No surprise to the Fed decision Wednesday. Why do anything when nothing will work?
So, as we figured, they didn’t do anything other than yammer about inflation target this, expectations that. The usual stuff. Blah, blah, blah.
What matters, though, is how much money is being made up. Modern Monetary Theory – which I call the Robert Mugabe school of economics – holds that if you print just the right amount TOO MUCH money, things will work out well. Further consideration of Mugabe’s approach is warranted as it may yield insights into how the Fed (and the RoW/G20) are playing the game these days.
While I am a multi-billionaire in Zimbabwe dollars, the bad news is laid out in this Wikipedia note that explains why I can’t by so much as a new Hyundai with all that dough:
“From 1991 to 1996, the Zimbabwean Zanu-PF government of president Robert Mugabe embarked on an Economic Structural Adjustment Programme (ESAP) that had serious negative effects on Zimbabwe’s economy. In the late 1990s, the government instituted land reforms intended to evict white landowners and place their holdings in the hands of black farmers. However, many of these “farmers” had no experience or training in farming. From 1999 to 2009, the country experienced a sharp drop in food production and in all other sectors. The banking sector also collapsed, with farmers unable to obtain loans for capital development. Food output capacity fell 45%, manufacturing output 29% in 2005, 26% in 2006 and 28% in 2007, and unemployment rose to 80%. Life expectancy dropped.
The Reserve Bank of Zimbabwe blamed the hyperinflation on economic sanctions imposed by the United States of America, the IMF and the European Union. These sanctions affect the government of Zimbabwe, and asset freezes and visa denials targeted at 200 specific Zimbabweans closely tied to the Mugabe regime. There are also restrictions placed on trade with Zimbabwe, by both individual businesses and the US Treasury Department’s Office of Foreign Asset Control…”
Still, Mugabe is still there, although being born in 1926, he’s getting up there. I feel a certain kinship with Mugabe – he just had cataracts out this year. Welcome to the club!
Mugabe’s little experiment in managed hyperinflation was run more quickly than how things are rolling here in the (former) Land of the Brave, Home of the Taxed.
If you read the Federal Reserve’s H.6 money stocks report, you’ll find that M2 (cash, demand deposits, and very short term CDs and such) is up 5.4 percent, compared with year-ago levels.
Confused why this matters?
(About here, Ure’s personality begins to shift into his ‘nutty professor modality’…)
(Taking a huff of the china board market, Ure stumbles clumsily to the board and begins scrawling…)
“See here? Year-on-year inflation is…uh… (he clicks a projector!)
“The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.4 percent in August on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 1.9 percent.”
“Yah shee dah mish-tree? (he huffs again) “Zhizts pretty simple, really: 5.4 percent minus 1.9 percent means the current rate of real deflation is 3.5 percent!”
A hush fell over the assembled multitude…then a collective gasp as Professor Ure lurched away from the board in search of his coffee cup. A huge swig later he continued…
“Yah shee, where’d the mishing money go?”
Several students found his transition from an addled drunkard huffing china board markers to a half-way good Humphrey Bogart impression, quite commendable.
Suddenly the Professor shook himself violently, stood fully erect and appeared to have been possessed by sudden sobriety.
“I’ll tell you where the money went: Part of it went into paying interest since America rents its money from Banksters. Then a big pile of it went those dead pools of capital in New York and Greenwich. And whatever is left – which will be a bunch next year, especially, will be used by the Fed to buy-down it’s own balance sheet.”
A hand went up in the audience. “How’zzat gonna work, boss?”
“See this circle, ” he said drawing on the board. “Let’s say this is a pile of leftover paper securities from the Housing bubble. Maybe it’s never been marked to market. How to I get rid of it….anyone? Hands?”
None went up.
“I MAKE UP THE MONEY, give it to you, and then sell you the steamy lumps of crap in the lunch sack in the middle of the circle. By doing this, we buffer the Mugabe direct-role and we make it all look – when stuff blows up in three- to five years – like it was all the fault of greedy investors, not the Fed or the government, that orchestrated the whole thing.”
Suddenly, a rotten tomato exploded on the china board and began to slide down. “Get off there old man, no one believes that monetarist stuff. This is Modern Monetary Theory. Everyone knows the government serves the people and the Fed is simply saving us from ourselves.”
“Yeah, right. And I’m the Easter Bunny. The only difference between MMT and Mugabe is change rate plus a truckload of AK-47’s.”
Professor Ure turned, revealing what looked like a large cotton ball in the middle of his rump. He hopped twice.
“Bitcoin Tells the Future!“
The professor wasn’t done yet make an ass…er..bunny…of himself yet.
“We don’t normally talk about this stuff outside of our subscription site – Peoplenomics.com – but here’s something else you can think about while you’re watching your digi-dollars collapse:” Reach into his pocket another projector slide popped…
“This is what I’m talkin’ about! See where the Wave E will take us??? This is how we do it in the Big Leagues, except Football which has gone political and fans are dropping out like mad because they want to have one big party instead of a breaking-up nation. In fact….uh….did anyone besides me read “Age of first exposure to American football and long-term neuropsychiatric and cognitive outcomes?”
No? Well….er……where was I?
Oh, yeah. So you draw in trend channels and then you throw-up Elliott counts and then you throw up again as you see that if we take out the $2,950 area, or so, in Bits, that the hopes of another major wave up are out the window. Remember, the Chinese moved today’s BTC hype-fest to Hong Kong because their government isn’t as stupid as ours…”
The crowd stared in silence for what must have been the better part of an hour. One student in the front row passed out, but no one seemed to care. They were all starting at the chart.
“I said it before and I’ll say it again: Bitcoin is the Millennial and Gen-Z stock bubble of 1929 being replayed in UHD!”
The staring continued for several more minutes before the professor, sensing the effect of coffee on his kidneys, moved to wrap up.
“I suppose you’re wondering when I make forecasts how I can be so accurate, right? I’ll be explaining that using discontinuous nested cycles of climate in Saturday’s morning’s Peoplenomics class. The rest of you study this morning’s Philly Fed Business Outlook report.”
“The index for current manufacturing activity in the region increased 5 points to a reading of 23.8 and has remained positive for 14 consecutive months (see Chart 1). Nearly 39 percent of the firms indicated increases in activity this month; 15 percent reported a decrease in activity. The new orders and shipments indexes also registered an improvement, increasing 9 points and 8 points, respectively. Both the unfilled orders and delivery times indexes were positive for the 11th consecutive month, suggesting longer delivery times and an increase in unfilled orders.”
“I’m going to go work on my next book, now, because this being Rosh Shoshana, it’s a perfect day to work on tertiary resonances of the shofar so if I ever find some friends, we can march around walled cities. You did know that there are no Trumpets in the Bible? Shofars…ram’s horns. Trumpets is made up – a distraction, swills for moderns…. Mor’on the Morrow!”
As the Professor left the podium, and began to run toward the Men’s Room, one student looked at another and remarked “Man, was he ‘out there’ today, or what?”
To which, the student replied “Yeah…sure was. Heard him telling the disclosure minister that he sold his short position for a gain in the panic gap between the FOMC statement and JanetVision, though. He may be weird, but I dunno…”
“You read about the uptick in west coast earthquakes out in Washington?”
“Dude, like the nutty professor says, Denial is a Powerful Drug.”
“‘spose so, spose so…”