Search Results for “"Purple Party"”

Issues Associated with the Current Election

Posted on 31 October 2024 by David Merkel

Picture Credit: derek visser (modified to exclude extraneous comments) || Trump and Harris are more similar than different. Both favor the rich, they lie, they are for abortion and against immigration.

1) For those that follow my Twitter feed, you know that I don’t like Trump or Harris much. Trump has bad character and evil policies. Harris is an accidental candidate that initially sparked some excitement among Democrats, but has proven to be a low quality campaigner. Had Biden not sought re-election Harris would not have been the choice of the Democrats. She would have failed the same way she did in the 2020 primaries. She also has the baggage of having concealed Biden’s mental infirmity, when she should have invoked the 25th amendment as her duty. Other problems: Endorsing all the actions of the Biden administration. Also, a history of such a wide range of policy positions that you really don’t know what she stands for. Finally, she is a Democrat so she has evil policies as well.

For ethical reasons, I can’t vote for either of them. Since I live in Maryland, my vote doesn’t mean anything, anyway.

2) A while ago, I wrote a piece called NOTA Bene, and followed it with NOTA Bene, Redux. NOTA: None Of The Above. The idea is that “None Of The Above” would exist as a choice in every race, and if it wins, the election must be reheld, with none of the prior candidates allowed to run, and (in the more severe version) that none of the parties represented can nominate a candidate.

Think about it. The far left and far right would gain no advantage from running polarizing candidates, because they would lose to NOTA. We need to create a NOTA-type law or amendment to the Constitution. It ended the Soviet Union; it could end our lousy politics.

3) One other thing NOTA might help end is the “Purple Party.” The Purple Party governs America on behalf of the rich. Both Trump and Harris are part of the Purple Party. In general, the wealthy get what they want as result of the structure of the tax code. They pursue a global dominance policy that protects American and allied business interests, rather than the simpler concept of defense. They are the party of big government; the Republicans long ago forsook shrinking the government and the deficit. If we had more moderate conservatives, centrists, and moderate liberals in office, we might be able to work out some of the harder issues.

4) Fideism: “If I believe it, it is true.” We have more and more people engaging in wishful thinking. An example is Modern Monetary Theory, which I call Banana Republic Monetary Theory. There are no limits to borrowing? Tell that to Zimbabwe, Venezuela, Argentina, Turkey, and many other developing nations who borrowed far too much money and ruined their economies.

What makes the US different? Neither Harris nor Trump sees any reason to not expand the deficit further. For now, other countries want us to buy their goods, so they take in our government debts to make the books balance. But less and less of the world is doing so. Russia, China, and a few other nations are limiting their use of US dollars, and dollar-denominated debt.

Fideism is a Trump specialty. He makes up his own truth. The 2020 election was not stolen. The State GOP chairmen to a man in Arizona, Georgia, Pennsylvania, and Wisconsin all stated there was no election fraud to the degree of changing the results. If anything, the one trying to steal the election in 2020 was Trump. After losing, and being told by many of his subordinates that he lost, he did everything he could to change the result. It’s one thing to file lawsuits with hard evidence; it’s another thing to do it with vague allegations.

But fideism is across the political spectrum, amplified by the far right and far left media. They feed people what they would like to be true. Me? I read from the moderate right to the moderate left. I have a reasonably good idea of what those who disagree with me think. If you don’t understand your opponents, you probably don’t understand your own position so well.

5) And why not say, “Let us do evil that good may come”?—as we are slanderously reported and as some affirm that we say. Their condemnation is just. [Romans 3:8 NKJV]

I have some words for my fellow evangelical Christians here. Choosing the lesser of two evils is choosing to do evil. It is not copping out to say, “I am not playing this game.” Just write in NOTA on every race where the main choice is voting for the lesser of two evils. Voting for Trump or Harris is a sin.

Remember Jesus is King over all, sitting at the right hand of the Father in Heaven. God has already won, and this election is of no consequence to Him. He does care about what his Church is doing, and in supporting Trump, he sees the sins of the Church. We can engage in politics, but on Christian principles, not those of the Republican (now Trump Nationalist) Party.

It was good to fight for ending abortion on demand. Roe vs Wade was badly decided in 1973. This should have been worked out by the states. Many intelligent people thought the 1973 opinion was thought out badly. Even RBG thought that. But when the Supreme Court reversed Roe vs Wade, the predictable thing happened. Many states passed laws to allow abortion on demand, and many Republicans (who were always half-hearted about opposing abortion because it was only about keeping evangelicals and other religious people who opposed abortion in the GOP) abandoned the pro-life cause. It was now a vote-loser.

Christians, you did your best, but the culture of America has changed. We are a much more cruel society than we once were. Abortion is cruel, killing the weakest of people in their mother’s womb.

But America is cruel in another way. My ancestors came to America when immigration was lightly regulated. They would refuse those who were diseased, and exile immigrants that committed felonies. Why do I have the right to live here, and those who want to get away from oppressive governments don’t?

I favor of the relatively free immigration that existed before the Protestants acted to keep Roman Catholics, and those of other religions out. Those who come to US fleeing persecution now get locked up in US jails with fewer rights than felons, and the grand majority of them get deported back the country from which they fled. Who is to blame for this? Trump, Biden and Harris, and their parties.

It is a myth that immigrants take jobs away from others. If anything, they create jobs. The jobs they do most Americans don’t want to do. And, many of them build their own businesses, employing others. The skills that it takes to flee your home country and get to America are similar to those that you need to run a business. You have to be flexible, adapt, and be determined to achieve your goal.

The Bible teaches us fifteen times that we are supposed to take care of the widow, orphan, and stranger. Turning away people who are seeking to live safely in the US is cruel. Yes, if someone is known to be a spy, or commits a felony, exile them.

