" The ship-of-fools in the Eccles Building have led Washington and Wall Street alike to believe in what amounts to the greatest lie in financial history that we can borrow and print our way back to prosperity!".

          ~David Stockman

           

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(Caveat Emptor)

News and opinion from all over the political universe. 

Much of it to be taken with several grains of salt.

April 7th, 2020

   Email:  Wrisley.com
"Get Poor Quick and Avoid the Rush!"
  
We created this bumper sticker in the days of the 1970's double digit price inflation. 
     At that time our theory was that reducing one's wants to frugal levels was rational because it lessened the need to go deeply into hock merely to maintain a living standard that looked and felt good but was not sustainable in the long run.  Logic and reason never caught on, although Fed chief Paul Volcker slammed on the money lending breakes with high interest rates and the U.S. weathered the 1970s inflation storm. 

     Once upon a time folks were urged to live within their means.  The idea of buying things with little or nothing down was a 20th century concept that gained popularity when the Federal Reserve was in its youth.  But it had its comeuppance in the great Wall Street crash in the autumn of 1929.  It led to nearly a decade of doing without or doing with less.  That was followed by half a dozen years on a wartime footing in which people lived with rationing and shortages in order to help support the high cost of war.  Then came the post-war inflationary boom along with the arrival of the famous "Baby Boomers."

     Now we are once again in an economic jam.  The props have been knocked from beneath our system by a serious virus scourge and large numbers of people are suddenly unemployed or underemployed.  Government is trying desperately to bridge the plunge with a helicopter drop of cash but it must do so by placing a huge lien against the economic future.  That is, borrowing from tomorrow to limp through the shortfalls of the moment. 

     Business-as-usual has shuttered its doors and when some of them open again life will not be able to immediately return to the
 high flying level in which people lived happily on the hope and promise of escalating incomes.

      "Getting poor" doesn't mean living on the streets or in dirt-floor hovels.  In a majority of cases it merely means making do with less.  It means separating NEEDS from WANTS.  

        Maybe you don't  "need"  a bigger house with its bigger mortgage.  You might get along with an older car instead of saddling yourself with an 84 month mortgage on a new one. And,  as an oldtime sailor told us some sixty years ago, "If you have to borrow to buy a boat you can't afford one."  We believe vacations and hobbies should never be financed.  We also believe any government that will pile on debt to an extent it can never be paid is on a path to destruction. 
 

April has  essentially been "canceled".  Now, what? 

      We'd love to be in possession of an accurate crystal ball right now. As long as Congress and the Federal Reserve System can churn out dollars that find their way into the pockets of individuals, businesses, local governments,foreign central banks and any other entity stressed by the virus pandemic, social chaos will probably be avoided. But the clock is ticking with the passage of each day and it may not be long before citizens will become tired of being restricted in their movements and decide to gamble on their chance of catching the coronavirus and surving it if they do. It is not, after all, a death sentence - - although old people with pre-existing health liabilities often wind up in a morgue if they catch it.

   "We're all in this together," remarked a TV news anchor recently. Quite true. And it has made planning for the future more difficult than ever. We have reports of our great-grandchildren completing their present school year with laptop computers at home.  Public schooling is only one facet of life that's been turned upside down. And economists are trying to figure out if the recession into which we are sliding will deteriorate into something resembling the Great Depression of the 1930s. After all, the machinery of a huge economy has never been stopped so abruptly before. Unemployment is expected to jump into double digits, which leads to the question - "What will the econmy look like at election time in November?"  Will liberal Democrats be able to find a Franklin Roosevelt who can roll over a Herbert Hoover-like Trump? 

   One thing for sure. A lot of drama awaits us in the weeks ahead.


   And don't forget to wash your hands!!



Must an economic jolt occur?
Yes.
      Like COVID-19 sufferers the world deb- based economy is gasping for breath.
   
      When they met in 1787 to reconstruct the Articles of Confederation the representatives of the U.S. former British colonies settled on the framework of a republic rather than a democracy as the better form of governance.  "Keep the federal government weak and the people strong" could have been their bumper sticker. 

