every country either fail in life, or shrink from the conflicts which the competitive system makes necessary, is very attractive; it soon converted the civil service into what has been called "spoils"; that is, booty won by victories at the polls". Roll forward one hundred years and we can only be in a worse spot: bigger, more complex problems are being addressed by even less qualified individuals. The result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I trust.
What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money By Greg Ip
Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C Cam Dipalo

I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy". Describing the election / selection process of political leadership in America (more than one hundred years ago), I was struck by "the certitude of the salary [provided by office] to the great multitude who in every country either fail in life, or shrink from the conflicts which the competitive system makes necessary, is very attractive; it soon converted the civil service into what has been called "spoils"; that is, booty won by victories at the polls". Roll forward one hundred years and we can only be in a worse spot: bigger, more complex problems are being addressed by even less qualified individuals. The result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I trust.
What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money By Greg Ip
Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C Cam Dipalo

I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy". Describing the election / selection process of political leadership in America (more than one hundred years ago), I was struck by "the certitude of the salary [provided by office] to the great multitude who in every country either fail in life, or shrink from the conflicts which the competitive system makes necessary, is very attractive; it soon converted the civil service into what has been called "spoils"; that is, booty won by victories at the polls". Roll forward one hundred years and we can only be in a worse spot: bigger, more complex problems are being addressed by even less qualified individuals. The result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I trust.
What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money By Greg Ip
Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C Cam Dipalo

I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy". Describing the election / selection process of political leadership in America (more than one hundred years ago), I was struck by "the certitude of the salary [provided by office] to the great multitude who in every country either fail in life, or shrink from the conflicts which the competitive system makes necessary, is very attractive; it soon converted the civil service into what has been called "spoils"; that is, booty won by victories at the polls". Roll forward one hundred years and we can only be in a worse spot: bigger, more complex problems are being addressed by even less qualified individuals. The result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I trust.
What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money By Greg Ip
Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C Cam Dipalo

I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy". Describing the election / selection process of political leadership in America (more than one hundred years ago), I was struck by "the certitude of the salary [provided by office] to the great multitude who in every country either fail in life, or shrink from the conflicts which the competitive system makes necessary, is very attractive; it soon converted the civil service into what has been called "spoils"; that is, booty won by victories at the polls". Roll forward one hundred years and we can only be in a worse spot: bigger, more complex problems are being addressed by even less qualified individuals. The result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I trust.
What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money By Greg Ip
Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C Cam Dipalo

I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy". Describing the election / selection process of political leadership in America (more than one hundred years ago), I was struck by "the certitude of the salary [provided by office] to the great multitude who in every country either fail in life, or shrink from the conflicts which the competitive system makes necessary, is very attractive; it soon converted the civil service into what has been called "spoils"; that is, booty won by victories at the polls". Roll forward one hundred years and we can only be in a worse spot: bigger, more complex problems are being addressed by even less qualified individuals. The result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I trust.
What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money By Greg Ip
Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C Cam Dipalo

I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy". Describing the election / selection process of political leadership in America (more than one hundred years ago), I was struck by "the certitude of the salary [provided by office] to the great multitude who in every country either fail in life, or shrink from the conflicts which the competitive system makes necessary, is very attractive; it soon converted the civil service into what has been called "spoils"; that is, booty won by victories at the polls". Roll forward one hundred years and we can only be in a worse spot: bigger, more complex problems are being addressed by even less qualified individuals. The result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I trust.
What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money By Greg Ip
Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C Cam Dipalo

I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy". Describing the election / selection process of political leadership in America (more than one hundred years ago), I was struck by "the certitude of the salary [provided by office] to the great multitude who in every country either fail in life, or shrink from the conflicts which the competitive system makes necessary, is very attractive; it soon converted the civil service into what has been called "spoils"; that is, booty won by victories at the polls". Roll forward one hundred years and we can only be in a worse spot: bigger, more complex problems are being addressed by even less qualified individuals. The result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I trust.
What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money By Greg Ip
Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C Cam Dipalo

I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy". Describing the election / selection process of political leadership in America (more than one hundred years ago), I was struck by "the certitude of the salary [provided by office] to the great multitude who in every country either fail in life, or shrink from the conflicts which the competitive system makes necessary, is very attractive; it soon converted the civil service into what has been called "spoils"; that is, booty won by victories at the polls". Roll forward one hundred years and we can only be in a worse spot: bigger, more complex problems are being addressed by even less qualified individuals. The result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I trust.
What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money By Greg Ip
Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C Cam Dipalo

I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy". Describing the election / selection process of political leadership in America (more than one hundred years ago), I was struck by "the certitude of the salary [provided by office] to the great multitude who in every country either fail in life, or shrink from the conflicts which the competitive system makes necessary, is very attractive; it soon converted the civil service into what has been called "spoils"; that is, booty won by victories at the polls". Roll forward one hundred years and we can only be in a worse spot: bigger, more complex problems are being addressed by even less qualified individuals. The result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I trust.
What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money By Greg Ip
Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C Cam Dipalo

I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy". Describing the election / selection process of political leadership in America (more than one hundred years ago), I was struck by "the certitude of the salary [provided by office] to the great multitude who in every country either fail in life, or shrink from the conflicts which the competitive system makes necessary, is very attractive; it soon converted the civil service into what has been called "spoils"; that is, booty won by victories at the polls". Roll forward one hundred years and we can only be in a worse spot: bigger, more complex problems are being addressed by even less qualified individuals. The result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I trust.

[May 08, 2021] Rising Bond Yields Threaten Financial Market Stability

The Fed Bankers lie every day to prevent panic and the lemmings believe it all.
May 08, 2021 | www.zerohedge.com

The 10-year US Treasury yield fell to only 0.48% in March 2020, when deflationary fears were mounting. The S&P 500 index had fallen by 32% in just five weeks as China's covid crisis was followed by the prospect of other jurisdictions going into pandemic lockdowns. Commodity prices were collapsing. The Fed then did what it always does in these conditions. It cut interest rates to the minimum possible (zero this time) and it flooded markets with money ($120bn in QE every month) along with some other market fixes to cap corporate bond yields from rising to reflect lending risks.

Fuelling it all is the expansion of base money by central banks. The St Louis Fed's FRED chart below showing the Fed's monetary base illustrates the point and is a proxy for the global picture, because the dollar is the reserve currency and the pricing medium for all commodities.

From the beginning of March 2020, which was the month the Fed announced virtually unlimited monetary expansion, base money has grown by 69%. It is this rapid growth in central bank money which is undoubtedly behind rising commodity prices, or put more accurately, is why the purchasing power of the dollar in international markets is falling.

When the outlook for the purchasing power of a fiat currency falls, all holders expect compensation in the form of higher interest rates. Partly, it is due to time preference -- the fact that an owner of the currency has parted with the use of it for a period of time. And partly it is due to the expectation that when returned, the currency will buy less than it does today. Official forecasts of the CPI state that the dollar's purchasing power will probably sink to 97.5 cents on the dollar, then the yield on the ten-year UST should be at least 2.56% (2.5%/0.97), otherwise new buyers face immediate losses. The official expectation that the rise in the rate of price inflation will be temporary is immaterial to an investment decision today, because the yield can be expected to evolve over time in the light of events.

This is before adding something to the yield for time preference (admittedly minimal in a freely traded bond), plus something for currency risk relative to an investor's base currency and plus something for creditor risk. Stripped of these other considerations, on the basis of expected inflation alone a current yield of 1.61 appears to be far too low, and a yield target of at minimum of 2.5% appears more appropriate.

ay_arrow

FinsterF 14 hours ago

Will increase??? Inflation is already much higher than 2% or whatever the latest government figures imply. Price inflation first shows up in real time data like stock and commodity prices. It only later shows up in broad consumer prices. Not to mention that year over year data already average six months late.

And this on top of tricks like homeowners equivalent rent and hedonic adjustments. So official inflation stats both systematically understate and lag actual inflation.

HorseBuggy 19 hours ago

As long as you print money you could keep this market going higher and higher regardless of any reality.

philipat 14 hours ago

As much as I enjoy reading Alasdair's work, he's wrong about Bond Yields because there IS NO RECOVERY. The latest BLS jobs report started to indicate that despite all the "stimulus" the underlying economy is very weak, and that isn't due to the excuse of Covid. From the data, the global economy started turning down in 4Q2108. This became more obvious in 3Q2019 with the REPO crisis. All before Covid.

The Bond markets almost always get it right and, as of now, Bond yields are falling as also are Eurodollar Futures, suggesting that for once Powell is right, any inflation is indeed transitory.

The good news for Alasdair is that for the last 3 years, Gold has been a precise mirror image of Bond REAL yields so as Real Yields now fall further negative again, Gold should respond to the upside - as already being seen.

