Thomas Sowell Explains Why Sub-Saharan Africa Remained Underdeveloped

Think about this in terms of what trade barriers, sanctions and other barriers do to the advance of civilization (2 minutes and 29 seconds).

 

 -RW

Why Are So Many Corporate Executives Acting Woke?

Any thinking person looking over the current social, political and corporate landscape is sure to be asking: Why are so many top corporate executives acting woke?

Stephen R. Soukup, in a new book, The Dictatorship of Woke Capital: How Political Correctness Captured Big Business, has taken a major step toward answering the question. 

The book provides an overview of the problem from its historical-philosophical foundations to current day major woke players

From the historical-philosophical perspective, Soukup provides an excellent overview of all the major influencers from Antonio Gramsci and György Lukács to the Frankfurt School and the media-savvy Herbert Marcuse.

He also provides an excellent outline of the role played by Richard Ely, especially his influence on Woodrow Wilson.

He then explains how concern for stakeholders took over concern for shareholders.

And then he moves in on current-day players who are at the forefront of the woke movement. 

He especially singles out Larry Fink of Black Rock. 

Black Rock has $8.7 trillion under management. That is power. Fink being a true believer of wokeism, has enormous sway over corporate heads with his position as CEO of Black Rock which holds massive stock positions in most of the major publicly traded companies in the United States.

Soukup states, "Larry Fink is a religious fanatic; a believer in the pure fundamental practice of his faith... [That is]Fink aligned himself with and placed himself at the forefront of the 'ESG' movement, an investment trend focused on Environmental, Social and Governance matters in assessing a company's long-term value. He placed himself in the position to be crowned king not just of the financial services world but also of 'woke capital,' the top down, anti-democratic means by which some of the most powerful and best-known men and women in American business are endeavoring to change capitalism, the securities markets in the fundamental relationship between the state and its citizens – – and save the world." Fink is playing a major role in all this.

On top of that Soukup explains, Black Rock has been named the administrator and manager of significant portions of the emergency COVID-19 debt-buying program of the Federal Reserve which allows the Fed to lend directly to corporations. That is power.

Sokup also discusses in his book the roles of State Street, Calpers and Bridgewater Associates as major woke influencers

On the individual investor front, he points to, among others, the woke activism of the widow of Steve Jobs. 

Lurene Powell Jobs (worth $20 billion) is a member of the Climate Leadership Council and has bought a majority stake in The Atlantic and Axios. She has been a major money funder of lefty voter registration programs.

It goes on. The book is encyclopedic in coverage and narrative in style concerning the major woke influencers and how they get their fangs into corporate America and elsewhere.

If you want to understand the woke influences, this is the book for you.

The only weakness in the book is the ending where Soukup attempts to discuss how we get out of the current woke mess. Like the rest of us, he hasn't figured that program out yet, but to understand what is going on in terms of woke in corporate leadership and why, there is no better resource than The Dictatorship of Woke Capital: How Political Correctness Captured Big Business.

 -RW

BREAKING: Biden Wants to Double the Top Capital Gains Tax Rate

Okay, it is clear, Joe Biden hates capital and essentially holds a Marxist view on the "struggle" between capital and labor.

According to Bloomberg, the president will propose almost doubling the capital gains tax rate for wealthy individuals to 39.6%, which, coupled with an existing surtax on investment income, means that federal tax rates for investors could be as high as 43.4%.

The plan would boost the capital gains rate to 39.6% for those earning $1 million or more, an increase from the current base rate of 20%.

A 3.8% tax on investment income that funds Obamacare would be kept in place, pushing the tax rate on returns on financial assets higher than the top rate on wage and salary income.

The proposal could reverse a long-standing provision of the tax code that taxes returns on investment lower than on labor. Biden campaigned on equalizing the capital gains and income tax rates for wealthy individuals, saying it’s unfair that many of them pay lower rates than middle-class workers.

Well, you could equalize rates by lowering taxes on middle-class workers to capital gains but Joe is all about the big state and he has never ever thought about taking actions to shrink government even when he had a full grasp of his faculties.

