Free speech is the whole thing, the whole ball game. Free speech is life itself.
If liberty means anything at all it means the right to tell people what they do not want to hear.
Today’s title is from Salman Rushdie in 1991.
The second quote is from George Orwell in his outstanding 1945 proposed preface to Animal House, The Freedom of the Press. It’s more applicable today than ever, a must read.
Just a sampling…
At this moment what is demanded by the prevailing orthodoxy is an uncritical admiration of Soviet Russia. [Today we’ve flipped 180°] Everyone knows this, nearly everyone acts on it. Any serious criticism of the Soviet régime, any disclosure of facts which the Soviet government would prefer to keep hidden, is next door to unprintable…
Speaking of must reads, this July 4th weekend, check out Eisenhower’s Farewell Address. Note that this speech, during a freezing part of the Cold War, when we had a realistic chance of nuclear war every day, Eisenhower did not directly mention the Soviet threat at all. Instead, he warned of, basically, a “deep state.” In 1961.
Imagine how immensely more powerful it is today…
This conjunction of an immense military establishment and a large arms industry is new in the American experience. The total influence-economic, political, even spiritual-is felt in every city, every state house, every office of the Federal government. We recognize the imperative need for this development. Yet we must not fail to comprehend its grave implications. Our toil, resources and livelihood are all involved; so is the very structure of our society.
In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist.
We must never let the weight of this combination endanger our liberties or democratic processes. We should take nothing for granted only an alert and knowledgeable citizenry can compel the proper meshing of huge industrial and military machinery of defense with our peaceful methods and goals, so that security and liberty may prosper together.
…we must also be alert to the equal and opposite danger that public policy could itself become the captive of a scientific-technological elite.
And of course there’s George Washington’s 1796 farewell address, which every American armchair chickenhawk warmonger needs to read (no video - sorry). Just a remarkable document.
…nothing is more essential than that permanent, inveterate antipathies against particular nations and passionate attachments for others should be excluded and that in place of them just and amicable feelings towards all should be cultivated.
The nation which indulges towards another an habitual hatred or an habitual fondness is in some degree a slave. It is a slave to its animosity or to its affection, either of which is sufficient to lead it astray from its duty and its interest. Antipathy in one nation against another disposes each more readily to offer insult and injury, to lay hold of slight causes of umbrage, and to be haughty and intractable when accidental or trifling occasions of dispute occur. Hence frequent collisions, obstinate, envenomed, and bloody contests.
The nation, prompted by ill will and resentment, sometimes impels to war the government, contrary to the best calculations of policy. The government sometimes participates in the national propensity and adopts through passion what reason would reject; at other times, it makes the animosity of the nation subservient to projects of hostility instigated by pride, ambition and other sinister and pernicious motives. The peace often, sometimes perhaps the liberty, of nations has been the victim.
So likewise, a passionate attachment of one nation for another produces a variety of evils. Sympathy for the favorite nation, facilitating the illusion of an imaginary common interest in cases where no real common interest exists, and infusing into one the enmities of the other, betrays the former into a participation in the quarrels and wars of the latter without adequate inducement or justification. It leads also to concessions to the favorite nation of privileges denied to others, which is apt doubly to injure the nation making the concessions—by unnecessarily parting with what ought to have been retained—and by exciting jealousy, ill will, and a disposition to retaliate in the parties from whom equal privileges are withheld. And it gives to ambitious, corrupted, or deluded citizens (who devote themselves to the favorite nation) facility to betray or sacrifice the interests of their own country without odium, sometimes even with popularity; gilding with the appearances of a virtuous sense of obligation a commendable deference for public opinion, or a laudable zeal for public good, the base or foolish compliances of ambition, corruption, or infatuation.
Now compare these two Presidents to those since they killed JFK. Embarrassing.
Inflation is a crowd phenomenon in the strictest and most concrete sense of the word. The confusion it wreaks on the population of whole countries is by no means confined to the actual period of the inflation. One may say that, apart from wars and revolutions, there is nothing in our modem civilizations which compares in importance to it. The upheavals caused by inflations are so profound that people prefer to hush them up and conceal them.
- Elias Canetti, Crowds and Power
Here is Nomura’s Expectations for the Fed’s policy rate path:
At this rate the Fed will be cutting rates and monetizing trillions again in no time. Remember, we went over this:
Eurozone inflation hits record 8.6% in June Lagarde’s solution is to raise rates from -0.5% to -0.25% three weeks from now.
Peter Boockvar, February 2020:
"There is quite a disconnect between central banks who want to raise the cost of living, and people living paycheck to paycheck...at some point, I hope the average person will make the connection and see what central banks are trying to pull off."
Jeff Greene “also sees a parallel between the subprime mortgage crisis of 2007 and the booming stock market and crypto wave of 2021. “It's like when I was doing the subprime short [betting that the value of subprime mortgages would fall] and I remember saying, 'Who's on the other side of this trade?' These mortgage-backed securities had almost no possibility of being paid back,” he said.