Sound of the Suburbs 13 hours ago

Why is neoclassical economics so dangerous to the financial system?

We never did learn as much as we should have done from 1929.

Neoclassical economics produces ponzi schemes of inflated prices.

When they collapse it feeds back into the financial system.

Neoclassical economics still has its 1920's problems.

What's wrong with neoclassical economics?

  1. It makes you think you are creating wealth by inflating asset prices
  2. Bank credit flows into inflating asset prices, debt rises faster than GDP and you eventually get a financial crisis.
  3. No one notices the private debt building up in the economy as neoclassical economics doesn't consider debt.

What is the fundamental flaw in the free market theory of neoclassical economics?

The University of Chicago worked that out in the 1930s after last time.

Banks can inflate asset prices with the money they create from bank loans.

https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf

Henry Simons and Irving Fisher supported the Chicago Plan to take away the bankers ability to create money.

"Simons envisioned banks that would have a choice of two types of holdings: long-term bonds and cash. Simultaneously, they would hold increased reserves, up to 100%. Simons saw this as beneficial in that its ultimate consequences would be the prevention of "bank-financed inflation of securities and real estate" through the leveraged creation of secondary forms of money."

https://www.newworldencyclopedia.org/entry/Henry_Calvert_Simons

Margin lending had inflated the US stock market to ridiculous levels.

Richard Vague had noticed real estate lending balloon from 5 trillion to 10 trillion from 2001 – 2007 and went back to look at the data before 1929.

Real estate lending was actually the biggest problem lending category leading to 1929.

The IMF re-visited the Chicago plan after 2008.

https://www.imf.org/external/pubs/ft/wp/2012/wp12202.pdf

Existing financial assets, e.g. real estate, stocks and other financial assets, are traded and bank credit is used to fund the transfers. This inflates the price.

You end up with a ponzi scheme of inflated asset prices that will collapse and feed back into the financial system.

At the end of the 1920s, the US was a ponzi scheme of inflated asset prices.

The use of neoclassical economics and the belief in free markets, made them think that inflated asset prices represented real wealth.

1929 – Wakey, wakey time

Why did it cause the US financial system to collapse in 1929?

Bankers get to create money out of nothing, through bank loans, and get to charge interest on it.

https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf

What could possibly go wrong?

Bankers do need to ensure the vast majority of that money gets paid back, and this is where they get into serious trouble.

Banking requires prudent lending.

If someone can't repay a loan, they need to repossess that asset and sell it to recoup that money. If they use bank loans to inflate asset prices they get into a world of trouble when those asset prices collapse.

As the real estate and stock market collapsed the banks became insolvent as their assets didn't cover their liabilities.

They could no longer repossess and sell those assets to cover the outstanding loans and they do need to get most of the money they lend out back again to balance their books.

The banks become insolvent and collapsed, along with the US economy.

When banks have been lending to inflate asset prices the financial system is in a precarious state and can easily collapse.

What was the ponzi scheme of inflated asset prices that collapsed in Japan in 1991?

Japanese real estate.

They avoided a Great Depression by saving the banks.

They killed growth for the next 30 years by leaving the debt in place.

https://www.youtube.com/watch?v=8YTyJzmiHGk

What was the ponzi scheme of inflated asset prices that collapsed in 2008?

"It's nearly $14 trillion pyramid of super leveraged toxic assets was built on the back of $1.4 trillion of US sub-prime loans, and dispersed throughout the world" All the Presidents Bankers, Nomi Prins.

They avoided a Great Depression by saving the banks.

They left Western economies struggling by leaving the debt in place, just like Japan.

It's not as bad as Japan as we didn't let asset prices crash in the West, but it is this problem has made our economies so sluggish since 2008.

The last lamb to the slaughter, India

They had created a ponzi scheme of inflated asset prices in real estate, but it collapsed.

https://www.wsj.com/articles/indias-ghost-towns-saddle-middle-class-with-debtand-broken-dreams-11579189678

Now they need to recapitalize their banks.

Their financial system is in a bad way, recovery isn't going to be easy.

Sound of the Suburbs 13 hours ago (Edited)

They did work out what went wrong the last time they used neoclassical economics.

They put regulations in place to ensure financial stability.

Financial stability arrived in the Keynesian era and was locked into the regulations of the time.

https://www.brettonwoodsproject.org/wp-content/uploads/2009/10/banking-crises.png

"This Time is Different" by Reinhart and Rogoff has a graph showing the same thing (Figure 13.1 - The proportion of countries with banking crises, 1900-2008).

Neoclassical economics came back and so did the financial crises.

The neoliberals removed the regulations that created financial stability in the Keynesian era and put independent central banks in charge of financial stability.

Why does it go so wrong?

Richard Vague had noticed real estate lending balloon from 5 trillion to 10 trillion from 2001 – 2007 and knew there was going to be a financial crisis.

Richard Vague has looked at the data for financial crises going back 200 years and found the cause was nearly always runaway bank lending.

We put central bankers in charge of financial stability, but they use an economics that ignores the main cause of financial crises, private debt.

Most of the problems are coming from private debt.

The technocrats use an economics that ignores private debt.

The poor old technocrats don't really stand a chance.

In 2008 the Queen visited the revered economists of the LSE and said "If these things were so large, how come everyone missed it?"

It's that neoclassical economics they use Ma'am, it doesn't consider private debt.

Here it is Ma'am, look it's obvious.

https://www.youtube.com/watch?v=vAStZJCKmbU&list=PLmtuEaMvhDZZQLxg24CAiFgZYldtoCR-R&index=6

At 18 mins.

Let's get our experts in neoclassical economics to have a look.

"It was a black swan"

Not considering private debt is the Achilles' heel of neoclassical economics.

It is a black swan to them.

That's the problem.

[May 07, 2021] U.S. job growth disappoints in challenge to economic recovery - BNN Bloomberg

May 07, 2021 | www.bnnbloomberg.ca

6h ago

U.S. job growth disappoints in challenge to economic recovery

Olivia Rockeman , Bloomberg News

https://imasdk.googleapis.com/js/core/bridge3.455.0_en.html#goog_688272017 U.S. jobs data in April disappoints

U.S. job growth significantly undershot forecasts in April, suggesting that difficulty attracting workers is slowing momentum in the labor market and challenging the economic recovery.

Payrolls rose 266,000 from a month earlier, according to a Labor Department report Friday that represented one of the largest downside misses on record. Economists in a Bloomberg survey projected a 1 million hiring surge in April.

The unemployment rate edged up to 6.1 per cent, though the labor-force participation rate also increased.

... The disappointing payrolls print leaves overall employment more than 8 million short of its pre-pandemic level and is consistent with recent comments from company officials highlighting challenges in filling open positions.

... While job gains accelerated in leisure and hospitality, employment at temporary-help agencies and transportation and warehousing declined sharply.

...

Labor force participation, a measure of the percentage of Americans either working or looking for work, rose to 61.7 per cent in April from 61.5 per cent, likely supported by increased vaccinations that helped fuel the reopenings of many retail establishments, restaurants and leisure-facing businesses.

Average weekly hours increased to match the highest in records dating back to 2006. The gain in the workweek, increased pay and the improvement in hiring helped boost aggregate weekly payrolls 1.2 per cent in April after a 1.3 per cent gain a month earlier.

Workforce participation for men age 25 to 54 increased last month, while edging lower for women.

[May 07, 2021] Goldman, Pimco Detect Irrational Inflation Mania in Bonds

May 07, 2021 | finance.yahoo.com

Goldman Sachs Group Inc. and bond titan Pacific Investment Management Co. have a simple message for Treasuries traders fretting over inflation: Relax.

The firms estimate that bond traders who are pricing in annual inflation approaching 3% over the next handful of years are overstating the pressures bubbling up as the U.S. economy rebounds from the pandemic.

...the overshoot could be as large as 0.2-to-0.3 percentage point. That gap makes a difference with key market proxies of inflation expectations for the coming few years surging this week to the highest in more than a decade. The 10-year measure, perhaps the most closely followed, eclipsed 2.5% Friday for the first time since 2013, even after unexpectedly weak U.S. jobs data.

There's at least one market metric that backs up the view that the pressures, which have been building for months, aren't about to get out of hand and may even prove temporary. A swaps instrument that reflects the annual inflation rate for the second half of the next decade has been relatively stable in recent months.

...The Federal Reserve has been hammering home that it sees any spike in price pressures as likely short-lived, and that it's willing to let inflation run above target for a period as the economy revives.

... ... ...

... Inflation worries have been mounting against a backdrop of soaring commodities prices -- copper, for example, set a record high Friday. It's all happening as lawmakers in Washington debate another massive fiscal-stimulus package.

...

