The Fed Will Inflate Until It Can’t

Wednesday, 23 September 2020

Recently we read that the stock market was going down. This author,
who is selling a book, claimed that the lamestreet media is crying out
the stock market will go down further.

Maybe he has something here besides the book promotion.

Is the “media” priming us for MOAR Fed inflation? Why does the Fed have to inflate?

The politicians wish to avoid responsibility. This way they can spend massive amounts of “money” on the electorate without raising taxes. Interest rates on bonds indicate their prices. The higher the interest rate, the lower the price. Owners of bonds consider them assets, because money goes into their pocket as a result of that ownership. What happens when the supply of anything goes up, while the demand remains constant? The price has to go down. The federal government has been increasing the supply of U.S. treasury bonds. There is no way to measure the real demand for them, because the whole treasury market is manipulated by the FOMC and the Fed. The Fed and the FOMC arrange for a buying spree to soak up those extra bonds and keep the prices up.

The Fed exists to prop up prices for assets, like bonds. MOAR than the “lender” of last resort, it is the “buyer” of last resort and guess who ultimately guarantees the prices of those assets. If you guessed “the tax payer”, go to the head of the class!

Why would the banks need to prop up these asset prices? It is their balance sheets. If the “value” of the asset side goes down too much,their capital goes down. If their capital goes down too low, they can’t lend anymore. If they can’t lend anymore, they close.

All this makes Chairman Powell and his boys the most powerful group in town and basically makes this stupid Presidential election a sham. The man or woman in the White house means almost nothing.

If you don’t believe me, perhaps Chris Whalen, who used to work at the
Fed can persuade you:

“The primary dealers as a group almost got blown out in March, like most restaurants in lower Manhattan right about now. The Powell Fed knows that direct support for the Treasury market via QE is a permanent fixture on the economic scene.

And they know that the dealer banks have zero appetite for supporting a failing Treasury market, meaning that the Fed of New York is the market. Indeed, the Fed’s supposed change in policy regarding inflation targeting was really just window dressing, lipstick on the proverbial pig. The economists will talk about inflation, but the reality is in more or less continuous open market operations.

Just as with downside of manipulating interest expense, the economist fraternity misses the punch line. Inflation must be higher because the Fed must continue to buy trillions in Treasury debt and agency MBS each year. No matter who wins the presidential election in November, have no doubt that Chairman Powell is the most important man in town.”

I would take the “economist fraternity” a little farther. Most
“economists” depend upon Fed “money”. I think that makes most of them shills.

Have a good day!

Florida Teachers Want Schools Closed

August 7, 2020

The Florida teacher’s union has filed a lawsuit seeking to keep schools closed:

“The Florida Education Association last month filed a lawsuit against Gov. Ron DeSantis, Education Commissioner Richard Corcoran and other defendants, alleging that a July 6 order issued by Corcoran violates the state Constitution, which guarantees Floridians the right to “safe” and “secure” public education.
But the governor and Corcoran this week asked a Miami-Dade County circuit judge to toss out the lawsuit, calling it a “misguided effort to obtain a judicial mandate that forbids any school in the state from providing in-person instruction to any student.”

Corcoran’s order requires all school districts to reopen brick-and-mortar schools at least five days a week sometime in August, unless state and local health officials direct otherwise.”

Here is governor DeSantis’s position:

“As the virus has continued to spike throughout Florida in recent weeks, DeSantis has repeatedly said that families need to be able to choose whether to have their children return to classrooms or continue to learn from home.”

Ibid.

I recommend that governor DeSantis go one further and tell the teachers that it is fine for them to stay home without pay and then open the market place to non-union teachers that want to go into business. The non-union teachers should be free to make whatever contractual arrangements that suit them and the parents of the students.

I am sure this won’t happen, but it is nice to dream.

Kashkari Wants to Bury You in Debt

August 3, 2020

Mr. Kashkari (ironic name for this guy), president of the Minneapolis Federal Reserve Bank is claiming that we will have a better economic recovery if we lock down again in an effort to contain the SARS-CoV-2 virus:

“Neel Kashkari, president of the Minneapolis Federal Reserve Bank, said the nation needs to control the spread of the virus, which is increasing across much of the country, to get back on a path to economic health.”

He went on to say this:

‘He also said that Congress can afford large sums for coronavirus relief efforts, though Republican lawmakers are looking to lessen the amount of supplemental aid for unemployed Americans as part of the next relief bill.

“Right now, the U.S. can fund itself at very, very low rates. Congress should use this opportunity to support the American people and the American economy. I’m not worried about it,” he said. “If we get the economy growing, we will be able to pay off the debt.”’

