No CPI Change
Several ill-defined economic data points were unveiled this week. Namely, the Labor Department’s July consumer price index report. According to the government data, on whole, consumer prices for the month didn’t change one iota.
Short Circuited Feedback Loops
Finding and filling gaps in the market is one avenue for entrepreneurial success. Obviously, the first to tap into an unmet consumer demand can unlock massive profits. But unless there’s some comparative advantage, competition will quickly commoditize the market and profit margins will decline to just above breakeven.
Example of a “commoditized” market – hard-drive storage costs per GB. This is actually the essence of economic progress; this price decline has benefited consumers immensely and vastly enriched their lives. This makes it all the more baffling that central bankers insist we absolutely need price inflation in order to have economic growth (in fact, it actually demonstrates what dangerous lunatics they are). – click to enlarge.
The Next President’s Debt Burden
According to the Department of Commerce, U.S. gross domestic product increased at an annual rate of 1.2 percent in the second quarter of 2016. This, unfortunately, isn’t indicative of the sort of robust economic activity that will grow the economy out of debt. In fact, as growth is stagnating, deficits are increasing.
Potential future debt administrators Donald Trump and Hillary Clinton (this may be the real Hillary Clinton; unfortunately no-one knows where she is at the moment, as she has evidently been replaced by a malfunctioning android).
Photo credit: Getty Images
Mad as a Hatter
Somewhere, someone first said “bull markets don’t die of old age.” We suppose this throwaway phrase was first uttered in a time and place much like today. That is, in the midst of a protracted bull market where stock prices had detached from the assets and earnings of companies their shares represent claim to.
They may not die of old age… but they do occasionally die.
Photo credit: Brett Cole
“What has been will be again, what has been done will be done again; there is nothing new under the sun,” explained Solomon in Ecclesiastes, nearly 3,000 years ago.
King Solomon, who reportedly was the go-to guy in his time when good advice was urgently needed. He also was a nigh inexhaustible fount of highly quotable statements. What would he have made of negative yields to maturity?
Painting by Giambattista Tiepolo
Asset Price Levitation
One of the more preposterous deeds of modern central banking involves creating digital monetary credits from nothing and then using the faux money to purchase stocks. If you’re unfamiliar with this erudite form of monetary policy this may sound rather fantastical. But, in certain economies, this is now standard operating procedure.
The “Tokyo Whale” Haruhiko Kuroda explains his asset purchase madness with a few neat little slides.
Photo credit: Stringer / Xinhua Press / Corbis
Consequences of Central Bank Policies
The existing capital stock continues to be frittered away at the expense of savers and retirees. Nonetheless, central bankers don’t give a doggone about it. This, after all, is one consequence of roughly eight years of near zero interest rate policy.
Central planning superheros, leaving a wasteland behind…
Image credit: Steve Epting
Myths and Legends
“Myths and legends die hard in America,” remarked Hunter S. Thompson in The Great Shark Hunt, nearly 40-years ago. Thompson didn’t likely have U.S. Treasury bonds in mind when he made this observation. Though, if he were still alive, he may find the present state of the great Treasury bond bubble to be an amusing anecdote.
Gonzo! Hunter S. Thompson, who had the theory that the truth is never told during the nine-to-five hours…
Winners and Quitters
Vince Lombardi, the famous American football coach, once said, “Winners never quit and quitters never win.” Maybe he meant that winners overcome obstacles to reach their goals while quitters give up and fall short… or something to that effect.
Legendary coach Vince Lombardi, prolific provider of bumper sticker material.
Photo credit: USATSI
A Sucker’s Deal
The yield on the 10-Year Treasury note’s accelerating its descent toward zero. The last we checked the yield was at about 1.56 percent. But in every practical sense, for income investors, a yield of 1.56 percent may as well be zero.
Beyond Human Capacity
Distilling down and projecting out the economy’s limitless spectrum of interrelationships is near impossible to do with any regular accuracy. The inputs are too vast. The relationships are too erratic.
The economy – complex and ever-changing interrelations.
Image credit: Andrea Dionne
Seven Year Achievement
“Read the directions and directly you will be directed in the right direction.” — Lewis Carroll
See? It’s easy Janet! Just read the directions!
Illustration credit: Walt Disney
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- The Great Stock Market Swindle
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