Monday, May 17, 2021

Socialism By Any Other Name


 
By David Stockman

You really cannot curse Donald Trump enough for his horrid appointments to the Fed.  The latter is now and has been for a good while the implacable enemy of sound money,  fiscal rectitude, capitalist prosperity, small government and personal liberty.  

In fact, the Donald’s last appointment, who was confirmed in the nick of time in  December 2020, just averred that 4.0% inflation would be just fine by him:  

Among Fed speakers overnight, Governor Christopher Waller signaled that  rates won’t rise until policymakers either see inflation above target for a long  time or excessively high inflation. He also said he would only get worried  if inflation rose above 4%, defining the Fed’s first real “red-line.” 

Well, what would you expect from this paint-by-the-numbers academic?  

After graduating from Bemidji State University (whatever that is) and getting a PhD in  economics from Washington State, he spent his entire career professoring, writing  papers in behalf of easier money and more Fed power, and eventually heading the  “research” department at the St. Louis Fed, where he teamed up with its lunatic dovish  president, James Bullard.  

Read the rest here.

The Government of Lebanon Has Entered Default, Argentina Could Be Next


Dr. Benn Steil, Senior Fellow and Director of International Economics at the Council on Foreign Relations, emails:

The CFR Sovereign Risk Tracker is updated.

 

Lebanon has entered default, making it the second country on the Tracker in default (along with Venezuela). Serial-defaulter Argentina has jumped from an Index rating of 7 (out of 10)  in 2019 to 10 today, which implies a greater than 50% chance of default.  Tunisia’s Tracker Index score has jumped the most since 2019, from 4 to 8, the main cause being its poor economic performance during the pandemic.

 

Sincerely,

Benn

 -RW

World Economic Forum Cancels August Meeting


A small break against Klaus Schwab the central planning globalists.

 The World Economic Forum has confirmed reports it is canceling its meeting, which was supposed to take place in August in Singapore, and moving it to the first half of 2022.

"Regretfully, the tragic circumstances unfolding across geographies, an uncertain travel outlook, differing speeds of vaccination rollout and the uncertainty around new variants [of COVID-19] combine to make it impossible to realize a global meeting with business, government and civil society leaders from all over the world at the scale which was planned," the organization said.

The WEF is yet to confirm the exact date and location of the rescheduled encounter.

 -RW

The World Economy Is Running Low on Everything


From Bloomberg:

A year ago, as the pandemic ravaged country after country and economies shuddered, consumers were the ones panic-buying. Today, on the rebound, it’s companies furiously trying to stock up. 

Mattress producers to car manufacturers to aluminum foil makers are buying more material than they need to survive the breakneck speed at which demand for goods is recovering and assuage that primal fear of running out. The frenzy is pushing supply chains to the brink of seizing up. Shortages, transportation bottlenecks and price spikes are nearing the highest levels in recent memory, raising concern that a supercharged global economy will stoke inflation.

Copper, iron ore and steel. Corn, coffee, wheat and soybeans. Lumber, semiconductors, plastic and cardboard for packaging. The world is seemingly low on all of it. “You name it, and we have a shortage on it,” Tom Linebarger, chairman and chief executive of engine and generator manufacturer Cummins Inc., said on a call this month. Clients are “trying to get everything they can because they see high demand,” Jennifer Rumsey, the Columbus, Indiana-based company’s president, said. “They think it’s going to extend into next year.”

The difference between the big crunch of 2021 and past supply disruptions is the sheer magnitude of it, and the fact that there is — as far as anyone can tell — no clear end in sight.

Who could have possibly anticipated this?

In the EPJ Daily Alert in March of last year I wrote:

 My view continues to be that once the panic is over, there will be a manufacturing boom both here in the US and China as businesses chuck "just in time" inventory operations and resort to "stock up enough inventory to keep me operational through next flu season."

This will be a bonanza for  container ship operators whose stocks have been absolutely destroyed by the COVID-19 panic.

On June 3, 2020, I wrote:

 We haven't even seen the price inflation that I expect yet so the earliest we could see price controls is sometime in 2021...

The price inflation rate will very likely hit 5% annualized, but it could very well be much higher, maybe 10% plus. 