We know now the Marxist part of his brain is still functioning--if you can call a Marxist brain ever properly functioning.

For $1 million earners in high-tax states, rates on capital gains could be above 50%.

For New Yorkers, the combined state and federal capital gains rate could be as high as 52.22%. For Californians, it could be 56.7%.

 -RW

Yanis Varoufakis On Why We Are in a Post-Capitalist Era

Yanis Varoufakis

What a mess.

Yanis Varoufakis, former Greek Minister of Finance, the co-founder of DiEM25, elected MP and leader of MeRA25 (DiEM25's Electoral Wing in Greece), and Professor of Economics at the University of Athens, delivered a virtual keynote speech on post-capitalism before DiEM25.

Varoufakis told the 6,210 viewers that we are beyond the free-market perspective of "Ludwig Hayek (sic)."

His speech did provide a lot of factual insight as to what has been going on in global economies since 2008 but his failure was astonishing on the theoretical level.

He seemed to have no theoretical understanding of how the financial crisis of 2008 was just one in a long series of crises created by central bank money printing (To understand how the 2008 crisis was one in a series, see my book: The Fed Flunks).

It was clear he has no understanding of business cycle theory.

His correct factual observations on expanding crony-capitalism failed to make the important link between the growth of crony-capitalism and the growth of central power. That is, he failed to reach the important conclusion that if you shrink (end?) the state, you eliminate crony capitalism.

Instead, he called the current period a post-capitalist period and offered a solution, the next step, an economy where every worker owns one share in a corporation and has one vote. Thus completely failing to recognize the extremely important role of insightful individuals, known as entrepreneurs, in an economy. 

To say nothing about his confusion about the role of capital and laborers.

To make it clear, we are not in a post-capitalist period. We are in a typical period of strong central bank money manipulations and expanding government power that results in great corruption.

Varoufakis sees the current corruption but is terribly weak in economic theory and thus misses the solution from the current situation. It is as though he has never read Ludwig von Mises and Friedrich Hayek.

 -RW

After the COVID-19 Lockdowns: The Next Globalist Power Grab Move

Do you think things will return to normal after the COVID-19 lockdowns are over? Forget about it.

The financial rape of the average man is going to reach an entirely new level.

The global elitists are setting up for the next move to capture as much of global wealth as they can for themselves. 

A major tell came in the recently released undercover tapes released by Project Veritas, where a Veritas undercover reporter talked to a high-ranking CNN official.

While most of the focus was on the discussion of how CNN distorted the news about Donald Trump and also COVID-19, the key point of alarm should have been the discussion of what the next distortion campaign is going to be all about.

With a Veritas secret recording device rolling, CNN Director Charlie Chester explained how the spin occurs:

Any reporter on CNN -- what they're actually doing is they're telling the person what to say… It's always like leading them in a direction before they even open their mouths. The only people that we [CNN] will let on the air, for the most part, are people that have a proven track record of taking the bait.

Chester also described how CNN has used the COVID-19 panic to keep viewers hooked on the screen.

“It's fear. Fear really drives numbers – [TV ratings],” Chester said. “Fear is the thing that keeps you tuned in.” 

He added, “COVID? Gangbusters with ratings, right? Which is why we [CNN] constantly have the [COVID] death toll on the side.” 

Chester said Jeff Zucker – the network’s president –- would call the CNN newsroom during live TV segments and order the staff to keep COVID death tolls on the screen to capture viewers’ attention.

But COVID-19 fatigue has set in and Chester revealed the new plan:

Chester: “I think there's a COVID fatigue. So, like whenever a new story comes up, they're [CNN’s] going to latch onto it. They've already announced in our office that once the public is -- will be open to it -- we're going to start focusing mainly on climate.” 

Chester: “It's going to be our [CNN’s] focus. Like our focus was to get Trump out of office, right? Without saying it, that's what it was, right? So, our next thing is going to be climate change awareness.”

Veritas Journalist: “What does that look like?”

Chester: “I don't know. I'm not sure. I have a feeling that it’s going to be like, constantly showing videos of decline in ice, and weather warming up, and like the effects it’s having on the economy--”

Veritas Journalist: “Who decides that?”

