Economics

Whip Inflation Now: As Stupid Then as It Was When It Was Written

rafifarber Economics, The Jewish Libertarian Blog , , ,

Found this on EPJ today. It’s Gerald Ford, blathering about literally nothing, using as many words as possible to convey the least amount of information he can manage.

The solution to inflation is very simple. It is to stop inflating. That means stop printing more money. That’s it. That’s the entire solution, and the only solution. There is nothing else to say. The end.

But here’s Gerald Ford on stopping inflation. Notice that he doesn’t actually ever say anything.

Bob also notes what Alan Greenspan said about the Whip Inflation Now campaign, which basically consisted of summits of politicians all over the country meeting and coming up with asinine suggestions like voluntary price freezes to stop inflation. And a bunch of buttons.

As it turns out, I actually own the book where Greenspan talks about this. He says it was “unbelievable stupidity” and almost had him running back to New York to get out of the White House. He should have run, but he became a central planner anyway and threw out his libertarian beliefs entirely.

I own the book, Greenspan’s memoirs called the Age of Turbulence. My brother suggested I buy it because it was interesting. (He’s not great on economics.) So I found it for $1.50 on Amazon or something and what-the-helled. I could never bring myself to read the trash though or touch the book fearing the evil would burn my skin, but I guess it does have nuggets of Greenspan’s long-ago neglected conscience in it.

Why Donald Trump Will be a Disaster

rafifarber Economics, The Jewish Libertarian Blog , , ,

In the end it doesn’t matter who is president of the US, but Donald Trump is especially scary because he’s even more bloodthirsty than Lincoln or FDR or Truman or Bush, יימח שמם. Economically he’s a lunatic, not any more lunatic than any of the other candidates, but only because he may be insane enough to try to force his policies by sheer might.

As for bloodthirsty, of all the candidates he may be the one to invade China or Russia, or both, because he’s so awesome that it would work just because. He believes China is devaluing its currency to hurt American exports (and what’s America doing?), and on that pretext he wants to “punish” them. He can do this by either restricting trade, in which case Americans will no longer have cheap stuff from China anymore, or by bombing China, which is bat guano crazy.

Here’s a good analogy that illustrates how bloodthirsty Trump is. The classic argument for Truman murdering 200,000 innocent people is that it somehow saved American lives. Truman could have simply stopped the war unilaterally after Hitler was defeated and just leave the Japanese the hell alone. That would have saved American lives without murdering 200,000 more. He did not have to continue conquering Japan.

He could have easily sent a video of the first nuclear bomb test to Horohito and the Japanese government, pulled all the troops out of the Pacific, and said to Japan, “Look, if you ever touch US territory again, we’ll drop one of these on your head.”

For the love of God there were better ways of saving American lives than dropping two nuclear bombs on civilians. It’s so ingrained that this was the justification that nobody questions it. Even if you want to say the first one was justified (which it categorically was not), there was no point in bombing Nagasaki 3 days later for God’s sake.

It took Japan another 3 weeks to surrender unconditionally. In those three weeks, Truman’s generals were urging him to bomb another city with yet another nuke that was almost ready, and Truman said no, that’s enough. He stopped the carnage.

Donald Trump would have destroyed another city and murdered another 100,000 people or more. Because remember, Japan’s surrender was not unconditional. They insisted that Horohito retain the title of “Emperor”. Truman said fine. Trump would have said no, and obliterated another city, just so some guy can’t call himself “Emperor”.

He’d say some snappy bloodthirsty line that makes the masses cheer like, “God help me if I let him call himself Emperor. I’ll nuke his country until he’s the last Jap standing! I’ll make him pay for bombing Pearl Harbor! Then we’ll see who he’s Emperor of!” and everyone would cheer and he’d keep murdering away. (Pearl Harbor, by the way, was a military installation of warships. It is therefore a legitimate target if you’re trying to retaliate against an oil embargo enforced by those ships. Yes, Japan committed lots of war crimes against the Chinese in particular, but Pearl Harbor was not one of them.)

Why? Because Trump is so arrogant that his bloodthirsty psychopathy knows no bounds. Had he been German in the 1930’s, he would have been an enthusiastic supporter of the Final Solution, instead of just a guy following orders. That is his personality.

Economically, he came out with a statement a few days ago on how he would not allow Ford to ship any factories outside the US. He said he would force Ford to move the factory back to the US if elected. And why are they moving it to Mexico in the first place? Because labor is cheaper there, and they need to keep costs down. If they keep the factory in the US, who pays the difference? Ford?

Ford is already $123 billion in debt. And unlike the US Government, Ford cannot inflate its way out.

The difference will be paid by the taxpayer in the next round of bailouts signed into law by President Trump.

Goods need to be made where they can be made cheapest, so we can have those goods for cheap. Those who would have been manufacturing cars here should do something else.