Christians, also remember that Leviticus 24:22 says, “You shall have the same law for the stranger and for one from your own country; for I am the LORD your God.” To that end, either immigrants get access to welfare programs, or we end those programs for everyone. America should be the beacon of freedom to the world that it was back in the late 19th century.

Conclusion

Today I go to the polls and vote. I will be writing in NOTA a bunch of times. I will vote against the proposal to enshrine abortion in the Maryland Constitution. Will it matter? Yes. God is watching me. That is what matters.

They Can’t Help You, Redux

Posted on 3 November 2020 by David Merkel

Photo Credit: Dunk ???? || Aside from the last election, I can’t think of a worse pair to choose from.

I wrote a piece 4.6 years ago to kvetch about the lousy choices in the 2016 Presidential Elections. It is no better today in political terms, and times are worse in prospect now.

Whereas the last post focused on individual choices, and why it is stupid to look to politicians to increase prosperity, this one is going to point to a grimmer reality. We are headed for a crisis, and the following parties are out of touch with reality:

The far left
The far right
Trump
Biden
Congress, inhabited by the permanent government of the Purple Party
The grand majority of the media, which is innumerate, and economically illiterate
The American people generally

You can’t get something for nothing. You can’t print or borrow prosperity. Prosperity comes from producing products or services that other people want. Everything else is a sideshow.

These are realities that the next President and Congress will bump into, regardless of who is elected:

We will begin to run into borrowing limits.
We will begin to experience inflation — at least, poor people will experience inflation. DC doesn’t care about poor people. They will only get alarmed if inflation affects the middle and upper classes.
Monetary policy will either prove impotent, or it will take over areas that properly belong to private banks, leading to favoritism in the provision of credit.
Municipal pension funds will see their funding levels deteriorate. Medicare’s funding will deteriorate. So will that of Social Security.
Some major currency will experience a crisis. It may not be the US Dollar. It might be the Euro, Yen, or Yuan. Personally, I think the Euro is structurally the weakest, but seeing a major currency fail will set the world on edge, and make everyone ask what currency defines value.

Ask yourself this: who cares about the long run? I don’t see anyone among major politicians who cares about the long run. This is the sort of behavior that exists prior to a revolution. Self-interested parties bicker with one another over short-term matters, while long-term problems are ignored.

Now, many people, including the editors of Barron’s praise the Fed for being a guardian of the economy while Congress and the White House bicker. Nothing could be further from the truth. The Fed has been complicit with the government by not letting recessions clear out bad debt, and forcing Congress and the Executive Branch to own up to their foolish policies.

Instead, the Fed has encouraged public and private debt to the degree that bailouts by the Fed and Congress MUST happen, or we will get a depression. And as a result, will they finally begin monetizing the debt of the US Government directly, so that we can have severe inflation? That may be the only way to get rid of the debt, but will it create a revolution en route?

Friends, the promises of venal politicians are catching up to us. The unwillingness to have stable policies like balanced budgets, which work really well if adhered to, are a remote dream of our parents.

Okay, we may not have a crisis by 2025, but a crisis is coming, and with most crises, the weakest are hurt the most. To that end, the Democrats should be the most cautious about deficits, but the short-term governs politics.

To that end I will say that your vote doesn’t matter. There are bigger economic forces that will constrain politicians, and the same result is coming regardless of who is elected. The Republicans and Democrats are a duopoly which should be abolished, and they cooperate together for bad policy that harms average people in America.

PS — the far right and the far left in the media live to create fear. They lie to their bases to stir them up. Don’t listen to them. Economically and politically, the truth is in the center, if we will ever remember to run balanced budgets, and not run profligate monetary policies.

Persistent High Volatility

Posted on 16 September 202016 September 2020 by David Merkel

Photo Credit: picme1983 || Imagine a hurricane that never stops entirely

This should be a short post. When valuations are high, volatility is typically high as well. When interest rates are low, volatility also is high. Why? A situation has been set up by the functional equivalent of the “Wizard of Oz” where small changes to interest rates or economic activity will have big impact on stock prices.

And so I am telling you, be ready for whippy markets. The sorcerer’s apprentices at the Fed, gamely trying to cover for their bosses (Congress) who have no coherent idea of what to do, will keep short-term, high-quality interest rates low.

And that’s fine, not, as even the slightest variation in wording will make economic agents jumpy. When markets are priced to perfection, even the slightest breeze makes the branches at the top of the tree move hard.

My advice to you is simple. Run a balanced portfolio, and resist the trends. Buy low, sell high. Sell to the greedy, and buy from those who panic.

Final note: as far as economics goes, there is very little difference between the red and blue parties. The purple party controls DC, and all they do is run huge deficits and ask the Fed to monetize them via expanding bank credit. Would that we could vote them all out of office, balance the budget on an accrual basis, and link the dollar to gold.

We are going to have some significant disaster out of the current policy, but I can’t tell what kind of disaster will come. They expected inflation in the Great Depression, and got deflation, as the rich were able to protect their interests. That may happen this time as well. Don’t be too certain that we will get inflation.

The Worst Policies are Made During Crises

Posted on 21 March 202022 March 2020 by David Merkel

Photo Credit: Mike Licht || As a culture, we are very much “live for the moment.” But what happens when buyers of Treasuries decide that it’s not worth it anymore?

I am not a fan of the Democrats or of Big Government Republicans like Bush Jr. and Trump. In general, I think we need to shrink our government, decentralize, and de-lever our economy such that we make debt a smaller component of how we finance our lives. The Democrats talk about inequality, but they don’t really mean it. Increasing marginal tax rates is good show, but the real game is how income is calculated, and they won’t touch that, because their richest donors find ways to hide their income — the same as donors to the Republicans.