Chester: “Head of the network.”

Veritas Journalist: “Who is that? Is that [Jeff] Zucker?”

Chester: “Zucker, yeah. I imagine that he's got his council and they've all like, discussed, like where they think--”

Veritas Journalist: “So, that's like the next--”

Chester: “Pandemic-like story that we’ll beat to death, but that one's got longevity. You know what I mean? Like there's a definitive ending to the pandemic. It'll taper off to a point that it's not a problem anymore. Climate change can take years, so they'll [CNN will] probably be able to milk that quite a bit.”

Veritas Journalist: “So, climate change overload.”

Chester: “Be prepared, it's coming. Climate change is going to be the next COVID thing for CNN.”

Hmm, so is there any other proof the elitists are thinking climate change as the next big move?

Secretary of State Tony Blinken delivered an address on climate change at the Chesapeake Bay in Maryland on Monday in which he admitted that some American workers “would be hit hard” by the Biden administration’s policies, reports Breitbart.

Blinken said that the U.S. needed to lead the global fight against climate change.

“If America fails to lead the world on the climate crisis, we won’t have much of a world left,” Blinken said.

Blinken also claimed that “weather events are becoming more extreme,” another claim that scientists have criticized, noted Breitbart.

And here is the indication that it is all one big scam.

Much of Blinken’s speech focused on domestic policy — for example, stressing the need for “good, paying jobs, and the opportunity to join a union” as part of climate change policy. The opportunity to join a union a climate change policy?

But Blinken also said Biden’s policy would cause job losses for some Americans.

“We will be mindful that for all the opportunities offered by the unavoidable shift to clean energy, not every American worker will win out in the near term. Some livelihoods and communities that relied on old industries will be hit hard.”

He then said: “We won’t leave those Americans behind. We’ll provide our fellow Americans with pathways to new, sustainable livelihoods, and support as they navigate this transition.”

Bottom line: It is all about a move toward a more centrally planned economy with the elitists and power freaks in charge.

Alexandria Ocasio-Cortez is all on board:

Listen to this:

The intersecting crises which we face demand a Green New Deal to create jobs, deliver justice, and save our planet. Thank you @AOC, the @sunrisemvmt, and all of our partners organizing in Congress, online, and in the streets for a just and livable future. pic.twitter.com/vQkapTodDR

— Ed Markey (@EdMarkey) April 21, 2021

And yesterday, Treasury Secretary Janet Yellen spoke virtually at the Glasgow Finance Alliance for Net Zero event. Forty-three banks from 23 countries (with assets of $28.5 trillion) form the Net-Zero Banking Alliance

Yellen said that companies setting ambitious carbon reduction targets are already helping financial institutions manage climate-related risks and helping support a transition to a low-carbon economy.

"They also help financial institutions manage the risks and opportunities associated with the transition, while sending a powerful signal to global financial markets," she continued.

And she made clear during the speech how big the Biden administration is thinking.

To bring the U.S. economy in line with international goals of eliminating carbon emissions will “require bold and urgent action - nothing less than transforming important sectors of the global economy, especially when it comes to how we generate power and move people and goods,” she said.

“We are committed to directing public investment to areas that can facilitate our transition to net-zero and strengthen the functioning of our financial system so that workers, investors, and businesses can seize the opportunity that tackling climate change presents,” Yellen added.

Biden is scheduled to convene today a summit of 40 world leaders on climate change, where he is expected to unveil a target to cut emissions by roughly 50% by 2030 compared with 2005 levels. 

The fearmongering about the climate is going to be over the top, Chester at CNN got that right.

“This is an immense, immense task. We need to work together closely ... in order to deal with what has become an essential risk to our planet,” Yellen said during a Q&A session after a speech before the Institute of International Finance.

The costs will be “enormous,” Yellen said.

And she is going to play rough.

Yellen said the Financial Stability Oversight Council would be the principal agency managing and assessing the financial risks associated with climate change, and if necessary, taking appropriate action to mitigate them.