The Fed is about to Be Squeezed into a Corner

rafifarber Economics, The Jewish Libertarian Blog ,

At the end of my recent column for CalvinAyre, I wrote the following:

US securities have a possible day of reckoning coming in around 3 weeks. Take a look at the latest money stock measures release, and you’ll notice that in the final column of table 2, the three figures above $12T occupy the first 3 rows. In 3 weeks, those numbers will be off the quarterly table, and the 13 week average two columns over will plummet if we don’t decisively break through $12T consistently in the next 3 weeks. Assuming weekly money supply stays constant by July 30, money supply will have actually shrunk on a quarterly basis.

Keep in mind that this is not a magic number game and there’s nothing inherently special about a declining quarterly money supply average that necessitates a crash. It just greatly increases the chance of one happening. And the last time money supply shrunk on a quarterly basis was the weekend of September 25, 2008. It has never done that since.

The last three weeks have been interesting though. Demand deposits have increased by $231B, but savings deposits have decreased by $292B, a net $61B loss in money supply. That tells me that savings are being moved to checking accounts for spending purposes. Does that movement hint at signs for the next 3 weeks? Possibly. Increases in demand deposits usually correspond with decreases in savings deposits. An increase in both in the same week is very rare, and that is what we’d need to top $12.1T. It doesn’t look like we’re going to make it. Not in three weeks anyway.

If it does happen in the next three weeks and it triggers a selloff, the Fed may have ironically lost its window of opportunity to raise the Federal Funds Rate as it has been threatening to do for months.

There’s a machlokes (argument) here between Bob Wenzel on one hand, and Ron Paul and Peter Schiff on the other. Paul and Schiff believe the Fed will never raise interest rates ahead of the market forcing them to do so, and QE4 or 5 is coming. Wenzel believes that the Fed will raise interest rates and QE is off the table.

I have sided with Wenzel, until now. In 3 weeks, we could be headed for a market crash. We’ll find out in a week or two. If money supply doesn’t jump quickly by Thursday when the next report comes out, it looks like a real possibility. And the response of the Fed to a crash will be more QE.

Why the current state of Negotiations over Greece proves anarcho capitalism

rafifarber Economics, The Jewish Libertarian Blog

Alexis Tripras is broken. Over the past 48 hours, Eurozone creditors have demanded more and more cuts from his government in order to stay in the Eurozone. Given that Tsipras is an outright and full-blown communist, this total and outright capitulation really shows how political theory is drenched in total and complete bullshit.

If printing money is great, then why can’t Greece print Drachma? Because even the total communists know that hyperinflation will follow, because there are no goods and services in Greece for those drachmas to chase. It all comes from productive Eurozone countries. Greece is a welfare state. Most of its GDP is welfare and it produces nothing but tourism.

When reality hits and there is no more to inflate or steal outright, all the disgusting illusion breaks down. Germany is demanding cuts far more drastic than anything Greece has rejected over the past 5 months, and Tsipras is desperate for any agreement whatsoever, as long as he stays in the Euro. Because he knows that if he exits, thousands will starve and die.

Debt is not a game. This is not a math game of numbers. If it is too high, people will die. It becomes all too real. Greece is just the beginning. When the illusion is sliced in half in the US and the $18 trillion debt pile comes crashing down in ashes, that will be the end of the West as we know it, forever. It will be globally catastrophic.

Syriza has lost. Ignominiously, completely, and totally. They will agree to almost anything. The only question now is Germany. They finance all this. Will they push Greece to the brink of the almost, making their acquiescence so completely humiliating in light of the Communist and Unionist policies they stand for that they will simply resign, or does Germany have a smidgen of faith left that the Communists in charge of Greece can understand that wealth is indeed scarce on planet Earth, and that economics is, indeed and reality, the study of scarcity and choice, no matter how your “electorate” votes?

In a world where money is debt and debt is garbage

rafifarber Economics, The Jewish Libertarian Blog , ,

Here’s a shout out to Bill Still, a strange guy (who isn’t strange these days?) I debated once when some monetary reform group headed by Crackpot Israeli Academic Chicagoan Friedmanite Monetary Totalitarian Socialists invited him to Israel to speak with Moshe Feiglin, and he had me take up the liberty side.

Still is obsessed with an accidental feature of the monetary system, a problematic one but an accidental one nonetheless – that money comes into existence through debt. This is true. It means that the creators of money buy bonds with the money they create, and whoever they give the new money to (always government) always owes the money back to the Fed.

Every dollar in existence is owed back to the Fed because it represents a government bond that was purchased. The government will get the money to repay the bond by taxing us. Therefore, every dollar that exists, that you have, will be paid back to the Fed at interest.

This sounds bad, and it is. But it is not a necessary part of the current fiat monetary system. Why not? Because the Fed does not have to buy bonds with the money it creates. It could buy anything it wants. It could buy my old dilapidated desk chair, or the desk I’m working on right now that I found abandoned on the street before Pesach.

If it bought real assets instead of debt, then no one would have to pay the money back. It could circulate indefinitely. It wouldn’t represent debt. It would just be value stolen from taxpayers that was used to buy my desk.

The real evil is not that money is debt. That is just an added layer of evil on top of the main sickness, which is that printed money – ANY printed money that must be used by law to pay taxes, whether it is printed initially to buy debt or a desk I found in the garbage, is theft of value from the previous holders of that money.

