Low inflation is "one of the major challenges of our time," Fed's Powell says

Have a nice weekend, amigos.

"The ancient art of deception is this: to present two lies, and get the people arguing viciously about which is true." - Dr. Yoshi Matsumoto

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(Here’s a link to the title of today’s missive (and don’t forget Yoda!))

So what can I say, other than Mission Accomplished!

The last time the CPI was this high, the Fed’s policy rate was 13%-14%. I wonder if they’ll buy T-Bills again today.

Ever since the Maestro and Citadel Ben, the Fed has squirted gasoline all over America (you know - “the Wealth Effect” aka “Trickle Down”). Now they’re shocked someone dropped a few matches.

These Fed clowns adversely affect 330 million Americans (to be fair, Larry Fink’s friends will be fine), yet there is never any Fed (or Congressional) accountability.

Too bad our sycophant Fed reporters are so awful.

This is funny: ECB doves disheartened by plans to hasten pace of rate rises Um, what rate rises?

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• New Car Prices Nearing Record High “The average new car sold for $47,148 last month.” Over 60% of American wage-earners make less than that in a year.

• Mark Zandi’s back: Opinion: Inflation is painfully high, but it should ease soon. I was reminded of this, from 2010: The Abysmal Track Record of Moody’s Mark Zandi

• “In the world of Wall Street, if you're bullish and wrong, you usually have plenty of company. But if you're bearish and wrong, it's almost unforgivable.” - Bob Kargenian

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Friend of the show Rational Walk pointed me to this story, Social Security Needs Saving Again. (By the way, the author’s first name is Rudy, and he was born in Weimar, Germany. How ‘bout that?)

So guess what one of Rudy’s solutions is? Monkey with the inflation numbers!

Slow the growth of benefits for new and existing beneficiaries alike by changing the basis on which they’re indexed for inflation. All indexing of Social Security now uses the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W. Economists agree that the Chained CPI is the most accurate inflation index available [remember, CPI is a nonsense model - RH]. Between 2000 and 2020, the Chained CPI was around 0.3 percentage point lower each year than the CPI-W.

“…as usual in human affairs, what determines the behavior are incentives for the decision maker.” - Charlie Munger

RW sent me a second article: ‘We’re all afraid’: Massive rent increases hit mobile homes. You will own nothing.

Private-equity firms including Stockbridge Capital, Carlyle Group and Apollo Global Management have been rapidly buying up mobile home parks over the last decade, often using funding from government-sponsored lenders Fannie Mae and Freddie Mac. Once they take over, one of their first moves is to raise rent

I wrote a long thread on Twitter about Bernanke, Yellen and Powell’s private-equity buddies taking over large chunks of housing, but now that I’m suspended, they’ve basically blown my archive to bits. Thanks, Paraga, you little rat.

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On being a landlord (or tenant) during hyperinflation…

Of great consequence — economically, socially and politically — was the strict control of rents of private dwellings, combined with regulations about security of tenure. In a country where individual house-ownership was comparatively rare and the renting of flats widespread, this was of great importance. For many years rents were kept so low as to be negligible — in 1922 some two or three per cent of the pre-war rents, expressed in gold marks. Suffice it to say that by the end of 1922 rent constituted less than a half per cent of the average household expenses. If this was a blessing for the tenant, who was thus at least assured of a roof over his head, and a blessing for the employers of labour, who could successfully advance the lowness of rents as an argument against wage increase demands, it was a curse for the owners of blocks of flats, who saw themselves deprived of the return from their investment in property, for the benefit of their tenants. - The Great Inflation

From When Biology Became Destiny

The middle class, comprised of owners of small enterprises, distributors, large and small, and professionals, lost its economic base. People dependent on fixed incomes, such as pension and personal savings, were reduced to penury, with women—particularly widows— suffering disproportionately. Those peasants and estate owners who were in debt gained somewhat since they were able to pay back their loans with cheapened money. The big industrial capitalists gained the most, benefiting from the bankruptcies of smaller businesses—a process which concentrated capital in fewer hands—and from lowered real wages, which made German exports more competitive.

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Interesting Real Estate Podcast with Nick Gerli “A lot of people are blaming this housing downturn on increased mortgage rates, which is true to an extent, right? The higher mortgage rates are leading to declining affordability, but the real problem in the housing market is that home prices are too high.”

Reminds me a bit of Kyle Bass in 2008.

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The Overton Window

The magician controls your mind by limiting what you’re able to consider as valid solutions to a given problem. It is no different than when a parent, seeking the compliance of a child, gives the child a limited choice. “Would you rather stay and help me clean up or do your homework?” Framing the question in this way feels like a genuine choice to the child, and, in a way, it is. But the secret is that the parent has limited the available choices to only the two most acceptable to himself. Whatever the child picks is fine, because the options the parent did not like have already been taken off the table.

This my friends is Red vs Blue. Republican vs Democrat. Right vs Left. They give you a choice, but only between things they consider manageable. Only within the bounds of their game.

“End the Fed” is outside the Overton Window. It’s not even in the same universe as the window.

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Rethinking the Legal Protection of American Police for Cowardice

And vice versa.

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“There is great freedom in realizing that corporatism is bipartisan. It frees you from the squabbles of the cable news syndicate…” - Saagar Enjeti

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