The global Financial Stability Board’s Task Force on Climate-Related Disclosure had devised a framework that was proving useful, and she she said she hoped the U.S. Securities and Exchange Commission would base its own efforts on that work.

The scam is on. When government officials talk about "climate change," you should think the raping and pillaging of the economy by corporate elitists who are close to power or who often control power.

This is damn scary:

The Administration is taking a whole-of-government approach to aggressively tackle climate change.
My goal, at Treasury, is to support this work with a whole-of-economy approach so workers, investors, and businesses can seize the opportunity that tackling climate change presents.

— Secretary Janet Yellen (@SecYellen) April 22, 2021

And they are definitely working on making a global controlled effort.

From Yellen's IIF speech:

 I am pleased that Treasury is co-chairing the newly relaunched G20 Sustainable Finance Working Group.  G20 finance ministries and central banks will together consider how to improve existing international initiatives and approaches to sustainability disclosures, building on the work of the TCFD.  The Working Group will also coordinate approaches to identifying investments as climate-aligned or sustainable.  This is an effort to counter another potential market friction—the rise of different policies and approaches across the world creates the potential for inconsistencies that lead to market fragmentation, distorting markets or impeding the flow of capital.  The G20 brings together the largest world economies and emitters, and I look forward to working with my counterparts to make progress on these critical issues...

I know some have argued that this is a reason for us to move slowly.  The thinking goes that because we know so little about climate risk, let’s be tentative in our actions—or even do nothing at all.  This is completely wrong in my view.  This is a major problem and it needs to be tackled now. 

 -RW

How to Pronounce the Last Name of John Maynard Keynes

John Maynard Keynes

This is a special pop-up edition of "This Week in Economics with Robert Wenzel."

If you know the correct pronunciation of the last name of John Maynard Keynes, you can skip this pop-up edition. But if you are not very familiar with economics but talk about economic policy, it is time you get the pronunciation of the name "Keynes" correct.

 

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

George Floyd and the "Counterfeit" $20 Bill

George Floyd

Why did the police even respond to the passing of a "counterfeit" $20 bill call? 

In reference to my post at Target Liberty, An Open Letter to American Patrolmen in the Wake of the Guilty Murder Verdict Against Patrolman Derek Chauvin, Murray Sabrin emails:

Bob:

Great Open Letter post to the cops, especially the observation about the cops being called because Floyd passed a bogus $20 bill in a store.  Isn't this a federal crime?  Local police should not have been called, which set into motion the events leading to his death.  Attached is my 1976 NYT letter about counterfeiting and the Federal Reserve.  I will send a letter to remind the Times' readers that the Fed and ultimately the Congress are responsible for Floyd's death.

Stay well,

Murray  

Murray Sabrin, Ph.D.
Emeritus Professor of Finance
Sabrin Center for Free Enterprise (founder)
Ramapo College of New Jersey 
www.ramapo.edu/sabrincenter/
Why The Federal Reserve Sucks: 
It Causes Inflation, Recessions, Bubbles and Enriches the One Percent 

 

 -RW

Coincidence?

 Lumber prices are soaring.

The physical market for wooden framing — 2x4 lengths of Western Spruce-pine-fir — has risen 30 per cent since the start of the year to $1,205.

This follows an increase in the money supply over the last 12-months of 25%.

Wait until you see what happens to consumer prices over the next few months.

For money flow reasons, most new money printed by the Fed enters the capital goods areas first, then the non-durable consumer goods sector.

 -RW

One Key Biden Policy Will Reduce Household Income By $1,650, New Study Finds

By Brad Polumbo

President Biden is touting his new $2.3 trillion+ spending plan as a boon to workers, even dubbing it the “American Jobs Act.” But there’s reason to believe that a key provision in Biden’s plan would result in a sizable drop in income for millions of American families.

The president wants to pay for his multi-trillion-dollar spending proposal in part by raising the corporate tax rate from 21 percent to 28 percent. A new study from the conservative-leaning Heritage Foundation finds that this tax increase on “Big Business” would ultimately be borne in large part by workers. Heritage macroeconomist Parker Sheppard projects that the economy would shrink to the tune of $1,650 lost per household, with the median worker seeing an $840 decline in their annual income.

