’Bidenomics’: Dumbed-Down Bullsh!t

WHAT COULD BE MORE FUN on Christmas Day than to look back over 2023 and recall ‘Bidenomics?’ Here it is, in pictures, according The Washington Post, which gets its facts for free. The gist of the pitch is that labor, unemployment, growth, gas prices, home prices, inflation, interest rates, disposable income, stock market, student loans, consumer sentiment, and the federal deficit, while not perfect, all look pretty good. They don’t. None of them. NONE.

Ask Art Laffer, known for the ‘Laffer curve’ on the relationship between tax rates and the amount of tax revenue received. He’ll tell you simply: “[People] care about prices, jobs, and mortgage rates.” Never mind the costs from the enormous federal deficit, border crisis, illegal alien invasion, increased welfare roles, disease resurregence, military and bureaucratic support of Ukraine, Gaza support, likelihood of Taiwan intervention, and the Red Sea crisis currently unfolding. Never mind a possible WWIII and draft in young America’s future. Never mind generalized corruption at home and abroad, problems from China, Iran, and others, or the rampant human and drug smuggling and homelessness here. Never mind continued supply chain problems and shortages of goods from baby formula, drugs, cars, and a lot of stuff in between, along with recent bank failures destined to worsen as more Americans rely on second jobs, credit, or retirement savings to pay bills. Inflation is brutal; homes, food, etc. Increased bankruptcies and business failures are likely. Who knows what the Fed will do in ’24, but easing v. tightening money supply in recent years has given Americans whiplash.

Goldman Sachs isn’t so cynical about the economic future. Others think the worst may be behind us. From a monetary perspective, that cannot be true. Fiscally? Maybe. But don’t bank on it…  As for freedom of speech in the New Year? Forget about it, along with accurate vote counts! They can’t count money or votes…

An Insolvent Central Bank Attempts to Sell Off a Seized Asset

ANOTHER BANK FAILURE is imminent—that of First Republic Bank out of San Francisco. It is the third such failure in under two months, after the bank runs on Silicon Valley Bank and Signature Bank, where billions were pulled by worried depositors. Even a $30 billion lifeline from 11 Wall Street banks in March couldn’t curtail the hemorrhaging at First Republic, and by Friday, its market cap hit a trough of $557 million, down from a crest in Nov. of 2021 of $40 billion. FDIC receivership appeared inevitable. 

The Federal Deposit Insurance Corporation on Thursday requested PNC Financial Services, US Bancorp, Bank of America Corp. and JPMorgan Chase make any final bids for the bank by Sunday, prior to its anticipated seizure of FRB. The intent was to have a deal before Asian markets open Monday morning, although talks were still underway prior to midnight EDT on Sunday. The plan is being conducted more rapidly than in the prior two failures. FRB’s stock plummeted 97% this year, and trading was halted numerous times on Friday morning as a result of its precipitous 50% decline. It’s 52-week range was a high of $171.09 to just $2.99.

FRB’s doomed fate began with SVB’s troubles, resulting from an otherwise  theoretically safe bond-ladder balance sheet that had declining values due to large Fed interest rate hikes in a short period of time. When, after the run at SVB, the asset flight continued at FRB by nervous depositors, bank assets, which had diminished in value, were insufficient to cover demand from the high net-worth clientele with their high amounts of uninsured deposits (i.e., in excess of $250,000). For FRB, those deposits amounted to 68% of the total. This necessitated expensive borrowing from the Fed, the lender of last resort. All told, FRB lost $100 billion in deposits in the first quarter. Coupled with a disappointing earnings and guidance on April 24th, the writing was on the bad check. 

Todd Baker, Senior Fellow at the Richman Center for Business, Law & Public Policy at Columbia tried to handicap the bidders on Medium. He summarized the situation thusly: “All [five bidders] can “afford” the bank with sufficient FDIC assistance, although a private deal is effectively impossible outside of a collective bid by the banks that provided $30 billion in emergency deposits last month.” (brackets mine.) 

Baker stressed that branch closings and layoffs won’t do the trick. The successful bidder would need to instead have retention packages to keep the customer service model intact that catered to wealthy clientele. (He also noted the possible irony of BoA was the successful bidder since it owned FRB after buying Merrill Lynch in 2008, and selling it in 2010 because it didn’t fit in with its own wealth management plans.) Baker ultimately concluded PNC would be the best fit because it has a growing wealth management operation and there is little to no overlap in service area, which would provide the highest added value amongst the bidders. Though, he added, Citizens Bank could be “a real dark horse winner” for similar reasons. 

JPMorgan has the big bucks to do the deal, but since it holds over ten percent of the nation’s total bank deposits, federal law would technically bar it from the acquisition of FRB, although it could be waived by banking regulators according to an alleged expert on bank failures. The law on point is the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1993 for anyone caffeinated and self-loathing enough to stay awake through a reading of the dry language. 