Korapaty calls the outlook for inflation "benign." His view is that the market is overly optimistic with its inflation assumptions, with the greatest mismatch to be found on the three- and five-year horizon. At roughly 2.75% and 2.7%, respectively, those rates are around 20 to 30 basis points higher than they should be, in his estimate.

... ... ...

...Treasury Secretary Janet Yellen stirred markets by saying interest rates will likely rise as government spending swells and the economy achieves faster growth. She walked back the remarks hours later.

... "Because we think front-end rates are pricing in a more aggressive Fed path than we believe, we do like shorter-dated nominal bonds, and think there's value there," she said.

[May 07, 2021] Crooks are selling to fools

finance.yahoo.com

...retail investors have been net buyers of stocks for 10 straight weeks, hedge funds have been sellers, client data from BofA Global Research showed, with the four-week average of net sales of equities by hedge funds hitting their highest levels since the firm began tracking the data in 2008.

[May 07, 2021] Consumer Credit Explodes Higher As Americans Rediscover Their Love For Credit Cards

May 07, 2021 | www.zerohedge.com

Just yesterday, we showed that only a few quarters after banks effectively shut down, refusing to give out C&I, credit card or auto loans and mortgages to virtually anyone as a result of record Draconian credit standards, credit standards saw a complete U-turn and as of April, lending standards for credit cards and autos were the loosest on record.

This was not lost on US consumers who after suffering through a miserable 12 months in which they dutifully repaid their credit card debt like total idiots who acted responsibly (instead of doing what US corporations are doing and loading up on even more debt to ensure they all get bailed out during the next crisis), in March aggregate consumer credit surged by $25.8BN, smashing expectations for the 2nd month in a row ( as a reminder February was the biggest beat on record ) and barely slowing down from last month's massive $26.1BN increase.

... non-revolving credit - i.e., student and auto loans - continued its relentless ramp higher, increasing by $19.4BN in March, the most since June of 2020...


Just a Little Froth in the Market 10 minutes ago

"Americans are once again highly confident about the future, and are spending far beyond their means, as they always tend to do."

Ah no, they are using credit cards because they have no real money. Asinine article.

Archimedes bathwater PREMIUM 7 minutes ago

If Americans use their credit cards for the same stuff as last year, but everything costs 20% more, is that also called an explosion in consumer credit? MOAR WINNING??!

nsurf9 8 minutes ago (Edited) remove link

Well, the average revolving credit card rate is only 16%.

brian91145 12 minutes ago

lol so no one is working and everyone is using credit cards? Sounds like a great economy!

[May 07, 2021] From Dutch Tulips to Internet Stocks, How to Spot a Financial Bubble by Jon Hilsenrath

finance.yahoo.com

... ... ...

Charles Kindleberger, the late MIT professor who wrote the popular book, "Manias, Panics and Crashes," called such speculation and crisis a hardy perennial.

"Periods of great innovation are interesting from an investor's perspective because you can justify a wide range of valuations," says Robin Greenwood, a Harvard Business School professor who has studied bubbles. He says another classic example was a 1920s boom in closed-end funds, investment portfolios that trade on an exchange. Before the 1929 stock crash, issuance of closed-end funds soared and the prices on the funds raced ahead of the underlying values of their investment holdings.

Swindlers are oftentimes attached to the financial boom, too. That included Robert Knight, who helped cook the books of the South Sea Company, fled England and landed in an Antwerp prison for a time. Then there was Bernie Madoff, who cooked up his own investment Ponzi scheme that crashed in December 2008. He died in jail last month.

.... The problem might be when investment in the vehicle is fueled by a surge in borrowing. "Leverage is the killer," Mr. Buiter said.

That was certainly the case for the 2000s, when collateralized debt obligations helped fuel mortgage borrowing. Between 2000 and 2008, debt in the financial sector more than doubled from $8.7 trillion to $18 trillion; among households it doubled from $7.2 trillion to $14.1 trillion, according to Federal Reserve data.

This time the pattern is different. Though government debt is rising fast, debt in the financial sector remains below its 2008 peak and household debt has been rising more slowly than in the 2000s. Between 2012 and 2020, household debt rose to $16.6 trillion, from $13.6 trillion. That is something that gives Mr. Buiter some peace of mind.

"There are signs, indicators of excess, but they haven't led us down the path of an unsustainable credit boom yet," Mr. Buiter said. C


From Dutch Tulips to Internet Stocks, How to Spot a Financial Bubble by Jon Hilsenrath

Dogecoin is completely worthless in the grand scheme. Unlimited dogecoins can exist (first red flag of many). It was created as a joke. Yet people are buying for one reason and one reason only: They think someone will come behind them and pay even more. Until that stops happening the sky is the limit. If this is not a sign of the bubble I do not knw what is...

... ... ...

Charles Kindleberger, the late MIT professor who wrote the popular book, "Manias, Panics and Crashes," called such speculation and crisis a hardy perennial.

"Periods of great innovation are interesting from an investor's perspective because you can justify a wide range of valuations," says Robin Greenwood, a Harvard Business School professor who has studied bubbles. He says another classic example was a 1920s boom in closed-end funds, investment portfolios that trade on an exchange. Before the 1929 stock crash, issuance of closed-end funds soared and the prices on the funds raced ahead of the underlying values of their investment holdings.

Swindlers are oftentimes attached to the financial boom, too. That included Robert Knight, who helped cook the books of the South Sea Company, fled England and landed in an Antwerp prison for a time. Then there was Bernie Madoff, who cooked up his own investment Ponzi scheme that crashed in December 2008. He died in jail last month.

.... The problem might be when investment in the vehicle is fueled by a surge in borrowing. "Leverage is the killer," Mr. Buiter said.

That was certainly the case for the 2000s, when collateralized debt obligations helped fuel mortgage borrowing. Between 2000 and 2008, debt in the financial sector more than doubled from $8.7 trillion to $18 trillion; among households it doubled from $7.2 trillion to $14.1 trillion, according to Federal Reserve data.

This time the pattern is different. Though government debt is rising fast, debt in the financial sector remains below its 2008 peak and household debt has been rising more slowly than in the 2000s. Between 2012 and 2020, household debt rose to $16.6 trillion, from $13.6 trillion. That is something that gives Mr. Buiter some peace of mind.

"There are signs, indicators of excess, but they haven't led us down the path of an unsustainable credit boom yet," Mr. Buiter said. C curt meinecke

Whenever I got that panicked feeling that I was missing out on crazy returns (dot-com stocks in the 90s, housing in the 2000s), it always ended with a crash. I got that feeling with crypto currency. I know to resist the urge. I did.
From Dutch Tulips to Internet Stocks, How to Spot a Financial Bubble by Jon Hilsenrath
Dogecoin is completely worthless in the grand scheme. Unlimited dogecoins can exist (first red flag of many). It was created as a joke. Yet people are buying for one reason and one reason only: They think someone will come behind them and pay even more. Until that stops happening the sky is the limit. If this is not a sign of the bubble I do not knw what is...

... ... ...

Charles Kindleberger, the late MIT professor who wrote the popular book, "Manias, Panics and Crashes," called such speculation and crisis a hardy perennial.

"Periods of great innovation are interesting from an investor's perspective because you can justify a wide range of valuations," says Robin Greenwood, a Harvard Business School professor who has studied bubbles. He says another classic example was a 1920s boom in closed-end funds, investment portfolios that trade on an exchange. Before the 1929 stock crash, issuance of closed-end funds soared and the prices on the funds raced ahead of the underlying values of their investment holdings.

Swindlers are oftentimes attached to the financial boom, too. That included Robert Knight, who helped cook the books of the South Sea Company, fled England and landed in an Antwerp prison for a time. Then there was Bernie Madoff, who cooked up his own investment Ponzi scheme that crashed in December 2008. He died in jail last month.

.... The problem might be when investment in the vehicle is fueled by a surge in borrowing. "Leverage is the killer," Mr. Buiter said.

That was certainly the case for the 2000s, when collateralized debt obligations helped fuel mortgage borrowing. Between 2000 and 2008, debt in the financial sector more than doubled from $8.7 trillion to $18 trillion; among households it doubled from $7.2 trillion to $14.1 trillion, according to Federal Reserve data.

This time the pattern is different. Though government debt is rising fast, debt in the financial sector remains below its 2008 peak and household debt has been rising more slowly than in the 2000s. Between 2012 and 2020, household debt rose to $16.6 trillion, from $13.6 trillion. That is something that gives Mr. Buiter some peace of mind.