One mistake many people often make is assuming that whoever is formally assigned a tax is also who ultimately bears the costs. But this isn’t necessarily the case, because people change their behavior as a result of tax increases—raising prices, decreasing investment, changing consumption habits, and so on. 
“It is the operation of the market,” wrote Austrian economist Ludwig von Mises, “and not the government collecting the taxes, that decides upon whom the incidence of the taxes falls and how they affect production and consumption.”

“Who pays the tax?” economist Murray Rothbard asked. “It would seem that the answer is clear-cut, since the government knows on whom it levies a tax. The problem, however, is not who pays the tax immediately, but who pays it in the long run.”
In the case of corporate taxation, an overwhelming body of research confirms this theory and shows over the run, the costs are mostly borne by workers via reduced wages and partially by consumers via higher prices.

Why?

Because corporate tax increases make investment more expensive, and investment in productivity improvements is key to wage growth. As Mises lucidly explained, “More investment of capital means: to give to the laborer more effi­cient tools.”

When this investment allows workers to become more productive, their wages will soon rise. 
“As the employer consequently will be in a position to obtain from the consumers more for what the em­ployee has produced in one hour of work, he is able—and, by the competition of other employers, forced—to pay a higher price for the man’s work,” Mises concludes. 

In the case of corporate tax hikes, the opposite occurs: investment is reduced and wages fall as a result.
“Workers with newer or improved equipment, or places to work, are more productive and can command a higher salary,” Sheppard explains. “If the corporate tax causes firms to reduce their investment and operate with less capital, they will pay lower wages as a result.”

The Heritage study finds that Biden’s proposed corporate tax hike will significantly decrease investment into new business equipment and structures, which leads to lower wages over time. 
Here's the bottom line.

Promising to pay for his massive spending schemes by raising taxes on “Big Business” may serve President Biden well politically, but the laws of economics are unmoved by public opinion polling. There’s no getting around the fact that a key aspect of the White House’s grand plan to put Americans back to work is projected to boomerang back in workers’ faces.

Brad Polumbo (@Brad_Polumbo) is a libertarian-conservative journalist and Policy Correspondent at the Foundation for Economic Education

The above originally appeared at FEE.org

Need $$$? Contact: DH5yaiegoZN36fDVciNyRueRGvGLRmr7L

By David Stockman

 If you are a bit short on change, we’d suggest you contact  

DH5yaiegoZN36fDVciNyRueRGvGLRmr7L. It seems that he/she/they/it recently stumbled upon a $15 billion fortune after deciding to get in on the joke about two years ago.  

The joke, of course, was a cryptocurrency called Dogecoin, which was created by two  wiseacres named Jackson Palmer and Billy Markus as a parody of a viral meme  involving a Shiba Inu dog. After several years in the crypto-wilderness, Dogecoin was  discovered by the reigning financial genius of our day, Elon Musk, and the rest was,  well, madness.  

The latter took to tweeting about it, beginning with a single word ‘Doge’ back in  February. The SpaceX CEO then vowed to put Dogecoin on the Moon, sharing a bizarre  image captioned: “Doge Barking at the Moon.”  

In another tweet, Musk claimed, “Dogecoin is the people’s crypto”, while in still another  he added: “No highs, no lows, only Doge.”  

When queried about why he loves doge so much he replied: “I love dogs and  memes”, adding that he purchased “the future currency for Earth” Dogecoin for his  nine-month-old son.  

Well, you get the picture.  

After all, what would you expect from someone who is worth $170 billion, but  whose company Electric Vehicle Ponzi has never made a single dime of profits aside  from regulatory credits dictated by the state? 