Still, these bank failures never should have happened. In the cases of SVB and Signature, the Fed did something unusual (and one would think illegal) when it insured depositors over and above the usual $250,000. (It apparently required the approval of the Treasury Secretary, the president, and super-majorities of the boards of the Federal Reserve and the FDIC.) While it was clearly done to try to prevent bank runs, it didn’t work, perhaps because depositors didn’t believe it. Whether the Fed would—or will— do the same for First Republic isn’t known, though if it were to do so, one would think it would have been done by now. This apparent favoritism is vaguely reminiscent of the Fed’s letting Lehman Brothers and Bear Stearns fail, while it propped up other banks in the 2008 Financial Crisis. 

Interestingly, the Fed seems to accept some blame, according to The Wall Street Journal. But is the U.S. Federal Reserve Bank itself even solvent? So-called investigative historian Eric Zeusse says no in his opinion piece on Telegram, here. A senior economist at the American Institute of Economic Research, Thomas L. Hogan, Ph.D., agrees. It all begs the question of whether and to what extent any of these regulators know what they’re doing—with taxpayers’ money.

There are other troubling signs in the economy in 2023. There have been 70 major business bankruptcies already this year. It’s the third-worst start to a year since 2000. Also concerning is the commercial real estate sector, first hurt by the pandemic. Office vacancies are rising at a startling rate nationwide, but especially in cities. Combined with newly rising unemployment rates, it’s an ominous start.

Bidenflation & the Call for IOUs, Digital Currency, & Wooden Nickels

In the 1970s, there used to be this thing called the “Peter Principle,” which, paraphrased, held that people reach their own level of incompetence in life. Today things are different. We now have the “Woke Principle,” which goes even further, to say people who are incompetent simply rise like a Chinese surveillance balloon, and to continue the metaphor, may later suddenly pop. 

It’s hard to believe Janet Yellen was Federal Reserve Chairperson (2014-2018). If not qualified, then she seemed at least marginally competent, reaching her Peter Principle zenith. Today, she’s Treasury Secretary in the Biden regime, and has fallen from those lofty heights as well as from America’s good graces. She’s about to pop. To be sure, it’s a hard job and hard times, but still, this is bad…

After two recent bank failures, Silicon Valley Bank and Signature Bank, Yellen was called to testify before the Senate Finance Committee on Biden’s 2024 preposterous and irresponsible budget proposal where Sen. James Lankford (R-Okla.) tried to get her to commit as to whether or not the deposits at all Oklahoma community banks would, from here on in be fully insured under the FDIC, just like Silicon Valley Bank and Signature Bank were. (SVB filed for bankruptcy on Friday.) He was referring to the moral hazard of having Americans mistakenly believe their deposits would be fully insured above $250,000 FDIC limits like the Valley oligarchs were, and he clearly didn’t believe that was, or would be the case.

Yellen said she didn’t want to encourage that line of thinking, adding that a bank would only get “that treatment” under the “systemic risk exception rule.” That takes a “supermajority,” along with the agreement of Biden and herself. The test is that “the failure to protect uninsured depositors would create systemic risk and significant economic and financial consequences.” 

When asked about the insurance on CCP-linked deposits at the two banks on Thursday, Yellen could only muster a vague response to Sen. Lankford’s question, “Will my banks in Oklahoma pay a special assessment to be able to make Chinese investors whole from Silicon Valley Bank?” Yellen replied, “I suppose that could include foreign depositors. I don’t believe there’s any legal basis to discriminate among uninsured.”  Say what?! Do you not see you are discriminating against Oklahoman depositors?! (Video here.) In a complete non sequitor, Yellen, with a straight face and bulging eyes, told the Senate, “the banking system is sound.” Yeah, right…Why then did former Chairman of the FDIC, William Isaac, tell Neil Cavuto on Fox News that “there’s probably going to be more failures along the way…the problem we have is the same one that we had back in 1970s when the government was out of control with its fiscal policies, its monetary policies, inflation set in, and banks were just not ready for that.” 

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The FDIC was established after the Great Depression by the Glass-Steagall Act of 1933 to insure bank deposits. The first year, it was for $2,500 per depositor, and today is $250,000. It appears the SRE was promulgated in 1991 by the Federal Deposit Insurance Corporation Improvement Act, to include reporting and audit requirements for banks and winding-up procedures for insolvent banks, among other things, after the banking crisis of the 1980s. Some 1,600 banks had failed between 1980 and 1994. A number of factors caused it, including ineffective regulation of S&Ls and a dramatic collapse of prices of energy and real estate in a significant portion of the country (including mine.) 

The FDICIA also encompassed “the least cost test,” which provided that the FDIC had to use the least costly method to provide FDIC insurance to depositors—selling the bank as a single entity, for example, or liquidating it and selling assets piecemeal.  The FDICIA also had an exception to the least cost test, known as the systemic risk exception, which allows for a decision to protect uninsured depositors, too, even if it’s more costly, when complying with the least cost test “would have adverse effects on economic conditions or financial stability.