"There are signs, indicators of excess, but they haven't led us down the path of an unsustainable credit boom yet," Mr. Buiter said. C curt meinecke

Whenever I got that panicked feeling that I was missing out on crazy returns (dot-com stocks in the 90s, housing in the 2000s), it always ended with a crash. I got that feeling with crypto currency. I know to resist the urge. I did.
From Dutch Tulips to Internet Stocks, How to Spot a Financial Bubble by Jon Hilsenrath
Dogecoin is completely worthless in the grand scheme. Unlimited dogecoins can exist (first red flag of many). It was created as a joke. Yet people are buying for one reason and one reason only: They think someone will come behind them and pay even more. Until that stops happening the sky is the limit. If this is not a sign of the bubble I do not knw what is...

... ... ...

Charles Kindleberger, the late MIT professor who wrote the popular book, "Manias, Panics and Crashes," called such speculation and crisis a hardy perennial.

"Periods of great innovation are interesting from an investor's perspective because you can justify a wide range of valuations," says Robin Greenwood, a Harvard Business School professor who has studied bubbles. He says another classic example was a 1920s boom in closed-end funds, investment portfolios that trade on an exchange. Before the 1929 stock crash, issuance of closed-end funds soared and the prices on the funds raced ahead of the underlying values of their investment holdings.

Swindlers are oftentimes attached to the financial boom, too. That included Robert Knight, who helped cook the books of the South Sea Company, fled England and landed in an Antwerp prison for a time. Then there was Bernie Madoff, who cooked up his own investment Ponzi scheme that crashed in December 2008. He died in jail last month.

.... The problem might be when investment in the vehicle is fueled by a surge in borrowing. "Leverage is the killer," Mr. Buiter said.

That was certainly the case for the 2000s, when collateralized debt obligations helped fuel mortgage borrowing. Between 2000 and 2008, debt in the financial sector more than doubled from $8.7 trillion to $18 trillion; among households it doubled from $7.2 trillion to $14.1 trillion, according to Federal Reserve data.

This time the pattern is different. Though government debt is rising fast, debt in the financial sector remains below its 2008 peak and household debt has been rising more slowly than in the 2000s. Between 2012 and 2020, household debt rose to $16.6 trillion, from $13.6 trillion. That is something that gives Mr. Buiter some peace of mind.

"There are signs, indicators of excess, but they haven't led us down the path of an unsustainable credit boom yet," Mr. Buiter said. C curt meinecke

Whenever I got that panicked feeling that I was missing out on crazy returns (dot-com stocks in the 90s, housing in the 2000s), it always ended with a crash. I got that feeling with crypto currency. I know to resist the urge. I did.
From Dutch Tulips to Internet Stocks, How to Spot a Financial Bubble by Jon Hilsenrath
Dogecoin is completely worthless in the grand scheme. Unlimited dogecoins can exist (first red flag of many). It was created as a joke. Yet people are buying for one reason and one reason only: They think someone will come behind them and pay even more. Until that stops happening the sky is the limit. If this is not a sign of the bubble I do not knw what is...

... ... ...

Charles Kindleberger, the late MIT professor who wrote the popular book, "Manias, Panics and Crashes," called such speculation and crisis a hardy perennial.

"Periods of great innovation are interesting from an investor's perspective because you can justify a wide range of valuations," says Robin Greenwood, a Harvard Business School professor who has studied bubbles. He says another classic example was a 1920s boom in closed-end funds, investment portfolios that trade on an exchange. Before the 1929 stock crash, issuance of closed-end funds soared and the prices on the funds raced ahead of the underlying values of their investment holdings.

Swindlers are oftentimes attached to the financial boom, too. That included Robert Knight, who helped cook the books of the South Sea Company, fled England and landed in an Antwerp prison for a time. Then there was Bernie Madoff, who cooked up his own investment Ponzi scheme that crashed in December 2008. He died in jail last month.

.... The problem might be when investment in the vehicle is fueled by a surge in borrowing. "Leverage is the killer," Mr. Buiter said.

That was certainly the case for the 2000s, when collateralized debt obligations helped fuel mortgage borrowing. Between 2000 and 2008, debt in the financial sector more than doubled from $8.7 trillion to $18 trillion; among households it doubled from $7.2 trillion to $14.1 trillion, according to Federal Reserve data.

This time the pattern is different. Though government debt is rising fast, debt in the financial sector remains below its 2008 peak and household debt has been rising more slowly than in the 2000s. Between 2012 and 2020, household debt rose to $16.6 trillion, from $13.6 trillion. That is something that gives Mr. Buiter some peace of mind.

"There are signs, indicators of excess, but they haven't led us down the path of an unsustainable credit boom yet," Mr. Buiter said. C curt meinecke

Whenever I got that panicked feeling that I was missing out on crazy returns (dot-com stocks in the 90s, housing in the 2000s), it always ended with a crash. I got that feeling with crypto currency. I know to resist the urge. I did.
From Dutch Tulips to Internet Stocks, How to Spot a Financial Bubble by Jon Hilsenrath
Dogecoin is completely worthless in the grand scheme. Unlimited dogecoins can exist (first red flag of many). It was created as a joke. Yet people are buying for one reason and one reason only: They think someone will come behind them and pay even more. Until that stops happening the sky is the limit. If this is not a sign of the bubble I do not knw what is...

... ... ...

Charles Kindleberger, the late MIT professor who wrote the popular book, "Manias, Panics and Crashes," called such speculation and crisis a hardy perennial.

"Periods of great innovation are interesting from an investor's perspective because you can justify a wide range of valuations," says Robin Greenwood, a Harvard Business School professor who has studied bubbles. He says another classic example was a 1920s boom in closed-end funds, investment portfolios that trade on an exchange. Before the 1929 stock crash, issuance of closed-end funds soared and the prices on the funds raced ahead of the underlying values of their investment holdings.

Swindlers are oftentimes attached to the financial boom, too. That included Robert Knight, who helped cook the books of the South Sea Company, fled England and landed in an Antwerp prison for a time. Then there was Bernie Madoff, who cooked up his own investment Ponzi scheme that crashed in December 2008. He died in jail last month.

.... The problem might be when investment in the vehicle is fueled by a surge in borrowing. "Leverage is the killer," Mr. Buiter said.

That was certainly the case for the 2000s, when collateralized debt obligations helped fuel mortgage borrowing. Between 2000 and 2008, debt in the financial sector more than doubled from $8.7 trillion to $18 trillion; among households it doubled from $7.2 trillion to $14.1 trillion, according to Federal Reserve data.

This time the pattern is different. Though government debt is rising fast, debt in the financial sector remains below its 2008 peak and household debt has been rising more slowly than in the 2000s. Between 2012 and 2020, household debt rose to $16.6 trillion, from $13.6 trillion. That is something that gives Mr. Buiter some peace of mind.

"There are signs, indicators of excess, but they haven't led us down the path of an unsustainable credit boom yet," Mr. Buiter said. C curt meinecke

Whenever I got that panicked feeling that I was missing out on crazy returns (dot-com stocks in the 90s, housing in the 2000s), it always ended with a crash. I got that feeling with crypto currency. I know to resist the urge. I did.

[May 05, 2021] FED Powell on tough question: Not sure what the exact nature of that question is

May 05, 2021 | www.zerohedge.com

ReadyForHillary 1 hour ago

When will the economy be able to stand on its own feet?

He immediately followed with:

I'm not sure what the exact nature of that question is.

HA HA HA HA! HA HA HA HA HA HA HA HA!

[May 05, 2021] Mark Blyth " An Inflated Fear of Inflation ?

May 01, 2021 | www.nakedcapitalism.com

Yves here. Mark Blyth is such a treat. How can you not be a fan of the man who coined "The Hamptons are not a defensible position"? Even though he's not always right, he's so incisive and has such a strong point of view that his occasional questionable notions serve as fodder for thought. And I suspect he'll be proven correct on his topic today, the inflation bugaboo. Yves here. Mark Blyth is such a treat. How can you not be a fan of the man who coined "The Hamptons are not a defensible position"? Even though he's not always right, he's so incisive and has such a strong point of view that his occasional questionable notions serve as fodder for thought. And I suspect he'll be proven correct on his topic today, the inflation bugaboo. Even though he's not always right, he's so incisive and has such a strong point of view that his occasional questionable notions serve as fodder for thought. And I suspect he'll be proven correct on his topic today, the inflation bugaboo. Even though he's not always right, he's so incisive and has such a strong point of view that his occasional questionable notions serve as fodder for thought. And I suspect he'll be proven correct on his topic today, the inflation bugaboo. By Paul Jay.

... ... ...

Paul Jay
And is the idea that inflation is about to come roaring back one of the stupid ideas that you're talking about? And is the idea that inflation is about to come roaring back one of the stupid ideas that you're talking about?
Mark Blyth
I hope that it is, but I'm going to go with Larry on this one. He says it's about one third chance that it's going to do this. I'd probably give it about one in ten, so it's not impossible.

