tag:blogger.com,1999:blog-29927402502706008442024-03-18T18:02:48.199-07:00Advancing TimeBruce Wildshttp://www.blogger.com/profile/10181323607060607040noreply@blogger.comBlogger1272125tag:blogger.com,1999:blog-2992740250270600844.post-15289406998661850942024-03-17T09:33:00.000-07:002024-03-17T09:33:57.485-07:00Advancing Time: The Plumbing Of The Financial System We Don't See<a href="https://brucewilds.blogspot.com/2024/03/the-plumbing-of-financial-system-we.html?spref=bl">Advancing Time: The Plumbing Of The Financial System We Don't See</a>: There are a lot of parts or plumbing in the financial system that we don't see. It is important to note the financial system and the eco...Bruce Wildshttp://www.blogger.com/profile/10181323607060607040noreply@blogger.com0tag:blogger.com,1999:blog-2992740250270600844.post-53692433453091859802024-03-17T09:22:00.000-07:002024-03-17T09:22:51.858-07:00The Plumbing Of The Financial System We Don't See<p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://th.bing.com/th/id/OIP.SHSK6UfNcTPQxen3wEk3uAHaFr?rs=1&pid=ImgDetMain" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="363" data-original-width="474" height="245" src="https://th.bing.com/th/id/OIP.SHSK6UfNcTPQxen3wEk3uAHaFr?rs=1&pid=ImgDetMain" width="320" /></a></div>There are a lot of parts or plumbing in the financial system that we don't see. It is important to note the financial system and the economy may intersect but are not the same thing. Ignoring this fact, as many people do, will come back to haunt us. <p></p><p>This is why AdvancingTime has pounded away at the idea that <b>where and what we buy has a major impact on the future of both communities and countries</b>. I just finished watching "Thoughtful Money (with Adam Taggart)
<span class="yt-core-attributed-string yt-core-attributed-string--white-space-pre-wrap" role="text"><span class="yt-core-attributed-string--link-inherit-color" style="color: #131313;">Good news!" The Zero Hedge team put this special <a href="https://www.youtube.com/watch?v=5_J7uwLDBgA">Thoughtful Money's debate on the fate of the US dollar on the YouTube channel</a>. </span></span>This was a deep-dive discussion of over three hours<span style="color: #131313;">. </span><span class="yt-core-attributed-string yt-core-attributed-string--white-space-pre-wrap" role="text"><span class="yt-core-attributed-string--link-inherit-color" style="color: #131313;"> </span></span></p><p><span class="yt-core-attributed-string yt-core-attributed-string--white-space-pre-wrap" role="text"><span class="yt-core-attributed-string--link-inherit-color" style="color: #131313;">This important video did nothing to change my mind about where the world is going. </span></span>In short, I liked Brent Johnson's line, "certainty is death." He claims he is not certain about anything. The footnote under the discussion title makes it clear that <span class="yt-core-attributed-string yt-core-attributed-string--white-space-pre-wrap" role="text"><span class="yt-core-attributed-string--link-inherit-color" style="color: #131313;"><i>Investing in stocks, bonds, exchange-traded funds, mutual funds, and money market funds involves risk of loss. Loss of principal is possible. </i>Also,<i> some high-risk investments may use leverage, which will accentuate gains & losses. Foreign investing involves special risks, including a greater volatility and political, economic, and currency risks and differences in accounting methods. </i></span></span>In short, it underlines Johnson's uncertainty. </p><p><span style="font-size: small;"><i><b></b></i></span></p><h3 class="post-title entry-title" itemprop="name"></h3>
<div class="post-header">
<div class="post-header-line-1"></div>
</div>
<div class="post-body entry-content" id="post-body-235291077636664235" itemprop="description articleBody">
<table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right; margin-left: 1em; text-align: right;"><tbody>
<tr><td style="text-align: center;"><a href="https://1.bp.blogspot.com/-PNO1a5tZsCA/WMAHpxbe01I/AAAAAAAACnY/ErqvGYaysx4KCsRC8XIMKKFLQm3SfRbqgCLcB/s1600/rb.jpg" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" height="178" src="https://1.bp.blogspot.com/-PNO1a5tZsCA/WMAHpxbe01I/AAAAAAAACnY/ErqvGYaysx4KCsRC8XIMKKFLQm3SfRbqgCLcB/s320/rb.jpg" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span><b><span style="font-size: medium;"><a href="In truth, the financial system is a rickety cobbled-together mess of poorly fitted pieces. Overall, the global financial system is not a well-designed efficient machine. Instead, it is glued together in a haphazard way to get the job done. ">The Financial System Is Built Like This</a> </span></b></span></td></tr>
</tbody></table><p style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">More
than one economist, big wig CEO, and Fed watcher have admitted the
problems haunting the financial system have very deep roots. These
people often contend governments and central banks have not fully
rectified the problems causing the great financial crisis of 2008.