Systemic risk is defined, not at law, but in an FDIC working paper as “risk that arises because of the structure of the financial system and interactions between financial institutions.” Systemic risk may include systematic risk, which is “risk explained by factors that influence the economy as a whole,” and it includes risks caused by “contagion,” defined as “the transmission of losses or distress from one institution to another.” In terms of contagion, there are two kinds described as ‘asset price contagion,’ where, for instance, fire sales by a failing institution force mark-to-market prices down for all other institutions, possibly putting their balance sheets in jeopardy; and ‘counter-party contagion,’ where a transaction’s failing counter-party has a domino effect that negatively impacts other financial institutions.”

For SRE to be invoked, the FDICIA requires written recommendations from both the boards of the FDIC and Federal Reserve, with a 2/3 or more vote by each. At that time, the Secretary of the Treasury (here, Yellen) signs off after consultation with the President (here, allegedly Biden). Congress must then be notified. Despite increasing objections from many, it appears the law was likely followed to the extent it exists, and that discretion used was at least arguably authorized, even if only in that vaguely and disturbingly opaque and oblique administrative law way of the executive branch. 

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However, that does not mean opponents of the invocation of the SRE are wrong. They are not. First, while it may not be expressly provided for, implicit in the relevant law is that the problem at hand needs to be corrected. In other words, while being true to the letter of the law, one must follow the spirit of the law, too. The law is clear, at least interstitially, that the idea isn’t to spend good money after bad, or vice versa, and therefore, a solution must also be found for the problem.

While there appear to be safeguards built into the system, by virtue of the numbers required to sign off, these entities are intensely political and divided, despite the fact the Federal Reserve is supposed to be independent and devoid of partisanship. It must not only appear independent, but be independent in fact. And it just doesn’t look that way to many. They need a better explanation than what Yellen managed to muster on Thursday because she, and the Fed she once chaired, have lost credibility with many people. 

That so many are up in arms about these recent bailouts is definitely not dispositive of whether there is a systemic risk to the banking infrastructure, but it is at least suggestive there is a possibility, however slight, that there might not be to the extent of invoking the SRE. Was this possibility deliberated, and how was the decision reached? And why is there not a public disclosure of which banks are deemed to be “too big to fail” or systemic risks enough to trigger the exception? Depositors might like to know. After all, having big banks with outsized Chinese deposits being bailed out by American taxpayers is offensive to said taxpayers, especially when their own regional or local banks are not given the same deference. They are suffering from both the causes and effects of these decisions by people who are  unelected and unaccountable.

Second, just because you can do something doesn’t mean you should. Bailing out all depositors having over $250,000 in a bank when the law is clear that is supposed to be the limit requires the taxpayer to be on board and trust the system while you’re exploiting an exception that has only been used once before. (Then it was for the 2008 Financial Crisis where Lehman Bros. was allowed to fail, but the SRE did not stop the Global Finance Crisis, so there’s that…). 

Many simply do not trust this system. This is because mistakes were made in the Fed, which Yellen once chaired and Powell has chaired since then. That at least one of the entities signing off on this exception are complicit in the underlying problem (by ‘fighting’ inflation by sudden and drastic interest rate increases after way-too-long ‘loose’ monetary policy along with uncontrolled and spiraling fiscal spending) means there could be a perverse incentive to do that which is not in America’s best interests. There have also been regulatory failures at a more pedestrian level that seem rife for repeat along with the moral hazard that entails.

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Concerns are only heightened when we learn that in addition to the SRE, the Fed on March 12th created the “Bank Term Funding Program,” designed to give banks, savings associations, and other institutions Fed-backed loans for up to a year “to help assure banks have the ability to meet the needs of all their depositors,” according to the Federal Reserve press release. So far, $11.9 billion has been borrowed. 

And already, 90-day bank borrowing from the Fed’s discount window, is a whopping $153 billion this week, well exceeding the prior record during the 2008 crisis of $111 billion. The BTFP may, in fact, be a wise prophylactic, but as a person bailing out the system, I’d rather see regulators do their jobs in an even-handed, honest, and prudent manner and bypass all these tests altogether. Because when push comes to shove, it isn’t really the FDIC who is insuring these depositors: it is the weary and abused taxpayers of this once-great nation.

Confidence wasn’t instilled in the minds of hard-working, tax-paying Americans when Yellen testified in the Senate Finance Committee hearing that her boss’ policies led to the massive inflation crisis that led to the rapid interest rate hikes that in turn led to the ongoing banking crisis. How much worse can it get, we are left to wonder with fear and trepidation. (According to The Wall Street Journal, since February 2020, the Fed increased the nation’s money supply by a staggering 40%. To some experts, it explains why the U.S. is experiencing its highest inflation rate since 1981.)

The Federal Reserve has been, after all, devaluing the otherwise prudent balance sheets of all banks, not only SVB and SB. Yellen stammered through the hearing, saying a bit incoherently, “My understanding is that the bank, to meet liquidity needs had to sell assets that it expected to hold to maturity and given that the interest rate increases that have occurred since those assets, including treasuries–and government-backed–mortgage-backed securities they had lost market value.” (Video here.)  There was a systemic failure: failure of regulators to do their jobs!