That’s why I call the governing elite in DC “The Purple Party.” A blend of red and blue, with just enough difference to get politically motivated donors to give, but practically doing the same thing, serving wealthy elites.

I’m going to make a post on COVID-19 next week, but my last post on the topic was too optimistic. That said, the politicians, particularly governors, are being scaremongers. They are vastly overestimating the size of the crisis.

What really bugs me are the foolish ideas being propounded by the Fed and politicians. Let me talk about a few of them.

1) Don’t close the stock or bond markets. Closing the markets does not eliminate volatility. It only hides it. Practically, it makes the price of securities to be zero for those who want to sell them. And, for those who left some cash on the side, it denies them the opportunity to profit from their wisdom.

2) The Fed should only hold short government debt. That is a neutral asset. Anything else makes the Fed play favorites in what they buy, whether it is mortgage-backed securities, municipal bonds, or corporates. Don’t let the Fed become a political institution, creating ad hoc policy by whose debt they do and don’t buy.

3) Don’t close businesses. Let all businesses set their own policies. They don’t want their workers to infect others. Let them operate.

The idea that there are “necessary businesses” is foolish. The “necessary businesses” rely on other businesses to be their suppliers.

What would be better would be to have extensive testing for COVID-19, and to quarantine those who are infected, and those who are not tested who had contact with those who are infected. Leave the rest of society free. Don’t close firms down, and then give some lame amount of government assistance to them. We do best when we are working. People staying at home lack the healthy stress that working provides.

4) Now, if you have to give assistance, giving it to people directly is the best way. I advocated for that in the last financial crisis. But you should give it to all Americans equally, to avoid favoritism. Now, there is the issue of those who buy US Treasury debt objecting to the concept, and I can respect that. Why else do you think that the yield on 30-year Treasury Bonds has risen 0.8% over the last ten days?

There is no such thing as a free lunch, and with all those advocating excessive deficit spending, I would say “Yes, the past efforts have not disrupted the markets, but if you read economic history closely, no one can tell what will make the paradigm shift. Are you feeling lucky?”

Summary

From my reading of the data, I don’t see how this crisis lasts past the end of April. Yet there are governors of states foolishly shutting down businesses, and thinking that they are doing something good. “Shelter in place” is a recipe for turning all Americans into lawbreakers in the same manner as is with highway speed limits. Do you really want to ruin our culture via overly strict laws?

What of the poor people running out of money? What of the small businesses that go broke? Governments should focus on testing for the virus, and quarantining those who have it and those who have had contact and are untested.

In closing, I would encourage all readers to vote all incumbents out of office. They are not serving the interests of average Americans well. They are cowards who listen to scaremongers, and that includes Trump.

PS — some people might suggest that I am not kind to those that are hurting. It’s not true. I give over 10% of my income to charity each year. Beyond that, I would challenge people to consider Venezuela. Many small to medium-sized actions by Chavez and Maduro slowly robbed the country of economic vitality. The wealthiest nation in South America became the poorest.

The same could happen here. Economic disasters often spring from something small — remember Ben Bernanke saying that the risk from subprime mortgages was “well contained?” Yes, subprime mortgages were small, but they represented the marginal buyers of residential real estate, so when they failed, so did property prices. Like dominoes, they fell.

Thus I am saying to urge the government to not engage in policies that increase its deficits. You can’t tell when the last bit of debt will be the straw that breaks the back of the camel.

On a Letter from an Expatriate

Posted on 26 March 201627 March 2016 by David Merkel

Photo Credit: Liz West

A friend I haven’t heard from in many years?since he left the USA wrote me. He closed the letter in an unusual way, saying:

PS — USA has gone completely bonkers these days? or what the heck is going on over there? would love to pick your mind over a glass of wine. someday!

I’m not intending on writing on politics as a regular habit at Aleph Blog, and most of what I am going to say is economics-related, so please bear with me. ?Hopefully this will get it out of my system.

To my friend,

There are a lot of frustrated people in the US. ?Though you’ve been gone a long time, you used to know me pretty well; after all, I trained you on economic matters.

Let me give a list of reasons why I think people are frustrated, then explain how that affects their political calculations, and finally explain why they have mostly misdiagnosed the issues, and won’t get what they want regardless of who is elected.

The electorate is frustrated because:

Living standards have declined for the lower 80% of society.
Many people lost jobs, homes, pensions, etc., during the recent financial crisis… those assets are not coming back anytime soon. ?Much of the fault was theirs, but they don’t recognize that, preferring to blame others for their problems.
Many formerly attractive jobs are disappearing either due to technological change or offshoring (whether corporations or subsidiaries).
The economy muddles along, and economic policies that average people don’t understand dominate discussion. ?Many wonder if anyone is seriously trying to improve matters. ?They generally distrust the Fed.
It doesn’t seem to matter who gets elected, Democrat or Republican — the status quo remains because business interests support the Purple Party, which is the consensus of establishment Republicans and Democrats who duopolize politics in the USA.
Nothing good seems to happen in DC, and what few significant pieces of legislation have occurred in the Obama years have turned out to be bad (Obamacare) or useless (Dodd-Frank to the average person who doesn’t get it).
Immigration issues get short shrift, also trade issues.
Moral issues have basically disappeared from the political agenda in any classical form. ?Everything is pragmatic, geared to serve the Purple Party.
In general, the candidates are pretty lousy, and the moral tone of the campaign has been poor. ?That said, negative campaigning works, and the candidates that focus on being negative are doing better.

Now take a moment and think about what people do when they are desperate. ?In short, they take longer-shot chances than they would ordinarily take. ?They think:

“This person couldn’t be that much worse than what we have going now, and he sounds a lot different than the politicians that I have been hearing for so many years, ad nauseam. ?He talks about issues that affect my situation, and is not willing to mince words. ?He could be a LOT better than the status quo, which stinks. ?

