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Friday, November 18, 2022

2022-11-18

*** denotes well-worth reading in full at source (even if excerpted extensively here)


in-brief only; haven't been keeping up with my regular reading while under-the-weather


Economic and Market Fare:

Modern money & inflation
MILTON Friedman was a powerful magician. His words charmed people into believing that night was day, against the evidence of their own eyes. Friedman’s maxim that “inflation is everywhere and always a monetary phenomenon” is widely believed by economists, even though it is abundantly obvious that the costs of production, especially energy costs, play a major role in creating inflation.

.................. We will conclude this article by discussing some simple economic theory, which continues to baffle the Friedmanites. Milton Friedman’s views are based on a very simple idea of classical economics. Given a fixed amount of goods, if we double the amount of money in the economy, then prices will also double.

Keynes observed that this did not hold during the Great Depression, when production levels were very low relative to what they could have been. He noted that pouring money into the economy would lead to increased production. If we double the goods and double the money, then no inflation would result.

Friedmanites (monetarists) reject this basic Keynesian idea. They argue that the inflow of money does not lead to increased production, and so inflation will result from the increased money supply. Empirical experience strongly supports Keynes against Friedman. In contrast to monetarists, modern monetary theory (MMT) builds upon, and sharpens, this Keynesian insight, as we discuss below.

Historical experience showed that the expansion of money supply by the central bank did not necessarily reach the sectors of the economy where there was high unemployment. Instead, the money might flow into those sectors operating at full capacity and cause inflation, contrary to Keynesian views. This phen­o­menon was termed ‘stagflation’ — un­­e­mployment toge­th­­er with inflation. MMT suggests that mo­­n­ey should be targe­ted at unemploym­ent, to prevent this from happening.

The key policy recommendation of MMT is a job guarantee programme. The most valuable unemployed resource in an economy is the labour. If we spend money on providing a productive job to an unemployed labourer, then the increase in money will automatically be offset by the increase in production. More money combined with more output will not lead to inflation. ............


Inflation Huge Miss: Core CPI Slides From 40-Year-High, Real Wages Tumble For 19th Straight Month







..........

Conclusion:

There seems to be light at the end of the inflation tunnel, particularly as money supply has collapsed down to levels consistent with 2% inflation. Quantitative tightening can accelerate this trend further, potentially pushing M2 into negative territory. Inflation has now become very sticky and broad-based, however, while wage growth is still not consistent with 2% inflation. Moreover, the velocity of money remains a big unknown and could keep inflation high even if money supply falls.

As things stand right now, a further deceleration in inflation seems probable, but a quick return to normality still looks unlikely.



Key Points
  • The US Federal Reserve Bank’s expectations for the speed of reverting to 2% inflation levels remains dangerously optimistic.
  • An inflation jump to 4% is often temporary, but when inflation crosses 8%, it proceeds to higher levels over 70% of the time.
  • If inflation is cresting, inflation levels of 4 or 6% revert by half in about a year. If inflation is accelerating, 6% inflation reverts to 3% in a median of about seven years, threatening an extended period of high inflation.
  • Reverting to 3% inflation, which we view as the upper bound for benign sustained inflation, is easy from 4%, hard from 6%, and very hard from 8% or more. Above 8%, reverting to 3% usually takes 6 to 20 years, with a median of over 10 years.
... Those who expect inflation to fall rapidly in the coming year may well be correct. But, history suggests that’s a “best quintile” outcome. Few acknowledge the “worst quintile” possibility, in which inflation remains elevated for a decade. Our work suggests that both tails are equally likely, at about 20% odds for each. .....

When Will the Inflation Genie Go Back in Its Bottle?
To answer this question, we studied all cases where inflation surges above 4% in 14 OECD developed-economy countries from January 1970 through September 2022.1 After a country’s inflation rate first exceeds 4%, we observe inflation’s behavior thereafter. 

..... We observe a useful pattern. When inflation first crosses the 4% threshold, often caused by a temporary exogenous shock, it usually reverses course; in 32 out of 52 cases; over 60% of the time inflation never reaches the next threshold of 6%. We call any case where inflation fails to reach the next threshold cresting inflation. That is the good news. The bad news is at 6% and higher inflation, cresting inflation is the exception, not the rule: inflation usually marches to the next threshold. When inflation subsequently rises to the next threshold, we call these cases accelerating inflation. Indeed, once the 8% threshold is surpassed, as happened this year in the United States and much of Europe, inflation marched to the next threshold, and often well beyond, over 70% of the time
.......



Charts:

4:



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Bubble Fare:



....The tricky part is that investors do not obey any formula that requires the valuations they pay, or the returns they accept, to be wise rather than stupid. We’ve seen far too much “stupid” in this bubble, particularly at the speculative edges, where the implosion is already clearly underway. .................



(not just) for the ESG crowd:


Banks and corporations making pledges of ‘net-zero’ emissions are taking the public for a ride, according to a new United Nations report released at this week’s COP27 climate change conference



Tweet Vids of the Week:




Contrarian Perspectives

Extra [i.e. Controversial] Fare:

*** denotes well-worth reading in full at source (even if excerpted extensively here)


Krishnamurti: “It is no measure of health to be well adjusted to a profoundly sick society.”