Instead, they have merely papered over our failures by printing money
and flooding the system with liquidity.</span></p><p style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> </span></p><p style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">In truth, the financial system is a rickety cobbled-together mess of poorly fitted pieces. <b>Overall, the financial system is not a well designed machine. Instead, it is glued together in a haphazard way to get the job done.</b> </span><span data-preserver-spaces="true" style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">To
make matters worse, this system is greased by the greed of those who
benefit from stealing a little from here and there. </span></p><p style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> </span></p><p style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">In the real world,
things are usually not intentionally designed to be complicated but the
reality is that they just are. </span>Part of getting a clear picture of where we are headed stems from the reality this is not all about economics but politics plays a major part in our future. Recessions have always had the effect of cleansing the economy of weak noncompetitive companies to clear the way for new stronger companies. The efforts of those in charge of such things to remove recessions from the economic cycle has created a new hazard. <br /></p></div><p></p><p>An excellent example of "hidden plumbing" is the Japanese carry trade. An article by Bloomberg reporter Masaki Kondo that appeared on Zerohedge on February 1st titled, "<a href="https://www.zerohedge.com/markets/aozora-delivers-grim-reminder-japan-carry-trade-risk">Aozora Delivers Grim Reminder Of Japan Carry-Trade Risk</a>" details some of these issues. It details how Japanese investors as a whole have boosted their overseas investment
since the BOJ expanded monetary easing in 2013. This
includes Japanese banks. This puts them at risk if the cost of borrowing in yen should rise. He point out this could<i> </i>trigger an unwinding of Japan's massive carry trade. </p><div class="separator" style="clear: both; text-align: center;"><picture style="margin-left: 1em; margin-right: 1em;"><img alt="" class="inline-images image-style-inline-images" data-entity-type="file" data-entity-uuid="7acbd941-0cfd-4609-a9a3-fbd8cc2c07af" data-responsive-image-style="inline_images" height="289" src="https://assets.zerohedge.com/s3fs-public/styles/inline_image_mobile/public/inline-images/past%20decade%20buying.jpg?itok=R7b9b-e1" width="500" /></picture></div><p></p><p>While many people have focused on the losses US banks have incurred on long-term US bonds and American Banks' exposure to commercial real estate, little attention has been paid to Japan's exposure to these items. Not only could Japanese banks take a hit on both these investments but <a href="https://brucewilds.blogspot.com/2023/10/china-could-derail-japans-fragile.html">Japan's exposure to the downturn and losses in China</a> is another area for concern. <b style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">Yes, it is possible that China's economic problems will spill over and negatively impact Japan.</span></b><span style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> Still, t</span>his is an area many financial gurus claim is an opportunity for Japan to expand into and exploit, in short, they claim economic chaos in China is a plus. <b> </b><i><b><br /></b></i></p><p>We should be aware that clogs in the system could create liquidity issues and even a change in the velocity at which money moves through the financial system could cause problems. The "slowing in the velocity of money" is rooted in where it is being placed<i>. </i>The speed at which money flows through the economy in some ways is tied to the speculation about the future of inflation.<i> </i></p><p>Behind the scenes, a lot of things are occurring that we don't recognize as important until they are unveiled as being so.<i> </i>Trade deficits, reshoring of manufacturing, changes in how taxes are accessed, man made and natural disasters, and more all flow into this mix. This translates into "nobody really knows what the future holds." The so-called, often self-proclaimed experts, included. <i><br /></i></p><p><span data-preserver-spaces="true" style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">Another thing we should be worried about is "financial one-offs" These are one-time events that may prove unable to propel the financial system forward over the long haul. In a world void of financially nutritious content, an individual has to really go out of their way to become educated in the way to avoid ending up as financial road kill.