Still, given that Dogecoin has risen by 500% in the past week, Zero Hedge felt  compelled to call out the farce:  

There is little we can add here that David Einhorn didn’t already say yesterday,  but it’s probably worth noting for those keeping track of where in the bubble  we are now, that in the magical world of dogecoin – a cryptocurrency that  was specifically created as a joke spoof on the crypto concept and which has  been promoted aggressive by such luminaries as Elon Musk – there is now a  holder residing at address “DH5yaieqoZN36fDVciNyRueRGvGLR3mr7L” who  owns 36,711,935,369.11 dogecoins or whatever the plural is, and whose holdings  – which started accumulating back in February 2019 – after the latest surge in  dogecoin which has sent the joke crypto up 150% in the past 24 hours and 5x in  the past week…… are worth just under $15 billion.

  

Of course, ZH’s above reference to the intrepid value investor and proprietor of  Greenlight Capital, David Einhorn, was with respect to his already famous investor  letter released yesterday. The latter surveyed the bubble madness now rampant  throughout the entire warp and woof of the financial system and in addition to touching  upon Dogecoin made mention of a penny stock called Hometown International  (HWIN).  

Strange things happen to all kinds of stocks. Last year, on one day in June, the  stocks of about a  dozen bankrupt companies roughly doubled on enormous volume.  Recently, the Wall Street Journal reported a boom in penny stocks. Someone  pointed us to Hometown International(HWIN), which owns a single deli in  rural New Jersey. 

The deli had $21,772 in sales in 2019 and only $13,976 in 2020, as it was closed  due to COVID from March to September. HWIN reached a market cap of $113  million on February 8. The largest shareholder is also the CEO/CFO/Treasurer  and a Director, who also happens to be the wrestling coach of the high school  next door to the deli. The pastrami must be amazing! 

For want of doubt, here is what a $113 million business looks like in a world where  JayPo and his mad money-printers keep talking “economy”, but are actually inflating  the bejesus out of anything that can be traded. 

  

Alas, just when you are ready to completely despair, along comes an analyst we never  heard of named David Kimberley. The latter works for a publication called Freetrade,  which we also never heard of, and told Express.co.uk:  

“People are buying the cryptocurrency, not because they think it has any  meaningful value, but because they hope others will pile in, push the price up  and then they can sell off and make a quick buck. 

“But when everyone is doing this, the bubble eventually has to burst and you’re  going to be left short-changed if you don’t get out in time.” 

Well, yes.  

But here’s the thing. How can you expect the kids to not go bat-shit crazy in the middle  of a biblical mania when the so-called adults in the room have lost all contract with  reality, as well. We are referring to another shareholder letter of recent instant  notoriety, this one from the very head of the nation’s most profitable bank, Jamie  Dimon of JPMorgan.  

For our money, you could not possibly dense-pack more delusions into one sentence  even if you tried for a month of Sundays.  

“I have little doubt that with excess savings, new stimulus, huge deficit  spending, more QE, a new potential infrastructure bill, a successful vaccine, and  euphoria around the end of the pandemic, the U.S. economy will likely boom. 

This boom could easily run into 2023 because all the spending could extend well  into 2023.” 

For crying out loud. If bankers are supposed to know about anything, it’s the basic truth  of double-entry bookkeeping. Does this preening corporate peacock think that all those  deficits, all that spending, all that money-printing, all that free stuff temporarily lodged  in checking accounts at JPMorgan et. al. has happened with no off-setting cost?  

For instance, couldn’t an 8th grader tell that there is something very fishy about the  chart below?  

Last year total government spending in the US (including state and local government)  grew by the staggering sum of $1.825 trillion. That happens to be nearly 5X the gain  that occurred during the depths of the Great Recession in 2008, and towers above all  else that has come before.  

The question might present, therefore, as to what happens when government spending  returns to a semblance of normalcy, how long will it take and how are these trillions  being financed in the interim?  

Beyond that, if it has generated the kind of welcome and awesome economic Boom  implied by Dimon’s shareholder letter, why has it taken the politicians so long to  discover the purported magic of this kind of government spending bacchanalia?  

YoY Change In Total Government Spending (billions), 1980-2020

Presumably, Dimon still recalls that there are no free lunches. So why would he not be  waving the red flag, as have sober bankers for decades upon decades before, about the  long run costs and pain of the eruption of deficit finance that made the above spending  surge possible?  