So, let's unpack why we're going to see this. Can you generate inflation? Yeah. I mean, dead easy. Imagine your Turkey. Why not be a kind of Turkish pseudo dictator?

Why not fire the head of your central bank in an economy that's basically dependent on other people valuing your assets and giving you money through capital flows? And then why don't you fire the central bank head and put in charge your brother-in-law? I think it was his brother-in-law. And then insist that low interest rates cure inflation. And then watch as the value of your currency, the lira collapses, which means all the stuff you import is massively expensive, which means that people will pay more, and the general level of all prices will go up, which is an inflation. So, can you generate an inflation in the modern world? Sure, yeah. Easy. Just be an idiot, right? Now, does this apply to the United States? No. That's where it gets entirely different. So, a couple of things to think about (first). So, you mentioned that huge number of 20 trillion dollars. Well, that's more or less about two thirds of what we threw into the global economy after the global financial crisis, and inflation singularly failed to show up. All those people in 2010 screaming about inflation and China dumping bonds and all that. Totally wrong. Completely wrong. No central bank that's got a brass nameplate worth a damn has managed to hit its inflation target of two percent in over a decade. All that would imply that there is a huge amount of what we call "˜slack' in the economy. (Also) think about the fact that we've had, since the 1990s, across the OECD, by any measure, full employment. That is to say, most people who want a job can actually find one, and at the same time, despite that, there has been almost no price pressure coming from wages, pushing on into prices, to push up inflation. So rather than the so-called vertical Phillips curve, which most of modern macro is based upon, whereby there's a kind of speed bump for the economy, and if the government spends money, it can't push this curve out, all it can do is push it up in terms of prices. What we seem to actually have is one whereby you can have a constant level of inflation, which is very low, and any amount of unemployment you want from 2 percent to 12 percent, depending on where you look and in which time-period.

All of which suggests that at least for big developed, open, globalized economies, where you've destroyed trade unions, busted up national product cartels, globally integrated your markets, and added 600 million people to the global labor supply, you just can't generate inflation very easily. Now, we're running, depending on how much actually passes, a two to five trillion-dollar experiment on which theory of inflation is right. This one, or is it this one? That's basically what we're doing just now. Larry's given it one in three that it's his one. I'd give it one in ten his one's right. Now, if I may just go on just for a seconds longer. This is where the politics of this gets interesting. Most people don't understand what inflation is. You get all this stuff talked by economists and central bankers about inflation and expectations and all that, but you go out and survey people and they have no idea what the damn thing is. Think about the fact that most people talk about house price inflation.

There is no such thing as house price inflation. Inflation is a general rise in the level of all prices. A sustained rise in the level of prices. The fact that house prices in Toronto have gone up is because Canada stopped building public housing in the 1980s and turned it into an asset class and let the 10 percent top earners buy it all and swap it with each other. That is singularly not an inflation. So, what's going to happen coming out of Covid is there will be a big pickup in spending, a pickup in employment. I think it's (going to be) less than people expect because the people with the money are not going to go out and spend it because they have all they want already. There are only so many Sub-Zero fridges you can buy. Meanwhile, the bottom 60 percent of the income distribution are too busy paying back debt from the past year to go on a spending spree, but there definitely will be a pickup. Now, does that mean that there's going to be what we used to call bottlenecks? Yeah, because basically firms run down inventory because they're in the middle of a bloody recession. Does it mean that there are going to be supply chain problems? Yes, we see this with computer chips. So, what's going to happen is that computer chips are going to go up in price.

So, lots of individual things are going to go up in price, and what's going to happen is people are going to go "there's the inflation, there's that terrible inflation," and it's not. It's just basically short-term factors that will dissipate after 18 months. That is my bet. For Larry to be right what would have to be true?

That we would have to have the institutions, agreements, labor markets and product markets of the 1970s. We don't.

... ... ...

So, I just don't actually see what the generator of inflation would be. We are not Turkey dependent on capital imports for our survival with a currency that's falling off a cliff. That is entirely different. That import mechanism, which is the way that most countries these days get a bit of inflation. That simply doesn't apply in the U.S. So, with my money on it, if I had to bet, it's one in 10 Larry's right, rather one in 3.