      They not only did not "reconstruct" the charter of the confederacy, they tossed it out and designed a new constitutuion.  But the yearning among the people for a benificent and constantly growing central government led to amendments galore and the U.S. Constitution became a mere shadow of its original self.  The voting majority discovered it could vote for largess from the national treasury and the concept of "social safety nets" grew to astronomical proportions.  The fact that the government could not give a dime to anybody that it not first taken from someone else was overlooked.  Besides, the government had the power to float boatloads of debt to pay its bills. 

       So it did.  And just like all other great empires of the past it took on more debt than could ever be repaid and set deliberate currency inflation goals to disguise the growing imbalance.  Such a method can't continue forever.  Even the long lasting Byzantine republic fizzled when it finally allowed the debauchery of its currency.  Whenever economic bubbles are formed there are bound to be pins lurking somewhere in the atmosphere.  The pin that popped our bubble was the coronavirus pandemic.  If that had not done it something else, perhaps a vicious war, would have done the job. 

       There are only seven months until the national election.  Let's be real picky about whom we choose.  Promises of "free lunches" for all didn't work.  Better to avoid the trappings of socialism and reinstitute some  of the mandates of the original Constitution - such as restoring sound money to replace the failing fiat currency system that makes planning one's finanmcial future impossible. 


The Census Bureau first counted our nose when we were 11/12ths of a year old.
It was April, 1930, and census takers went door to door to tabulate the population.

      We've been counted every ten years since, most recently last week when we went on line to supply the requested census data. It was sort of a Grande Finale because we seriously doubt we'll be around to be counted ten years hence.

   What strikes us as very interesting is the price tag this exercise lays on us at a most inconvenient time. More than $15 billion! The nation was already running into debt at more than a trillion dollars a year and that's not counting the huge outpouring of dollars to pay the cost of the economic shutdown and medical expenses caused by the coronavirus scare. How long before the money printing apparatus  grinds to a halt from overheating? 

    The Missus, by the way, was listed as only 4/12ths of a year old in the 1930 census. Babies aged 1-12 months were listed in fractions of a year.

National Debt increasing at a million dollars every 15 seconds.
"All debt must be paid.  Either by the borrower or the lender."  ~Publilius Cyrus

   If we lend someone $100.00 and he doesn't pay it back we're out $100.00. This is what Cyrus meant by his remark in ancient times. If the borrower can't or won't pay his debt the lender must write it off as a loss. 

    Modern monetary theory has it that heavy debt doesn't matter at the sovereign government level. "After all, we only owe it to ourselves," as the old cliche has it. However, the worldwide holders of all the  national debt instruments...the notes, bonds and all other federal securities believe the paper IOUs they hold in return for their investments will be paid on schedule.  After all, didn't the ancients say "Pacta sunt servanda."? (The contract must be served.)

    All this ran through our mind when we checked the national debt clock.  Take a look:  DEBT CLOCK.

     We ain't seen nuthin' yet. The U.S. unemployment rate has now leaped to 6.6 percent and dour forecasts indicate the rate could climb into double digits in the weeks ahead owing to the abrupt slowdown of the bulk of the U.S. economy.

     The frightful coronavirus pandemic is popping economic bubbles all over the world and and the future is fraught with tough challenges. Rapidly accumulating debt promises to be a deadweight hanging over the scene for a long time. We can only guess how the mess will resolve itself, but it's a safe bet the debt-based high life will hit the pause button and won't return until much of the towering debt is unwound. 

      But, overall, there's probably a silver lining behind the pandemonium. We recall the depression of the 1930s when the pop music tempo slowed down, church going increased, skirts lowered, and society came to terms with the post-Roaring Twenties era. People whistled catchy melodies in the streets and manners improved. 

      We'll soon discover what this economic correction will bring us.   ~JW


"The pandemic has released a tightly coiled pandemonium that will play out in the years ahead."
   Although he has long warned that the foolishly overblown debt bubble would one day implode, Charles Hugh Smith is not one of your run-of-the-mill Chicken Littles.  In fact, he may a little too scholarly for the Main Street philosopher who forms opinions from the daily headlines and leaves the chore of peeling away the chaff to others.

    Here's a quote from his current column: 
"
Only chumps, rubes and marks think they can get something for nothing, yet here we are, rubbing our hands with glee at the Fed's trillions in free money."   PANDEMONIUM