Economic Notes - 2022 and 2021
Oct. 21, 2022: See, here is the thing that is making us (economists and rational investors) so crazy - we are in a weird kind of crazy-world, were damage is being programmed-in with careful, deliberate intent. This is nuts. We have rising prices, which are *not* the result of too much demand. Our global supply-chains are being constrained - and this is causing scarcity, and that is causing prices to rise. Here is a specific example - rice - which has nothing to do with chips, cars, or semi-conductors:
We *will* see rising prices now, for rice. Everyone eats rice. We eat rice every day. Rice has been cheap and plentiful for most of our lives. But this is going to change. And the rising costs of rice, will have *nothing* to do with interest-rates. Rising interest-rates will just *raise housing costs* because mortgage costs have basically doubled, supply of new-construction will be reduced, and scarcity will be enhanced. Demand will fall for new houses, but housing costs will *rise*, not fall. Rate increases will *raise* costs for housing. Supply restrictions will raise prices for food.
And rate increases will have *no effect at all* on reducing prices of food products, which are being restricted by supply constrainsts. But the rising food and housing costs *will* induce working folks to demand higher wages and salaries.
We (and others!) suspect that recent rapid increases in administered interest-rate costs, will also raise government financing costs as government bonds will require 3, 4 or 5 percent yields (or higher) to be sold to investors - especially since inflation is running at 7 to 8 percent. This means governments will be looking to raise taxes - further adding to rising household costs.
The rapid interest-rate increases are also hammering - quite effectively - the global equity (stock) markets, and household wealth is falling. In some cases, it is falling *a lot*. But this will not induce lower prices - it will just make people poorer, as they face the rising prices created by higher housing costs, and higher food costs, and now have less wealth to offset the new costs.
And higher energy (fuel and heating and electricity) costs are also happening, and also are not being reduced by higher interest-rate costs. With substantially higher financing costs, any pipeline, refinery or exploration and development costs will be higher - and this will drive higher energy costs.
There is simply no way around these facts - raising interest-rates will *raise* costs, in any activity where financing is required - everything from oil-and-gas exploration and development, to battery mineral (eg. lithium & cobalt) mining and EV development efforts, now face substantially higher project costs. They just do. This is clear, and obvious.
So, the entire approach of the Central Bankers, is not just questionable - it can be proven wrong, by basic inspection.
We are certain the inflation we are seeing, is less the result of too-much-demand, and very much being driven by too-little-supply, or other supply-related constraints, of which, at the moment, there are so many obvious ones.
So, just what the fuck are these clowns thinking they are doing? Do they not have any analysts that can actually think and make economic observations, and then suggest rational action?
This is a manufactured crisis that need not take place - at least not at the rate and intensity that we are seeing it unfold.
The Central Bankers should pay attention to the stock markets, not just the bond markets. The equity markets are sending out a very clear message, and the government people and the bankers should think twice about just ignoring this message.
Engineering an economic depression is perhaps not the smartest or wisest course of action, especially since we (the Western World) is now tracking towards global war, which appears now to be something that cannot be avoided, without we risk our own destruction at the hands of totalitarian states which have chosen to follow the path of evil. (So surprising. Who would have thought?)
But Economics matters. And we need to have central bankers and government people not be completely stupid, and mindlessly follow the dictates of incorrect models.
We would advise central bankers to avoid any further interest-rate increases, and focus instead on reducing the bloated money supply - and do this just by letting the bonds on the balance sheet "run-off" (mature, and as they mature, do not purchase new ones). This will shrink the bloated money supply, and should act to reduce overall price-level. Maybe. Watch and see.
And government people need to reduce restrictions on development of critical energy infrastructure (nuclear reactors, oil pipelines, mining efforts, etc.), and ensure supply restrictions are addressed. Government people are doing exactly the opposite of this.
Hell, we learned all these lessons in the 1970's and 1980's.
It is frustrating to see that we need to have the political people and the central bankers, learn all this important material again.
We don't need to have an economic depression - but that is what we are tracking towards, if we don't make some serious course changes.
Oct. 20, 2022: This is hilarious - it is beyond comical - Biden's "Energy Advisor" has actually admitted: we are degrading and damaging USA oil and gas production (and making prices, of course track upwards), so as to "accelerate the transition".
You could not make stuff like this up. The Biden Democrats are way past just being stupid - they have tracked into that world of "mass deception" where they just lie into the camera, and on their news-generation clips, and say stuff that folks know to be complete fraud.
But not always - every so often, one of them tells the truth, as in: (I paraphrase:) Yes, we are lying to you about greedy oil and gas companies, because, hey, we are trying to degrade American oil production, so we can "accelerate the transition" to a special America, that looks like WE want it to look like - lots of bicycles and poor-people on trains who have to vote Democrat, if they want to eat... And if you don't like it, too bad, losers.
This is the really amazing part of Economics. When you see these political monkey-boys, try to actually damage and degrade a working economic process, so they can have a "crisis", which they can then use to leverage themselves into positions of power and control - it is amazingly dishonest and abusive. It is the edge-condition of ugly, corrupt and abusive political fraud. And it seems to be so curiously common now.