Paul Jay
The other point he raises, and we talked a little bit about this in a previous interview, but let's revisit it, is that the size of the American debt, even if it isn't inflationary at some point, creates some kind of crisis of confidence in the dollar being the reserve currency of the world, and so this big infrastructure spending is a problem because of that. That's part of, I believe, one of his arguments. The other point he raises, and we talked a little bit about this in a previous interview, but let's revisit it, is that the size of the American debt, even if it isn't inflationary at some point, creates some kind of crisis of confidence in the dollar being the reserve currency of the world, and so this big infrastructure spending is a problem because of that. That's part of, I believe, one of his arguments.
Mark Blyth
The way political economists look at the financial plumbing, I think, is different to the way that macro economists do. We see it rather differently. The first thing is, what's your alternative to the dollar unless you're basically going to go all-in on gold or bitcoin? And good luck with those. If we go into a crushing recession and our bond market collapses, don't think that Europe's going to be a safe haven given that they've got half the US growth rate. And we could talk about what Europe's got going on post-pandemic because it's not that good. So what's your alternative (to the Dollar)? Buy yen? No, not really. You're going to buy Chinese assets? Well, good luck, and given the way that their country is being run at the moment, if you ever want to take your capital out. I'm not sure that's going to work for you, even if you could. So you're kind of stuck with it. Mechanically there's another problem. All of the countries that make surpluses in the world make surpluses because we run deficits. One has to balance the other. So, when you're a Chinese firm selling to the United States, which is probably an American firm in China with Chinese subcontractors selling to the United States, what happens is they get paid in dollars. When they receive those dollars in China, they don't let them into the domestic banking system. They sterilize them and they turn them into the local currency, which is why China has all these (dollar) reserves. That's their national savings. Would you like to burn your reserves in a giant pile? Well, one way to do that would be to dump American debt, which would be equivalent to burning your national savings. If you're a firm, what do you do? Well, you basically have to use dollars for your invoicing. You have to use dollars for your purchasing, and you keep accumulating dollars, which you hand back to your central bank, which then hands you the domestic currency. The central bank then has a problem because it's got a liability " (foreign) cash rather than an asset. So, what's the easiest asset to buy? Buy another 10-year Treasury bill, rinse and repeat, rinse and repeat. So, if we were to actually have that type of crisis of confidence, the people who would actually suffer would be the Germans and the Chinese, because their export-driven models only makes sense in terms of the deficits that we run. Think of it as kind of monetarily assured destruction because the plumbing works this way. I just don't see how you can have that crisis of confidence because you've got nowhere else to take your confidence.
Paul Jay
If I understand it correctly, the majority of American government debt is held by Americans, so it's actually really the wealth is still inside the United States. I saw a number, this was done three or four years ago, maybe, but I think it was Brookings Institute, that assets after liabilities in private hands in the United States is something like 98 trillion dollars. So I don't get where this crisis of confidence is going to come any time soon. If I understand it correctly, the majority of American government debt is held by Americans, so it's actually really the wealth is still inside the United States. I saw a number, this was done three or four years ago, maybe, but I think it was Brookings Institute, that assets after liabilities in private hands in the United States is something like 98 trillion dollars. So I don't get where this crisis of confidence is going to come any time soon.
Mark Blyth
Basically, if your economy grows faster (than the rest of the world because you are) the technological leader, your stock markets grows faster than the others. If you're an international investor, you want access to that. (That ends) only if there were actual real deep economic problems (for the US), like, for example, China invents fusion energy and gives it free to the world. That would definitely screw up Texas. But short of that, it's hard to see exactly what would be these game-changers that would result in this. And of course, this is where the Bitcoin people come in. It's all about crypto, and nobody has any faith in the dollar, and all this sort of stuff. Well, I don't see why we have faith in something (like that instead . I think it was just last week. There wasn't much reporting on this, I don't know if you caught this, but there were some twenty-nine-year-old dude ran a crypto exchange. I can't remember where it was. Maybe somewhere like Turkey. But basically he had two billion in crypto and he just walked off with the cash. You don't walk off with the Fed, but you could walk off with a crypto exchange. So until those problems are basically sorted out, the notion that we can all jump into a digital currency, which at the end of the day, to buy anything, you need to turn back into a physical currency because you don't buy your coffee with crypto, we're back to that (old) problem. How do you get out of the dollar? That structural feature is incredibly important.
Paul Jay
So there's some critique of the Biden infrastructure plan and some of the other stimulus, coming from the left, because, one, the left more or less agrees with what you said about inflation, and the critique is that it's actually not big enough, and let me add to that. I'm kind of a little bit surprised, maybe not anymore, but Wall Street on the whole, not Larry Summers and a few others, but most of them actually seem quite in support of the Biden plan. You don't hear a lot of screaming about inflation from Wall Street. Maybe from the Republicans, but not from listening to Bloomberg Radio. So there's some critique of the Biden infrastructure plan and some of the other stimulus, coming from the left, because, one, the left more or less agrees with what you said about inflation, and the critique is that it's actually not big enough, and let me add to that. I'm kind of a little bit surprised, maybe not anymore, but Wall Street on the whole, not Larry Summers and a few others, but most of them actually seem quite in support of the Biden plan. You don't hear a lot of screaming about inflation from Wall Street. Maybe from the Republicans, but not from listening to Bloomberg Radio.
Mark Blyth
You don't even hear a lot of screaming about corporate taxes, which is fascinating, right? You'd think they'd be up in arms about this? I actually spoke to a business audience recently about this, and I kind of did an informal survey and I said, "why are you guys not up in arms about this?" And someone that was on the call said, "well, you know, the Warren Buffet line about you find out who's swimming naked when the tide goes out? What if a lot of firms that we think are great firms are just really good at tax optimization? What if those profits are really just contingent on that? That would be really nice to know this because then we could stop investing in them and invest in better stuff that actually does things." You don't even hear a lot of screaming about corporate taxes, which is fascinating, right? You'd think they'd be up in arms about this? I actually spoke to a business audience recently about this, and I kind of did an informal survey and I said, "why are you guys not up in arms about this?" And someone that was on the call said, "well, you know, the Warren Buffet line about you find out who's swimming naked when the tide goes out? What if a lot of firms that we think are great firms are just really good at tax optimization? What if those profits are really just contingent on that? That would be really nice to know this because then we could stop investing in them and invest in better stuff that actually does things."
Paul Jay
And pick up the pieces of what's left of them for a penny if they have to go down. And pick up the pieces of what's left of them for a penny if they have to go down.
Mark Blyth
Absolutely. Just one thought that we'll circle back, to the left does not think it's big enough, etc. Well, yes, of course they wouldn't, and this is one of those things whereby you kind of have to check yourself. I give the inflation problem a one in ten. But what I'm really dispassionately trying to do is to look at this as just a problem. My political preferences lie on the side of "˜the state should do more.' They lie on the side of "˜I think we should have higher real wages.' They lay on the side that says that "˜populism is something that can be fixed if the bottom 60 percent actually had some kind of growth.' So, therefore, I like programs that do that. Psychologically, I am predisposed therefore to discount inflation. I'm totally discounting that because that's my priors and I'm really deeply trying to check this. In this debate, it's always worth bearing in mind, no one's doing that. The Republicans and the right are absolutely going to be hell bent on inflation, not because they necessarily really believe in (inevitable) inflation, (but) because it's a useful way to stop things happening. And then for the left to turn around and say, well, it isn't big enough, (is because you might as well play double or quits because, you know, you've got Biden and that's the best that's going to get. So there's a way in which when we really are trying to figure out these things, we kind of have to check our partisan preferences because they basically multiply the errors in our thinking, I think.
Paul Jay
Now, earlier you said that one of the main factors why inflation is structurally low now, I don't know if you said exactly those words. Now, earlier you said that one of the main factors why inflation is structurally low now, I don't know if you said exactly those words.
Mark Blyth
I would say that yes. I would say that yes.
Paul Jay
Is the weakness of the unions, the weakness of workers in virtually all countries, but particularly in the U.S., because it matters so much. That organizing of workers is just, they're so unable to raise their wages over decades of essentially wages that barely keep up with inflation and don't grow in any way, certainly not in any relationship to the way productivity has grown. So we as progressives, well, we want workers to get better organized. We want stronger unions. We want higher wages, but we want it without inflation. Is the weakness of the unions, the weakness of workers in virtually all countries, but particularly in the U.S., because it matters so much. That organizing of workers is just, they're so unable to raise their wages over decades of essentially wages that barely keep up with inflation and don't grow in any way, certainly not in any relationship to the way productivity has grown. So we as progressives, well, we want workers to get better organized. We want stronger unions. We want higher wages, but we want it without inflation.
Mark Blyth
And it's a question of how much room you have to do that. I mean, essentially, if you quintuple the money supply, eventually prices will have to rise"¦but that depends upon the velocity of money which has actually been collapsing. So maybe you'd have to do it 10 times. There's interesting research out of London, which I saw a couple of weeks ago, that basically says you really can't correlate inflation with increases in the money supply. It's just not true. It's not the money that's doing it. It's the expectations. That then begs the question, well, who's actually paying attention if we all don't really understand what inflation is? So I tend to think of this as basically a kind of a physical process. It's very easy to understand if your currency goes down by 50 percent and you're heavily dependent on imports. You're import (prices) go up. All the prices in the shops are going to go up. That's a mechanism that I can clearly identify that will generate rising prices. If you have big unions, if you have kind of cartel-like vertically integrated firms that control the national market, if you have COLA contracts. If you have labor able to do what we used to call leapfrogging wage claims against other unions, if this is all institutionally and legally protected, I can see how that generates inflation, that is a mechanism I can point to. That doesn't exist just now. Let's unpack this for a minute. The sort of fundamental theoretical assumption on this is based is some kind of "˜marginal productivity theory of wages.' In a perfectly free market with free exchange, in which we don't live, what would happen is you would hire me up to the point that my marginal product is basically paying off for you, and once it produces zero profits, that's kind of where my wages end. I'm paid up to the point that my marginal product is useful to the firm. This is not really a useful way of thinking about it because if you're the employer and I'm the worker, and I walk up to you and say, hey, my marginal productivity is seven, so how about you pay me seven bucks? You just say, shut up or I'll fire you and get someone else. Now, the way that we used to deal with this was a kind of "˜higher than your outside option,' on wages. The way we used to think about this was "why would you pay somebody ten bucks at McDonald's?" Because then you might actually get them to and flip the burgers because they're outside option is probably seven bucks, and if you pay them seven bucks, they just won't show up. So we used to have to pay workers a bit more. So that was, in a sense, (workers) claiming (a bit of the surplus) from productivity. But now what we've done, Suresh Naidu the economist was talking about this the other day, is we have all these technologies for surveilling workers (instead of paying them more). So now what we can do is take that difference between seven and ten and just pocket it because we can actually pay workers at your outside option, because I monitor everything you do, and if you don't do exactly what I say I'll fire you, and get somebody else for seven bucks. So all the mechanisms for the sharing of sharing productivity, unions, technology, now lies in the hands of employers. It's all going against labor. So (as a result) we have this fiction that somehow when the economy grows, our productivity goes up, and workers share in that. Again, what's the mechanism? Once you take out unions and once you weaponize the ability of employers to extract surplus through mechanisms like technology, franchising, all the rest of it, then it just tilts the playing field so much that we just don't see any increase in wages. (Now) let's bring this back to inflation. Unless you see systematic (and sustained) increases in the real wage that increases costs for firms to the point that they need to push on prices, I just don't see the mechanism for generating inflation. It just isn't there. And we've underpaid the bottom 60 percent of the U.S. labor market so long it would take a hell of a lot of wage inflation to get there, with or without unions.
Paul Jay
Yeah, what's that number, that if the minimum wage was adjusted for inflation and it was what the minimum wage was, what, 30 years ago, the minimum wage would be somewhere between 25 and 30 bucks, and that wasn't causing raging inflation. Yeah, what's that number, that if the minimum wage was adjusted for inflation and it was what the minimum wage was, what, 30 years ago, the minimum wage would be somewhere between 25 and 30 bucks, and that wasn't causing raging inflation.
Mark Blyth
And there is that RAND study from November 2020 that was adeninely entitled, "˜Trends in Income 1979 to 2020,' and they calculated, and I think this is the number, but even if I'm off, the order of magnitude is there, that transfers, because of tax and regulatory changes, from the 90th percentile of the distribution to the 10 percentile, totalled something in the order of $34 trillion. That's how much was vacuumed up and practically nothing trickled down. So when you consider that as a mechanism of extraction, why are worrying about inflation (from wages)? The best story on inflation is actually Charles Goodhart's book that came out last year. We got a long period of low inflation because of global supply chains, and because of demographic trends. It's a combination of global supply chains, Chinese labor, and demographics all coming together to basically push down labor costs, and that's why you get this long period of deflation, which leads to rising profits and zero inflation. A perfectly reasonable way of explaining it. And his point is that, well, that's coming to an end. The demographics are shifting, or shrinking. We're going back to more closed economies. You're going to create this inflation problem again. OK, what's the timeline on that? About 20 years? A few years ago, we were told we had 12 years to fix the climate problem or we're in deep shit. If we have to face the climate problem versus single to double-digit inflation, I'm left wondering what is the real problem here? And there is that RAND study from November 2020 that was adeninely entitled, "˜Trends in Income 1979 to 2020,' and they calculated, and I think this is the number, but even if I'm off, the order of magnitude is there, that transfers, because of tax and regulatory changes, from the 90th percentile of the distribution to the 10 percentile, totalled something in the order of $34 trillion. That's how much was vacuumed up and practically nothing trickled down. So when you consider that as a mechanism of extraction, why are worrying about inflation (from wages)? The best story on inflation is actually Charles Goodhart's book that came out last year. We got a long period of low inflation because of global supply chains, and because of demographic trends. It's a combination of global supply chains, Chinese labor, and demographics all coming together to basically push down labor costs, and that's why you get this long period of deflation, which leads to rising profits and zero inflation. A perfectly reasonable way of explaining it. And his point is that, well, that's coming to an end. The demographics are shifting, or shrinking. We're going back to more closed economies. You're going to create this inflation problem again. OK, what's the timeline on that? About 20 years? A few years ago, we were told we had 12 years to fix the climate problem or we're in deep shit. If we have to face the climate problem versus single to double-digit inflation, I'm left wondering what is the real problem here? The best story on inflation is actually Charles Goodhart's book that came out last year. We got a long period of low inflation because of global supply chains, and because of demographic trends. It's a combination of global supply chains, Chinese labor, and demographics all coming together to basically push down labor costs, and that's why you get this long period of deflation, which leads to rising profits and zero inflation. A perfectly reasonable way of explaining it. And his point is that, well, that's coming to an end. The demographics are shifting, or shrinking. We're going back to more closed economies. You're going to create this inflation problem again. OK, what's the timeline on that? About 20 years? A few years ago, we were told we had 12 years to fix the climate problem or we're in deep shit. If we have to face the climate problem versus single to double-digit inflation, I'm left wondering what is the real problem here? The best story on inflation is actually Charles Goodhart's book that came out last year. We got a long period of low inflation because of global supply chains, and because of demographic trends. It's a combination of global supply chains, Chinese labor, and demographics all coming together to basically push down labor costs, and that's why you get this long period of deflation, which leads to rising profits and zero inflation. A perfectly reasonable way of explaining it. And his point is that, well, that's coming to an end. The demographics are shifting, or shrinking. We're going back to more closed economies. You're going to create this inflation problem again. OK, what's the timeline on that? About 20 years? A few years ago, we were told we had 12 years to fix the climate problem or we're in deep shit. If we have to face the climate problem versus single to double-digit inflation, I'm left wondering what is the real problem here? OK, what's the timeline on that? About 20 years? A few years ago, we were told we had 12 years to fix the climate problem or we're in deep shit. If we have to face the climate problem versus single to double-digit inflation, I'm left wondering what is the real problem here? OK, what's the timeline on that? About 20 years? A few years ago, we were told we had 12 years to fix the climate problem or we're in deep shit. If we have to face the climate problem versus single to double-digit inflation, I'm left wondering what is the real problem here? A few years ago, we were told we had 12 years to fix the climate problem or we're in deep shit. If we have to face the climate problem versus single to double-digit inflation, I'm left wondering what is the real problem here? A few years ago, we were told we had 12 years to fix the climate problem or we're in deep shit. If we have to face the climate problem versus single to double-digit inflation, I'm left wondering what is the real problem here?