So, the downside is limited, and the upside could be significant. ?I don’t care about the rough edges of this guy; the media always blows things out of proportion anyway, and helps foster the consensus candidates that never solve anything. ?So, I’m just going to hold my nose and vote for (fill in the blank).”

In my opinion, that’s why politics is nuts over here right now. ?Given the relative inability of the electorate to digest complex explanations, there are a lot of matters that they can’t understand, and as a result, regardless of who they elect, they won’t be happy.

Most of the economic and political problems stem from:

Technological change
Increasing returns to those that are smart versus those that are not
Not enough productive children being born
Attempts to improve the economy that don’t work
Gerrymandering
A diminishing consensus on what is right and wrong, and the proper role of government

The technological change is the most important factor, and explains why attempts to limit immigration or limit free trade won’t help. ?As a result of the internet, businesses can set up in many areas and benefit from the different aspects of each area — labor here, capital there, taxes way over there. ?Unless governments are willing to work together to limit this, and they?compete, they don’t cooperate here, this can’t be solved.

Information technology can make lower skilled workers far more productive, leading to a diminution of jobs in many sectors. ?This can happen anywhere — in banks, investment shops, factories, and restaurants. ?It works anyplace where you can turn 80%+ of a job into a set of rules. ?That can move jobs away from where they currently are to places where inexpensive labor can do the work.

In the short-run, this is a problem for many. ?In the long run, it will release labor to more valuable pursuits. ?That said, many older people will not be capable of retraining, and younger people will gain the opportunities if they are smart. ?the “know nots” are becoming “have nots.”

Part of this is payback for not studying enough in school, and/or studying topics that would eventually valuable in college. ?As I have said before, “Follow your bliss” is selfish and dumb. ?Real value comes, and society improves, from facilitating the bliss of others. ?The more people you make happy, the greater the rewards are.

Now, demographics are getting worse for most developing economies. ?Most economies do better when the fertility rate is over 2.1 — i.e., that population is growing. ?Typically that means that opportunities are growing. ?When working populations shrink, social benefit plans begin to collapse, and when populations shrink, countries lose vitality and creativity. ?We need youth to replenish its ranks to keep our societies healthy.

Note that efforts to fix fertility by offering tax incentives do not work. ?Once women are convinced it is not valuable to have kids, no reasonable amount of effort will change that.

As for economic policy, we are still running policy off of a model that assumes that debts are not high on order for policy to work. ?That is why continued deficit spending and abnormal monetary policy (QE & Zero or Negative Interest Rates) aren’t helping. ?Helicopter money?has its own issues.

Regardless of what happens to the presidency, Congress will remain the same because of gerrymandering. ?There’s only so much that even a good President can do if Congress is occupied by ideologues from both sides of the political spectrum.

Finally, the sides of the political spectrum are further apart because there is less consensus?on what is right and wrong, and the proper role of government. ?In some ways the internet facilitates this because you can filter out the arguments of those who disagree with you more easily. ?I set up my news sources so that I am always reading liberals and conservatives, as well as those that don’t fit well on the political map, but few others do.

And that, my friend, is why the political scene is nuts in the US now. ?There are a lot of disappointed and desperate people who are willing to try anything to get their prosperity back, even though none of the politicians can do anything that will genuinely help the situation.

It is a recipe for disaster, and absent an act of God, I don’t see anything that will change the attitudes rapidly. ?People across?the political spectrum are happily believing their own myths; it will take a lot of pain to puncture them all.

PS — I’ve given up alcohol. ?We’ll have to figure something else out if?we get together.

Stay Calm

Posted on 5 November 2014 by David Merkel

Photo Credit: Moyan Brenn || Relax, you know less than you think... — Photo Credit: Moyan Brenn || Relax, you know less than you think…

So, the Republicans swamped the Democrats in the midterm elections.

Big deal.

The differences between the varying wings of the Purple Party are smaller than you think. ?What’s more, their willingness to magnify those differences and do little as a result is a high probability outcome.

Add in that the Republicans don’t have a coherent set of policies as a group. Will the t-party and Establishment wings of the GOP come to a meeting of the minds? (Democrats may insert easy cheap joke here.) ?Even if they do, who will take the blame when Obama vetoes their bills? ?They aren’t called the “stupid party” for nothing. ?They have a peculiar knack for snatching defeat from the jaws of victory, and letting their less presentable members define them.

Even if in theory, the markets do better from Republicans, in practice the reverse seems to be true. ?But the track record has so few data points that statistical credibility is low.

And, if there is something to the Republicans being in power moving the markets, how would you know if it wasn’t anticipated in the recent run-up of prices? ?Many parties may have bought into the concept of greater prosperity as result of the then-forthcoming elections. ?The time to buy?the rumor is gone. ?The time to sell the news may be here.

The same applies to the presidential cycle. ?Many argue that we are heading into a good time for the markets in the third and fourth year of a presidential term. ?Too many are arguing this in my opinion, and even if there is some real impact from presidential terms, perhaps the market is anticipating this as well. ?After all, the bad part of the presidential cycle looked pretty good this time around.

Add in that again we are working with the law of small numbers — the presidential cycle could just be due to?randomness. ?Some part of the presidential cycle had to look better. ?Is it so much better than any other subset could have been?

The same thing applies to the argument I am seeing trotted around that we are coming into the best six months?of the year. ?Cue the comments on the law of small numbers and randomness. ?Even if there is a structural reason like tax-based selling, might it have been anticipated this time around? ?Markets tend to anticipate. ?Some six month period had to be best… but is it due to randomness?