*     *.       *

On Thursday, the Federal Reserve announced the “FedNow” program that will begin in July, probably after additional and foreseeable bank failures. Available 24/7/365 for instant bill payments, money transfers, and government disbursements. It is operated by a consortium of large banks (too big to fail, one would hope) rather than blockchain technology. Certification begins in April. Proponents claim this program cite ‘equity’ and that it will ‘bank’ the ‘unbanked.’ Opponents fear it’s a start of digital currency used to surveil financial transactions and requiring intrusive digital IDs which violate one’s privacy. Add another objection now: it relies on an insecure consortium of banks for its backbone. The timing, once again, couldn’t be worse. 

And on Friday, it was reported the Fed would likely raise interest rates 25 basis points at its next meeting on March 22nd in a frantic attempt to continue to try to tame what has become known as Bidenflation. The Fed has raised rates seven times, totaling 450 basis points, in 2022 already.

Some would undoubtedly claim I’m being way too charitable to these oligarchs. Perhaps. Economics is a challenging assignment, though. I’m admittedly not an ‘End the Fed’ or ‘Screw the Banksters’ type. The Federal Reserve and banks provide a strong societal backing most of us rely on in our personal and business endeavors. We do, however, need to trust these people we are entrusting in non-elected positions of significant power. To taxpayers in the middle or upper-middle classes, who are needed to pay the bulk of taxes in the U.S. today, there is a real disconnect when Silicon Valley start-ups, established tech firms, and Chinese speculators and venture ‘capitalists’ (hugely in aerospace and defense ventures, no less!) and who are all advised well enough to know the $250,000 rule, get bailed out when the taxpayers, as depositors at local or regional banks may not be under what appear to be otherwise identical circumstances.

The next proverbial shoe to drop is likely Credit Suisse which will catapult America’s banking crisis into a global one. Another good timing situation as the world tiptoes into World War III…

Biden’s Rude ‘Wokening’

MARKETS HELD THEIR COLLECTIVE BREATHS when the opening bell rang at the New York Stock Exchange on Monday morning. They had all weekend to fret about the failure of Silicon Valley Bank, Silvergate Capital, and, more recently, Signature Bank, a crypto bank out of New York who had former Rep. Barney Frank on its Board. (His signature legislation, known as the Dodd-Frank Act, was ironically passed in response to the 2008 financial collapse.) Bank buyer(s) hadn’t been found. Would there be a blood bath on Wall Street at 9:30 a.m.? Pre-market trading indicated there would be.

There was a massive $100 billion was lost in the U.S. banking sector on Monday. Some regional banks, in sympathy with SVB, fell by up to 60%, and the so-called “Big Four” trillion-dollar banks (Citigroup, Wells Fargo, Bank of America, and JP Morgan) were thought to be drawn into the contagion from SVB, which had stopped trading on Frriday. In fits and starts, tickers that had ceased trading periodically in the trading day ended up, in some cases, in the green by 4 p.m.. The tech companies that banked with SVB started the day in the red, but in after-hours trading, many were also in the green. What happened?

Treasury Sec’y. Janet Yellen’s remarks over the weekend were a bit cryptic. On the one hand, the regime messaged that no one, no one, would be “bailed out.” The denizens of the Valley, however, were very vocal in their opposition to the regime’s position. Once it all was clarified on Monday, it seemed all borrowers would be made whole, even if they had far in excess of the $250,000 that the FDIC insures all depositors for. This is preposterous. The $250k is per depositor per class of account. One person might theoretically have a checking, savings, money market, trust, business checking, and escrow account and all would be insured to $250k.

So it’s simply a matter of setting the accounts up appropriately in the first place, and FDIC insurance, which banks (and indirectly their customers) all pay for, would kick in and cover one totally. If the government forces the FDIC to cover people who didn’t bother with setting up their accounts properly, it is not only creating a moral hazard, it is endangering the safety and solvency of the FDIC. (Others may need it down the road, BTW!) Yes, it’s true businesses, like the Silicon Valley start-ups that banked at SVB, must have large sums available in banks for payroll and other expensive things that exceed $250k every week or even every day, but an entity can set up bank accounts all over the country if they want and have every account insured up to $250k per. It’s a little less convenient to spread money out like that, but it’s less inconvenient than loosing some of the deposits and have to re-earn the money. But the Valley has lots of Democrat donors (unlike East Palestine, Ohio) and you don’t want to inconvenience them.

In a stunning moment, the illegitimate one, Joey Biden, took an early morning flight to the left coast to reassure the donors  tech entrepreneurs in person. He was brief when he got there and walked off without answering any questions. The messaging, however, was clear: this was not a bailout and taxpayer money would not be involved. 