For want of doubt, here’s the annual change in the public debt (market value basis) since  1980. At last year’s staggering $5.8 trillion gain, we are truly in the nosebleed section  of history. That figure is actually 23X larger than the $250 billion gain back in 1982,  when the outbreak of the Reagan deficits scared the whits out of not just your editor, but  practically all of Capitol Hill on both sides of the aisle and absolutely the entirety of the  banking fraternity on Wall Street. 

Of course, back then they knew that deficits have to be financed and were under no  illusions that Tall Paul Volcker was prepared to do it the easy way at the Fed’s printing  press. That is to say, the Jamie Dimon equivalents of the day knew it would cause havoc  in the bond pits if financed honestly out of the nation’s savings pool, and to a man (there  were then no women or theys at the top of the banking fraternity) were resolutely  opposed to the Reagan deficits.  

YoY Change In The Gross Public Debt (billions), 1980-2020

Nowadays, of course, the Fed has cranked up its printing press to a red hot level of  RPMs, which folly did temporarily delay the due bill. Then again, last year’s $3.2 trillion  gain in the Fed’s balance sheet exceeded its entire accumulation during the full century  between it creation in 1913 and 2013.  

Needless to say, printing money at $3 trillion a gulp is a financial monstrosity that no  Wall Street banker would have embraced, as did Dimon, even a few years ago.  

Explosive Growth of the Fed’s Balance Sheet, 1980-2021

Among other things, worldwide central bank money printing like that shown above has  generated a stampede into risk assets, especially equities on the grounds that central  banks will not let prices fall materially or for any sustained period of time.  

According to B of A calculations, in fact, the inflow to global stocks during the past 5  months ($569 billion) exceeds the inflows during the prior 12 years combined($452  billion)!  

Is it any wonder that money loosing machines like Tesla are being valued at 1200X its  phony net income or that hole-in-the-wall deli’s in New Jersey command a market cap  of $113 million? 

If you want any evidence that its been the raw power of cash stampeding into the Fed’s  casino that’s fueling today’s mania—-big caps and small caps alike—look no farther than  the Covid home arrest winner, $241 billion market cap Netflix.  

In a word, finally after being handed the greatest captive audience in human history,  Netflix managed to generate $1.9 billion of operating free cash flow during 2020. That  came after $10.7 billion of cumulative negative free cash flow between 2012  and 2019.  

Still, notwithstanding the Covid bonus point bulge in the 2020 figure, Netflix is still  being valued at 125X free cash flow.  

And that’s a “boom” alright. The kind that shatters everything around it when it ends.  Netflix Free Cash Flow Versus Market Cap, 2014-2021

Nor is the absurd over-valuation of the likes of Tesla and Netflix the extent of the  damage. It is becoming more evident by the day that Silicon Valley has gone Woke  Socialist and makes no never mind about the financial consequences because it is sitting  on the world’s most phantasmagorical collection of inflated stocks.  

Ever since Twitter kicked-off from its platform its very best customer by a country-mile,  it has been evident that business-impairing leftist virtue-signalling is cost-free to Silicon  Valley.  

For instance, when the Donald got banned permanently on January 9, 2021, the  company’s stock was valued at $41 billion. From time immemorial, of course, the loss of  a monster customer has always taken a heavy toll on a company’s stock, but no more.  

Twitter is now valued at $56 billion. No sweat!  

But that’s barely the half of it. The more CEO and founder Jack Dorsey has styled  himself as some present day Rasputin, the more Twitter’s stock has risen,  notwithstanding its abysmal financial results.  

Back in June 2015, for instance, the company’s market cap weighed in at $11.5 billion on  the strength of LTM free cash flow which posted at $293 million. Accordingly, its free  cash flow multiple back then was a not shabby 39X.  

For the LTM period ending December 2020, its free cash flow figure posted at, well,  $119 million, representing at 59% drop over the five year period. So at today’s market 

cap of the aforementioned $56 billion, its free cash flow multiple weighs in at an  absurd 471X! 

Twitter Free Cash Flow Versus Market Cap, 2015-2021 

So, yes, Jack Dorsey’s $5 billion fortune has remained fully intact and has actually  grown by leaps and bounds, even as he has gone full retard wokester.  