"It's the same thing with people saying, 'Well I have to buy equities because I don't want to make one percent [return with low interest rates] so I'm going to put my money in something that's highly inflated,” Greene said. “And they bought crypto, SPAC shares, houses to flip, equities and private equity investments at unprecedented multiples of revenue with no prospect of earnings whatsoever.”
This was Bernanke’s and the Fed’s intent with ZIRP and QE - get Grandma into risky stuff.
ZIRP and QE distorted (and still distort) the price of everything on Earth, as everyone got into a desperate reach for yield for over a decade.
Asset bubbles grew massively, Larry Fink got richer, Ben went to his reward with Ken Griffin and Pimco, and most Americans fell further and further behind.
First we got the asset inflation a few overwhelmingly benefited from, then we got even higher goods inflation - the most regressive tax - in everything else.
Never forget - for years every central banker on Earth told us low inflation was the #1 threat, when in reality it was their policies.
The Federal Reserve is an existential threat to most people.
Tell your Congressperson.
Who owns the Fed’s massive losses?
We estimate that at the end of May, the Federal Reserve had an unrecognized mark-to-market loss of about $540 billion on its $8.8 trillion portfolio of Treasury bonds and mortgage securities. This loss, which will only get larger as interest rates increase, is more than 13 times the Federal Reserve System’s consolidated capital of $41 billion.
Unlike regulated financial institutions, no matter how big the losses it may face, the Federal Reserve will not fail. It can continue to print money even if it is deeply insolvent. But, according to the Federal Reserve Act, Fed losses should impact its shareholders, who are the commercial bank members of the 12 district Federal Reserve banks.
…This unenviable financial situation — huge mark-to-market investment losses and looming negative operating income — is the predictable consequence of the balance sheet the Fed has created. The Fed is paying rising rates of interest on bank reserves and reverse repurchase transactions while its balance sheet is stuffed with low-yielding long-term fixed rate securities. In short, the Fed’s income dynamics resemble those of a typical 1980s savings and loan.
…Clearly, if the Fed is required to comply with the language in the Federal Reserve Act and assess member banks for its operating losses it could impact monetary policy. The prospect of passing Fed operating losses on to member banks could create pressure to avoid losses by limiting the interest rate paid to member banks or discouraging asset sales needed to shrink the Fed’s bloated balance sheet. Moreover, if the Fed’s losses were passed on, some member banks may face potential capital issues themselves.
Will the Fed ignore the law, monetize its losses, and create a new source of inflationary pressure? Or will it pass its losses on to its shareholders? Stay tuned.
One of the authors of the above I often cite:
“The Federal Reserve Reform Act of 1977, for one, does not say ‘price stability.’ It does in particular not say ‘a stable rate of inflation.’ It says ‘stable prices.”
- Alex J. Pollock, President and CEO of the Federal Home Loan Bank of Chicago, 1991-2004
I like to joke(?) that the Fed is a sort of unconstrained bond fund (and they must be the largest mortgage-holder of residential property in America.)
California Drivers Paying More Than $6 a Gallon Brace for Fuel Tax Hike
“At an average of $6.29 a gallon — which is almost 50% higher than it was a year ago — Californians already pay more for gas than residents of any other state, partly due to environmental regulations that require the sale of a less-polluting blend of fuel. The national average is $4.86 a gallon, according to auto club AAA. Also, the state already charges the second-highest gas tax nationwide — after Pennsylvania — at 51.1 cents a gallon. As of Friday, the fuel excise tax rate is set to rise 5.6% — adding about 3 cents a gallon — due to a statutory annual increase to keep with inflation”
The People’s Republic of California has devolved into a dysfunctional feudal one-party authoritarian state, run by some of the stupidest people this side of New York City - but the weather’s nice.
Like a conventional resource, a shale basin ramps up early in its life then plateaus and ultimately declines. We were among the first to intensely study the concept of shale depletion as early as 2019 and we concluded their best days were likely past. This was an incredibly important conclusion given the US shale basins represented nearly 90% of all non-OPEC+ growth between 2010 and 2019. In our Q4 2019 letter, we laid out our research and predicted that shale growth would begin to falter, causing the global crude market to slip into deficit. So far this is exactly what has happened.
From what I’ve seen, these Goehring and Rozencwajg guys have been really prescient on energy matters. My other go-to source on energy (and inflation-related stuff) is anyone from Horizon Kinetics. (I have a little bit in one of HK’s funds).
The road to zero emissions must embrace nuclear power
The capital, operation and maintenance cost of two power systems, the need to operate at lower efficiencies, the extra stop/starts, grid balancing, spinning, the use of less efficient turbines and the need to buy gas on the spot market at times of high demand all add costs to the operation of the grid. Those costs will increase as you add more intermittent power sources to the grid, but they are never shown in the published costs of wind and solar power. Those extra costs are the reason why countries with high installed wind and solar capacity tend to have high electricity prices, and why your electricity bill will always go up when so-called “low cost” wind and solar are added to the grid.
FRED does housing inventory!
These are percentage increases over last year for Austin and Phoenix.