Only two banks, SVB and Signature, were insured. It will be interesting to see how he, Biden, makes an insurer, FDIC, pay out beyond what it contracted to, which is up to $250k per account. It may be impossible to pay out, too: the FDIC insurance fund stands at roughly $125 billion, which, in the scheme of things, isn’t that much. It is hard to imagine the executive branch can force such an expenditure, but there again, ol’ Joey thinks he can just ‘cancel’ student loans without Congressional approval. So maybe he can ‘cancel’ the FDIC compact, too. Axios reports that uninsured depositors have been paid out in full in every bank failure “in living memory” except for IndyMac in 2008. And taxpayers have always been on the hook from the airline industry bailout of 2001 to Bear Stearns in 2008 to GM in 2009. No one wants another Lehman Brothers, of course.

So what happened, exactly? Information is still forthcoming, but it appears the major problem at SVB was they held government bonds on their balance sheet, which would ordinarily be considered a very conservative and safe investment. However, in this case, at this time, it was a lightening rod. In order to get any return at all, they’d buy long-term government bonds, but as the Fed began raising rates aggressively, new bonds were issued at higher rates, making the long-term bonds held by SVB and others, look very unattractive. When short term bond rates exceeded the long-term rates, known as an “inverted yield curve,” there was a problem. Add Peter Thiel running around with a key on a kite in a storm and yelling to people to get their money out of SVB ASAP, and you have an old-fashioned run on the bank. 

Paying out to the depositors meant selling these almost worthless bonds for squat. Some have said SVB didn’t have a sufficiently diversified client/depositor base, but while it would have been better if they did, it’s losing the forest through the trees, or the sky through through the lightening, so as to not mix metaphors. Inverted yield curves are the sign of economic toxicity.

This all seems more like the S&L Crisis of 1979-1982 than the Great Recession of 2008, as it has been likened to by some. See here, here, and here. Why? Because both S&Ls’ snd SVB’s troubles were triggered by higher energy prices, huge budget deficits, easy money, and ultimately, a tightening Federal Reserve. And this meant, more simply, they borrowed short and lent long in an economic environment where that is very risky. 

It didn’t take long to blame the bank failures on 45th President Donald Trump. And what wasn’t his fault could be blamed on E.S.G. factors: environment, social, governance. Banks (and other woke businesses) made it their highest priority to give loans to alleged victims of ‘racist’ E.S.G. policies and practices (like lending) of the ‘privileged,’ (like bankers). E.S.G. is really just a dog whistle for the woke. Some called for the heads of SVB management, too. What they did wrong (beyond what may be insider trading) isn’t altogether clear. What were the supposed to hold on the bank’s balance sheet, anyway? Crypto?

The question now is how the Fed will tame the wildest inflation since Jimmy Carter’s administration in time for the next presidential election. The Fed is supposed to be nonpartisan, and usually seems to be, but with Janet Reno, formerly on the Fed, and now in Treasury, it’s not so clear where loyalties are. Truth be told, Fed Chairman Jerome Powell et al. should’ve stopped after QE-1 and begun tightening the money supply, slowly but consistently thereafter. Covid made the situation vastly worse, but to be tightening so fast and so hard has had a tourniquet effect on the economy, and now it is not only woke, but broke. Things tend to break. And they broke on Biden’s watch, so he’ll take a hit in the polls. Of course, with friends like Dominion Voting Systems, it may not matter…

FY ’24 Budget: A Month Late and $20 Trillion Short

THURSDAY USHERED IN THE 2024 BUDGET SEASON on Capitol Hill: a month late. The illegitimate occupant of the White House, Joey Biden, supplied a $6.9 trillion list of gifts to special interests and bills for taxpayers which, he said, without evidence, would reduce the deficit by $2.8 trillion over a decade. The evidence actually shows the it’s based on unrealistically optimistic economic assumptions and unlikely policy outcomes, per the Concord Coalition.

There is an overwhelming reliance on dramatic tax increases on the upper middle to upper classes which is not likely to win the hearts or minds of G.O.P. lawmakers in the House. Speaker Kevin McCarthy has already nixed it. It is likewise the case that a budget relying solely on spending cuts to reduce the deficit would be D-O-A for Dems in the Senate. This means deficit reduction will be back-burnered.

In a press release, the Concord Coalition stated, “A deficit reduction plan at least twice as large as [Biden] has proposed would be needed to stabilize the debt-to-GDP ratio. It is also noteworthy that even with the deficit reduction assumed in the budget, interest on the debt doubles from $661 billion in 2023 to $1.32 trillion in 2033.” The deficit in 2024 would increase from $1.6 trillion to $1.8 trillion and gross federal debt would rise to a nosebleed height of $51 trillion after a decade. Meanwhile, there is no evidence the Federal Reserve will slow down tightening of the money supply which will result in the continuation of rapid increases in interest rates upon which this debt will have to one day, eventually, be repaid. All this reduces economic growth which means the debt becomes harder to manage. It’s a vicious cycle that lands in the halls of Congress for resolution. 

