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Turning The Wealth Pyramid Upside Down

Turning The Wealth Pyramid Upside Down

When we look at upside down wealth pyramid at the left, I have a big problem with the picture it promotes. It is clearly based on someone’s opinion of what investments are safe. The one thing it does well is to scream that some investments have a high degree of risk and it is best not to put all our eggs in the same basket.

Another issue is how a 401 or pension will fare during hard times or if we do see a huge number of defaults. Consider this an indication that placing your wealth into paper promises means it has the potential to vanish or be converted into something to would never agree to. Again, the devil is in the small print or the fact “they” can change the rules at any time.

While a great deal of speculation has been showered upon us concerning inflation turning to deflation, we will not know the true direction of things until they occur. One thing to keep in mind is that government employs a tremendous number of people that will never accept a cut in pay. This will put a solid net under falling prices. Combined with the refusal of many workers to consider working for anything near minimum wage helps push away the notion of deflation. In fact today, my local paper announced the City Council in Fort Wayne, Indiana just approved retroactive COVID-19 hazard bonuses for all city workers.

It is important to move towards forecasting based on probability rather than predictions. Keep in mind a great deal of how we deal with the options before us is centered on how we position ourselves…

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Inflation Lowered By Investment In “Intangible Goods”

Inflation Lowered By Investment In “Intangible Goods”

Inflation ahead will be contained in certain sectors of the economy. How much inflation we see is still up in the air. From a Main Street perspective, people and businesses are saying that inflation is here to stay and is not a short-lived or transient issue. Still, it is also important to remember that as supply and demand have taught us, what goes up can and often does come down. I contend and envision most of the inflation that takes place will be in hard assets and it will be the result of people losing faith in fiat currencies.When money is created or printed it has to go somewhere, and it has been fueling the “everything bubble.” While feeding the “wealth effect” and inequality, a bubble is not necessarily inflationary. All this can be a difficult concept to grasp. The important point to remember is that everything is relevant and values and prices change. Up until now, much of the newly created money has not resulted in massive inflation. This is because it has been diverted from goods everyone needs to live and into intangible assets not included in the consumer price index.

The way people view fiat currencies way be about to change in a big way, they are generally a poor place to store wealth. To be clear, I view the dollar as the best of the four fiat currencies, however, I expect all of them to come under more pressure in the near future with the yen and euro being the biggest losers. The amount of interest in cryptocurrencies and other inflation hedges is an indication many investors are losing faith in the central banks and fiat currencies. The result may be a monetary crisis and chaos that shifts people into tangibles and a self-feeding inflation loop.

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Is Powell Again Pulling Strings From “The Shadows”?

Is Powell Again Pulling Strings From “The Shadows”?

Recently, we have seen stocks rally while the dollar falls. Some of us are wondering why the dollar is falling at the same time currency traders are busy penciling in as many as four interest rate increases. The ICE U.S. Dollar Index, a measure of the currency against a basket of six major rivals, was down 0.1% on Thursday hitting a two-month low. This drop leaves the dollar with a loss of 1.2% since the start of the new year.A more aggressive tightening of monetary policy and “hawkish” central bank intent on slowing inflation is generally seen as supportive to a currency. Is it possible Powell dropped the dollar to kick the stock market back up? I contend this is what is happening. Such a move has been used in the past. In volatile markets, like we have today ruled at times by emotions, the fear of missing out, and a slew of traders trained to buy the dip, it doesn’t take much to turn an ugly selling streak into a buying panic.

The combination of a sudden drop in the dollar just as the Fed starts talking about tapering and raising rates is difficult to understand. With most seasoned investors allergic to risk, logic would tend to make them view the coming Fed action as a strong headwind to markets going higher. At the same time, higher interest rates and less expansion of the Fed’s balance sheet generally moves the dollar higher.