Going back to politics, I would point out that few significant things change in politics off of party affiliation. ?How many states have their budgets balanced on an accrual basis, taking into account the need to spread out the cost of infrastructure projects, and?pensions funded assuming a realistic 5% earnings assumption on assets, together with fully funded accrual accounts? ?None. ?All of the states put off paying for the accruals of what should be current expenses.

We’ve talked about entitlement reform, but action never happens, except further expansion, as under Bush, Jr. ?Will we see GSE reform, or will Congress continue to use the GSEs for their own ends? ?Will there ever be significant cuts in defense? ?Will we ever see truly balanced budgets on an accrual basis?

Beyond that, consider the Fed, the Supreme Court, and the bureaucracy generally… they don’t change rapidly, if at all. ?Admittedly, the Supreme Court has been more activist over the recent past… so maybe I am wrong there.

And truly, Congress changes only at the edges. ?The grand majority?of the same faces will be there, only the majority and committee assignments shift. ?That may not mean much.

But do we want lots of change? ?Individually, many of us do, but if you add us all together, it often nets to something near zero. ?Perhaps most of us are happy with that, given the alternative that those of us with the opposite views might impose them on the rest of us.

I leave you with this: don’t make too much out of the election results, the presidential cycle, the “sell in May and go away” phenomenon, etc. ?The world is complex, with many people trying to anticipate market reactions. ?Untangling them is close to impossible, so stay calm, and pursue the ordinary strategies that you always do. ?For me, I will continue my value investing.

Peterson’s Guide to Financial Blog Commenters

Posted on 16 April 2014 by David Merkel

I’ve been blogging for over seven years… this is just an experiment, and unlikely to be repeated. ?Here goes:

Have you ever read through comment streams on major financial news and blogging websites? ?Or the Message Boards at Yahoo? ?It is often ugly, bitter, and uninformed. ?That’s why I am bringing to you the?Peterson’s Guide to Financial Blog Commenters! ?Let’s have a look at the zoo:

The Insult Masters

There are many who can’t argue the details of an article, so it saves time and face to insult the author or other commenters. ?These are all too common, and make life dreary for serious thinkers.

The Person with a Little Insight

There are well-meaning and knowledgeable commenters, and they are a breath of fresh air compared to most of those who comment. ?Would that we had more of them. ?More often found in places where authors don’t write offensively.

The Person with a Lot of Insight

This is rare, but occasionally you get commenters that know more than the writer, or at least are on a par. ?If you spot them in the wild, take a snapshot of them, and send it in to the Aleph Blog. ?I appreciate great wisdom wherever it is found. ?Usually found as blogs that take a studious and serious tone.

Cult Members / Victimhood

The internet has many nooks and crannies, more than a mountain of English muffins. ?Let me point out a few with respect to cults & victimhood:

Cults

Bitcoin
Xenophobia
Guns

Victimhood

Bush
Obama
1%
Bankers
Government
Big Biz & Big Government
The Purple Party (I.e. “there ain’t a dime’s worth of difference between the Republican and Democrat parties.” George Wallace)
Jews — Really? ?We haven’t gotten past this? ?Anti-Semitism is so 20th Century.

Partisan Hacks

You know how the world works, and you talk down to the unwashed who don’t agree. ?Though they may deprecate religion, they are as bad as the worst of the religious in not listening to the views of the other side — after all, they have the knowledge that few do.

Too Much Time on Your Hands

I don’t know why some people leave incredibly long comments at a website or blog. ?It would be far better for them to start their own blog where they can showcase their work, and put it forth positively, rather than merely reacting.

The Writer is a Shill

There are some commenters that exist only to push a view for which they are compensated. ?Be wary of those who stridently comment in areas where there is some financial advantage to do so.

Pushes Pet Issue

Much like the cult members and victims, there are those that will push their pet issue, because that is a main goal of theirs.

Tells Sob Story

Cute kid, huh? ?But some people use comment threads to grieve over their story where they allege they were abused by powerful corporations, governments, etc.

Joker

Some just make jokes about the article or comments, and this is perhaps the most common of all… after all, who doesn’t like a good joke? ?Unless, of course, you are the target…

Pot Shots

There are many who go for quick hits on authors or commenters. ?After all, in an anonymous culture, there is no cost to being insulting or rude. ?So take a pot shot, right?

Ranters

Like those that have to much time on their hands, those that rant have a lot to say, and you are entitled to all of it.

Pedant

Finally, the least valuable — those that insist on points of grammar, when the sense of the communication is easily known.

Summary

My main point here is that most who comment on financial websites and blogs should not do it, or they should change, so that they comment in such a way that they elevate the discussion above the analogy of a common brawl. ?Do unto others as you would have others do unto you. ?Aim for the good of others, rather than putdowns. ?It’s that simple.

Stagflation and Financial Repression

Posted on 20 November 201320 November 2013 by David Merkel

This post is an experiment.? Don’t hold me to high standards here.? I want to explore the area where governments extract value out of their citizens via inflation.

With stagflation, we have high inflation and high unemployment.? Financial Repression has inflation higher than safe interest rates.

In the current situation, we have a lot of discouraged workers.? We also have a government sucking value out of savers because short interest rates are so low.

The main thing to understand here is that the government is not here to help you, but to milk you.? The government does not care about you.? It cares about its survival.? If it can’t get sufficient taxes out of the populace, it will use its financing arm, the central bank, to lend to it at preferential rates, while passing on losses to the populace via inflation.? Also note that inflation tends to hit the poor more than the rich.? Food and energy, two things that can’t be printed, have prices that rise more rapidly.? Food and energy price rises affect the poor more than the rich.? As such, the current Fed policy that tends to raise commodity and asset prices discriminates against the poor and in favor of the rich.? From unelected bureaucrats, it’s hard to think of a more unaccountable policy.