I think this is a banker’s game – bury people in debt and make them slaves. There is a reason that debt instruments are called “bonds” – they put people in bondage. What does Mr. Kashkari think will happen to loans, mortgages and leases as businesses are closed for another month to six weeks?

We also get this line of malarkey from MSN Money:

“It’s a rapid reversal in fortune. Early on in the pandemic, the dollar soared after investors sought safety in U.S. assets like Treasuries while the virus stormed through Europe. But with cases now exploding at home, the ineffectual American response to the disease has become a millstone for the currency, spurring concern about lasting damage to the U.S. economy that could keep interest rates and growth low for years.”

MSN Money blames dollar weakness on “…the ineffectual American response to the disease….”

I do not believe this for one second. I don’t know about you, but I like to buy low and sell high. Right now the dollar’s price or purchasing power is declining. Here is why:

“Absolute power and lack of accountability by the Fed are generally defended on one ground alone: that any change would weaken the Federal Reserve’s allegedly inflexible commitment to wage a seemingly permanent “fight against inflation.” This is the Johnny-one-note of the Fed’s defense of its unbridled power. The Gonzalez reforms, Fed officials warn, might be seen by financial markets “as weakening the Fed’s ability to fight inflation” (New York Times, October 8, 1993). In subsequent Congressional testimony, Chairman Alan Greenspan elaborated this point. Politicians, and presumably the public, are eternally tempted to expand the money supply and thereby aggravate (price) inflation. Thus to Greenspan:

‘The temptation is to step on the monetary accelerator or at least to avoid the monetary brake until after the next election. Giving in to such temptations is likely to impart an inflationary bias to the economy and could lead to instability, recession, and economic stagnation.’”

Mr. Greenspan told us here that “money” printing is the cause of “…an inflationary bias to the economy….” I think he misused the term “inflation” here to refer to a general rise in prices or general decline in the purchasing power of the USD.

Lets take a look at how hard the Fed stepped on “the monetary accelerator” beginning in February 2020. The week ended February 19, 2020 the total assets held by the twelve Federal Reserve Banks stood at $4,171,570 millions (4.171 trillion). That means the twelve Federal Reserve Banks had the exact same amount in liabilities. The liabilities are basically “money”. Some of that “money” is what the banks call reserves and that “money” stays on “deposit” at the Fed for the most part. Now we will fast forward to the week ended June 4, 2020. The total assets held by the twelve Federal Reserve Banks at that time was $7,165,217 millions (7.165 trillion).

In the space of twelve weeks the Fed nearly doubled its liabilities. This means that the “money” supply nearly doubled. The increase in twelve short weeks was only slightly less than what occurred over about three years from 12/2007 to 12/2014 ($3.623 trillion). I know that a substantial portion of that increase will stay within the banks and will not come out to Main Street, although in theory it could. Historically the banks held almost nothing in “reserves”. It wasn’t until September 2008 that the banks began to hold such a huge amount of “reserves”.

Here is why banks are willing to leave those “reserves” on “deposit” at the Fed:

“On October 3, 2008, Section 128 of the Emergency Economic Stabilization Act of 2008 allowed the Federal Reserve banks to begin paying interest on excess reserve balances (“IOER”) as well as required reserves. The Federal Reserve banks began doing so three days later.[5] Banks had already begun increasing the amount of their money on deposit with the Fed at the beginning of September, up from about $10 billion total at the end of August, 2008, to $880 billion by the end of the second week of January, 2009.[6][7] In comparison, the increase in reserve balances reached only $65 billion after September 11, 2001 before falling back to normal levels within a month.”

What we have seen is a huge and unprecedented increase in “bank money”. Essentially this was stepping on “…the monetary accelerator….” Mr. Kashkari and his shill MSN Money are using the SARS-CoV-2 as cover. The strategy recommended by Mr. Kashkari will simply create MOAR “assets” for the banks or IOU’s as the Congress borrows every MOAR “money” to bail out the locked down businesses. Oh, and I wonder what businesses will receive that bailout “money”. Will small “Main Street” businesses receive it? I doubt it. I suspect it will be the large corporations that are important to our “representatives” in Washington.

So, as the supply of “money” goes up, its price or purchasing power goes down. It may be too late to sell already, but it is no wonder that dollar is being sold.

Have a nice day!

Meaningless “Data”

July 24, 2020

We are bombarded daily with “statistics” regarding “new cases”. These “statistics” are worthless and in-fact are harmful. These “statistics” incite panic. We do not get meaningful statistics until we speak about people with clinical signs of the disease (symptoms).