While it could be argued the falling dollar simply reflects the coming recession into which the Fed is tightening, again I point to Powell as the great enabler…

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Arguing The Un-Consensus On Today’s Macro & Inflation

Arguing The Un-Consensus On Today’s Macro & Inflation

In a YouTube video Mike Green, Chief Strategist at Simplify Asset Management, attacks the idea of hyperinflation and inflation. He is not alone in pushing back on the idea inflation is about to run rampant. Despite the price rises we have been seeing, many economists claim that while inflation is likely to remain elevated for the near future we are now seeing projections it will peak in the first half of this year.During an amazing, almost two-hour video interview,  Green shares his macro view of the economy, inflation, markets, and the dynamics of today’s equity and fixed income markets. In the video titled; The Un-Consensus on Today’s Macro & Inflation, Green claims the base effects driving inflation are becoming more challenging and will not allow for it to remain elevated. He also shares his view of how stock markets have become less efficient and more ‘inelastic’ due to the proliferation of passive index investing, and where that might lead.

While price is said to be located at the intersection of supply and demand, manipulation and interventions have muddied this picture. Green keys in on the fact that price shocks and distortions have a way of working through the system, when prices rise in the capitalist system, we generally see an increase in the supply of that commodity or service. He also points to the strong role demographics play in the economy. It is important to remember while price hikes can appear inflationary they are not a big issue if they last only a short time. The price of gas from 2000 until today is an example of how wildly prices can swing. In short, if prices do not stay elevated or continue to climb, they do not add to inflation.

See the source image
We Have Witnessed Wild Price Swings In Gas Prices Over The Years

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The Coming Retirement Crisis Will Affect Everyone

The Coming Retirement Crisis Will Affect Everyone

We are on the cusp of a retirement crisis that will affect everyone. Far too many promises have been made and the demographics we face do not bode well for a bright future. The answer that some people tout is we should have more children or open the borders. This is based on the idea we need more workers and ignores many other factors feeding into this issue. There is simply no way “more children” or workers can ever pay enough into the system to fulfill the promises that have been made.The competition for programs from the government to support the needs of different generations is about to explode as young and old Americans reach out for more help. Much of our problems stem from a slew of bad policies either driven by stupidity, corruption, or an unwillingness to accept the reality you can postpone a reckoning for only so long. Investors and the public at large suffer from a “recency bias of hope” that tends to blind them from unpleasant long-term realities. 

The coming together of surging investment risk, an interrupted business cycle, and demographics are coming together to form the perfect storm. To clarify, much of the wealth in America is held in the hands of the baby boomers that have just or are about to retire, and over the years, many have moved into risky investment in search of yield. It has been years since we have had a major recession so sooner or later, it is logical one will arrive. Last, but not least, we are now seeing demographics play a larger role in the economy as boomers downsize (sell assets) and cut spending.

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Inflation In 2021 Far Different From What We Had In 1979

Inflation In 2021 Far Different From What We Had In 1979

The inflation of today is a starkly different creature than what we faced in 1979. The world is massively different and presenting us with a strain of inflation that will most likely be stronger and more difficult to combat without major disruptions to our economy. This article is an attempt to highlight the differences and why today the position we find ourselves in is much more precarious.New data released by the Bureau of Labor Statistics showed price inflation in November rose to the highest in forty years. Allianz Chief Economic Advisor Mohamed El-Erian warned the Federal Reserve is losing credibility by not tapering its balance sheet to rein in inflation. Appearing on CBS’ “Face the Nation” he stated the most significant miscalculation in decades is the Fed’s inability to characterize inflation correctly. It was only on November 30th that Fed Chair Jerome Powell finally retired the term “transitory” and opted to label inflation as persistent.

President Biden responded to rising inflation has been to call upon Congress to pass his Build Back Better plan. Biden claims this will lower how much families pay for health care, prescription drugs, child care, and more.” In reality, of course, the passage of BBB would increase inflationary pressure throughout the economy and only transfer these soaring costs from the individual to the government.

The idea the economy of 2021 is strong enough to allow a rapid and huge surge in interest rates such as those imposed upon America in 1981 is false. During America’s prior bout with inflation 40 years ago the economy was able to withstand the shock. Yes, we did have a recession, but it was short-lived because the foundation of our economy was much stronger. America was not bleeding from huge trade deficits and people had real jobs.

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Will America’s New Nuke Deter War, Or Bring It On?

Will America’s New Nuke Deter War, Or Bring It On?

