There's nothing "capitalist" about the Federal Reserve.
Also - ever notice that QT is much, much, much, much, much, much, much, much slower than QE?
"...when you look at the wealth disparity today, which by the way, in my opinion, the biggest accelerant of has been QE, it's not even debatable..."
Stan Druckenmiller
From Grant’s, May 2020:
They really want to ban cash:
The Reserve Bank of India announced on Friday that it would eliminate Rs2,000 ($24) notes, instructing the public to exchange or deposit them at banks by the end of September…The cash withdrawal, which begins on Tuesday, echoed Prime Minister Narendra Modi’s controversial decision in 2016 to invalidate Rs500 and Rs1,000 notes overnight, which were equivalent to more than 80 per cent of currency in circulation.
Global drugmaker AstraZeneca will seek to be a patriotic company in China that "loves the Communist Party", its China president said on Friday.
THE GRANT WILLIAMS PODCAST: RAYMOND BAKER
Baker just wrote a book called Invisible Trillions : How Financial Secrecy Is Imperiling Capitalism and Democracy and the Way to Renew Our Broken System
Here’s a synopsis:
Over the last half century, capitalism has created the means for trillions of dollars, euros, pounds, and other stores of wealth to move invisibly—beyond the control of central bankers, law enforcement agents, and international institutions. With an entire financial secrecy system now dominating capitalist operations, riches flow inexorably upward and accelerate economic inequality. And rising inequality is directly imperiling—weakening, obstructing, and degrading—democracy.
This book is not a screed against capitalism—it is a call for capitalism to return to its roots, reenergizing its synergies with democracy. Raymond Baker writes, “Democratic capitalism is, in my judgment, the best system yet devised in political economy, but dysfunctions within its capitalist component are undermining the two-part system.”
I don’t agree with everything Baker says, which is fine. Below is a section from Baker that I am completely on-board with. Common ground.
…the biggest part of the corroding of the commons is the impact that it has on economic inequality. This is what is driving the seriousness of the problem. We operate a system, the purpose of which is to move money from criminal to legitimate, from corrupt to respectable, and from poor to rich. That’s the purpose of the financial secrecy system. It’s not a extraneous after effect. That’s the purpose of the system and all that it does to crime and corruption, the biggest impact is on economic inequality.
…The biggest impact of this system is on democracy itself. We have so separated rich and poor that it’s having an impact on our commitments to democracy. I’ve argued this point with a lot of people and I have asked, “Tell me how you strengthen democracy amidst continuously rising inequality.” No one has ever given me an answer. I don’t think anybody’s going to give me an answer. Curtailing inequality isn’t the only thing that needs to be done for democracy, but it is an essential component of strengthening democracy.
…When I entered the business world, I won’t say that I felt this, in retrospect I think I realized that capitalism and democracy were working pretty well together. There was a measure of sync between the two. Capitalism was driving prosperity, democracy was driving equality in the political arena. But I’ve watched these two realities now drawing apart, becoming decoupled.
A lot of people think that you can have capitalism without democracy, you can maintain capitalism and drift toward authoritarianism, and that’s all right. I don’t think it’s all right. I think the capitalist system is dependent upon democracy. If the democratic capitalist system loses its capitalism component, I think it’ll take democracy down with it. This is what’s happening in so many countries around the world that have turned toward authoritarianism. I’ve never known an authoritarian country that didn’t have massive amounts of theft, kleptocracy at the highest levels.
We’re risking democracy itself with the machinations within the capitalist system. And I make this point because a lot of people think that the troubles within democratic capitalism are primarily in its democracy component. I don’t agree with that. I think it’s primarily in its capitalism component. That’s the component of this that has to be strengthened. Give me a more equal economic environment, and much of the problems that we have in democracy will begin to weaken and we can find again, the unity that is necessary to make both parts of our system work.
I see a trend:
There is nothing “capitalist” about our private banking cartel, and there was nothing "capitalist" about how Paulson, Bernanke and Kashkari handled 2008 ("Fascist" is a better term.) It was a heist (and 2020 was a repeat on steroids).
(Speaking of Grant Williams, I just saw he just did a podcast with - I haven’t heard it yet, but I like Matt1 (and Grant). I think both of them are among too few who are trying to find common ground in our crazy political arena. I know you have to sign up and pay Grant, so if you’re poor, just follow both of them on Substack or Twitter or wherever.)