This gives us plenty of time to prepare. 

 On October 19, 2020, I wrote:

 The material shortage is an indication of likely strong price pressures developing for the materials. The climb in materials prices will not be small...Price inflation is currently under 2.0%. It will start to climb in a month or two but it will take months before it is considered a serious problem.

 -RW

Elizabeth Warren Signals She is Part of the Anti-IP Crowd

Elizabeth Warren

Massachusetts Senator Elizabeth Warren, who hates anything that hints of free markets and private property, has signaled she is a member in good standing of the anti-IP crowd.

The Wall Street Journal reports:

Progressives are promoting President Biden’s waiver of U.S. Covid vaccine patents as necessary to save lives. So full marks for candor to Sen. Elizabeth Warren, who last week explained the real goal: set a precedent that erodes all pharmaceutical intellectual property protections in the U.S. and around the world.

“Special [IP] protections for drug companies are an even bigger issue than COVID-19 alone,” the Massachusetts Senator said at a Senate Finance hearing with U.S. Trade Rep Katherine Tai on Wednesday. 

This should come as no surprise. As Warren has demonstrated, time after time, she is first and always a  central planner. Denying individuals and corporations the ability to protect their inventions in their own fashion is simply a central planning scheme to take control of intellectual creations away from the creators and hand them over to the state to make the rules.

There is no surprise that Warren would be in favor of this.

The libertarian position on intellectual property was best presented by Murray Rothbard, who argued that the structure of copyright law was the best legal structure for intellectual property and should also be used for creations that are now protected by patents:

Violation of (common law) copyright is an equivalent violation of 
contract and theft of property. … our theory of property rights 
includes the inviolability of contractual copyright.
 Ethics of Liberty, p. 123
… violation of copyright should indeed be illegal.
 Libertarian Forum v. 2, p. 112
On the free market, there would therefore be no such thing 
as patents. There would, however, be copyright for any inventor or 
creator who made use of it, and this copyright would be perpetual, 
not limited to a certain number of years.
 Man, Economy, and State with Power and Market, p. 74

 -RW

Sunday, May 16, 2021

Bitcoin Dives on Tweets From Elon Musk

Well, bitcoin, that great "store of value," is diving again because Tesla CEO Elon Musk just implied in a Twitter exchange that Tesla may have sold or may sell the rest of its bitcoin holdings.

A Twitter user who goes by @CryptoWhale said, “Bitcoiners are going to slap themselves next quarter when they find out Tesla dumped the rest of their holdings. With the amount of hate @elonmusk is getting, I wouldn’t blame him…”

Musk replied, “Indeed.”

Whether Musk sold, or not, is not the point. The point is that anything that can experince significant selling because of a tweet by a very strange character is not a store of value.

 -RW

Gold and Silver Manipulation, Bitcoin, Deficits and Much More

In this edition of "This Week in Economics with Robert Wenzel," I answer listener questions on a wide variety of topics on economic issues of the day.

   

The podcast version is here

It is also available on your favorite podcast platform. If your platform does not carry the podcast just enter this feed address to start following "This Week in Economics": https://feed.podbean.com/wenzel/feed.xml

 -RW

Why Aren't Interest Rates And Gold Going Up?

Keynes relaxing and considering potential beauty contest choices of others.

 James Freeman, who always asks intriguing questions, writes at The Wall Street Journal:

This column has been surprised that America’s asset managers have not reacted more aggressively in response to the inflation threat.

This is a common perspective that I believe is similar to the John Maynard Keynes' "beauty contest" view of investing.

From Economicae: an illustrated encyclopaedia of economics:

The Keynesian beauty contest is the view that much of investment is driven by
expectations about what other investors think, rather than expectations about the
fundamental profitability of a particular investment. John Maynard Keynes, the most
influential economist of the 20th century, believed that investment is volatile because
investment is determined by the herd-like “animal spirits” of investors. Keynes
observed that investment strategies resembled a contest in a London newspaper of
his day that featured pictures of a hundred or so young women. The winner of the
contest was the newspaper reader who submitted a list of the top five women that
most clearly matched the consensus of all other contest entries. A naïve strategy for
an entrant would be to rely on his or her own concepts of beauty to establish
rankings. Consequently, each contest entrant would try to second guess the other
entrants’

In an EPJ Daily Alert this week, I responded to a subscriber comment with regard to the strong CPI number and the fact that silver declined at the same time:

Biggest inflation print since 1981.....