So Bill Still wants to change printed money from money used to buy debt, to money that is just injected into the economy used to buy nothing. Just distributed. For free. And he thinks this would solve everything. The guy is nuts, and his followers are obsessed with a purely accidental feature of the monetary system.

But my shout out to Mr. Still is that insofar as money is debt these days, however accidentally, and debt is garbage, then money is garbage. When the debt loses all nominal value because it simply cannot be repaid anymore, then the money goes with it.

And debt is losing value fast now in Europe.

IRONY of Ironies: Greece may not even have the money to hold a referendum!

rafifarber Economics, The Jewish Libertarian Blog , ,

Zerohedge is reporting that FAZ, a German news agency, is reporting that the referendum may be moot simply because the Greeks have no money to logistically carry it out.

I can’t imagine that if the referendum actually happens, the Greek people will turn it down and say no to the deal. They’ll say yes. Losing access to their savings outright is too frightening for anyone. And I cannot imagine that if they say yes, the Troika will say, “Nope, sorry, you’re a week too late,” and cut the country loose. They’ll give them the money eventually and Grexit will be avoided.

BUT. If the referendum doesn’t actually happen in the first place because the Greek government is so bankrupt that it can’t even hold a referendum, then Grexit is entirely possible, and this is the end.

And it will be their fault too, because they have waited so long to actually ask their people.

So let’s sharpen it. If the referendum happens, collapse will be averted. If it doesn’t because they are so completely bankrupt, then this is the endgame.

Bond Attack on Italy and Spain Begins

rafifarber Economics, The Jewish Libertarian Blog , ,
Spanish bond yields jump
Spanish bond yields jump

Yields are falling in the stronger economies and surging in the weaker ones. Bloomberg:

Spain’s 10-year bond yield jumped 14 basis points to 2.25 percent, set for the biggest increase since June 15. The yield on Italian 10-year bonds climbed 14 basis points to 2.29 percent, having earlier surged as much as 57 basis points.

“The market is seeking haven assets as some investors perceive Grexit risk as being higher now,” said Vincent Chaigneau, London-based global head of rates and foreign-exchange strategy at Societe Generale SA. “That said, we expect to see some stabilization soon. If the Greeks vote to accept the creditors’ deal, then talks can resume and I think most of them still want to remain in the euro zone.”

The Greeks will vote next week to stay in the Eurozone. If that quells bond markets, it may avert a collapse for a while. If it doesn’t, then this is the end game. Unless China keeps crashing and bringing down other markets with it anyway. China is down another 3.5% today.

Has Someone on Huffington Post been Reading TJL?

rafifarber Economics, The Jewish Libertarian Blog

This blog on the Huffington Post was published on the same day my blog was published on Times of Israel, and then republished here after the editors there took it down. It supports a free market in organs.

Why We Need a Market for Organs

By Sabrina Zurga

Over 123,000 people in the U.S. need organ transplants. But in 2014, only 28,953 transplants were performed. Every day, 21 people die because they cannot secure an organ for transplant– and this number is on the rise. Even with countless celebrity-backed public service announcements urging the public to become organ donors, the supply of organs is nowhere close to matching the demand. If we continue to rely on donations alone, there is little we can do to help patients in need of organ transplants.

A burgeoning black market for organs fills this gap between supply and demand. Patients from more affluent countries like the US, Canada and the UK travel to countries like China and India to buy organs illegally. In 2011, the FBI discovered the first US based organ ring in Brooklyn, New York. Levy Izhak Rosenbaum, an Israeli citizen, confessed to arranging illegal kidney transplants and pocketing approximately $410,000 in brokerage fees. He was sentenced to two and a half years in prison. None of the organ recipients were prosecuted…

I can only hope I helped inspire that piece. Thanks Sabrina, in either case.

 

 

The China Bubble is Bursting, Halleluyah!

rafifarber Economics, The Jewish Libertarian Blog ,

I’ve been writing about this for a year and a half. It is finally happening. Chinese stocks are down another 7% today.

The last time I covered this was June 1 at TheStreet in an article titled Chinese Chinese Stocks Headed For a Bust:

Despite huge gains today (June 1), the Chinese markets may have topped and are prime for a bust.

In short, the People’s Bank of China seems to be tightening the reins on the money supply, which could lead to continued slowing in the Chinese economy.

Last Thursday, Bloomberg reported that the People’s Bank of China sold $16 billion worth of short term debt to select financial institutions as a way of draining excess liquidity. Central bank jargon calls these “repurchase agreements” but what it basically means is the PBOC is giving debt contracts to banks, and the banks give the PBOC money in return, which is then taken out of the circulating money supply. This shrinks the money supply overall.

When governments shrink money supply after years of inflationary expansion, busts must happen by logical necessity.

There’s still time to get in on the short side here. I own 2017 puts on FXI. I think I have to put that legally or the government will fine me for saying things. And that I am not an investment adviser and I’m not making any recommendations. Or something like that. Am I yotzeh?