From here things get much more tricky. The year-over-year base effects will roll out at the end of June, meaning July numbers, and from then on it could go any which way…in the U.S., food price inflation is still high. Food at home, above 6%, has always meant a recession. Food at home has been above 6% for two years running - it has gone up to 13 1/2% at the high, and is now all the way down - down! - to 7.1%. I broke down the components…60% of the food components…7% or higher, 40% are in double-digits! Forty-percent of the food items people buy are still inflating at double-digit rates, and this is every month, year-over-year…higher higher higher higher. Only 15% are in deflation. In the meantime, shelter is still 8.8%, two months in a row, and services ex-energy is now above 7%. This inflation has become a little more embedded.
This week, Eurostat reported that processed-food inflation (excluding alcohol and tobacco) eased in April for the first time in almost two years, from 18.8% yoy to 17.1%.
Yay! Food inflation is easing to 17.1% year-over-year!
Weldon also points out that real Japanese rates are at their lowest ever(?), with - unbelievably - yields below zero all the way out to 4-years!
And everywhere they’re pulling this stunt:
“16% size reduction along with 20% price increases”
Good commentary from Paul Sankey on the oil market. The headline of the podcast is Bull Market In Oil Is Over, but that wasn’t my takeaway, unless you are very short-term oriented.
Dismissing wind power, Sankey says “You either do nuclear or you do natural gas, it’s as simple as that.”
Jack: “Or you have technology where you can store it for a really long time, which is in the process of being developed.”
Sankey: “That would be the battery, and they’ve been developing that one for about 120 years. The battery is the Holy Grail, but the problem is you haven’t got close - even remotely close - to a baseload battery that would be, for example, the equivalent of a nuclear power plant. I mean you’re absolutely nowhere near that.”
Sankey mentions this from a 2007 book, Oil on the Brain:
Americans of all political persuasions tend to believe that we are trapped in an oil dependency over which we have no control. We are therefore victims of (fill in the blank): the Saudis, the Strategic Petroleum Reserve, OPEC, Exxon, GM, environmentalists who refuse to allow the building of new refineries, collusion between Dick Cheney and the oil industry, road-hog drivers, China's growing economy, and so on. Even the president, himself a son of the oil industry, has characterized American oil dependence as an "addiction," as if it were a tragic product of brain chemistry rather than one made of daily economic choices. Not only are these conspiracy theories useless for examining our relationship to an economy as complex as that of oil, they actively discourage strategic planning by suggesting that all circumstances are beyond our control. This uncurious anger and passivity among consumers, I've come to believe, is the real oil conspiracy.
“Joey Tumminello with Marcus & Millichap’s Institutional Property Advisors Group shares his insight on what the “smart buyers” (REIT’s, pension funds, life insurance and large family offices) are buying or NOT buying.”
Interesting anecdote right off the bat, referring to a different presentation:
One of the stats that Neil Bawa mentioned was that essentially nine out of ten syndicators out there have never done a capital call, and most people are coming into the capital call thinking, alright, I’m going to send an email, and all the money’s just going to come flooding in, and most of these capital calls are failing. Based on sort of a rough sampling, like 60% to 70% of capital calls are failing.
Three REITs getting drilled due to a crummy Los Angeles office market:
Results for the RV Industry Association’s March 2023 survey of manufacturers determined that total RV shipments ended the month with 31,869 units, a decrease of (-50.8%) compared to the 64,778 units shipped in March 2022. To date, RV shipments are down (-54.3%) with 78,600 units.
Realtor Growth (or lack thereof)
Since 1971, the average 30-year fixed-mortgage rate is 8.3%, and the median is 7.42%.
Let’s look at some rates…
After personally researching and watching how much the BLS has monkeyed with the CPI over the years - always to lower the number - I don’t know how you can really trust any governmental data.
The Labor Department’s Job Openings and Labor Turnover Survey (JOLTS) is overestimating the number of job openings in the U.S. by as much as 300,000, a Goldman Sachs group led by economist Jan Hatzius wrote in a Wednesday note to clients.
JOLTS, a monthly poll of employers long viewed as one of the most important reports on the labor market, has suffered from a roughly 50% reduction in its response rate since early 2020 as remote and hybrid jobs surged in popularity, Goldman noted; the survey’s standard error is now 90% higher than it was between 2002 and 2013.
The “upward bias from nonresponse” likely explains why the number of job openings reported far exceed similar measures reported by surveys with a heavier remote presence, according to the bank, suggesting JOLTS should be viewed “less like the ‘true’ level of job openings and more like another series to be viewed in conjunction with a suite of job openings metrics.”
I don’t always agree with Matt. e.g., I saw he just recommended a post by Robert Reich, who I think is a perfect example of the type of hopelessly partisan political hack we have far too many of in the world.
I have no idea if Bon Scott actually played the bagpipe, but he is one of the all-time great rock party gods.
Yay Capitalism” h/t Ben Hunt