The Concord Coalition made special note of the solvency of Social Security and Medicare. It criticizes Biden for failing to cut Social Security benefits, which it somehow equates with his promise to “stand up for seniors” in his State of the Union address. Breaking news, CC, cutting benefits is not standing up for seniors! Many have called for means-testing benefits, but everythingis means-tested in this country, to the point the redistribution of wealth makes even socialists blush.

Seniors have paid into the system that is meant to work as a social insurance system rather than a welfare benefit for the poor. Who in their right mind would pay into such a system all their lives for nothing? Changing the rules seconds before the finish line is not only unfair, but downright cruel. Changes should be made for those not yet in the workforce, so that they may respond to the changing circumstances accordingly, without being bound by terms they never agreed to. 

Raising the age for benefits is no solution, either, at this point. Some may live long enough to get their ‘contributions’ to the system back, but many won’t. If you don’t live long enough, you’re doubly-screwed: you’re dead and get no benefits. And whether it’s related to Covid-19, life expectancies are down of late, anyway.

The last place you want to cut, in any event, is benefits for a population that is effectively unable to just go out and get a job if conditions change in the economy, like, as now, out-of-control inflation. It’s not simply that it’s a population with sometimes very vulnerable people due to health; it’s also that they aren’t likely to be hired at a certain point. 

As for Medicare, CC credits Biden with trying, but failing—because he is simply redirecting resources and savings from one budget line item to another. Why that is such a problem is opaque. It is a promise society has made to its seniors in exchange for their contributions into the system and into the economy as a whole during their working lives. If it falls short some years, so what? Are you going to deny medical care to seniors because they happened to have been born in a period where many others were, too? That’s a triple-whammy: you’re not getting benefits because you’re not poor enough; you’re not getting health care because you were born at the wrong time, and it doesn’t matter anyway, because one could be dead. 

What a system! What a country! Why don’t we take away welfare benefits if too many were born in someone’s generation? We don’t do that. In fact, we look for new ways to give away medical care to able-bodied non-working people in the peak of their lives. Or, even worse, to illegal aliens, to whom we owe absolutely nothing. And the stealing from Peter to make Paul feel better is wholly unjust and reeks of moral hazard. Ol’ Joey has plenty of new and increased income redistribution schemes in this irresponsible budget. 

A radical approach is needed to budget going forward because the debt and deficit are not sustainable and haven’t been for years. We must ensure the solvency of the nation and not pass along crippling debt to the future generations. This means severely curtailing the role of government, but making cuts in a way that it isn’t too abrupt for the truly vulnerable to adapt to. And never mind the astonishing $886.4 billion for military. The Concord Coalition’s criteria are here. 

It’s Not Just About Guns or Butter. It’s Also About ‘Pork’ or Chicken.

Image: source.

NEW INFLATION NUMBERS ARE OUT for January, and they’re not good. Despite the Federal Reserve’s tightening, and interest rates correspondingly rising, costs of goods (and services) are mushrooming. The overall Consumer Price Index is +6.4% y/y, which doesn’t sound too terrible (or accurate) until you realize fuel oil is up nearly 28%, and electricity, nearly 12%.   Core C.P.I., which excludes food and energy, is up 5.6%. Airfares are up over 25.5%. New car prices aren’t even in the discussion, at a distressing  +30%. 

And while groceries are up about 11.5 %, eggs are up over a whopping 70%. Milk is up 11%; baby food, 10%. Chicken is up 10.5 %; potatoes, almost 12.5%. Bread is up nearly 15%. Housing is up markedly, however, much of this is due to the effects of the pandemic. It’s a lagging economic indicator, but the housing market shows no signs yet of collapsing, although it always depends on location, location, and location. At some point, it could collapse, though, given much higher mortgage rates, rapidly increasing property taxes, lumber shortages, and a still limited, but increasing, number of homes on the market. The decrease in real hourly wages and an already increasing number of layoffs in high-paying sectors  can be a problem.

All figures above are positive, year-over-year. Real average hourly wages, however, are down almost 2% y/y, for the 22nd consecutive month, which corresponds with the Biden regime’s pork-filled $1.9 trillion “stimulus.” Fed Chairman Jerome Powell can only fantasize about his 2% goal—or the reelection of 45th President Donald Trump— at this point. 

Aborting Liz Warren’s ‘Baby’

ON WEDNESDAY, THE 5th CIRCUIT COURT OF APPEALS, in a three-judge panel, ruled that the Obama-era Consumer Financial Protection Bureau is unconstitutional. The case, brought by high-interest-rate “payday lenders,” got a regulation promulgated by the financial watchdog agency tossed as well as a ruling that the funding mechanism for the agency “violates the Constitution’s structural separation of powers.” The decision can be read here.