Both policies, stagflation and financial repression, come about because the government and central bank are trying to force the economy to do more than it can do, leading to greater poverty on the low end of society, leaving aside the fine-sounding words of the liberals.? You have to get this: there is no constituency for small business and poor people in Washington, DC.? The policies align with big business and rich individuals.? The purple party reigns, sucking in donations from both sides.? Significant donations only come from big business and rich individuals.? (Purple is significant of Monarchy, aside from being the mix of red and blue.)

My main point is this: it will be difficult for most developed country governments to fulfill all the promises they have made.? The results of this may involve stagflation, financial repression, and/or defaults.

What a world we bequeath to our children and grandchildren.

Sorted Weekly Tweets

Posted on 11 May 2013 by David Merkel

China

Pettis: I would argue that until Beijing has cleaned up its debt problems and its very unstable balance sheets, it cannot move quickly. $$
Pettis: Reducing the [interest] subsidy by raising rates would cause them all to bleed money. (DM: thus fin’l liberalization difficult) $$
Pettis: Far more than 100% of total SOE profits come from the interest rate subsidy (not to mention other subsidies…) $$
Target loopholes in pension system firststks.co/fVB7?China pensions exceeds the stupidity of US but not Greece: ret ages 2 low $$
Chinese steel association seeks to tackle ‘vicious competition’?stks.co/pBzz?A lot of words trying to explain away 2 much steel $$
China Slowing Reserves – A reverse QE?stks.co/hUjH?Hu Jintao ate sour grapes & Xi Jinping’s teeth r set on edge $$#dealtabadhand
Policy battle rages in China as slowdown feeds ‘sense of crisis’?stks.co/qBXa?Hard to overcome bureaucracy stifling the economy $$

Europe

Germans Splurge on Italian Homes Locals Can?t Afford?stks.co/iUpP?Pushes $$ into Italian economy, don’t kvetch
German euro founder calls for ‘catastrophic’ currency 2b broken upstks.co/tBWC?The political experiment should end; harm>good $$
Eurozone crisis deepens as German ‘sado-monetarists’ refuse to back QEstks.co/gUXD?Either centralize or dissolve the Eurozone $$
Southern Europeans Flock to Germanystks.co/cTEw?Cheaper labor emigrates to Germany to benefit from their capital invested $$
Sweden a Crisis Casualty No More Shows How to Get Haven Glowstks.co/bTBH?Which inflates asset values in their economy, great $$

Rest of the World

Egypt?s Wheat Farmers Hobbled by Fuel Shortages as Silos Run Lowstks.co/pCGK?Who would have the courage 2free Egypt’s economy? $$
Dollar Buying Continues Apace After ?100 Break?stks.co/iVEm?&?stks.co/jV1m&?stks.co/fVAg?Three on?#Japan?$$
Iran Cracks Down Ahead of Electionstks.co/gV0Q?The Ghanoon newspaper says. “Only in Iran: Election comes and Internet goes.” $$
SAT Scandal Shines Harsh Light on South Korean Academics?stks.co/qC0LSAT exams cancelled in S. Korea, a first for any country $$
Egypt Investment Collapsing as Citizens Turn Into Vigilantes?stks.co/eTds?It was smart 2 topple Hosni Mubarak & Saddam Hussein $$
In India, a Quixotic Fight Against Car Honks?stks.co/sBQj?Makes me want 2 create a bumper sticker, “Honk if you love India!” $$ 😉

Companies & Industries

Blackstone Targets Bulging Corporate Coffers Via New Unit?stks.co/sC9w?W/ MMFs under threat, alternative S-T income funds arise $$
Temporary Workers Near US Record Makes Kelly a Winner?stks.co/rC9qStaffing firms benefit from need 4 fewer full-time workers $$
And, as an aside, once PPACA [Obamacare] really kicks in, part-time work may become even bigger; very ill-thought out law, unforced error $$
Delta Capital-Return Plan Puts Focus on Cash Flow?stks.co/cThy?Airlines r2 capital intensive 2b run 4 free cash flow; dubious $$
Scor lead bidder for Generali USA in $800m deal?stks.co/qC1o?Not surprising 2c Scor overpay;?$RGA?is conservative $$ | FD: +?$RGA
Some Insurers Turn Away Variable-Annuity Money?stks.co/eTaG?When a life company does this, fund it, & don’t surrender; you won $$
Merged Bonds May Spur Fannie, Freddie Revamp?stks.co/dT4a?Offer the equity interests a kiss goodbye & merge them into GNMA $$
Cheapest Way to Rob Bank Seen in Cyber Attack Like Hustle?stks.co/tBQ6Start Denial of Service attack, raid $$ during distraction
New technology propels ‘old energy’ boom?stks.co/rBPp?Alternative energy will make sense when conventional energy gets scarce $$
Amazon?s growing threat 2 H-P, Dell and Oracle?stks.co/qBQR?It’s amazing how you can beat your competitors w/no profit FD: +?$ORCL
Some Verizon Investors OK With Paying Premium 4 Vodafone Stake?stks.co/bTAjSome large?$VZ?shareholders ok paying $130B FD: +?$VOD

US Politics & Economics

Deficit Reduction Is Seen by Economists as Impeding Recovery?stks.co/eTyxEconomists have not been right, y listen 2 them? $$
??Big banks get a great deal when they borrow from the Fed,? Warren said on the Senate floor. ?In effect, the American taxpayer… (1/2)
…is investing in those banks. We should make the same kind of investment in our young people who are trying to get an education.? (2/2) $$
Private Student Debt Refinancing Could Help Economy, CFPB Says?stks.co/fV03Elizabeth Warren is a dangerous loony in this case $$
@AllenSammey?When a politician lobbies to use the borrowing power of the Fed for narrow political ends, that is dangerous, no?
@AllenSammey?Also, read the two prior tweets. They were meant as a group. I like a lot about Warren, but there is a lot 2 worry about also
@AllenSammey?That’s y I lend to my own children @ 0% in place of student loans; that they r not dischargeable in BK is another neg feature
Blacks Surpass Whites in Voter Turnout, Census Data Show?stks.co/hVAA?Helps explain the last election’s results $$
Colleges Soak Poor US Students While Funneling Aid to Rich?stks.co/bTURColleges r funded by donations. Poor people can’t donate.
What was Gallagher thinking?stks.co/dTHw?Difficult 2harm muni bonds w/strong economic purpose/pledges behind them $$ by?@munilass
Time for Americans to Rethink Retirement??stks.co/rBX4?If u have not concluded that u won’t retire, u r not paying attention $$
Federal Reserve Blows More Bubblesstks.co/eTLo?Ron Paul minces no words about the foolishness of current Fed policy $$
If this was a pill, you?d do anything to get it?stks.co/jUPk?Simple: have a nurse check on sick elderly at home once a week $$
Gore Is Romney-Rich With $200 Million After Bush Defeat?stks.co/pBWE?An utter hypocrite, pursuing his politics 4 financial gain $$
US Non-Farm Payrolls – The Hidden Weaknesses – not +165k but -376k?stks.co/rBPu?A pessimistic alternative view of jobs report $$
Too Much Asset Inflation?stks.co/eTGDTakes on Paul Krugman’s blather about there not being enough inflation, given asset bubble $$
Everything You Think You Know About the Fed’s Exit Plan May Be Wrongstks.co/rBOX?Fed may try 2 tighten &hold down long yields $$
Reverse Revolving Door: How Corporate Insiders r Rewarded, Leaving Firms For Congress?stks.co/gUMN?Y the Purple Party rules DC $$

Market Dynamics

Seth Klarman Warns of False Calm in the US?stks.co/jUu8?It is far easier 2b lax in $$ policy than it is to remove laxity#klarman
Investor Demand Propels Cheap Corporate Debt?stks.co/dTcm?Note that borrowing is not going on to fund organic growth, generally $$
Yields on Junk Bonds Reach New Lowonline.wsj.com/article/SB1000??When the average yield on junk bonds drops below 5%, we should run away $$
Listening to Harry Markowitz drone on about MPT, while I have 2 questions pending.?stks.co/aTco?Webinar:Arizona CFA socieities $$
As Sohn gears up, is it open season on Paulson and other hedge funds?stks.co/qBls?Hedge funds have a weak liability structure $$
This graph is 1 of many reasons y I follow the credit cycle:?stks.co/iUiM?Not perfect, but credit is the heartbeat of commerce $$
?Putting Dow 15,000 in Perspective? by@ReformedBroker?stks.co/qBe9?Round numbers fascinate us; processes behind them r unclear $$
Spinning single-family home investments into mortgage-backed securities?stks.co/iUe9?Better idea than securitizing rents $$
Current Account: Cheap Junk Leads to Expensive Mistakes?stks.co/aTNl?A lower coupon on a junk bond means more refinancing risk $$
Wall Street?s trading businesses turn to survival of the least dead?stks.co/gUR6You want 2b the last man standing: monopoly $$
Rush for gold coins, jewels peters outstks.co/hUcf?Looks like the drive to own physical precious metals has finished 4 now $$
Speedy Robots Still a Wall Street Perilstks.co/gUQe?Anytime a strategy gets too large, the non-linearities kick in, w/crisis $$
Chart of the Day: NYSE Margin Debt Raises Eyebrows?stks.co/hUcAAsset/Liability mismatch invites trouble; margin debt goes up $$

Other

Better Than Buffett, This Investor Made Me Rich for Life?stks.co/bTj3 @davidweidner?’s tribute to his late mother $$ Love > Money
If Spending Is the Goal, Try Use-It-Or-Lose-It Gift Cards?stks.co/iUpXSeiniorage should b distributed to the people per capita $$
The Internet Kills More Jobs Than It Creates?stks.co/fUm6?It is shrinking the cash/taxable economy, but not the economy. $$
Today?s CEOs Are Too Timid for the Times?stks.co/aTbG?The marginal productivity of capital is falling b/c of debt deflation. $$
David Ferrucci: Life After Watsonstks.co/dTER?Creator of IBM’s Watson goes 2Bridgewater 2apply Big Data & AI 2forecasting econ $$

Berkshire Hathaway

$BRK.A?CEOs Spend Quietly, Match Buffett on Heinz Deal?stks.co/dTmE?FD: +$BRK.B?| Clever subsidiary CEOs grow BRK organically $$
New book teaches children ABCs of Buffett’s Company?stks.co/iUpW?There would b a Hebrew version, but the Gecko isn’t kosher $$ 😉
I think reinsuring Long Term Care is stupid almost always. Insureds know more than insurer, who know more than reinsurer cc?@retheauditors
BRK knew *far* less than SwissRe about the policies they were reinsuring. On life re, meh, but 2 reinsure LTC takes real knowledge $$ +?$BRK
Buffett’s Ribbing About Swiss Re Dispute Is Fibbing?stks.co/bTGH?SwissRe took BRK 2 the cleaners FD: +?$BRK/B cc@retheauditors?$$
Warren Buffett worries about Fed’s ‘huge experiment’?stks.co/eTFv?Reliable: removing accommodation is harder than providing it $$
Munger: It’s time to break up the banksstks.co/hUcC?Munger knows that you should mix deposit insurance w/investment banking $$
A Lesson From Warren Buffett: Doubt Yourself?stks.co/sBPW?Many great investment teams encourage disagreement 2 test theses hard $$
?We Want to Win?:Berkshire Hathaway Ann’l Meeting, 2013 Edition?stks.co/gUPpBuffett could help?$VZ?buy VZ Wireless FD: +$BRK?$VOD