In a bit of irony, a Twitter comment by Jill Hruby Administrator of the National Nuclear Security Administration (NNSA) pointed to a new nuclear bomb as proof America is committed to nuclear deterrence. This is where it is important to remember that deterrence means, the action of discouraging an action or event through instilling doubt or fear of the consequences. See her Twitter post below;

@NNSAHruby
Last week, #NNSA successfully completed the B61-12 First Production Unit @PantexPlant. This is a huge milestone for stockpile modernization and demonstrates our Nation’s commitment to #nuclear deterrence.
 
The B61-12 Is Light And Accurate

It could be argued that reworking a nuclear bomb to make it easier to justify using it and widening out the opportunities for its use is nothing to brag about. This all falls under the category of, “once it’s out of the bottle it will be hard to put back in”

An article in The National Interest on October 9th, 2018 by Zachary Keck indicates this bomb may be the most dangerous nuclear weapon in America’s arsenal. The combination of accuracy and low-yield make the B61-12 the most usable nuclear bomb in America’s arsenal. It also makes using nuclear weapons thinkable for the first time since the 1940s.
 
To be clear, the reason it is such a monster is not because of its power. The bomb has a maximum yield of just 50-kilotons, the equivalent of 50,000 tons of TNT. By contrast, the B83 nuclear bomb has a maximum yield of 1.2 megatons which is 24 times greater. The B61-12 may only be able to carry low-yield nukes but is guided by an advanced Boeing tail kit.
Can Anyone Win A Nuclear War?

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Does Russia Threatens Us All By Simply Existing?

Does Russia Threatens Us All By Simply Existing?

This article is focused on giving readers a better understanding of the Russian threat. Few of us have had the pleasure of visiting Russia so what we do know about it has generally been filtered through a national security apparatus so entrenched in a cold war mindset they have lost all appearance of objectivity. Those with this bias are always pounding on the drums of fear and demonizing Russia as a major threat to America and our way of life.

Note Russia’s Failure To Appear On List!

Getting away from what shapes American opinion here are some real facts about Russia. For over half a century economic policy was shaped by the Communist Party and like the rest of the USSR, was centrally planned. The state controlled virtually all investment, production, and consumption across the country. The transition towards a market economy in the 1990s was painful. The chart on the right shows even today Russia fails to place in the world’s top ten largest economies.

    • Russia is the 9th most populated country in the world with 144.50 million people in 2017.

    • In terms of land area, Russia is spread across 9 time zones and is the largest country in the world. Russia shares borders with many countries, including China, Ukraine, North Korea, and Norway. 

    • The official language is Russian but there are 27 other languages co-official in various regions of the country. It is located in Eurasia (the combined continental landmass of Europe and Asia).

  • Some sources estimate that Russia contains over 30 percent of the world’s natural resources. 
Modest Skyline Downtown Moscow

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Our $29 Trillion Deficit, Interest Rates, Inflation, And Debt

Our $29 Trillion Deficit, Interest Rates, Inflation, And Debt

 

The emergence and acceptance of Modern Monetary Theory has turned our economic system upside down. Skeptics of its substance and sustainability have been brushed aside temporarily but expect the MMT experiment to collapse and end in ruin. To us that believe in old school economics, debt matters and is tied directly to interest rates and inflation. Central banks across the world claim the lack of inflation is the key force driving their QE policy and permitting it to continue, however, the moment inflation begins to take root much of their flexibility will be lost. This translates into governments being forced to pay higher interest rates on their debt.

With America’s national debt now blowing past 29 trillion dollars, it is important to keep the numbers in perspective. Nothing is as sobering as looking at future budgets. Those of us rooted in the tried and true economics relied upon in the past are worried.  For years the argument that “This Time Is Different” has flourished but history shows that periods of rapid credit expansion always end the same way and that is in default. This also underlines the reality that any claims Washington makes about the budget deficit being under control is a total lie.
Click (Here) To View National Debt Clock
America is not alone in spending far more than it takes in and running a deficit. This does not make it right or mean that it is sustainable. Much of our so-called economic growth is the result of government spending feeding into the GDP. This has created a false economic script and like a Ponzi scheme, it has a deep relationship to fraud.
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Warmongers Would Let Ukraine Become World War III

Warmongers Would Let Ukraine Become World War III

They just won’t let it go. It seems many of the so-called “warmongers” are hellbent on turning Ukraine into a major war whether the countries involved want it or not. History shows what has become known as “proxy wars” create profits for companies manufacturing weapons. The cost, of course, is then pawned off on taxpayers and a public preoccupied with personal concerns. Such talk of war is probably viewed as a blessing by President Biden and a White House that has been battered with bad press.