And silver is down lol

 RW response:

On a long-term basis, markets react to fundamental supply and demand. In past ALERTs, I outlined how slowed jewelry purchases because of the lockdowns and slowed central bank gold purchases caused gold price weakness in the second half of last year. Both these sectors are buying again (except for some slowdown in India because of COVID). But this type buying is the important long-term buying. With the Fed and most other central banks printing money, people who are regular gold and silver buyers have more money to buy gold and silver (In addition, more buying will occur for silver because of its use in the green movement). The buying because a CPI or PPI print is higher comes in a later phase when new buyers are attracted to gold (probably not until $2,500 per ounce plus). The buying now, the heavy lifting, will be done by regular buyers (including jewelry buyers and central banks). 

As technical resistance levels are broken, more traders will be attracted into the market and down the road new crowds but we are not there yet.

This is from my perspective, the last buying phase opportunity for us The money is in the system, it is trading the way you would expect it to trade and prices will punch through resistance---and then the crowd gets in but not now. We still have a small, in terms of time. buying period but it is not going to last very long.

The idea that it is crowds that always drive markets (and just react to short-term news) is just not the case. In most cases, it is fundamental buying and selling factors that drive markets. Put another way, beauty contests are not run every day.

The beauty contests are not now occurring in the bond market (interest rates) and the gold (and silver) markets.

At present, interest rates on bonds remain low because of the massive amount of Federal Reserve bond buying. At some point that will flip as it becomes extremely profitable for investors to borrow money at low rates to profit from the ongoing price inflation. NOTE: This is about investors being able to arbitrage price inflation against borrowing rates. It is not about bond traders "thinking" rates will go higher (nor is it about "bond vigilantes"). It is real-world borrowers with enormous thirst for real-world borrowing. The crowd follower trading does not occur until much later.

The same thing goes for gold (and silver), there is a lot of money around so the traditional buyers of gold have much more money available to them to do gold buying. It is only in later stages when gold is already on the run that the crowds get in,

Traditionally, crowds get in only after the momentum is hot and heavy for some time. They then react to the headline news.

But the non-headline accumulation phase, from traditional buyers, comes first.

 -RW

Saturday, May 15, 2021

Amazon Has Banned My Anti-MMT Book

See updates below.
\

It appears that Amazon has banned my book, "Problems With Modern Monetary Theory: A Comment on Stephanie Kelton's 'The Deficit Myth'"

For a while, it was ranked as the number one best seller in several Amazon categories.

It was selling very well. Apparently too well for Bezos and the "Deficits don't matter" crowd.

You will recall that when the book first came out, I had trouble with it because the link for the book at Amazon somehow ended up "Fast pink hot girls."

Find out what they don't want you to read. It is available by ordering through your local bookstore or online through Lulu.


UPDATE:

It is back up after a call by my distributor to Amazon.

You can order it here.

UPDATE 2:





In addition to my book, "Problems With Modern Monetary Theory: A Comment on Stephanie Kelton's 'The Deficit Myth'" being blocked/banned/delisted. (It is back up after my distributor called Amazon).



It appears that a large number of broadly classified "right-wing" books beyond my book have been blocked/banned/delisted byAmazon. It is not clear if this is temporary, a rogue employee or what.:

• The Unbroken Thread
• Live Not by Lies
• Why Liberalism Failed
• The Virtue of Nationalism
• The Politics of Virtue
• Hillbilly Elegy
• Under Siege
• Chaos Monkeys
• Coming Apart
Eudaimonia, Esq.
@TheAristoteIian


@TheAristoteIian
Also blocked: Integralism: A Manual of Political Philosophy
Eudaimonia, Esq.
@TheAristoteIian

Also blocked: the English version of The Decadent Society by Ross Douthat
Eudaimonia, Esq.
@TheAristoteIian
·