Here is a perfect example from Reuters:

“July 20 (Reuters) – Florida reported 10,347 new cases of COVID-19 on Monday, the sixth day in a row the state has announced over 10,000 new infections.

Florida reported 92 new deaths on Monday, bringing the state’s death toll to 5,183. (Writing by Lisa Shumaker)”

That is the entire “story”. It is utterly worthless. Obviously the intent here is to create fear. There was no discussion regarding the identification of the new “infections” and it was only implied that “92 new deaths on Monday,” were from COVID-19. This article by Neil A. Kurtzman, MD explains why these “statistics” are worse than worthless:

“It should be obvious from the data above that all the testing we have done and continue to do has likely confused more than enlightened. The virus is real and in the wild. How should we effectively deal with it? The best indicator of our status is how many people are in the hospital because of a clinical diagnosis of viral pneumonia. More specifically, how many are in the ICU. Note that testing here is unnecessary, as the assumption today is that any case of viral pneumonia is caused by the coronavirus.”

Have a good day!

Hopefully, Google Will Be Brought Down a Peg or Two

July 23, 2020

This paragraph pretty much explains why I hope that the free market will take Google down a peg or two:

Google is about to take one giant step into directly shaping the prevailing media narrative.

One month after Google made news by banning ads on websites – such as this one – for violating its terms of service when it comes to “derogatory” material (a purposefully amorphous concept), the world’s leading search engine and internet advertising monopoly which controls 70% of online ad spending, will take an even more aggressive step. According to CNBC, starting on August 18, Google will “ban publishers from using its ad platform next to content that promotes conspiracy theories about Covid-19.” Additionally, “in cases where a particular site publishes a certain threshold of material that violates these policies, it will ban the entire site from using its ad platforms.”

In short, anyone who deviates from the conventionally accepted narrative, or as CNBC puts it challenges the “authoritative scientific consensus” on the coronavirus pandemic will be promptly demonetized.

Google is a private company and it is certainly free to choose whom it wishes to spend its advertising dollars on, but it has 70 percent of the market. Again, I am not advocating government intervention here. Perhaps this represents an opportunity for other budding entrepreneurs. Perhaps government rules and regulations are presenting barriers to the entry of competitors into the search engine market place.

Science is never certain. In order to arrive at “truth” “science” needs to be continually questioned. That is how science works and that is where its power lies. Science is made up of hypotheses that are continually tested by experiments and even when we think we have something, the testing needs to continue. This is especially true with something extremely complex such as a pandemic infecting a population. There are an incredible number of variables at play and science works when you can control all the variables. You have to control all the variables in order to establish a cause and effect relationship. Otherwise you are left with a correlation only and that could be coincidental. Control of all the variables is impossible in real life, especially when you are dealing with billions of living organisms in different environments. This means that different points of view and dialogues are vital to arriving at the truth and it may also mean that science is not applicable to the problem of a “pandemic”. In other words it may not be possible to apply science to the mythical “collective”, because of the inability to control all the variables. This is not to say that science is never applicable to anything. It has been successfully applied to many “problems” and you cannot argue with success.

If one company controls most of the advertising dollars and threatens to cut off people that don’t hold to its views, the dialogue is shut down and what are we left with? Google’s opinion.

There is an old saying, “Don’t put all your eggs in one basket.” We could up date this to, “Don’t put all your questions in one search engine.”

Repetition and Practice Bring Fluency and Understanding

July 15, 2020

Barbara Oakley wrote an interesting article that asserts, “The building blocks of understanding are memorization and repetition.”

I totally agree with her. True knowledge of any subject comes from intimacy with it and that means spending a lot of time with it or “memorization and repetition.” It is hard work.

The problem with focusing relentlessly on understanding is that math and science students can often grasp essentials of an important idea, but this understanding can quickly slip away without consolidation through practice and repetition. Worse, students often believe they understand something when, in fact, they don’t. By championing the importance of understanding, teachers can inadvertently set their students up for failure as those students blunder in illusions of competence. As one (failing) engineering student recently told me: “I just don’t see how I could have done so poorly. I understood it when you taught it in class.” My student may have thought he’d understood it at the time, and perhaps he did, but he’d never practiced using the concept to truly internalize it. He had not developed any kind of procedural fluency or ability to apply what he thought he understood.

Joe Biden and Zero Emissions Dream

Tue 14 Jul 2020 07:24:51 AM EDT

This should not be interpreted as support for the Republican party.