So we always hear about how we don’t have enough homes, so I divided the Fed’s own “Housing Inventory Estimate: Total Housing Units in the United States” by the Population and got this:
The national median rent increased by a record-setting 17.5 percent over the course of 2021. This of course did not factor into the official CPI.
The high temperature in Las Vegas is 125 F (51 C) and the low is 8 degrees (– 13 C). Without modern machinery and a national network keeping this place supplied with essentials there’s no way the current population of 2,200,000 people could survive in this environment. Las Vegas is basically a space colony.
The Granola Shotgun blog is an interesting one. On February 17, 2020 the author had a comment on a (now deleted) article that I noted at the time:
One of the seasoned high end contractors I spoke with is a friend I’ve known for 25 years. He told me he’s not taking on any new projects. He sees all the warning signs of a market correction and he’s quietly wrapping up his existing work and stepping out of the game for a while. The reason he’s still a successful contractor is he noticed the signs of the last couple of on coming crashes in 2007 and 1999.
Note that the NBER (who someone put in charge of recessions) has the brief 2020 recession starting in February 2020, and they say that the peak occurred in Q4 2019, well before anyone other than a few conspiracy theorists had even heard of the new coronavirus. As I tweeted at the time, “Maybe it’s not just coronavirus.”
If you’d like an alternate 2019-2020 history, here you go. (Here’s a recent interview with the author, Fabio Vighi)
A 2014 article from the very interesting Credit Bubble Stocks site:
The BRIC ETF BKF has a dividend yield of less than two percent. One of the funny things about buy and hold investors is that they choose to ignore some very unpleasant discontinuities in stock index time series. For example, once during the past century you would have lost all of your investment in Chinese companies in a confiscation. How do you account for that? Are you getting paid for that risk with a two percent yield?
Breed’s Hill
Something else, something entirely intangible and perhaps not even recognizable at the time, had occurred on June 17, 1775. Men who were not fighters by trade or inclination had stood side by side behind their earthworks and their fences and had waited calmly while some of the most formidable fighters in the world advanced against them in ordered ranks. They had not run from artillery fire, they had stood up to the wild terror of a bayonet charge, and they had broken only when their ammunition gave out and they could fight no more. A few months earlier the odds against the success of any American military effort would have been overwhelming; the regular army was an object of dread, not to be tested. Now Americans had met it face to face, and like a figment of darkness suddenly exposed to the light, it could be seen for what it was—an army that commanded great respect, but one composed of men no taller or stronger than any others. By demonstrating that some rather ordinary American farmers had stood against this formidable enemy, the battle of June 17 proved, as nothing else could, that others might accomplish the same thing. Had they failed, it is just conceivable that the rebellion might have sputtered out.
- Richard M. Ketchum, Decisive Day: The Battle for Bunker Hill
The Battle of Bunker Hill is listed as the 6th deadliest of the Revolutionary War (in terms of Americans killed) - 411 Americans and over 1,000 British. Interesting that, of the top 25 deadliest battles, “only Ramsour’s Mill is considered a decisive American victory. The vast majority are decisive British victories with a handful of debated draws.”
I’ve seen a number of alarmist headlines this week. e.g., UK Covid Cases Surge 32% as Subvariants Trigger Fresh Concerns. Just an observation.
For what it’s worth: A Guide to the Management of COVID-19 (Front Line COVID-19 Critical Care Alliance) (I found a lot in here that confirmed much of what I’ve been reading - and using - for the past couple years. Note that I’m not legally a doctor.)
Barton Wang was one of the earliest smart people talking about Coronavirus, maybe even in late-2019. I basically went with his advice:
…And it really ticks me off that - after decades - the FDA is trying to make N-acetylcysteine (NAC) prescription only, because it’s safe, it works, and because Pfizer can’t make money off it..
This was probably my first coronavirus tweet, January 21, 2020:
If you recall, the stock market was asleep until around mid-February 2020:
Somebody mentioned the CHOP Zone earlier and I came across this:
…a man identifies himself with the unit of his money; doubt cast on it offends him and, if it is shattered, his self-confidence is shaken. He feels slighted and humiliated by the lowering of the value of his monetary unit and, if this process is accelerated and inflation occurs, it is men who are depreciated until they find themselves in formations which can only be equated with flight-crowds. The more people lose, the more united are they in their fate. What appears as panic in the few who are fortunate enough to be able to save something for themselves, turns into mass flight for all those others who have become equals by being deprived of their money.
- Elias Canetti, Crowds and Power
"...if you can depreciate a currency what you’re really lowering is the price of labor." - Michael Hudson
How in the hell do you remain so productive, relevant &, incremental to what I do? 🙏🎯
Farewell addresses left me speechless. Again.
The Corona ad is brilliant - given UV-exposure exterminates the "virus" entirely, yet the lockdowns orchestrated by wankers forced the crowd into the opposite direction: COVID-lockdowns are climate lockdowns of the New Normal - I wish it would be a joke...
Have a good weekend, sir!🍻