</span><i style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> </span></i><span data-preserver-spaces="true" style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">The less you know may increase your feeling all is well but does little to ensure your financial future.</span></p><p><span data-preserver-spaces="true" style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> </span></p><p><span style="font-size: small;"><i><b>(Republishing this article is permitted with reference to Bruce Wilds/AdvancingTime Blog)</b></i></span></p><p></p><p></p>Bruce Wildshttp://www.blogger.com/profile/10181323607060607040noreply@blogger.com0tag:blogger.com,1999:blog-2992740250270600844.post-23955025371230911372024-03-03T07:44:00.000-08:002024-03-03T07:44:02.191-08:00Advancing Time: America's Immigration Crisis, Due to Biden's Faile...<a href="https://brucewilds.blogspot.com/2024/03/americas-immigration-crisis-due-to.html?spref=bl">Advancing Time: America's Immigration Crisis, Due to Biden's Faile...</a>: CNBC just put out a video on the problems migrants are causing as cities struggle to deal with new immigrants being dropped on their doorste...Bruce Wildshttp://www.blogger.com/profile/10181323607060607040noreply@blogger.com0tag:blogger.com,1999:blog-2992740250270600844.post-58976725722847517132024-03-03T07:43:00.000-08:002024-03-03T07:58:07.017-08:00America's Immigration Crisis, Due to Biden's Failed Policy<p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://th.bing.com/th/id/OIP.LyuwfOcIAcrbT6nybFZl-AHaEK?rs=1&pid=ImgDetMain" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="266" data-original-width="474" height="180" src="https://th.bing.com/th/id/OIP.LyuwfOcIAcrbT6nybFZl-AHaEK?rs=1&pid=ImgDetMain" width="320" /></a></div>CNBC just put out a video on the problems migrants are causing as cities struggle to deal with new immigrants being dropped on their doorsteps. Even many of the cities that opened their arms to welcome these people want the government to halt the inflow. Coupled with this are calls for Washington to send money to help these cities out. <span class="yt-core-attributed-string yt-core-attributed-string--white-space-pre-wrap"><span class="yt-core-attributed-string--link-inherit-color" style="color: #131313;">Today,
major cities like New York, Denver, and Chicago are finding themselves
under extreme financial pressure and not getting the federal funding or
assistance needed to cope with the inflow. </span></span>All this has many Americans saying, enough is enough. <span class="yt-core-attributed-string yt-core-attributed-string--white-space-pre-wrap"><span class="yt-core-attributed-string--link-inherit-color" style="color: #131313;">The big question is how and when will this end.</span></span> <br /><p></p><p> Even some of those formerly advocating the loosening of immigration standards and open borders are coming to a place where they are untenable. Sadly, with the flow of more immigrants has come a slew of problems. Part of the problem is that many of the people streaming over our borders are not workers, this inflow includes people needing expensive healthcare and criminals. Yes, with the good come the bad unless restrictions are in place. <b>More people are not the answer to crafting a strong economy, quality is far more important than quantity.</b><span class="yt-core-attributed-string yt-core-attributed-string--white-space-pre-wrap"><span class="yt-core-attributed-string--link-inherit-color" style="color: #131313;"> </span></span></p><p> Remember, this immigration fiasco is occurring while American
citizens are forced to stand in long lines with passports in hand. Anyone who has
traveled knows you can't just walk into any country without any
questions asked. All this highlights the fact that immigration has been an issue for
decades and not properly addressing it will not make it go away. A
reasonable solution to
solving our immigration problems has eluded both
Republicans and Democrats time and time again and reduced those caught
within the system into political pawns.