It's a kind of nightmare economics, that seems curiously unexpected. But they are actually doing it. And we are eating the costs, right here, right now.
Sept 2022: The USA and the World economy are getting stretched and twitchy. Canada is booming along, since we have abundant supplies of both uranium, and oil and gas. We are also lucky in that we have most of the necessary infrastructure to actually process these raw "energy" inputs, and distribute the fuel-product to the nation - despite the absurd size and shape of our homeland.
But like our neighbour to the south, the politics at the federal level, is getting difficult and nasty. We are paying the price for some unwise political choices, and we will miss the opportunity to benefit by exporting our energy supplies to a now energy-starved Europe and Asia.
This is unfortunate. It was also un-necessary, and did not have to happen.
Our political problems stem in part, from the inherent lack of honesty, in our media entities.
It is even worse in the USA.
Just below is an August 30, 2022 piece by Newt Gingrich, and offers evidence of the twisted and dishonest state of USA mainstream media. It is so bad now, that this leftist-media disinformation process, is becoming a major economic factor. People are being systematically lied to and misled by American Leftist Media organs. it will affect economics, as deception always does:
Mr. Gingrich's piece is below. It is important.
Media refuse to see Republican wave coming this November
The legacy, left-wing media is at best misunderstanding – and at worst deliberately distorting – the evidence that a Republican-led wave election is coming in November.
This is especially true in the U.S. Senate, where Republican candidates are well positioned to regain control of the body in a mass repudiation of President Joe Biden and the Democrats’ policies.
For starters, it’s a midterm in a new president’s term. History tells us these elections almost always cut against the president’s party. Add to this that 74 percent of Americans think the country is headed in the wrong direction thanks to out-of-control spending, 40-year high inflation, rising prices, surging violence, an unpoliced border, and a host of lesser crises.
The Democrat-led Congress has a 79 percent disapproval rating, according to Statista. And Biden is hovering at 53 percent disapproval in an average of polls of likely voters, according to FiveThirtyEight
(many polls are much worse for Biden).
But set these broad indicators aside for a moment.
CNN, WSJ, WAPO REPORTS SUGGEST GOP LOSING MIDTERM STEAM
The left-wing media is currently pointing to the recent special election in New York’s 19th Congressional District as a bellwether for the November elections. Democrat Pat Ryan eked out a 2-percentage-point win over Republican Marc Molinaro. To claim this Democrat victory as a sign of things to come is either ignorant or dishonest. New York’s 19th District is reliably blue. In 2020, the Democrat won by 11.6 percentage points.
Democrats also had a tremendous structural advantage in this special election because it was held on the same day as party primaries – which are usually stand-ins for general elections in New York because of the massive Democrat voter base. New York has closed primaries, so independents (those who can swing an election) can’t vote in Democrat primaries. Simply put, this system suppresses independent voter participation because independents simply don’t have much on which to vote (independents made up less than 5 percent of the electorate in the previous three New York primary elections).
A 2-percentage-point win here should make Democrats nervous – not jubilant. The real lesson from the NY-19 race is for Republicans. President Trump earned 178,000 votes in the district in 2020. Although it was redrawn before this race, Molinaro got only 63,000 votes. Had Molinaro run a more aggressive campaign that focused on big national issues, I suspect he could have reached more of the potentially 115,000 Trump voters who weren’t motivated to turnout for the special election. This would have given him the win.
The media is also obsessing over Senate Minority Leader Mitch McConnell’s recent comment that the Senate elections would be tough for Republicans. In all fairness to McConnell, his super PAC has since poured tens-of-millions of dollars into these races – and he clearly intends to win them. At the same time, pundits and reporters are ignoring the deeply positive, optimistic attitudes from the Republican National Committee, the National Republican Senate Committee, and a host of other Republican Senate-focused groups. The media is also ignoring the massive Republican voter enthusiasm. We have seen enormous Republican turnout and voter registrations across the country.
As I wrote earlier this week, every Democrat Senate incumbent has to carry heavy burdens in November – the Biden record and their own votes. The Democrats running for Senate in Arizona, Colorado, Connecticut, Georgia, New Hampshire, Nevada, Pennsylvania, and Washington have voted with the Biden-Democrat agenda between 96 percent and 98 percent of the time this Congress.
Similarly, Democrats running in other races will have to bend over backwards to avoid repudiating their party base, leadership – and the president – if they want to reach independents.
Simply put: Democrats own inflation. They own high gas prices. They own rising violent crime. They own the border disaster. They own the 87,000 new IRS agents. They own all of it. If Republicans stay focused on these issues, the Democrats will crumble.
I don’t expect the establishment left-wing media will recognize any of this. But I expect the American people will.
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Here is link to Newt Gingrich's other note and reports:
Below, are some other interesting and illustrative economic observations, by other authors:
Further Critical Economic Reports, for Autumn, 2022: