Or, “How to Steal Without Robbing….”
Yeah, you’d think you can’t “steal from someone” without robbing them, right?
For mere mortals, the likes of us, that’d be the case. But in the CRAZY world of Made Up Money (*disguised as “Modern Monetary Theory” which is a misleading label for Marxist Monetary Theory, which is turn is Silently Seizing the Means of Production…) this is EXACTLY what’s going on.
I’ve been blessed to have been “schooled” on some very different (honest!) ways of looking at money and government policies by some real geniuses in clear-thinking. Howard Ruff, for one. And Dr. Paul Erdman, for another.
At the core of the learning is a simple notion: Money is never absolute.
There’s a simple thought-experiment that will make it clear.
Suppose we have three people and each of then has $10-dollars. Along comes you – ‘natchul-born’ sales guru that you are – and you offer the group this “gotta have it” new whizzy. The top price that can be paid? $10-bucks, unless two of the three cooperate. (We don’t allow conspiracies in thought-modeling…)
Now let’s change the equation around. Suppose now that each of our three marks has $6,453,221.25 each. This means (again, you playing the role of Super Salesperson) you will be able to sell the same “gotta have” for how much? $6,453,221.25!
Ceteris parabus, one of the most-useful (*and to the old UrbanSurvivalist more important) tools in economic thought, mean what exactly?
“Ceteris paribus or caeteris paribus is a Latin phrase meaning “other things equal”; English translations of the phrase include “all other things being equal” or “other things held constant” or “all else unchanged”. A prediction or a statement about a causal, empirical, or logical relation between two states of affairs is ceteris paribus if it is acknowledged that the prediction, although usually accurate in expected conditions, can fail or the relation can be abolished by intervening factors.
A ceteris paribus assumption is often key to scientific inquiry, as scientists seek to screen out factors that perturb a relation of interest. Thus epidemiologists, for example, may seek to control independent variables as factors that may influence dependent variables—the outcomes or effects of interest. Likewise, in scientific modeling, simplifying assumptions permit illustration or elucidation of concepts thought relevant within the sphere of inquiry.”
In our example above, the key takeaway is “Price is dependent on Money Supply.”
Right, then! Who’s Jacking Up the Money Supply?
Why, it’s America’s not really Federal and they don’t really have any Reserve. Though tax-demands backed up by a military works…
What they do have is America’s money supply by the gonads. And they are squeezing like hell trying to keep the smelly stuff from hitting the fan and pretending there’s “No Robbery!” in process. Well, there is….
Two tables (H.6 Money Stocks) updated after the market close Thursdays, reveal what has become the “necessary con.” Pay attention to the dates in the following summaries which any damn fool can find on the Fed website. (Otherwise, I’d have never found ’em!): Dates matter because we are talking about two “sliding windows.”
This first one ended the last day of April (*which is what TO MAY means):
The second “slider” (with apologies to White Castle) is the one that ended about ten-days ago:
So What’s Going On?
This part’s easy. The Fed is “Robbing (purchasing power) without (outright) Stealing.” Here’s how it works:
Remember the report from the Bureau of Economic Analysis (June 25 if you’re semi-eidetic like, er…uh…yeah…)?
“Real gross domestic product (GDP) decreased 5.0 percent in the first quarter of 2020, according to the “third” estimate released by the Bureau of Economic Analysis. The decline is the same as in the “second” estimate released in May. In the fourth quarter of 2019, real GDP increased 2.1 percent. “
Now, think this through carefully and include in your thinking that the employment data shows an economy that has taken about a 30% “hit” from Covid-19.
In other words, say we were running along at 100% (a notional number) but went down 15% in March, so the averaged drop is GDP was about 15% which is where the BEA numbers (kinda-sorta) hang together… If the economy was level two months out of three then to make a three month average down 5% one month would need to be down 15%…following this?
With some basic math, we can actually infer what the Real Hit on GDP has been. Let’s use the following method:
- If the economy was rolling at 100%…
- And we estimate it is now rolling 70%, then:
- With the economy at 70%, how much money needs to be “made up” to “pretend” the economy is really OK?
- Simple math problem: 100 divided by 70 equals 1.428571428571429 times or 42.857%. To round-off a bit, the Fed has to jack up the money supply by 1.43 times in order to paper-over a 30% disaster and leave your normalcy bias intact.