</p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: left; margin-right: 1em; text-align: left;"><tbody>
<tr><td style="text-align: center;"><a href="https://4.bp.blogspot.com/-cy9Ty-CTVro/XEaMLYQyQBI/AAAAAAAAEdA/B08j7C9eclsduxmVMELtX42mqBwo8avfgCLcBGAs/s1600/iStock-488636000.jpg" style="clear: left; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="800" data-original-width="1200" height="213" src="https://4.bp.blogspot.com/-cy9Ty-CTVro/XEaMLYQyQBI/AAAAAAAAEdA/B08j7C9eclsduxmVMELtX42mqBwo8avfgCLcBGAs/s320/iStock-488636000.jpg" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="font-size: medium;"><b>America's Immigration System Is Broken</b></span></td></tr>
</tbody></table><p>The debate over immigration, processing new arrivals, and addressing
millions of undocumented immigrants, receives plenty of press but most of our immigration problems lurk below the radar. The point is that we should be careful what we wish for. In our complicated world, there are often pros and cons for every issue. <span class="yt-core-attributed-string yt-core-attributed-string--white-space-pre-wrap"><span class="yt-core-attributed-string--link-inherit-color" style="color: #131313;">The
ongoing migrant crisis is unprecedented and is hitting countries across
the world. Here in America, it is impacting not only the border states
but is reaching deep within the country.</span></span><b> </b><span class="yt-core-attributed-string yt-core-attributed-string--white-space-pre-wrap"><span class="yt-core-attributed-string--link-inherit-color" style="color: #131313;"><br /></span></span></p><p>Even small businesses in my
state, far from the border, are required to confirm a worker is legal to
work. This is a bit ridiculous for small firms with only a few workers,
all from their own family and people they have known since
birth, but that's the law.<i> </i>The <a href="https://www.youtube.com/watch?v=O5w9rTvlgTM">comment section of the CNBC</a> video is full of opinions on how opening the border is impacting
America. Since these people are flooding to cities, that is where most
problems are apparent. Several of the themes revolve around things like,
"As a Chicagoan, my city is being ruined." People from New York and Denver are also echoing the same message and crying about what Texas has dealt with
100 times over. <br />
</p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right; margin-left: 1em; text-align: right;"><tbody>
<tr><td style="text-align: center;"><a href="https://1.bp.blogspot.com/-RR_f_qxlEnE/XEaLGTcr4nI/AAAAAAAAEc0/uxKE6eE3EdoXmU4-mGlgtNja6YwsI2CuQCLcBGAs/s1600/tmpc8335dfd-6c5d-44ec-9527-0e2904acb76d-1.jpg" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="563" data-original-width="1000" height="180" src="https://1.bp.blogspot.com/-RR_f_qxlEnE/XEaLGTcr4nI/AAAAAAAAEc0/uxKE6eE3EdoXmU4-mGlgtNja6YwsI2CuQCLcBGAs/s320/tmpc8335dfd-6c5d-44ec-9527-0e2904acb76d-1.jpg" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="font-size: medium;"><b><span>Trump's </span></b></span><span style="font-size: medium;"><b><span>Politically Divisive </span></b></span><span style="font-size: medium;"><b><span>Border Wall </span></b> </span> </td></tr>
</tbody></table><b>Immigration is the crux of the issue and Trump's so-called wall
became an emotionally divisive symbol that took our eyes off the real
problem. America's immigration policy is a costly mess. </b>Like it or not, those in charge of such things as controlling our
borders are letting immigration reshape the world. This is happening far
faster than most people can imagine.
