SatStats

 

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The state's war against inequality.

Since the Federal Reserve was created in 1913 and given control over the nation’s money supply, the Consumer Price Index has increased by a factor of 27.25 times which has caused the US dollar to lose 96.3% of its value/purchasing power. (Perry)

Negative Rates in Europe

Today’s political discord is less durable and dangerous than an obvious consensus, one that unites the political class more than ideology divides it. The consensus is that, year in and year out, in good times and bad, Americans should be given substantially more government goods and services than they should be asked to pay for.--Will


It feel cool. Like Fall.
Chris went to the Pirate game, then played baseball; mom went to a movie; Liz went to a musical.

Amanda Knox is getting married. Her wedding will be "very nontraditional."
That includes the couple "writing a fun script," Knox said, and asking guests to come in costume. Probably not scary ones.

Frequent Uber customers in San Francisco and Chicago can get Uber’s new subscription pass that combines all of the company’s offerings into a single deal: Discounted Uber rides, access to Jump electric scooters and bikes, as well as free Uber Eats deliveries, all in a single package. $24.99.

The Justice Department has received 270 bias-crime cases since 2009, and obtained convictions in only 29 of them. 

The political theorist Isaiah Berlin warned in 1967 that "a single formula to cover all populisms everywhere will not be very helpful. The more embracing the formula, the less descriptive. The more richly descriptive the formula, the more it will exclude." Nonetheless, Berlin identified a core populist idea: the notion that an authentic "true people" have been "damaged by an elite, whether economic, political, or racial, some kind of secret or open enemy." 
What fuels populist politics is that concept of the people battling the elite. This is often presented as anger towards subsets who are more successful but often looks more like anger toward subsets that have more access to perceived common assets. I'm not so sure about the "true people" requirement.

By 2017, a Pew poll showed that just 15 percent of Republicans supported paring back the escalating costs of Medicare or Social Security to bring down the deficit.

In every year from 1977 until about 2003, North Dakota ranked in the bottom 15 US states for GDP per capita. Thanks to the fracking revolution and the prolific Bakken Formation, North Dakota’s energy-related economy was booming by 2009 when it rose into the top 15 states for the first time, before quickly rising to the No. 1 state for per capita GDP in 2015. By 2018, North Dakota fell back to the No. 6 ranking.

On this day in 1945, in the 11th hour of World War II, Winston Churchill was forced to resign as British prime minister following his party’s electoral defeat by the Labour Party. It was the first general election held in Britain in more than a decade. The same day, Clement Attlee, the Labour leader, was sworn in as the new British leader. 
Apparently Churchill had not done enough for the British people.


               Negative Rates in Europe

There has been plenty of discussion in the financial media about the Fed needing to “compete” with other central banks, whose policies have led to $13 trillion in bonds with negative yields. As absurd as that might seem, especially when developed economies aren’t in recession, this type of  monetary policy has gone mainstream.

But how will that work when rates in so much of the developed world are already negative?

In his Out of the Box commentary, Mark Grant, B. Riley’s chief global strategist for fixed income, wrote on July 22 that the negative yields exist “for one reason only, and it is because the nations of the European Union, Switzerland and Japan have mandated that their central banks take rates to these levels so that their countries can survive.” Grant elaborated in a later commentary: “Most nations in Europe cannot afford their budgets, or their social programs, and have lost their ability to raise taxes without having their politicians thrown into the streets, and so they manufactured money in their computer rooms and lowered the yield on their bonds, to less than zero, in many cases.”
So the creation of that money needed to run their programs will be cheap.

All this, with low inflation. Someone planning to retire 10 years from now and fund a significant portion of his expenses with interest or dividend income from savings or investments may have to change his plans. Unless inflation quickens and forces a complete change in central banks’ policies, interest rates and dividend yields may be too low for a simple change “from growth to income” to fund his golden years. On the other hand, what will happen if the interest rates on that created money rises?

New Chart

The idea behind giving professors lifetime tenure is that this will enable them to speak out freely. But it would be hard to name any other occupation with a more cowardly record than academics, who have been giving in to politically correct campus bullies ever since the 1960s. --Sowell


Brian has some job offers to weigh.
Nice Pa Women Work dinner last night at Casbah. A lot of Docs.
One of Liz' co-workers tried to pull her in to a plot to embarrass her boss; a real Iago.