The CFPB was created under the Obama administration after the financial crisis of 2007-09 (known as the “Great Recession”) and widely viewed as the brainchild of Sen. Elizabeth Warren’s (D-Mass.) that she developed when she was a professor at Harvard University. It sought to protect Americans from illegal or unethical practices of banks, student loans, credit card companies, and other financial entities. While Congress had approved funding the bureau, the CFPB wanted to appear devoid of political influence, and so in an unprecedented arrangement, received its funding from the Federal Reserve, which is what violates the Constitution. Social Security and Medicare also are funded outside of Congressional annual appropriations, too.

Warren has been described as “having a hissy fit” over the decision, calling it “lawless and reckless.” Adding insult to her injury is the fact that the three judges were Trump appointees: Cory Wilson, Don Willett, and Kurt Engelhardt. It is expected the CFPB will seek a stay as it appeals to the full 5th Circuit Court, and, if necessary, to the Supreme Court. The bureau’s claim is the Federal Deposit Insurance Corporation and Federal Reserve do not get their funding through Congress, either, and is outside the appropriations process, using assessments from banks for funding. Opponents would surely point out the mandates and missions are quite different , it’s unaccountable, and it operates as a rouge agency because it’s not funded by Congress.  

Pity the Poor Western Taxpayer

JANET YELLEN PROCLAIMED the Ukraine War is the greatest “challenge” to the global economy on Thursday. She may be right, but the failures are many and are both profound and nuanced nonetheless. She made her statement in Bali, Indonesia as the G20 ministers prepare to commence talks at their summit, further opining Russian officials shouldn’t be supporting President Vladimir Putin. Hmm…isn’t this foreign interference? Just a day before, U.S. consumer prices were reported to have risen 9.1% in June, mostly due to food and gas prices. It’s been the largest annual increase in 40 1/2 years, and will likely force the Fed to hike interest rates by 75 basis points later in July.

Western nations at the G20 talks also condemned Russia over its aggression towards Ukraine. They had probably heard that a Russian strike had killed 23 on Thursday, leading Ukrainian president Volodymyr Zelensky to accuse the Kremlin of “terrorism.” Hmm…isn’t this an undeclared ‘war’? 

Zelensky hasn’t tired of barking orders to the puppet occupying the White House, Joe Biden (now begging for oil in Saudi Arabia). His latest demand on Thursday was to forget about capping prices on Russian oil—instead, embargoing it. Lovely. The U.S.’s latest aid to Ukraine was announced on Tuesday for $1.7 billion for their health care sector.

Earlier this week, Zelensky’s regime also issued a wishlist (read: demand) for three weapons systems to the compromised puppet: high mobility artillery rocket systems; heavy artillery, including 1,000 howitzers caliber 155 mm, 300 MLRS, 500 tanks, and 1,000 drones; and 2,000 armored personnel carriers. U.S. stockpiles are diminishing rapidly, along with our combat ready personnel, many of the best whom are about to be ‘cancelled’ due to refusals to comply with Covid vaccine mandates (under litigation). Let’s hope the puppet doesn’t instigate World War III.

Zelensky has also provided a preview of coming attractions, to wit, a demand for $9 billion a month in aid from the West. Zelensky will likely get whatever he asks for from the compromised Biden, who is singing from the Ukrainian hymnbook about the devil incarnate, Russia. As of Monday, the U.S. has provided over $7 billion in aid since February to corrupt Ukraine’s increasingly fascist regime, via 15 separate packages. Pity the poor taxpayers of the United States and Western Europe for they know not how they’ll pay Biden’s personal debt to Ukraine.

Where’s the Plunge Protection Team When You Need Them?

THE STOCK MARKET HAS DONE POORLY under the illegitimate C.C.P. puppet-in-chief occupying the White House, Joe Biden. The S&P 500 is now down 20%, in Bear Market Territory. That’s funny, because even though it seems a bit counterintuitive, markets typically do a little better under Dems than Republicans historically.

The Biden regime, though, has actually tried to destroy the whole economy, of which the stock market is a small but vital part. Yes, I’m accusing Biden of sabotage. There is no other explanation. His actions have been so obviously detrimental to the country’s economy, it must be intentional, because accidents just don’t happen in such an organized way. Remarkably, he doesn’t seem to care.

Was Biden briefed by the Plunge Protection Team when the market absolutely tanked this week? I don’t know for sure, but I’d suspect not. He’s been too busy selling American’s sovereignty to the WHO, transferring assets to illegal aliens, and giving away American’s money to Ukraine, among other nefarious doings.

The Fed’s Global Plunge Protection Team (a colloquial name given by The Wall Street Journal to the Working Group on Financial Markets) was an Executive Order creation of then-President Ronald Reagan in October of 1987 when the Dow Jones Industrial Average fell by 22.6% on what became known as “Black Monday.”

Its goal is “enhancing the integrity, efficiency, orderliness, and competitiveness of our Nation’s financial markets and maintaining investor confidence.” It does so by informally advising the president and regulators at times of economic turbulence. It has survived administrations since Reagan, and consists of high-ranking government financial officials who report directly to the president. Although its existence isn’t secret, it isn’t highly publicized, either, and does not release minutes of any of its meetings or recommendations. 