Endemic Fare:

I've continued to come across too much excellent COVID-related content (with contrarian evidence-based points-of-view!!) to link to it all
Read [almost?] everything by eugyppius; el gato malo; Mathew Crawford; Steve Kirsch; Jessica Rose!
Chudov, Lyons-Weiler, Toby Rogers are also go-to mainstays; a list to which I have added Andreas Oehler, Joey Smalley (aka Metatron) and, Julius Ruechel; Denninger worth staying on top of too for his insights, and especially his colorful language; and Norman Fenton; Marc Girardot; plus Walter Chesnut (on twitter); later additions: Sheldon Yakiwchuk & Charles Rixey & Aaron Kheriarty; and newest additions Meryl Nass and the awesome Radagast; and Spartacus is on substack now!!; I will of course continue to post links to key Peter McCullough material, and Geert Vanden Bossche, and Robert Malone, and Martin Kulldorff, and Jay Bhattacharya, and Sucharit Bhakdi, and Pierre Kory, and Harvey Risch, and Michael Yeadon, and John Ioannidis, and Paul Marik, and Tess Lawrie, and Dolores Cahill, and [local prof] Byram Bridle, and Ryan Cole, and... of course Heather Heying and Charles Eisenstein often bring their insight and wisdom to the topic as well... and if Heying's substack isn't enough, she joins her husband Bret Weinstein at their DarkHorse podcast ....
but, in any case, check out those sources directly as I will my linking to material by those mainstays mentioned above will be reduced to key excerpts and/or essential posts


Concerning new pre-print

Reason no 18493829340 why you shouldn’t vaccinate pregnant women with a substance that hasn’t been through robust trials. Reason no 18493829341 why you don’t say “well a few pregnant women have had it and they seem ok, so every pregnant woman should have it”. ........



Co-Vid of the Week:




Back to Non-Pandemic Fare:

***** CaitOz Fare ***** :


...... Westerners are “free” in the same way “free range” chickens are free; sure the door’s technically open and they can technically go outside, but they’re conditioned never to do so. Western so-called liberal democracy purports to offer freedom while in practice only offering the illusion of freedom. It uses the most sophisticated propaganda machine ever devised to keep people trapped in an existence as blindly obedient gear-turners while cartoons about freedom play in their heads.



I wonder if my own government is being truthful about its actions in that part of the world?

I wonder if my own government is in the wrong on this issue?

I wonder if the news media are telling the truth right now?

I wonder if the news media tell the truth about things generally? 

I wonder if the “Evil Dictators versus Virtuous Liberal Democracies” framework I’ve been taught by teachers, pundits and politicians is the most accurate lens through which to view world events?

Could I have been deceived about the way my government operates, at home and abroad?

Is it possible that my beliefs about my society, my government and my world are completely wrong?

What if the teachers, preachers and parents who helped form my worldview were relying on inaccurate information?

Who has benefitted from the beliefs that are in my head? Is it possible that those beliefs were placed there, directly or indirectly, by people who have benefitted from my having them?

Are there any power-serving falsehoods that I believe because it is cognitively easier to believe them than to let in information that might hurt my ego or require me to restructure my entire worldview?

Does civilization really have to be organized in this way? Is it possible to create better systems that work for everyone? Do I only assume things can’t change because the current systems have been deliberately normalized for me? .........



Rigger-ous Reads (on Culture Wars, Identity Politics, etc.):


........... Carroll, however, got into trouble by issuing the tweet above, which, as his caption noted, purported to represent the views of “actual science”. In reality, it represented the “progressive” ideological views of Scientific American. In light of the magazine’s steep decline, we can no longer take its word for what accepted science tells us. ......



Long Reads / Big Thoughts:

Not everything is horrible: there is greater knowledge, there is beauty, there is art, there is friendship

I often get criticized for coming across as too pessimistic (the young kids call it ‘blackpilling’), too negative, and lacking in ideas on how to make things better. This is a very fair criticism, but I will still try to mitigate it by explaining myself as follows:

It took me a very long time to realize that when I write, I am writing for myself, to myself, to help me understand the world around me. This might come across as selfish, but it is not intended to be so. The amount of information that the normal person is bombarded with daily would seem unreal to his or her own great-grandfather. For those of us who are terminally online news junkies, it becomes exponential.

Writing allows me to work out not just how to process this deluge of information, but also how to categorize it mentally, how to spot patterns in it, and how to anticipate what will come next. If I can make sense of something during this effort, it is a success.

Over the years I have learned to take a more ‘big picture’ view of the world around me, and not to get too lost in the details, even though “details can kill you”, as an ex-boss of mine in my consulting days hammered into my head. It’s this big picture approach that allows me to somewhat detach myself from the ups and downs of the news cycle. I credit Oswald Spengler for this, along with the fatalism that I have inherited from my own cultural upbringing. “Optimism is cowardice!”, insisted Spengler. ......




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