cocomaan , , May 1, 2021 at 7:24 am

Great piece. He put to words something I've thought about but couldn't articulate: if wages are stagnant, how could you possibly get broad based inflation?

There is no upward pressure on labor costs anywhere in the economy. The pressures are all downward.

You would need government spending in the order of magnitudes to drive up wages. Or release from a lot of debt, like student loan forgiveness or what have you.

Left in Wisconsin , , May 1, 2021 at 2:06 pm

I'm not sure you need wage growth to get inflation. As Blyth notes, most of the time inflation is a currency or a monetary issue. In the 70s, it was initially an oil thing " and oil flows through a lot of products " and then really went crazy only when Volker started raising interest rates. I don't think there is an episode of "wage-push" inflation in history. (The union cost-of-living clauses don't "cause" inflation, they only adjust for past inflation. If unions can cause wage-push inflation, someone needs to explain how they did this in the late 70s, when they were much less powerful and unemployment was substantially higher, than in the 1950s.) One could argue that expansive fiscal policy might drive inflation but, even then, the mechanism is through price increases, not wage increases. You do need consumption but that can always come from the wealthy and further debt immiseration of the rest of us.

Adam Eran , , May 1, 2021 at 2:51 pm

Blythe is one of those guys who is *almost* correct. For example he declares that expectations drive inflation. What about genuine shortages? The most recent U.S. big inflation stemmed from OPEC withholding oil"a shortage we answered by increasing the price ($1.75/bbl in 1971 -> $42/bbl in 1982). In Germany, the hyperinflation was driven by the French invading the Ruhr, something roughly like shutting down Ohio in the U.S. A shortage of goods resulted. Inflation! In Zimbabwe, the Rhodesian (white) farmers left, and the natives who took over their farms were not producing enough food. A shortage of food, requiring imports, resulted. Inflation!

I guess you could say people in Zimbabwe "expected" food"¦but that's not standard English.

JFYI, Blythe is not a fan of MMT. He calls it "annoying." Yep, that's his well-reasoned argument about how to think about it.

As a *political* economist, he may have a point in saying MMT is a difficult political sell, but otherwise, I'd say the guy is clueless about it.

CH , , May 1, 2021 at 9:13 am

Inflation isn't caused by the amount of money in the economy but by the amount of *spending*.

Like the other commenter, I've wondered this too"if wages have been stagnant for a generation, then how are we going to get inflation? By what mechanism? It seems like almost all of the new money just adds a few zeros to the end of the bank account balances of the already rich (or else disappears offshore).

Still, you just cannot people to understand this because of houses, health care and education. One might even argue that inflated house and education prices are helping keep inflation down. If more and more of our meager income is going to pay for these fixed expenditures, then there's no money left over to pay increased prices for goods and services. So there's no room to increase the prices of those things. As Michael Hudson would point out, it's all sucked away for debt service, meaning a lot of the "money printing" is just subsidizing Wall Street.

But if you pay attention to the internet, for years there have been conspiracy theories all across the political spectrum that we were really in hyperinflation and the government just secretly "cooked the books" and manipulated the statistics to convince us all it wasn't happening. Of course, these conspiracy theories all pointed to the cost of housing, medicine and education as "proof" of this theory (three things which, ironically, didn't go up spectacularly during the Great Inflation of the 1970's). Or else they'd point to gas prices, but that strategy lost it's potency after 2012. Or else they'd complain that their peanut butter was secretly getting smaller, hiding the inflation (shrinkflation is real, or course, but it's not a vast conspiracy to hide price increases from the public).

I'm convinced that this was the ground zero for the kind of anti-government conspiratorial thinking that's taken over our politics today. These ideas was heavy promoted by libertarians like Ron Paul starting in the nineties, helped by tracts like "The Creature from Jekyll Island," which argued that the Fed itself was one big conspiracy. I've seen plenty of people across the political spectrum"including on the far Left"take all of this stuff as gospel.

So if the government is secretly hiding inflation and the Fed itself is a grand conspiracy to convince us that paper is money (rather than "real" money, aka gold), then is it that hard to believe they're manipulating Covid statistics and plotting to control us all by forcing us all to wear masks and get vaccinated? In my view, it all started with inflation paranoia.

Blyth explains why housing inflation isn't really a sign of hyperinflation. But the average "man on the street" just doesn't get it. To Joe Sixpack, not counting some of the things he has to pay for is cheating. So are "substitutions" like ground beef when steak gets too pricey, or a Honda Civic for a Toyota Camry, for example. The complexity of counting inflation is totally lost on them, making them vulnerable to conspiratorial thinking. Since Biden was elected, the ZOMG HyPeRiNfLaTiOn!!&%! articles are ubiquitous.

Does anyone have a good way of explaining this to ordinary (i.e. non-economically literate) people? I'd love to hear it! Thanks.