We might then speculate (which encompasses a whole lot of economics, politics, medicine, and life lately, lol) that if the Fed has really jacked up the 6-month money supply (Table 2, above) by 51.9% in the shorter window, what is the real hit to the economy?
Simple enough: 100 divided by 1.519 which is (roughly) 65.83278472679394-percent.
Subtract the “rounded-off” 65.83% from 100 and the answer is CV-19 has (on a short-term cash basis) whacked the economy by 34.17% compared with January.
As the country goes back to work, we see the short-term stimulus being reduced, and indeed from the May 1 level down to 10-days ago, we see the jacking-up of M1 has reduced from 105% annualized basis the 90-day to 93.1% annualized 10-days ago, so in about 2-months, the decline in wild printing has been 11.9%. Can’t take the financial crack off the table or the economy will get seizures…markets could tumble…
As you can (*or should be able to mentally visualize) if M1 is coming down (at some fictional) 5% per month (to pull a number out of the air) then at some point the spread between the 93.1% and the one year rate of 31% ought to converge…This pencils out around 12.4 months hence.
Whee! See how easy and useful economics can be?
Well – Except for the Inflation Part…
Here’s the “baked-in” deal: The result unfortunately is that America will likely head into a period of about 30 percent annualized inflation (a year out, as markets normalize around the new fiat to goods reality).
We could take this 30% idea and offer some useful projections:
- The Ure’s little 30-acre “slice of woods and toys” which can be had for about $350,000 today will cost $455,000 a year from now. Ure’s net worth goes up $105,000. Ure’s lifestyle doesn’t change.
- Gold, which was around $1,775 this week, ought to be up to $2,307, or thereabouts. Again, Ure’s lifestyle doesn’t change.
- Bitcoin, and other “made-up money” should climb also, EXCEPT the FedGov at some point will tire of non-regulated competition and may move to outlaw cryptos, the same way gold and silver were both “called” in the Great Depression.
- Oh, and the stock market ought to climb 30%, as well…which might drive the Dow upwards of 33,575.
- Oil could climb, as well. Something like $52, but more likely (due to the prospect of insufficient supplies due to under-drilling for a couple of years) could be back in the $60-$70 range.
Which MIGHT save Houston, but won’t help Minneapolis which – by our reckoning – has cut its own financial throat by attempting to end effective law-enforcement. Commie are crazy…try to remember that.
Going into the Fourth, that’s how we see it.
Charts Only on our Peoplenomics.com subscription side tomorrow. I could have put this all up for subscribers only but we still have markets open in Ure-Up today, so the charts will drag by sorry-ass out of bed in the morning.
Around the Ranch
Hotter’n blazes. Peoplenomics readers can use the “shop weather forecast” technique I laid out in the air conditioning issue to see why getting into the shop early and going like hell till 11 AM, or so, is critical.
Tomorrow (or Sunday?) A special Ham Radio edition. Work has continued in Antenna Modeling of my new ? Super Antenna III. And to test, I need reader “William of the Radio Ranch” to send me the length of his “half-wave” stealth antenna. Haven’t run the model against it, but another 1-2 dB of ERP for a bit more wire? What’s not to love.
Short version – if you can’t wait: My model says adding some specific wires (which is cheap) may improve ERP by 2 (or more) dB. Not really patentable (which is really only a license to sue, anymore). But let’s see when it goes up if Ure could do an article for QST, or something.
Good News from Up North: Firefighter/EMT son does NOT have CV19. Though two firefighters in his department have tested positive…
Cats and Elaine are all dandy…Planning “online cocktails with friends” this afternoon, so yeah…another day in paradise.
Except for the neighbor kids down the road who lash up multiple M-80’s. Hmmm…teenage boys…hmmm… Anyone have a .mil recruiter’s business card I could leave with a note? Something like:
“If ya’ll like blowing shit up, rather than disturbing the peace of your neighbors, why not get paid for it? Call this guy… If you don’t, we will light up the range with the AK’s and tracers at 3 AM some morning…”
So goes life in the woods… The world is crazy, but screwy as it is, it beats the alternatives. Until we’re assured of cold brewski’s in the afterlife…
Write when you get rich,
(Good job on the day off, George!)