Also blocked: Natural Law and Human Rights by Pierre Manent
Eudaimonia, Esq.
@TheAristoteIian

Also blocked: Mere Christianity by CS Lewis
Eudaimonia, Esq.
@TheAristoteIian
·

Also blocked: God or Nothing by Cardinal Sarah
Eudaimonia, Esq.
@TheAristoteIian
·

Also blocked: Heart of the World, Center of the Church by David Schindler
Eudaimonia, Esq.
@TheAristoteIian
·

Also blocked: To Change the Church by Ross Douthat 
@DouthatNYT
Eudaimonia, Esq.
@TheAristoteIian

Also blocked: The Tragedy of Religious Freedom by Marc O. DeGirolami (
@MarcODeGirolami
Eudaimonia, Esq.
@TheAristoteIian
·

Also blocked: What it Means to be Human by 
@cartersnead
Eudaimonia, Esq.
@TheAristoteIian
·

Also blocked: 12 Rules for Life by 
@jordanbpeterson
 Jordan Peterson
Eudaimonia, Esq.
@TheAristoteIian
·

Also blocked: The Age of Entitlement by Christopher Caldwell
Eudaimonia, Esq.
@TheAristoteIian

Also blocked: Amazon’s listings for Critics of the Enlightenment by Christopher O. Blum
Eudaimonia, Esq.
@TheAristoteIian
·

Also blocked: Revolt Against the Modern World by Julius Evola
Jackson Boczar
@boczarj7
·

- Maps of Meaning 
- The Right Side of History 

All gone or censored from searches 

 -RW

The IRS Is Coming for Crypto Investors Who Haven’t Paid Their Taxes


Two new IRS efforts to find crypto tax evaders stand out: In April, a federal judge in Boston approved an IRS summons to the payments company known as Circle and its affiliates, including Poloniex, to turn over customer records to the agency. And in early May, a federal judge in San Francisco approved another IRS summons for records to the crypto exchange known as Kraken. In both cases, the turnover applies to customers who had more than $20,000 in transactions in any year from 2016 through 2020, reports The Wall Street Journal.

“With these summonses and other actions, the IRS is mounting a full-court press to show taxpayers how seriously it takes cryptocurrency compliance,” says Don Fort, a former chief of IRS criminal investigation now with Kostelanetz & Fink. “Taxpayers should take it seriously too.”

To justify the new searches of Kraken and Circle, the IRS divulged some results of its Coinbase campaign. In court filings, the agency said it has received more than 1,000 amended tax returns and collected $13 million from crypto holders with more than $20,000 of transactions, plus another $12 million from other crypto notices, and audits are ongoing.

Some Coinbase customers have entered the IRS’s Voluntary Disclosure program for taxpayers with criminal liability. This program usually lets participants out of prosecution but imposes large penalties.

In the case of Kraken, it may have to turn over phone numbers and email addresses as well as the customer’s name, date of birth, taxpayer ID number, and physical address. 

Have I mentioned that cryptocurrencies are extremely trackable?

 -RW

(ht Christopher Barcelo)

Larry Summers: The Price Inflation is Even Worse Than I Warned About

Larry Summers

 As detailed here at EPJ in the past, former Treasury Secretary Larry Summers has been wisely warning about accelerating price inflation.

U.S. consumer prices rose in April by the most since 2009.

Now that the April inflation numbers are in he is doubling down on his warning.

“I was on the worried side about inflation and it’s all moved much faster, much sooner than I had predicted,” Summers said in an interview with David Westin on Bloomberg Television’s “Wall Street Week.” “That has to make us nervous going forward.”

Summers said the 0.9% jump in the core measure in April left room for temporary price increases and “for us still to have an extremely serious problem of inflation rising to the 4% range. I don’t think you can dismiss these figures.”

“The Fed seems to be planning for a very benign scenario that we certainly can’t count on,” he said.

Summers is one of the few establishment Keynesian economists who gets what is developing.

“The better part of wisdom is that there are slippery slopes, and once you start a process of accelerating inflation there are precious few examples of where inflation has been brought back down without very substantial economic disruption and without enormous disruption to financial markets,” he said.