Presidential candidate Joe Biden is talking about taking command of of our economy and making it “zero-emission” (spoiler alert – this is the bone for the AOC/Sanders folks):

‘What many readers thought was the Biden plan is actually the work of a separate group headed by Alexandria Ocasio-Cortez and John Kerry that includes supporters of both Joe Biden and Bernie Sanders who are attempting to find common ground with each other. There are a number of so-called “unity groups” who hope to shape the final policy initiatives of a Biden presidency, which is appearing much more likely as the current occupant of the Offal Office continues to flail against a virus pandemic he takes as a personal affront.

According to The Hill, the AOC/Kerry task force plan includes a goal of eliminating carbon pollution from power plants by 2035, achieving net-zero emissions for all new buildings by 2030, and making energy saving upgrades to as many as 4 million buildings and 2 million households within five years.

“The Unity Task Force urges that we treat climate change like the emergency that it is and answer the crisis with an ambitious, unprecedented, economy-wide mobilization to decarbonize the economy and build a resilient, stronger foundation for the American people,” the plan states.

It further calls for a significant investment in renewable energy, including installing 500 million solar panels and manufacturing 60,000 wind turbines. Contrary to the policies of the current administration, it recommends the adoption of “strong standards” for clean cars and trucks and the transition of all school buses to American-made, zero-emission alternatives within five years.’

I think people are in for a rude awakening, if they decide to rely upon wind and solar panels. They will not have electricity available for consumption when they want it. They will not be able to charge their Tesla when it suits them. They might be able to have their electricity when they want it, if all that wind and solar is backed up with natural gas or coal fired power plants, but that would clearly defeat the purpose. It would defeat the purpose, because those plants would need to be running constantly, in order to be ready to supply electricity when the clouds blocked the sun or the wind died down.

I hope that everyone sees this for what it is – useless pandering designed to get someone in office, who can then squander taxpayer dollars on his friends. The “other” party – the Republicans – do this also, in fact they started this game. They tried for years to get this going, but the Constitution kept getting in their way. Abraham Lincoln finally succeeded in really getting this type of program going. If you want to learn more, look into Henry Clay and the “American System”.

Ironically, the Democrats used to oppose the American System and now they use it to the fullest.

This may be off topic, but ask yourself how a private business knows if it is serving its audience (ie. it is popular). It does this by measuring profit and loss. If the business experiences a loss, it knows its product
is not popular and it will fail. If it experiences a profit, it knows it is popular and should keep doing what it is doing.

Government programs, such as the one being discussed by the Joe Biden campaign are not subject to this discipline. When a government program does poorly (like public education), there are simply calls for more funding. Thus, instead of being subjected to the discipline a private business deals with, the government program is insulated and continues.

France and Germany have both pursued “green” energy programs. France based its program on nuclear reactors and Germany based its on wind and solar. Guess which nation has the cheapest electricity and the least C02 emissions. Spoiler alert – it isn’t Germany.

Tesla v. Toyota and “Green” v. Nuclear

Wed 08 Jul 2020

Here is an interesting comparison of Toyota v. Tesla. Toyota builds practical, reliable and energy efficient automobiles, while Tesla sells a dream of “green” energy.

“Currently, Tesla’s market cap is worth $259 billion compared to $206 billion for Toyota. Why did investors push Tesla’s stock up to $1,400 a share ($259 billion market cap) when its total revenues in 2019 were only a little more than Toyota’s net income profits? As you can see, Toyota posted $19 billion in net income profits on total revenues of $278 billion compared to Tesla’s $862 million net income loss on $24.3 billion in revenues.

Again, a perfect example of the investor mindset today. Profits don’t matter, just technology, regardless if it continues to lose money.

And, if we look at the comparison of car sales, Tesla’s U.S. EV sales were only 8% of Toyota’s North American sales in 2019. Toyota sold nearly 2.4 million cars and trucks versus 192,500 units for Tesla.”

I realize that a Tesla has no emissions at its tail pipe, so it looks good, but there are emissions. The emissions just take place out of sight. Think of the emissions involved in the mining and shipping of the materials for the batteries. There are emissions from generating the electricity to charge the batteries. Most electricity is still generated by some fossil fuel. Many people don’t realize that wind power and solar power actually cause us to burn more fossil fuel.

We are accustomed to having a constant supply of electricity, so that when we flip a light switch, the light immediately shines. We also want a steady supply of electricity at a relatively constant voltage for our computers and televisions. If the voltage dips too much they shut off. Wind and solar do not provide a steady supply of electricity, like we
desire. The reason we have a steady supply is fossil fuel power plants.

Fossil fuel power plants cannot come on line and begin to deliver electricity at the “flick of a switch”. It takes substantial time to get them up and running. Therefore, fossil fuel power plants have to be “standing by” to take up the slack when the wind stops blowing or the sun goes behind clouds and the output from “green” sources drops. This means that we are burning fossil fuels just to keep the “back-up” power plants idling. This is very inefficient.