<a href="https://brucewilds.blogspot.com/2023/01/immigration-mainly-benefits-those.html">
</a><b><a href="https://brucewilds.blogspot.com/2023/01/immigration-mainly-benefits-those.html">Let's call a spade a spade, immigration mainly benefits those
entering a country and not the country's current residents.</a> </b>Otherwise,
countries would have to pay people to come rather than build fences to
keep them out. <p>Washington has been playing games and politics with America's immigration policy for years it has been a political football. <b><a href="https://brucewilds.blogspot.com/2019/06/immigration-system-and-laws-remain.html">The immigration system is badly broken and
fixing it is easier said than done.</a> A huge part of the problem stems
from the fact most
people can not agree on exactly what kind of immigration system we
should have.</b> To many Americans, the key issue is how open the borders
should be and who should be allowed to enter. Now Washington's inaction is coming back to haunt us. </p><p>Tens of billions of dollars are wasted each year on this costly inefficient system according to <a href="https://www.americanactionforum.org/research/the-costs-of-a-broken-immigration-system-on-american-business/">an article published by the American Action Forum</a> way back in April of 2015. The article explored the cost of a broken immigration system on American business. <b>The fact is that when the American Action Forum (AAF) analyzed the total costs of the immigration system, they found close to <a href="http://americanactionforum.org/insights/the-intersection-of-immigration-and-regulation">$30 billion</a>
in annual regulatory compliance costs. It hardly takes a rocket
scientist to determine that reducing the number of people "illegally"
entering the country would save billions of dollars and allow the system
to function better even in its current poorly crafted form.</b></p><p><b>A lot more of our political
attention should be focused on the broken bureaucratic apparatus that
comprises our current immigration system.</b> While we spend hundreds of billions of dollars on this and that in overall cost the wall Trump proposed now seems a rather puny amount. This is confirmed by figures that show merely <a href="https://brucewilds.blogspot.com/2018/12/getting-rid-of-penny-would-pay-for.html">doing away with making and handling the penny America would save enough to pay for a border wall</a>. Of course, none of this is a solution to the Deferred Action For
Childhood Arrivals (DACA) situation. Loading millions of people on
buses and deporting them will never happen. At the same time, those
wanting more open borders should realize the current situation does not
work either.<b> </b></p><p>Washington should step away from the "emotional" aspects of immigration
such as flowery debates about the rights of people and what they
"deserve" and focus on the key issues of restoring a functioning
government and getting on with real immigration reform. In the overall
scheme of things considering America's multi-trillion dollar budget, the
5.7 billion dollars requested for the wall is peanuts. In truth, it is
easy to see how America will
get a good economic return on money spent on a barrier that works 24/7
year after year. Most taxpayers, if asked, would see this as a far
better investment than paying government workers to stay home, as we
did during the last government
shutdown.</p><p> </p><p><b>Footnote;</b> The article above contains several links due to the fact parts of this issue have been the focus of prior AdvancingTime posts. It is important to understand that immigration policies determine the future of a country and its "way of life."<br /></p><p><span style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> </span></span></p><p><span><span>(<span style="font-size: small;"><b><i><b>Republishing of this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)</b></i></b></span></span></span></p>Bruce Wildshttp://www.blogger.com/profile/10181323607060607040noreply@blogger.com0tag:blogger.com,1999:blog-2992740250270600844.post-17843570723022173762024-02-29T06:41:00.000-08:002024-02-29T06:41:25.941-08:00Advancing Time: The Dreadful "C" Word - Conserve!<a href="https://brucewilds.blogspot.com/2021/02/the-dreadful-c-word-conserve.html?spref=bl">Advancing Time: The Dreadful "C" Word - Conserve!</a>: An article I wrote years ago remains as relevant today as when I wrote it. The subject delved into how candidates shy away from the dreade...Bruce Wildshttp://www.blogger.com/profile/10181323607060607040noreply@blogger.com0tag:blogger.com,1999:blog-2992740250270600844.post-71214900386015701842024-02-25T10:38:00.000-08:002024-02-25T10:38:58.256-08:00Advancing Time: Austerity Appears To Be An Idea Long Dead<a href="https://brucewilds.blogspot.com/2024/02/austerity-appears-to-be-idea-long-dead.html?spref=bl">Advancing Time: Austerity Appears To Be An Idea Long Dead</a>: A word nobody has mentioned for a long time is austerity. The term that would take us down the path to sustainable spending has been tossed ...Bruce Wildshttp://www.blogger.com/profile/10181323607060607040noreply@blogger.com0tag:blogger.com,1999:blog-2992740250270600844.post-54951680326041036492024-02-25T10:37:00.000-08:002024-02-28T17:18:28.054-08:00Austerity Appears To Be An Idea Long Dead<p>A word nobody has mentioned for a long time is austerity. The term that would take us down the path to sustainable spending has been tossed into the dustbin of history. Today the concept of government restraining spending is considered a bad idea. Those who oppose austerity often cling to the idea that a major
reduction in government spending will change future expectations about
