Half-baked economics with your coffee?
Got up super early this morning and turned out a nice loaf of bread from the oven at 5:03 AM. Yeah… wheat belly, weight and all that aside…there are times when a couple of “breakfast sandwiches” is just about the best thing on Earth. Fresh-baked bread. An egg scrambled on each. Colby-Monterey shredded (a tablespoon, or so). Two of strips of bacon each. Large glass of milk, the vitamin stack, a yogurt for dessert…OMG! Ready for the day!
Inflation: “Yeast of Money”
As I turned the loaf out, a light went on.
“You know, Yeast is like Interest and Inflation. When you are baking bread, let’s say you start with a one pound loaf. Leave in a well-buttered pan overnight for the final rise. In the morning, the bread has tripled in size and is ready for baking.
Inflation works a lot like that. When you invest young in Life, it seems a modest amount. But when you look – 5 or 10-years down the road – it looks like a huge amount of money. Even triples, like the loaf, if you give it long enough.
Interest rates have about the same effect as room temperature when baking. When it’s cold, the bread seemingly never wants to rise. It’s like when interest rates are low. But, when the room is warm (as in just right) the bread rises and so do asset prices.
If the room gets too hot, like 110-or higher, it may kill the yeast and the bread will be ruined. Ditto with economics. If the interest rate “temperature” gets too high, what happens? Things collapse.
The Fed as “Dumb Bakers”
The Big Swindle in Americanized (discontinuous) economics, is that the Fed hasn’t figured out that stable rates work in the long term. They yammer on endlessly about the “dual mandate” – economic growth and employment – with loads of pontification on “effective lower bounds” while in fact, there are none. Stand bye for a “teachable moment” yet to come.
A solid baker knows the best rising temps will be around what’s comfortable for humans. A shade cool and the bread is more flavorful as the yeast develops slower on its high gluten roll. Warm and you might get a lighter loaf, and certainly faster. Especially with sourdough, though, the “tooth” may not be perfect.
Long ago, a genius-level colleague explained that the American economy is really like that: Take rates too low and you sink into “moral hazard.” Everyone and their grandma will demand a bailout. Which is going on right now.
If rates go too high, people won’t go into debt because the gap between current income and future obligations gets to be too much.
This colleague proposed that the “Best” interest rate for America would be somewhere in the 5 to 9 percent range. Likely around 7 to 7-1/2%.
The Fed – dumb bakers that they are – have been enlisted by a Deep State, cabal of Banksters, international financial swindlers, and two crooked political parties – to adjust the “wrong parts of the recipe.”
Like a balancing act gone bad, the half-baked Fed is now perpetuating malinvestment, fearing a “fallen loaf.” They miss the point that from the compost of failure, greater futures arise. But you knew that. Nothing is “too big to fail” and we all do. It’s ultimately called Death. Comes for all people…should come for a lot of companies, as well.
Key Lies About Inflation
- Back to the loaf: A one pound loaf weighs the same before and after rising.
- Value acts the same. Depending how much paper is chasing something of value…when that’s agreed, you have price.
- Prices don’t go up. Money’s purchasing power goes down. Because, like the yeast, it just “puffs things up.”
- To profit in Life buy stocks and tangible assets when inflation is increasing.
- Buy bonds and sell assets when inflation is in decline.
Long wave economic cycles can last a working lifetime and longer. We are nearing a major long-term bottom. But, there is still a huge economic hit to come. That’s because we are in mid “demand destruction.”
Mind Control at Work
We’ve often pointed out that CNN seems (to us) to be promoting the take-down America agenda. This morning we find that “blaming the public” instead of Banksters and a crooked congress is still being sold as gospel by the network. As they write in one report:
“Americans are slashing their spending, hoarding cash and shrinking their credit card debt as they fear their jobs could disappear during the coronavirus pandemic. “
Seriously? WTF? So CNN’s against saving and reducing DEBT????
When the sensible act of saving becomes hoarding, there’s a liberalista Gestapo in the wings. When anyone tells you how to spend or demand you go into debt, that’s economic slavery. The yoke’s on CNN.
Lately, prepping is being agendized as “hoarding” too. The Big Money Interests love to use emotional hot words to mess with your free will. “Hoarding” is hotter emotionally than “saving” or “preparing.” This is how complicit media – desperate to maintain failing ad revenues – are pushing every button they can find. To curry favor with Big Interests. Shock-jock 101.
There is no “Free Depression Workout.” Longwave bottoms hurt because savings and investments are destroyed. No one likes pain, but only those able to effectively lobby (and manipulate) the political system will be spared.
There is always a “proximate cause” (that which is named) and odds are excellent that Wall Street will hide behind CV-19. Yet, the real reason for pending economic crisis will be the same financial excesses that are the hallmark of every market break: Greed.
It doesn’t matter whether it’s the Knickerbocker panic, the Long Depression, the end of the Roaring Twenties, or the 2006 real estate bubble or the Internet’s dot-com collapse. It’s all the same tune. Just different verses.
The “Melody Matters”
Keynesian economics promoted the idea of inflation as a general rise in prices. The Great Depression seized communications (The FCC was created) and people were drugged (Prohibition ended). And war soon followed. But not until a period of arming.
Looking around today, we can see national marijuana law reform coming, we can see internet licensure. Or, at least additional freedom-killing restrictions on free speech, assembly, and the “right to move about the country.”