Another question is how much fossil fuel does it take to build the equipment for solar and wind and then to put it in place along with all the wires for transmission.

Here you can watch a former “green” energy reformer explain why “green” energy does not work and damages the environment.

He had data that showed nuclear power is cheaper and safer than all the other competitors, including wind. He compared Germany, which has a lot of wind and solar, with France, which is mostly nuclear. France had much lower electricity costs and had a steady supply of it, consistent with modern demands. Nuclear power plants emit nothing to the atmosphere.

If our aim is to reduce CO2 emissions, our best bet is probably nuclear power plants. They produce steady power, as we demand, and produce no CO2 while running. They cost less, are more efficient and their waste is contained.

I think what we are seeing with Tesla stock is a maniacal bubble, like the Dutch Tulip mania.

Abraham Lincoln’s Letter to Horace Greeley

June 30, 2020

Slavery as practiced here in the United States was an immoral abomination. It is too bad that Mr. Lincoln was not trying to abolish it.

Abraham Lincoln wrote a letter to Horace Greeley, the editor of the New York Tribune. Mr. Lincoln told us in this letter the real purpose of the Civil War was not to free slaves, but to “save the Union”. I am not sure how unions are “saved” at gunpoint. Mr. Lincoln revealed his real purpose in this line, “The sooner the national authority can be restored….” Mr. Lincoln said everything else was subordinate to this purpose. “My paramount object in this struggle is to save the Union, and is not either to save or to destroy slavery.” Unopposed “national authority” was his goal. This authority would be used to impose protectionist tariffs, create a central bank to control the money and for internal improvements (Railroads, etc.). The Civil War was a repeat of the Revolution, except this time “Great Britain” won.

Executive Mansion,
Washington, August 22, 1862.

Hon. Horace Greeley:
Dear Sir.

I have just read yours of the 19th. addressed to myself through the New-York Tribune. If there be in it any statements, or assumptions of fact, which I may know to be erroneous, I do not, now and here, controvert them. If there be in it any inferences which I may believe to be falsely drawn, I do not now and here, argue against them. If there be perceptable in it an impatient and dictatorial tone, I waive it in deference to an old friend, whose heart I have always supposed to be right.

As to the policy I “seem to be pursuing” as you say, I have not meant to leave any one in doubt.

I would save the Union. I would save it the shortest way under the Constitution. The sooner the national authority can be restored; the nearer the Union will be “the Union as it was.” If there be those who would not save the Union, unless they could at the same time save slavery, I do not agree with them. If there be those who would not save the Union unless they could at the same time destroy slavery, I do not agree with them. My paramount object in this struggle is to save the Union, and is not either to save or to destroy slavery. If I could save the Union without freeing any slave I would do it, and if I could save it by freeing all the slaves I would do it; and if I could save it by freeing some and leaving others alone I would also do that. What I do about slavery, and the colored race, I do because I believe it helps to save the Union; and what I forbear, I forbear because I do not believe it would help to save the Union. I shall do less whenever I shall believe what I am doing hurts the cause, and I shall do more whenever I shall believe doing more will help the cause. I shall try to correct errors when shown to be errors; and I shall adopt new views so fast as they shall appear to be true views.

I have here stated my purpose according to my view of official duty; and I intend no modification of my oft-expressed personal wish that all men every where could be free.

Yours,
A. Lincoln.

Mutt

June 26, 2020

I run Linux on all my home computers. I have a copy of M$ Windows, but it is not installed at the moment. I will only use it when forced. Those occasions are very rare.

My favorite MUA (Mail User Agent) is mutt. It is light and fast. You do not need a rodent (mouse) to use it and it is very customizable.

Recently I changed email servers. I used to run one at home, but email servers are complex and I had never gotten around to installing and setting up web mail. Needless to say, if you have many devices, web mail is almost a necessity. I changed my email server to PrivateEmail. The service is very good and it is well priced. It comes with different apps, like a calendar and drive. I am not a big fan of using the web browser for email and wanted to get back to my favorite MUA – mutt.

I set mutt up to get mail from PrivateEmail, but I kept getting a message, “tls_socket_write (TLS connection was non-properly terminated)” and the mailbox would close. It took a while to figure out why. Adding these two lines to my muttrc file seems to have fixed the problem:
set imap_check_subscribed=”yes”
set imap_list_subscribed=”yes”.

I think you also need this:
set imap_keepalive = 900 (I am using 150, but I have read that 900 should meet the RFC requirements).