The proof that Ukraine is unlikely to go quietly into the night is reinforced by a slew of news stories over the last few days. It includes items such as the U.S. Embassy in Ukraine is warning of “unusual Russian military activity” near the nation’s borders and in the annexed peninsula of Crimea or that Canada is now considering larger deployments to Ukraine.

Nothing ramps up the hype like the headline, “Ukraine fears that Russia may be preparing to invade.” Brig. Gen. Kyrylo Budanov, head of Ukraine’s defense intelligence agency, said last weekend. He went on to say that Russia had more than 92,000 troops amassed at the border and could attack as early as the end of January. In reaction, not only is Canada looking at deploying hundreds of additional troops to support the Canadian soldiers already in Ukraine on a training mission, it is considering redeploying some of the CF-18 fighter jets currently based in Romania.

NATO Has Slowly Expanded Towards Russia

I stand with those arguing this has little to do with Russia taking over the world or Ukraine’s national sovereignty. It is about money, energy, and power…

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China Housing Market Is On Life Support

China Housing Market Is On Life Support

We must understand the housing market in China to fully comprehend how wealth is stored by many people in China. To those looking in from the outside, the housing market in China appears a house of cards ready to collapse at any minute. It is also a market sector that has become greatly oversized that it may now account for 25% or more of China’s GDP. Because it has become so ingrained in China’s economy we find that the Chinese government has no choice but to shore it up while at the same time trying not to encourage its growth.

Prices Have Soared In Top Tier Markets

China has over 680 cities but four are considered to “rule supreme” and are viewed as the best; Beijing, Shanghai, Shenzhen, and Guangzhou. As in many countries, the supply of housing falls well short of demand in the top cities, leaving many people increasingly stretched to buy there. The average price for a one-bedroom apartment in Shanghai is nudging towards $1 million. The  job magnet metropolis of Shenzhen is no bargain either, at about $700,000 for a flat.

A clear sign something is wrong is evident in the findings of an analyst for economic research firm Rhodium Group that estimates around 90 million apartments across China are sitting vacant. This indicates a huge oversupply in some areas of the country and unaffordable homes in certain cities. For years, developers have put up large apartment blocks in isolated parts of China. This was done because the land is less expensive in these areas and under the concept “if you build it they will come,” but often, they have not.

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Power Grid Failure Remains A Game-Changer

Power Grid Failure Remains A Game-Changer

When the power grid fails, modern life rapidly grinds to a halt. This game-changer is an issue we must seriously recognize. Whether we are talking about the grid or soaring electricity cost one thing is very clear, we are very dependent on electricity. This article should be considered a reminder of the fragility of our codependent modern society and how the things we have come to depend on could vanish in a heartbeat. By highlighting some of the vulnerabilities we face, even if they have been voiced by others in the past, at least we raise awareness of some of the dangers we face.News of blackout and energy shortages also raises the question of what is going on and whether we are being “toyed with” by those pushing us towards what they see as a greener future. It could be argued these “outages” are why we need to rapidly, “build back better” the whole grid. Of course, the flip side of that argument is that overzealous environmentalists are causing most of the problems that have resulted in outages. Electricity remains the lubricant of modern life, without it society cannot function. A great deal of damage occurs to the economy when a  power outage takes place. People can’t work, food supplies are damaged, and in times of inclement weather, people suffer greatly. Most Americans remember the power outage that gripped much of Texas in February of 2021. It resulted in pipes freezing and bursting and a great deal of suffering.