There has been speculation, not really confirmed, that the PPT, in collaboration with large banks, such as Goldman Sachs and Morgan Stanley, can (and indeed has) engaged in undocumented transactions to support the stock market by purchasing index futures contracts to bolster a floundering market. It’s believable given the Federal Reserve’s asset purchases during the pandemic. The scale, scope, and junk status of some assets is mind-blowing. (Read more here.) The lack of transparency coupled with these speculations make some critics impute sinister motives to the PPT, by manipulation of our ‘free and open‘ financial markets.

The Futures of Commodities, Securities, and Money

I’M NOT SURE why the Drudge Report changed its right-leaning bias to left several years ago, but I still look at the headlines there from time to time. Today’s were noteworthy for the financial anxiety they contained: “The hit to your pocket from higher gasoline prices $2,000 a year; Wheat closes at record high as war paralyzes Ukraine grain flows; Retirement funds brace for losses…; Rouble hits new record low; Russians fear economic nightmare about to unfold; Rents roaring back in NYC; Oil crisis 2022 — Bets $200 a barrel this month; and there are others painting a very bleak picture of the economic future. It sums things up.

Food is paramount and, increasingly, a burden to household budgets. Prices have skyrocketed in the past year or so, but are facing the steepest climb in recent weeks. Inflation has hit meats, grains, and produce especially hard. Meat began its rise with Covid-19 closing meat packers nationwide, causing, in the first instance, a shortage, followed by shipping problems in the supply chain. Grains and produce, in some cases, went up in price due to weather issues. Grains, however, faced an additional price hike due to lack of availability because of geo-political factors, most notably, the Russia-Ukraine War of 2022. Other peculiar problems have arisen, like a shortage of aluminum (for some reason) causing a shortage of soft drinks on grocers’ shelves. Then the non-consumables, such as toilet paper, are in short supply due to people hoarding them because of Covid (though the association is a bit lose). Depending on where you live, groceries have gone up by about forty percent in a year.

Housing has been on a tear for a while. During Covid, peoples’ move to the suburbs and out of cities caused prices to rise in the former and decrease in the latter. Given people didn’t move if they didn’t have to, and no one did since jobs were being performed remotely, the shortage of housing inventory only increased prices further. Add to that the low interest environment, more people were looking to buy than ever. Outside of major cities, then, increased prices hit hard. And now, in what we can finally call a post-Covid period, prices are rapidly propelling skyward in cities, too. Homebuilders have been busy, but costs of building materials have risen precipitously due to supply chain problems, among other things. Plus, labor costs have risen dramatically, because there is a labor shortage leftover from Covid, when people were paid to not work and stay home.

Even when new homes have been built, they remain unsold or uninhabited in some cases because of supply chain problems preventing critical components from reaching their destinations. A home may be built, but lack a garage door, for example, or an electrical box, preventing a sale practically or by operation of law.

Rentals have gone up, too, largely to make up for rent payment moratoria put in place by governments, federal and local, due to Covid. (Some remain in place even now.) There are undoubtedly a lot of hurting landlords looking to collect whatever they can now and would be foolish not to leverage the higher prices of purchasing.

Transportation costs have been propelled higher recently due to the current regime’s exceedingly poor decision to close the Keystone Pipeline. As a result, the U.S. is no longer a net exporter of oil and gas, as it became under 45th President Trump. Instead, we’re dependent on foreign supplies again, and with geo-political troubles around the world, especially Russia, these supplies are threatened for the U.S., Europe, and other parts of the world. Need is higher than ever; supply, tighter than it needs to be. Gas is needed by those who have started commuting to work again after nearly two years of working from home. It’s reached record highs: most everywhere in the U.S., regular gas sells for over $4/gallon, and the price has risen faster than it ever has in history. Likewise, with diesel for trucks and planes. Trucks need to be running full time since there are shortages of multitudes of consumer goods, from toilet paper to appliances to automobiles due to Covid shutdowns. Airplanes want to be flying, too, as airlines have lost two years of optional air traveler, who at long last, want to take vacations or just see long-distance relatives, friends, or business associates. Likewise for cruise ships, seeking pleasure travel.

Forget about automobiles. Used ones are few and far between and in some cases, fetch more than the vehicle did when it was new! New cars are probably sitting on ships at Long Beach for the past month, waiting to be offloaded and transported to a dealership where it will be swiftly purchased by a long-awaiting and grateful buyer. There isn’t a shortage of new cars simply because of supply chain delays, however. In fact, the manufacturing process was slowed due to Covid, and even when auto assembly lines were operational, component parts, such as semiconductors, may have been delayed for similar reasons.

Monetary policy threatens the consumer now, too. The Fed has promised long, long overdue rate hikes. They have no choice. This has a cascading effect too consequential to go into here now. Suffice it to say, the Russian Rouble isn’t the only currency that won’t be holding its value.

So, Goodbye, Covid; Hello, Recession.