The City of Toronto police department has confirmed that a woman was shot in Nathan Phillips Square during the rally celebrating the Toronto Raptors' NBA championship win.

The Dodgers, looking to bolster a bullpen that has had its share of slip-ups this season, are interested in acquiring Pirates closer Felipe Vazquez, Jon Morosi of MLB.com reports. There is no indication the Pirates would be amenable to trading Vazquez, however. Vazquez wouldn’t be the closer with the Dodgers; he’d instead team with game-ending righty Kenley Jansen to form a duo that would be one of the envies of the league.
He couldn't be their closer, he'd be their setup man!

Former Secretary of State Rex Tillerson told Congress he was often blindsided by Jared Kushner’s foreign-policy efforts as Trump’s son-in-law worked independently, according to a transcript of testimony.(wsj)

 A 2016 paper by economists Emmanuel Saez and Gabriel Zucman attempts to measure wealth concentration at the very top of the distribution. Saez and Zucman’s study points to an extreme and rapid inequality spike. They claim that the wealth share of the top 1 percent skyrocketed from 24 percent of the total share in 1980 to 42 percent today — almost doubling in a little over three decades. A new statistical measure prepared by the Federal Reserve appears to tell a very different story. It shows that wealth inequality is increasing in recent decades, but at a much more modest pace that’s less than half of the Saez-Zucman spike. The Fed’s new DFA measure shows a recent rise in wealth concentration from a trough in the 1980s. But that rise only brings the 1 percent to parity with what Saez and Zucman’s own series depicts for the 1950s — an era that political commentators often champion as a “golden age” of greater equality in the United States.

A new Project Veritas investigation reveals some suspicious search manipulation skullduggery at Google to promote a political and social justice agenda. The guy who runs Veritas is really objectionable, but not as objectionable as Google's acts, if true.

According to the most recent data available from the National Science Foundation, women actually earned slightly more bachelor’s degrees in “Science and Engineering” (3,111,529) between 2006 and 2016 than men (3,091,614).

On this day in 1914, Archduke Franz Ferdinand of Austria and his wife Sophie were shot to death by a Bosnian Serb nationalist during an official visit to the Bosnian capital of Sarajevo. The killings sparked a chain of events that led to the outbreak of World War I by early August.


                             Some Charts

Why is it that the Asian-white achievement gap gets no attention compared to the extensive and widespread attention the white-black achievement gap gets, even though the gap for Math SAT scores has been growing for Asians vs. whites since 1996 while it’s been stable for whites vs. blacks for the last 20 years? (This chart compares Asian-White, not Asian-Black, scores.)




Can you believe this if it's a census question?



This is something:



This graph  of inflation pops up every so often but there is an interesting translation: Blue lines = prices subject to free market forces. Red lines = prices subject to regulatory capture by government. Food and drink is debatable either way. 

Buying Power

Here is a graph adapted by Perry to show prices over time and what has happened in the last twenty years to common purchases. The inflation rate was 55% during the twenty years, that is to say the growing available money pool devalued the dollar--and the stable wages and earnings of the hapless citizen--by 55%. But production changed the availability of some products and, hence, the price. (The economics of things makes much more sense if one thinks of it as a management of availability and scarcity.)

Real Numbers on Real Debt

Lacy Hunt's observations published recently by Mauldin deserves a hard look. His argument is that the current economic problems have appeared many times before, all as the result of overextended borrowing and nonproductive debt. He has no real argument with the stimulus, arguing that illiquidity is the worst possible circumstance in the scenario, but states that every single similar economic episode has evolved in the same way: long term low growth with low interest rates and no runaway inflation.

As much as I hate to say it, a vote for Krugman.

The Pleasure of Making Do

Hedonic technique  (from "pleasure") is an accounting effort to incorporate quality changes into evaluation of pricing. This is done by breaking everything--product, labor--into its constituent parts and evaluating their values individually.  A refrigerator with an improved heat exchange system, a better motor and a more efficient lighting system could be seen as a cheaper product despite being technically more expensive because it offered more. So an engineer making 100K when transferred to a less advanced country who finds he is able to live better for less would be seen by the hedonic method to have received a raise.

Wonderful things can happen when both components being analyzed are variables.

While this seems as modern "angels on the head of a pin" navel gazing, there might be some aspects here worth considering on a larger scale: How do people see their comfort and does it change over time? My parents had some specific aims in their financial life. They wanted a house they liked, a car and maybe a second used car, a decent education for their children and some promise of a comfortable retirement that would not necessitate a large decline in their lives. Succeeding in those hopes would be seen as comfort.

How about their grandchildren? Maybe in the future they will rent and not own a house. Maybe they will send their children to trade school and not college. Maybe they will feel real enjoyment with a good tv, cable and a great phone so that their lives, while smaller than their grandparents, will be at least as fulfilling.

So the older generation would see a decline in living standards the younger generation does not see. 

Modern Performance Art

Forbes Magazine had a recent article on "Aftershock," a book of anxiety and despair regarding the modern financial markets. The three co-authors, brothers David and Robert Wiedemer, and Cindy Spitzer (whose last book was "Sex for Grownups"), are making a lot of money by advising people to sell their homes now, cash out their life insurance policies, and dump their stocks ahead of what they predict will be 50% unemployment, a 90% stock market crash, and 100% annual inflation. Aftershock argues that a succession of bubbles (dotcom, housing) have set the country on the path to ruin.  Now Federal Reserve market "manipulation" make banana republic inflation levels inevitable starting in 2012. Their advice: Sell everything, buy gold and inflation-linked securities.

But the $800,000 or so in book royalties the authors may receive pales in comparison to the trio's ancillary businesses. David Wiedemer told Forbes Magazine the book is responsible for $100 million in assets flowing into Absolute Investment Management, a Bethesda, Md.-based money manager with whom the brothers partnered and where they are now managing directors. On top of that, 1,000 people have paid an annual fee of $399 to receive the Wiedemers' investment advice, a number that is growing faster as more people read the book.

A new book is coming but David is thinking bigger. "I'd really like to do a mutual fund," he says. (Forbes)

There is something about doomsday advice, some flame to the investor moth. Somehow even optimistic people can not stay away. They crowd in like a disaster movie. Global warming has a similar feel, the threat of chaos and the perhaps insane arrogance that regardless of the degree of disaster, we can take charge.

Sounds a lot like the hubris of certain politicians.

Years ago there was a guy named Joe Granville who was a very popular, very bearish investment adviser. At financial conferences he would come dressed as Moses or emerge from a coffin on stage. Sometimes he had animals on stage that did tricks. The Hulbert Financial Digest that reviews investment advisers' performances always rated his performance as low but I don't think Glanville was so concerned with the financial end of the performance.

He, like Barnum, knew what his audience was really interested in.

The Economy and the Well Poisoners

Employment rates for the over 55 year old cohort are rising. Rising. As the older generation continues to find they can not afford to retire, there will be fewer jobs for the younger generation to fill.

Why the difficulty in retiring? One thousand dollars in 1980 is now worth somewhere between 378 dollars and 192 dollars.
There are a number of accounting differences here but essentially what people have saved is being degraded in value by the government's expansion of the money supply. Degraded a lot. So a dollar in 1980 lost 63% of its value over 20 years but had it been in the stock market it would have been worth 15 dollars. That is an annualized return of 14.4; that looks good. But, inflation corrected, it is only 5.8%.

These are bad numbers.

But in the last 12 years, it is worse...
An investment of 1000 dollars in --the Dow -- the S&P500 --NASDAQ
has changed in value 2000-2012 --- +13.1% -- -7.1% -- -38.2%
but when inflation is factored---- -15.4% -- -30.5% -- -53.8%

That is a terrible record for someone hoping to grow his savings and retire. It's a terrible record for almost anything. And one can see the erosion, the gradual increase in the household workforce as wives, then children, get jobs; as households turn more and more to leverage to make up the shortfall in their buying power. This is not a poorly understood event like earthquakes or global warming; this is the result of policy, policy developed and implemented by politicians and bureaucrats who either do not know the consequences of their actions or do not care.

But when the inevitable happens they do sympathize with us and they do rush about looking for someone to blame.

War and Inflation

A look at any debt graph from the last century will reveal a truth of life: Inflation follows war. In fact war is the ultimate example of "the broken window" theory where production is gratuitous and does not contribute to the growth of the society. At war the whole county is devoted to producing things that blow up. What economic model could possibly be worse. Every war the Americans have fought in the last century resulted in inflation and this effort in The Middle East will too.
But this has not always been true. War has been--for the winners--a very successful national investment. History is filled with examples of war as a tool for expansion and expropriation. For the more primitive, the enemy's fields feed the troops and the victims allow the soldiers sporting diversion. The more sophisticated extort from the defeated in reparations. But sometimes warriors hit the lottery: One Roman emperor found so much silver on a foray into eastern Europe that it alone supported the military and domestic efforts of Rome for the next generation. The conquistadors were a gold mine for Spain. But the Americans have broken new ground with war: They don't steal things from the defeated. In fact they usually give things to them. While the Russians were dismantling every plant in East Germany and sending it home to Mother Russia, the Americans were Marshalling money to rebuild West Germany into a shining example of the west and, incidentally, a fine economic competitor. Ditto the Japanese' cultural U-turn.
This is a new concept and the Americans are consistent. They invaded Kuwait, saved the Saudis (who hate them), rescued the Kuwaitis (who hate them) and saved the country's oil fields from the Iraqi sabotage and, as well, saved the planet from their smouldering pollution. In spite of their slavish almost pathological relationship with petroleum, the Americans stole not one drop but cheerfully returned it to their rightful owners, the nomadic tribe that happened to be there when it was discovered. They are now in an endless campaign against an enemy with the GDP of the Tutsi.
There must be some explanation for this behavior. Perhaps it is the American respect for private property. My advice is: Do not attack and kill people unless you are willing to steal from them.

Love is Like Oxygen

Carbon monoxide, CO, is a colorless, odorless and tasteless gas that is poisonous to mammals. It has a peculiar property so cleverly incorporated into the novel "Coma": Its human victims appear healthier than average because the gas replaces CO2 on the hemoglobin molecule with CO and gives the blood a rosy quality despite the fact that no oxygen is transferred at the tissue level. Essentially CO binds to the hemoglobin, makes the blood look red and rich yet never releases oxygen. The victim suffocates despite his bright and flushed countenance. Describing it as insidious underestimates it; it is a killer with a disguise. It looks like what it is replacing so its homicidal effects are camouflaged. It mimics the appearance of well oxygenated blood while functioning as its opposite. It is the ultimate conflict between form and substance.
I've heard this used as an analogy to government acting as a substitute for private enterprise but it does not hold up well. Government can behave as a producer, an inventor and as an engine of economic growth--it is just very inferior. The motive for substituting government into an economy is never to improve it; it is always to sacrifice the economy to some other purpose, usually a bigger social safety net, sometimes simple personal aggrandizement or, worst, a theory. But CO is a lovely analogy to inflationary debt. The borrowed money provides leverage; the economy expands and shows all the appearance of good health. Carelessness, imprecision and overgrowth follows. Not until the value of the underlying assets are exposed as insufficient does the anemia become apparent. Then, decline and death.

The Willie Sutton School of Economics

I have spent some time looking at hard assets. This is a capitulation for me because these assets are unproductive, defensive and generally of little use to anyone. Sure, they have some uses in catalytic converters, electrical connections and coins worth less than their mineral content but assets are mainly bets against productivity, the other side of the inflation coin. Inflation is a subtle tax on savings; assets usually escape --and sometimes grow. Worse, inflation harms the lender most: It freezes his holdings in a currency that shrinks, then repays him in a currency that has shrunk. No wonder there is limited credit; no one wants caught owed the Old Maid Dollar when the game stops.
Our huge debts will be paid or defaulted on--then paid. There is no escape. But the average guy will not pay it; it will be the saver, the guy with the vision to deprive himself of something in the near term to grow something for the long term. The guy who has believed in and contributed to the "system." Because that's where the money is. And his involuntary contributions to balance the excess--through the inflationary destruction of his savings--will make him a disillusioned and hostile man.