Oh yeah, he gets it but Federal Reserve Board members appear clueless as to what is developing.


 -RW

Friday, May 14, 2021

Janet Yellen Speaks to the Pontifical Academy of Sciences About the Need For Global Corporate Tax Coordination!

Pope Francis

This has to be a first for a United States Treasury Secretary. 

During a virtual speech this morning, Treasury Secretary Janet Yellen told the Pontifical Academy of Sciences and the Pontifical Academy of Social Sciences at a Dreaming of a Better Restart event:

Let me close with a few words about...the race to the bottom on corporate tax rates. Our challenge is to make sure governments have stable tax systems that raise sufficient revenue to invest in essential public goods and respond to crises, and that all citizens fairly share the burden of financing government.

We are working with G20 nations to agree to a global minimum corporate tax rate that can stop the race to the bottom. Together we can use a global minimum tax to make sure the global economy thrives based on a more level playing field in the taxation of multinational corporations, and spurs innovation, growth, and prosperity.

There was no word on whether the Pope was taking notes. 

 -RW

Council of Economic Advisers Goes Woke and Calls for Massive New Government Control and Spending

CEA Chairwoman Cecilia Rouse

The Biden Administration Council of Economic Advisers has issued a Brief attempting to justify more government spending, a greater role for the government in the economy, mixed with woke positioning.

Some key snippets from the horrific paper (COUNCIL OF ECONOMIC ADVISERS ISSUE BRIEFMAY 2021):

The opening pargarapgh: 

For the past four decades, the view that lower taxes, less spending, and fewer regulations would generate stronger economic growth has exerted substantial influence on U.S. public policy. Over this period, the United States has underinvested in public goods such as infrastructure and innovation, and gains from growth have accrued disproportionately to the top of the income and wealth distribution. Long-standing racial, ethnic, and gender disparities persist. In addition, while historic progress has been made in expanding health insurance, more remains to be done to provide adequate protection against economic risk. Indicators of deprivation, such as child poverty, are too high, and declines in overall life expectancy in some years prior to the pandemic, accompanied by increased disparities, are cause for concern.

And the start of the call for more government involvement in the economy: 

The economic theory underlying President Biden’s American Jobs Plan and American Families Plan is different. These proposed policies reflect the empirical evidence that a strong economy depends on a solid foundation of public investment, and that investments in workers, families, and communities can pay off for decades to come...
In order to function and deliver strong and shared economic gains, markets need an engaged, effective public sector. From policies that spur innovation and facilitate labor supply to those that provide investments in children and protections against economic insecurity, the public sector has an important role to play in supporting the economy.

There is a call for government supported and managed technology development: 

Innovation—and the new technologies that result from it—drives growth, and the public
sector plays a pivotal role in that process...
Public support for research and development is essential to achieving an appropriate level of innovation...
There are also times when the public sector has to consider the composition of what is produced or how it is produced. 

 Then the Brief goes woke.

An economy where economic gains are not shared is one that is not delivering on its full promise to those who do the work of producing economic output...
Investments in children are a powerful force for equity...
Investing in children will thus not only deliver improved outcomes and faster growth, it will also advance equity by narrowing racial disparities and reducing child poverty.
The public sector plays a crucial role in ensuring that communities are not left behind...
New forms of protection against economic insecurity are necessary to ensure that
unavoidable risks do not become avoidable economic pain. Research finds that social
insurance programs not only directly reduce hardship and financial risk, they also moderate
economic downturns, improve health, and save lives. Investments in expanded social insurance would build on a long tradition of American social insurance programs, including unemployment insurance; Social Security; and Medicare, Medicaid, and the Affordable Care Act.

In short, the Brief from start to finish is justifying a move away from freedom and individual initiative and in the direction of the idea that the state must act as the director of economic activities and outcomes. It is far along the way to a vision that is fundamentally anti-American and in the direction of planned societies that have delivered such horrors as the National Socialist German Workers' Party, the Soviet Union, and Mao's China.

It is a Brief that shows naive thinking that Hayek warned about when he stated that "The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design."

It appears that none of the Biden economists at the CEA understand any of this. They appear to truly believe they can design the economy.