Just like *(questionable) “terrorism” on 9/11 set up “The Surveillance Industry” so too we expect an analog. The Vax-n-Trax industry.
This bioweapon (accidentally released, or otherwise) will be used as a justification to further erode American’s God-given rights. With enough panic, people will roll-over. They always do. Repetition works in hypnosis and in UHD.
After we “hit bottom” America may begin a massive period of rebuilding. That’ll be to prep for global war. Because in longwave cycles, we have Peak and Trough Wars. WW II was the Trough War following the Great Depression.
The 1857 Depression and Civil War
Occasionally, a Depression-ending War is not external, but rather internal in nature. From the Wikipedia discussion of the Panic of 1857:
The Panic of 1857 was a financial panic in the United States caused by the declining international economy and over-expansion of the domestic economy. Because of the invention of the telegraph by Samuel F. Morse in 1844, the Panic of 1857 was the first financial crisis to spread rapidly throughout the United States. The world economy was also more interconnected by the 1850s, which also made the Panic of 1857 the first worldwide economic crisis. In Britain, the Palmerston government circumvented the requirements of the Bank Charter Act 1844, which required gold and silver reserves to back up the amount of money in circulation. Surfacing news of this circumvention set off the Panic in Britain.
Beginning in September 1857, the financial downturn did not last long, but a proper recovery was not seen until the American Civil War, in 1861…”
Wars Are About Money
A key feature to look for in a “civil” war is a powerful economic angle. While true that the American Civil War was on freeing slaves, on one level, the economic subtext is often missed.
Northern machinery manufacturers were anxious to replace human powered slavery with banker-backed machines. It had taken a while, but Eli Whitney didn’t just invent the cotton gin, he also conceived of interchangeable parts and that led to the whole “machining industry” of the Northeast. By the 1860’s that industry was looking for new markets. Free slaves…buy machines!
We won’t know for a while. That are several trillion dollars up for grabs and there’s a mega-fight on beneath the reception threshold for power is obvious.
The main thing to observe is “How America’s Being Divided.”
Certainly racial lines are one “divider.” Lock-down is another. Pro Trump or Anti. Bailouts or Not. Vaccine or Tracking…both? There are almost limitless ways to keep America divided and conquered.
By whom? The Government-Corporation
Which really dates back to when America fell to international monied interests in 1871. Few realize that America’s original Constitution was replaced in February of that year when the “federal government” took over and created The District of Columbia. Deep State is old and predates us all. It’s a Corporation now.
As you can read on sites like this one, what most think of as the federal government of today is really a corporation. Operating a theater (congress) and some sideshows. (agencies) Unlike under the organic (original) Constitution, this one makes up money.
That corporation rules just 10-square miles – Washington D.C. But, you’ll lose any claim contrary because the Corporation runs the federal “courts.”
This is all important to understand before reading today’s Consumer Price Report. Because the world isn’t what you think. Values don’t go up and down, but prices paid vary widely because of how much paper is “made-up” to chase goods.
Now you’re ready…
Deflation is back – in spades:
The Consumer Price Index for All Urban Consumers (CPI-U) declined 0.8 percent in April on a seasonally adjusted basis, the largest monthly decline since December 2008, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 0.3 percent before seasonal adjustment.
A 20.6-percent decline in the gasoline index was the largest contributor to the monthly decrease in the seasonally adjusted all items index, but the indexes for apparel, motor vehicle insurance, airline fares, and lodging away from home all fell sharply as well. In contrast, food indexes rose in April, with the index for food at home posting its largest monthly increase since February 1974. The energy index declined mostly due to the decrease in the gasoline index, though some energy component indexes rose.
The index for all items less food and energy fell 0.4 percent in April, the
largest monthly decline in the history of the series, which dates to 1957. Along with the indexes mentioned above, the indexes for used cars and trucks and recreation also declined. The indexes for rent, owners’ equivalent rent, medical care, and household furnishings and operations all increased in April.
A few table items to review:
There’s also the “less food and energy” number that the Fed (we think delusionally) looks at: “The index for all items less food and energy rose 1.4 percent over the past 12 months.
And that screams inflation is still MIA while at the same time the Fed’s printing up paper at a 37.2% annualized (M1) rate.
Dow Jones industrials futures are up almost 100 after the number.
NFIB Small Business Optimism Slides
Another one of those press releases we don’t want to read, but…
“For the second month in a row, job creation plans among small businesses fell as the economy deals with the effects of COVID-19, according to NFIB’s monthly jobs report. An increasing number of firms reported reducing employment as the six-week total of initial unemployment claims has now reached 30.3 million.
“Small businesses have been doing everything they can to sustain their business during this economic uncertainty,” said NFIB’s Chief Economist Bill Dunkelberg. “As states begin to reopen, workers who have been unemployed will be called back to work at many of these small businesses. Until workers are back and the virus is contained, we will get a better picture of how many jobs and firms were lost during this time.”
A Few Headlines
Waiting for WH panic: White House requires masks for staff after several COVID-19 cases.
Oil-rich Norway will withdraw a record $37 billion from wealth fund as COVID-19 batters economy. Thing to watch here is how does that fund liquify to pay up?
And here we go with more FED price fixing, reports the NY Times: The Fed Is Buying E.T.F.s Today.
Insane…well, yeah….but it’s the only planet we can find to play on…
Write when you get rich,