TomDority , , May 1, 2021 at 9:41 am

"There is no such thing as house price inflation. Inflation is a general rise in the level of all prices. A sustained rise in the level of prices. The fact that house prices in Toronto have gone up is because Canada stopped building public housing in the 1980s and turned it into an asset class and let the 10 percent top earners buy it all and swap it with each other. That is singularly not an inflation."
Maybe I am totally off but, I would say"¦. By your definition, inflation does not exist in the economic terminology as inflation only exists if generally all prices go up and a singularity of soaring house prices and education and healthcare do not constitute an inflation because the number of things inflating do not meet some unknown number of items needed for a general rise in all prices to create an inflation.
What I read you to say is that if Labor prices go up " that could lead to inflation " but if house prices go up (as they have) that is not inflation.
Hypothetically " if labor prices do not go up and the "˜nessesities of living' prices go up (Housing and Med) " would you not have an inflation in the cost of living? " I am convinced that economists and market experts try to claim that the economy and markets are seperate and distinct from humans as a science " and that Political science has nothing to do with what they present. Yet, humans are the only species to have formed the markets and money we all participate and, the only species, therefore, to have an exclusive asset ownership, indifferent to any other species " IE " if you can't pay you can't play and have no say.
I submit that one or a few asset price increases that are combined with labor price stasis(the actual money outlayed for those asset price increased products not moving up) " especially one that is a basic to living (shelter) and not mobile (like money) is inflation " Land prices going up will generally increase the prices of all products created thereon.

Chris , , May 1, 2021 at 9:55 am

Exactly my interpretation.

The "transitory" "food inflation" (but it's not inflation since TVs went down!) is no issue. Just eat 2 years from now or a TV instead.

Objective Ace , , May 1, 2021 at 10:23 am

I think there's two things going on here. There's different inflation indicators, and asset prices are by definition never a part of inflation

The main indicator of CPI has so many different things in it that the inflation of any one item is going to have little effect on it. But you can look up BEA's detailed GDP deflator to see inflation for more specific things like housing expenses (rent) or transportation.

So back to real estate/land: real estate and land are like the stock market. They aren't subject to inflation. They are subject to appreciation. There is somewhat of a feedback effect for sure though: Increased real estate prices can drive up inflation. Rent for sure gets driven up, but also any other good that's built domestically if the owners of capital need to pay more to rent their factories/farms etc.

As noted in the article though, capitalists can simply move their production overseas so there's a limit to how much US land appreciation can filter into inflation. Its definitely happening with rent as housing can't be outsourced. But rent is only one part of overall inflation

jsn , , May 1, 2021 at 10:23 am

The point he was making is that the price change in housing is the result of a policy restructuring of the market: no new public housing and financial deregulation.

The price of food is similarly a response to policy changes: industry consolidation and resulting price setting to juice financial profits.

The point is distinguishing between political forces and market forces. The former is socially/politically determined while the latter has to do with material realities within a more or less static market structure.

This is a distinction essential to making good policy but useless from a cost of living perspective.

Starry Gordon , , May 1, 2021 at 11:26 am

One could prevent crossover for awhile, but eventually certain policies are going to affect certain markets. The policy of giving the rich money drives up asset prices, real estate is a kind of asset, eventually rising real estate costs affect the market the proles enter when they have to buy or rent real estate.

If state institutions tell them there is no inflation, the proles learn that the state institutions lie because they know better from direct experience. Once that gap develops, it's as with personal relationships: when trust is broken, it is very hard to replace. Once belief in state institutions is lost, significant political effects ensue. Often they are rather unpleasant.

jsn , , May 1, 2021 at 1:06 pm

Yes. Discussing complexity in a low trust society makes definitions of terms within a discussion necessary.

The same words are used in different contexts to mean different things making a true statement in one place a lie in another.

Skip Intro , , May 1, 2021 at 2:22 pm

Blyth pointed to the lack of systemic drivers of price increases, and how the traditional ones have disappeared. I think one that he missed, that results in a disconnect with the evidence of price increases across multiple sectors, is the neoliberal infestation. Rent-sucking intermediaries have imposed themselves into growing swaths of the mechanisms of survival, hollowed out productive capacity, and crapified artifacts to the extent that their value is irredeemably reduced. This is a systemic cause for reduced buying power, i.e. inflation, but it is not a result of monetary or fiscal policy, but political and ideological power.

cnchal , , May 1, 2021 at 3:23 pm

> . . . The fact that house prices in Toronto have gone up is because Canada stopped building public housing in the 1980s and turned it into an asset class and let the 10 percent top earners buy it all and swap it with each other.

That is a total load of baloney. The eighties were a time when the Conservative government came up with the foreign investor program and it was people from Hong Kong getting out before the British hand over to China in 1997.

I was there, trying to save for a house and for every buck saved the houses went up twenty. I finally pulled the plug in 89 when someone subdivided a one car garage from their house and sold it for a small fortune. The stories of Hong Kongers coming up to people raking their yard and offering cash well above supposed market rates and the homeowner dropping their rakes and handing over the keys were legendary.

It's still that way except now they come from mainland China, CCP members laundering their loot.

Any government that makes domestic labor compete with foreign richies for housing is mendacious.

When a Canadian drug dealer "saves up" a million to buy a house and the RCMP get wind of it, they lose the house. When a foreigner show up at the border with a million, it's all clean.

Robert Hahl , , May 1, 2021 at 9:49 am

Many people who talk about avoiding inflation are speaking euphemistically about preventing wage growth, and only that; dog whistles, clearly heard by the intended audience. Yet they are rarely confronted directly on this point. Instead we hear that they don't understand what the word inflation means, and Mark seems to be saying these euphamists (eupahmites?) needn't be so concerned because wages will not go up anyway. If so, what we are talking about here is merely helping workers stay afloat without making any fundamental changes. Well, both sides can agree to that as usual. Guess I'm just worn out by this kind of thing.

Basil Pesto , , May 1, 2021 at 10:02 am

this is only related insofar as Mark Blyth is a treat, and I shared it last week, but icymi, an excellent interview with him on the European Super League debacle last week , which really was a huge story.

The Rev Kev , , May 1, 2021 at 10:28 am

The thing that I like about Mark Blyth is how he cuts to the chase and does not waffle. Must be his upbringing in Scotland I would say. The revelation that the US minimum wage should be about $25-30 is just mind-boggling in itself. But in that talk he unintentionally put a value on how much is at stake in making a fairer economic system and it works out to be about $34 trillion. That is how much has been stolen by the upper percentile and why workers have gone from having a job, car, family & annual vacation to crushing student debt, a job at an Amazon fulfillment center and a second job being an Uber driver while living out of car.

Skip Intro , , May 1, 2021 at 1:24 pm

That $25-30 wage was keeping up with inflation , if it were keeping up with productivity it would be, IIRC, nearly twice that. It is interesting to see a dollar figure put on the amount you can reap after a generation or two of growing a middle class, by impoverishing it.

cnchal , , May 1, 2021 at 3:41 pm

This is key.

But now what we've done, Suresh Naidu the economist was talking about this the other day, is we have all these technologies for surveilling workers (instead of paying them more) . So now what we can do is take that difference between seven and ten and just pocket it because we can actually pay workers at your outside option, because I monitor everything you do, and if you don't do exactly what I say I'll fire you, and get somebody else for seven bucks.

Praise be the STEM workers. Without them where would the criminal corporate class be?

Every time I listen to the news (without barfing) the story is, we need moar STEM workers, and I ask myself, what do they do for a living?

howard in nyc , , May 1, 2021 at 10:37 am

Blyth is a bass guitar player! The things you learn about people.

eg , , May 1, 2021 at 11:32 am

I think he also plays guitar and drums, in addition to the bass guitar.

Mikel , , May 1, 2021 at 2:02 pm

If that kind of tidbit excites you:
Before going into economics, Alan Greenspan was a sax and clarinet player who played with the likes of Stan Getz and Quincy Jones.

Go figure"¦.

The Rev Kev , , May 1, 2021 at 7:42 pm

Mark Blyth has a remarkable history as well as, well, I will let you read this article about him-

https://www.jhunewsletter.com/article/2006/10/things-ive-learned-prof-mark-blyth-26651

As a tidbit, he has released five or six albums when younger and is into gourmet Indian cuisine.

HotFlash , , May 1, 2021 at 9:04 pm

And Michael Hudson studied piano and conducting . Do failed musicians gravitate to economics? Perhaps for the same reason as my bank manager, a failed bass player (honors graduate from Classy Cdn U in double bass), they see the handwriting on the wall. He told me his epiphany came when he and his band-mates were trying to make cup-o-noodles with tap water in a room over the pub in Thunder Bay where they were playing.

Tex , , May 1, 2021 at 10:39 am

The mental gymnastics to get to "everything needed to survive costs more but wages have not gone up in decades so therefore its all transitory and inflation does not exist" must be painful. How high does the price for cat food have to get before we stop eating?

freebird , , May 1, 2021 at 10:11 pm

Thank you. Most things I buy or am forced to pay for are rising in price. The economists may enjoy the article, but here in Topeka, it's not flying.

KLG , , May 1, 2021 at 10:49 am

Yes! "The Hamptons are not a defensible position" ranks r