taxes and future government spending. These are factors that encourage private consumption
and propel forward overall economic expansion.</p><p>Since 2017 when an article by James McCormack titled, <a href="https://www.project-syndicate.org/commentary/fiscal-policy-austerity-in-advanced-economies-by-james-mccormack-2017-07">"The Quiet Demise of Austerity"</a> was published on Project Syndicate, the idea of austerity has become toxic. Government spending has gone over the moon. It is a reach to blame it all on governments' response to the Covid pandemic. Still, the fact is that since then America's national debt has soared from roughly 21 trillion to over 34 trillion dollars. In short, austerity seems to have been forgotten just when it
is needed most.</p><p>In his article, McCormack pointed out that debates about the
potential advantages of using stimulus to boost short-term economic
growth, or about the threat of government debt reaching such a level as
to inhibit medium-term growth, have gone silent. <b>It is as if the whole world has
capitulated to the idea that we can spend our way out of the debt.</b> Other arguments center on the idea that it really doesn't matter and that we will deal with the issue when we have to.</p><p><b>There is no doubt that economic growth tends to mask a multitude of problems.</b> In economics,
austerity refers to cutting spending often by lowering and reducing the
number of benefits and public services. Austerity policies are often
used by governments to try to reduce their deficit spending. Spending
cutbacks are sometimes coupled with increases in taxes in an effort to
demonstrate long-term fiscal solvency to creditors. </p><p></p><div class="cap-right"><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right; margin-left: 1em; text-align: right;"><tbody><tr><td style="text-align: center;"><a href="https://3.bp.blogspot.com/-y6AEs2Tw7V4/WfXcs5pK4II/AAAAAAAADN0/kh_ldPI4w9YIYli2fXZXDW1an1UWDH8ZACLcBGAs/s1600/austerity.jpg" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="480" data-original-width="480" height="320" src="https://3.bp.blogspot.com/-y6AEs2Tw7V4/WfXcs5pK4II/AAAAAAAADN0/kh_ldPI4w9YIYli2fXZXDW1an1UWDH8ZACLcBGAs/s320/austerity.jpg" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="font-size: small;"><b>Austerity Is Often Seen As Heaping Misery On The Poor</b></span></td></tr>
</tbody></table><b>It is easy to point at measures taken to reduce runaway or wasted spending and
blame them for creating a reduced spending spiral but that is unfair.
Please note that while it is important to control rising budgets and how
much is spent, where it is spent is just as important.</b> </div><div class="cap-right"> </div><div class="cap-right">In
the article I cited McCormack wrote; <b><i>Objections to austerity
were understandable after the 2008 financial crisis when growth was
languishing below 2% and sizeable negative output gaps suggested that
overall employment would be slow to recover. But now the merits of
austerity seem to have been forgotten just when it is needed once again.</i></b></div><p></p><p><b>It is true that government spending financed by deficits
does support economic growth when consumers and businesses are unable to
do so. </b>When the private sector is unable or unwilling to consume at
a level that increases GDP and employment sufficiently, Keynesian economists claim governments should spend more, and not
less. This tends to be a slippery slope that is difficult to exit. Adding to this problem is that the government sector tends to be the least productive part of the economy. Larger government often leads to more regulation which strangles productivity in the private sector. What we are witnessing today is spending more and more in order to achieve economic growth. </p><p><b>Austerity has been given a bum
rap, blaming it for the problems we face is akin to
blaming the medicine taken after someone becomes sick for the </b><b>illness. </b>Austerity measures have been associated with public
protest and claims of a significant decline in the standard of living.
The argument by contemporary Keynesian economists that budget deficits
are appropriate when an economy is in recession bolsters this movement.
They claim it reduces unemployment and helps spur GDP growth, and that
in an economy one person's spending is another person's income. If
everyone tries to reduce their spending, the economy can fall into what economists call the paradox of thrift which results in a reduced spending spiral and a<i> </i>fall in the GDP.</p><p>Austerity measures are typically taken in extreme situations where there is a threat that a
government cannot honor its debt liabilities. Such a situation may
arise if a government has borrowed in foreign currencies that they have
no right to issue or if they have been legally forbidden from issuing
their own currency. In these cases, banks and investors may lose
trust in a government's ability and/or willingness to pay its
obligations and either refuse to roll over existing debts or demand
extremely high interest rates.</p><p></p><p>Often the typical goal of austerity is to reduce the annual
budget deficit without sacrificing growth. Part of the goal of these policies is generally to reduce the overall debt burden, as the economy grows. Unfortunately, most efforts by
central governments to prop up asset prices, bail out insolvent banks,
or "stimulate" the economy and deficit spending make stable growth less
likely. <i> </i> </p><p>People often look for someone or something to blame for the troubles we bring upon ourselves. This
is especially true when austerity is introduced as a way to bring out-of-control government spending back in check.