Further, they fail to understand another crucial point that Hayek made. This one in Chapter 10 of his book The Road to Serfdom. In the chapter, Hayek makes clear that the planned society results in the worst getting on top.

When you create government power centers, be it for new technologies, family support, education or whatever, the most evil will do what it takes to get close to such power and twist the power for their own benefit.

This is the horrifying direction that the CEA is justifying in this Brief.

It is a recipe for a collapsing standard of living coupled with more state authoritarianism. 

 -RW

Thursday, May 13, 2021

MORE INFLATION: Producer Price Index Soars

 

The just-released latest Producer Price Index shows price inflation at the producer lever for the month of April came in at 0.6% that is an annualized rate 7.2%.

This is a developing story, return to this post for updates.

UPDATE 1

On a 12-month basis, the PPI came in at 6.2%.

UPDATE 2

Fresh fruits and melons climbed 9.3% in the month. Beef and veal climbed 13.4% and pork climbed 10.2%. Airline passenger service climbed 7.2%. Passenger car rental climbed 17.0%.

 -RW

Chick-fil-A Limits Sauces per Order Due toTight Supplies


Chick-fil-A is limiting the number of sauces it gives out per order due to a limited amount of sauces in stock.

The fast-food chain said Wednesday that industry-wide supply chain issues had caused a “shortage of select items” that the chain serves, including sauces.

To meet customer demand, Chick-fil-A is limiting customers to one dipping sauce per item ordered at many of its 2,600 locations across the U.S.

“We are actively working to make adjustments to solve this issue quickly and apologize to our guests for any inconvenience,” the company said in a statement.

What we have here is a reflection of the current volatile and shifting economy.

The lockdowns have broken many supply chains and it will take some time for them to get back up and running---especially with the trouble businesses are having filling open jobs. The jobs are open despite high unemployment because current employment payouts provide incentives for workers to stay out of work. Some are getting more from unemployment payouts than what they could earn at a job.

Beyond this, you have a shifting economy as the lockdowns ease across the country.

It is all caused by government edicts from officials who don't have a clue, from local officials to state officials all the way up to the White House.

And it doesn't stop there, Federal Reserve Bank officials are madly printing money as price inflation roars.

 -RW

Wednesday, May 12, 2021

Tesla Suspends Bitcoin Payments

Elon Musk announced through Twitter that Tesla has suspended the use of Bitcoin for its vehicle purchases.

According to the statement, the company was "concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions," and while cryptocurrencies were a "good idea on many levels" and have a "promising future" they cannot come at the expense of the environment.

The statement also added that the company won't be selling any Bitcoin.

Musk just figured this out?

I doubt it. 

 Musk plays one very strange game. 

 Bitcoin is down 11.58% on the news.





 -RW

Biden Press Secretary: Government Prepared for 'Months or Quarters' of Higher Inflation

The Biden administration and the Federal Reserve are going to let price inflation rip through the economy.

White House Press Secretary Jen Psaki stated during a briefing today that the administration is prepared for "transitory" inflation growth where there will be "months or quarters" of price pressures.

"We knew just as the economy shrunk and shut down that as it's turning back on, there would be some of these impacts, but we are constantly tracking [...] and we knew that a lot of the investments that we've proposed were long needed even before the last several months," Psaki added in justifying continued mad government spending.

She also pointed out that data shows supply impacts on price increases, such as in the motor vehicle industry, struggling through a chip shortage. Additionally, the travel sector is seeing a growth in prices as people get vaccinated and are more open to vacations.

Note well: What she is putting forward is the impact on prices because of base price inflation and bottleneck-caused price inflation but what she is not mentioning is the elephant in the room, the mad Federal Reserve money printing.

I discussed all this in a recent podcast:

In an early April edition of "This Week in Economics with Robert Wenzel," I discussed the price inflation that is about to hit and the various factors driving it and what would have to happen for it to get really out of control.

The podcast version is here. And it is also available on your favorite podcast platform.

If your platform does not carry the podcast just enter this feed address to start following "This Week in Economics": https://feed.podbean.com/wenzel/feed.xml

-RW