But his latest gambit in that regard should be a clarion call. The Fed’s absurd money pumping is not only creating lunatic bubbles ranging from Netflix to Gamestop,  Coinbase and the $113 million New Jersey deli, but it’s also fostering political monsters  like the one pictured below.  

It turns out that Dorsey and his Twitter censorship brigade have permanently banned  Veritas, the intrepid exposers of establishment hypocrisy and malign endeavors. Their  sin in the case was exposing the truth that CNN has deliberately used blatant scare  tactics to generate COVID-Hysteria.  

After Veritas sent in a comely “nurse” to patrol the bar scene where New York media  types hang-out and got a CNN producer to spill the beans on a (hidden) camera about  how running and hyping the Chyron of Covid Deaths stimulates record viewership, you  would think Twitter should ban CNN.  

No, Rasputin banned James O’Keefe for exposing the truth. 

With this kind of mainstream media truthless-telling, it is no wonder that we had this  showdown on Capitol Hill last week between Congressman Jim Jordan and Dr. Fauci.  

“You can say I’m ranting,” Jordan went on, “I am actually asking the questions  that the citizens I get the privilege of representing —and my name actually goes  on a ballot. I don’t think your name has ever been on a ballot.”“My name goes  on a ballot,” he added. “The citizens I represent want to know when they are  going to get their liberty back. 

Fauci’s reply tells you all you need to know. Liberty was once protected by the U.S.  Constitution. Now thanks to the censorship and propaganda of the CNNs and Jack  Dorsey’s, it but a nuisance in the way of the state’s “public health thing”. 

“I don’t look at this as a liberty thing, Congressman Jordan. I look at this as a  public health thing.” 

Finally, we have a heads-up from out peripatetic friend, Lee Adler, who always follows  the cash. If you are wondering why the 10-year UST rate has stabilized in recent days  around the 1.60% yield level, then just consider the perverse mechanics of what Jamie  Dimon was celebrating in the quote above.  

Over the last several quarters the US Treasury has issued massive amounts of bills and  notes, which have been readily digested in the bond pits because the Fed had its big Fat  Thumb on the supply/demand scales and scarfed up most of the issues, which would  have otherwise found a home at drastically, even catastrophically, higher yields.  

However, as it does periodically, the US Treasury has temporarily paid down a  considerable amount of paper as part of its balance sheet management operations.  Temporarily, therefore, great gobs of cash has been released to the primary dealers to  load up on new inventory, thereby momentarily taking the edge off from UST yields.  

However, as Lee explains below that’s just a double shuffle. At length, the debts must be  paid.  

The US Treasury is again going hog wild with T-bill paydowns, announcing  $62 billion over the past week alone. There’s actually a net paydown in April,  after new coupon issuance. Extra slosh for the party. 

And, of course, this week is the Fed’s regular monthly MBS QE purchase  settlement week April 14-21. They’re pumping $93 billion into Primary Dealer  accounts this week. The dealers have been up against it in managing their bond  inventories, and the Fed and Treasury are, as always, doing whatever it takes  to rescue them. 

So all the explanations that you are seeing in the media about why Treasuries  are rallying are just so much BS from the clueless mob. It’s about money plain  and simple. The Fed and US Treasury are doing a great job of manipulating  prices in the short run by pumping a combined $185 billion into the markets,  most of it directly into the accounts of Primary Dealers in a very short period. 

We were prepared for and expecting this liquidity to boost the markets this  week as usual in the third week of the month, but the additional T-bill paydowns  over the rest of the month are a new wrinkle that will add even more liquidity  than we expected. The end of month period may not be as dry of funding as  usual. 

This too shall pass, and we know that the end is nigh!

Yes, it is. The lemmings are in their full-on dash to the sea mode, impelled, apparently,  by the hypnotic sound of the crashing waves down below.  

David Stockman was Director of the Office of Management and Budget under President Ronald Reagan. After leaving the White House, Stockman had a 20-year career on Wall Street.

The above originally appeared at David Stockman's Contra Corner.