Wrong

@creditplumber?My article is about insurance companies; u r taking my words out of context
Wrong: Fed in 2008 Showed Panic of 1907 Was Excessive?stks.co/jV1r?If/when the tightening cycle ends & things r fine, then crow $$
Wrong: Earnings Seen Lifting S&P 500 to Real Record?stks.co/bTjd?Profit margins would have 2 rise from record highs 2 do this $$
Wrong: Y I Have Never Said 2Invest With Warren Buffett?stks.co/qC02?U don’t tug on Superman’s cape, u don’t spit in the wind… $$
Unsure: Chanos sees downturn in hard disk drive industry?stks.co/iV3L?Will b hard to fight all of the free cash flow $$
Wrong: Larry Fink’s radical retirement recommendation?stks.co/fUaf?Please do *not* constrain people 2save; failure is an option $$
@AllenSammey?I mean that people should be free 2 take care of current needs rather than being forced to save, even if it means poor when old
Wrong: House Democrats Seeking Control Eye 17 Split-Ticket Seatsstks.co/gURH?This article asserts, it does not prove $$
Wrong: Bond Buyers See No 1994 Rout Helped by Bernanke Clarity?stks.co/qBQsNo one saw 1994 coming either; we r flying blind $$
Wrong: Crises Before and After the Creation of the Fed (2013-13, 5/6/2013)stks.co/gULU?Very premature 2 run a victory lap $$

Replies, Retweets & Comments

@SarcasticBull?I agree.
That is funny & weird. Very, very weird $$ RT?@izakaminska: Meme time:Hitler finds out about negative interest ratesstks.co/fUfN
@munilass?The danger 4 those that seek notable media coverage: media likes bold predictions, b/c they are “newsy.” Kind of a trap $$
@ScrollnKey?6x prior premium? Thanks. Post-Cyprus I think many people are analyzing how they can preserve their wealth.
Building a bigger, badder, bubble RT@kmac: RBA statement herebit.ly/12cL7Kk
@ScrollnKey?How is it compared to six months ago?
+1 Houses r expenses RT@cullenroche: Rarely do I disagree with Rick Ferri, but I do here.rickferri.com/blog/investmen?
@OffRoadFinance?I will accept the premise of the paper once we get through the ultimate tightening cycle, which may not b 4 decades
Van Hoisington, Lacy Hunt & Gary Shilling would agree RT?@carney: …a lot of people making bets on rates rising could get burned badly …
@ReformedBroker?thanks
@The_Analyst?@ReformedBroker?There are levels of trust; this one ain’t so high, but it’s a straw blowing in the wind
@ReformedBroker?What was the forward PE on the cyclicals?
@gmacd18?Too early to say. Japan has been given a temporary free pass from the G20. When more nations try2 weaken their currencies, we’ll c
RT?@volatilitysmile: “The tax deductibility of interest played its part in creating this mess, both in the corporate and mortgage markets.”

FYI

My week on twitter: 51 retweets received, 1 new listings, 87 new followers, 61 mentions. Via:?20ft.net/p

On the Platinum Coin

Posted on 9 January 20139 January 2013 by David Merkel

Okay, so the Treasury mints a Platinum coin, and deems it to be worth One Trillion Dollars.? We have a fiat currency, so what is the problem?

There are fiat currencies, and there are fiat currencies.? Depositing something as collateral into the central bank where the “melt value” is decidedly less than one million, much less trillion dollars, is ridiculous.? I realize that many believe that the Fed can do whatever it wants, but eventually cash flows will catch up with a central bank as inflation rises.

The Trillion dollar coin would have value only because the taxation authority of the US Government stands behind it.? But that is not the way the government is behaving.? The taxation authority is not taking in as much and more so that they can redeem the promises inherent in the coin.? Instead, they are looking to the Fed to absorb losses in a stealth monetizing of the debt.

Monetizing government debt leads to inflation.? Receiving something worthless, and deeming it to be of high worth is the same as monetizing the debt.? Yes, the Fed can try to sterilize the effects, but it leaves the Fed with a problem — it will never be able to shrink its balance sheet to 2007 levels.? Thus inflation, eventually.

The platinum coin is a bad joke, and bad policy if eventually done.? This is what I wrote at Felix Salmon’s blog yesterday:

If they tried the platinum coin(s) once, Congress would legislate to eliminate the practice. The Purple party would take back their authority.

It is also possible that the Supreme Court would make them reverse the transaction, on the grounds that only Congress can regulate what is money. The executive may not. The minor exception made by Congress for platinum coins was only intended for numismatic coins ? not anything large.

But yes, Felix, you are right. This would end the concept of the dollar as a reserve currency. Only banana republics monetize their debt. Hey, maybe even the Fed would develop a backbone, and refuse the coin, or tell them it is only worth $1000. They don?t want to be stuck with QE not of their own design. Their QE is bad enough, but the coin, which will be a hole in the Fed?s balance sheet for as long as it lasts will be far harder to reverse.

You can’t get something for nothing.? Monetary stimulus is garbage, it steals from savers to reward solvent debtors.? Insolvent debtors can rot.? As with all monetary policy, stimulus helps the solvent.

This is a huge advertisement to get the government out of the economics business.? It has never been good at it, and this is proof.? The government might be able to goose things in the short-run, but it never succeeds in the long-run.

As it is, our government is addicted to short-run policy, and as such, does not consider long-run solutions that might be painful in the short-run.

Too bad.? Your kids lose, while you don’t seem to lose much for now.? This is a lousy position to be in.? People play for short-term advantage while while inflation increases.

You can’t get something for nothing.? Either there will be inflation, or taxation to pay back the platinum coin.