Blackouts have long been a thing of the past in most major cities but that has started to change. According to Bloomberg, the energy crisis that is rippling through Asia and Europe could unleash similar electricity shortages and blackouts in the United States. Soaring natural gas prices are forcing U.S. utilities to quickly turn to more coal…

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Like The Dance Band On The Titanic, The Band Plays On

Like The Dance Band On The Titanic, The Band Plays On

As The Ship Goes Down The Band Plays On

It is said the dance band on the Titanic played on as the ship went down. This was all done as a grand effort to reassure the passengers and ease the panic in their hearts. Consider the possibility that behind all the noise we hear today a similar effort is being made to comfort us and take your attention off the hopeless feeling that comes when things sink away beneath your feet. For the last several months I have come to feel a similar story is playing out here. The Biden-Yellen-Powell economy is less than inspiring.Looking back, it is clear the Fed’s policies have hurt savers, It has caused savers to flee towards riskier investment in search of higher yields, driven speculation, increased equality, add added to inflation. Rather than using the bully pulpit and warnings of higher interest rates to keep government spending in check, the Fad has acted as an enabler to the crowd in Congress that loves nothing better than to sending taxpayer money back home calming it is a gift and proof they are “working hard for their district.”

With historically low-interest rates, rising inflation, and many consumers struggling to make ends meet. The economy is at a place where there is not much capability to increase consumption without throwing money from a helicopter and massively increasing the national debt. The problem with that is such stimulus programs are poorly focused. As we look about in this post-pandemic covid-lite era we see supply chains crumbling, stagflation mounting, and jobs being lost to automation. These are all immense problems even in the best of times.

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“Nothing To Hide,” A Poor Excuse To Justify Surveillance

“Nothing To Hide,” A Poor Excuse To Justify Surveillance

Many people claim they have nothing to hide and use that as the reason they don’t object to the expanding web of surveillance being weaved over them. These people ignore the fact we are surrendering our right to freedom when we as a society go down this path. The reality is that when someone knows all about you and your deepest thought they gain tremendous power over you. This is directly linked to the ability to control you.This weekend on a short trip I came across a couple of annoying examples of the government dirtying the waters and making our lives more difficult and less free. These include turning parts of the interstate system into a toll road then not taking cash as payment and so-called “photo enforcement” of traffic laws. While many states have gone to using cameras to some extent for enforcing traffic laws, the practice remains highly controversial. Whether it is incorporated in the notion of reducing labor, streamlining the system, or ending counterfeiting or money laundering, the above can complicate our life. Tech is not the gift of freedom many people think. It could be said we are being boxed in and many of our options are not being preserved. 

 

 

Some People Remain Optimistic

The picture to the right is one of many that appeared when searching for images showing people stand up and fighting. The idea of resisting new rules and mandates placed upon us conflicts with the idea we should all try to go along with what we are being told to do. Some people have even suggested and claimed those resisting the changes fostered upon us be labeled terrorists.…click on the above link to read the rest of the article…

Food Stamp Increase Means Higher Food Prices For All

Food Stamp Increase Means Higher Food Prices For All

With the stock market banging out new record highs each day and so many jobs available, it is odd the Biden Administration feels the need to boost the Supplemental Nutrition Assistance Program, or SNAP by 25 percent. This constitutes the largest single increase in the program’s history. This significant and permanent increase in benefits will be available indefinitely to all 42 million SNAP beneficiaries.The increase is projected to cost taxpayers an additional $20 billion per year. It coincides with the end of a 15 percent boost in SNAP benefits that was ordered as a “pandemic protection measure.” Agriculture Secretary Tom Vilsack said the change means the U.S. “will do a better job of providing healthy food for low-income families.” It will move the amount of the average monthly per-person benefits for qualified recipients from $121 to $157. Never think for a moment this is all about feeding the poor, it is also about pumping up the GDP and profits of many big companies.

Unfortunately, whenever the government increases its role in any sector of the economy history shows it generally has a profound effect on the prices charged to consumers. For proof, we only need to look at healthcare costs and college tuition. In this case, we should expect the same thing to occur to food prices. What does the big increase in the SNAP program mean to consumers both on this program and the rest of us? It means we should expect a big jump in prices in supermarkets across America.

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Olduvai IV: Courage
In progress...

Olduvai II: Exodus
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