Austerity has negative
connotations because it is often painful. Still, blaming austerity
for the blowback from governments living beyond its means is more than
unfair. </p><p>Common logic would dictate at all times governments
operate with responsible reigns on spending. If a government spends and runs its
business in an austere way the issue of when to start cutting or
tightening should never surface. There is no doubt that economic growth tends to mask a multitude of problems. In economics,
austerity refers to cutting spending, often by lowering and reducing the
number of benefits and public services.</p><p><i> </i>Simply put, such cuts are very unpopular and painful to the people and the voters as social spending
programs get targeted for cuts and taxes are raised. Also, retirement ages may be raised and government pensions reduced. Even port and
airport fees, train and bus fares, and a slew of other cost usually increase. Please note that while it is important to control rising budgets and how
much is spent, where it is spent is just as important.</p><p></p><p>The problem we face today is the wild spending post-Covid never stopped. Every dollar wasted on <a href="https://www.heritage.org/budget-and-spending/commentary/boondoggles-7-examples-wasteful-outrageous-earmarks-senate-spending">political pork</a>, <a data-external="yes" href="https://reason.com/2023/11/16/full-extent-of-covid-fraud-will-never-be-known-with-certainty/">fraud</a>, and poorly considered infrastructure makes the country's fiscal situation even worse. Those opposing austerity argue that,
in periods of recession and high unemployment, austerity policies are
counter-productive, because reduced government spending can increase
unemployment. Also, reduced government spending reduces GDP, which means the
debt-to-GDP ratio examined by creditors and rating agencies does not
improve. </p><p></p><p><b> </b>At some point, the present and the future intersect, it is not
just about the deficits of today but the promises you make coming due.
These promises and how they affect the financial landscape must be
factored in. The bill for overspending does eventually come back to
haunt you. That is why we would be far better off if the concept of austerity was replaced or renamed
sustainable spending.<i> </i>I suspect that by the time cutting spending is again in vogue, we will be in real trouble. <i></i></p><p><i><br /></i></p><p><span style="font-size: small;"><i><b>(Republishing this article is permitted with reference to Bruce Wilds/AdvancingTime Blog)</b></i></span></p><p></p>Bruce Wildshttp://www.blogger.com/profile/10181323607060607040noreply@blogger.com0tag:blogger.com,1999:blog-2992740250270600844.post-41315440697626025992024-02-09T06:15:00.000-08:002024-02-09T06:15:54.058-08:00Advancing Time: What Data Should Investors Believe? It Is All Skewed<a href="https://brucewilds.blogspot.com/2024/02/what-data-should-investors-believe-it.html?spref=bl">Advancing Time: What Data Should Investors Believe? It Is All Skewed</a>: Where are these "consumers are confident" stories coming from? Recent Michigan consumer confidence numbers are up. This comes at a...Bruce Wildshttp://www.blogger.com/profile/10181323607060607040noreply@blogger.com0tag:blogger.com,1999:blog-2992740250270600844.post-3661416477614304922024-02-09T06:10:00.000-08:002024-02-09T06:10:48.657-08:00What Data Should Investors Believe? It Is All Skewed <p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://www.rxrelief.com/wp-content/uploads/sites/3/2019/01/ThinkstockPhotos-478643836-3.jpg" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="339" data-original-width="509" height="213" src="https://www.rxrelief.com/wp-content/uploads/sites/3/2019/01/ThinkstockPhotos-478643836-3.jpg" width="320" /></a></div>Where are these "consumers are confident" stories coming from? Recent Michigan consumer confidence numbers are up. This comes at a time when<span class="yt-core-attributed-string yt-core-attributed-string--white-space-pre-wrap"><i> </i>the New York Fed's Empire PMI kicked off the January data cycle by plunging. Yes, m</span>uch of the economic data shows the economy is slowing. <p></p><p>It seems that many consumers are convinced the Fed will soon drastically drop interest rates and it will be a big boost to the economy. To many younger people, decades of lower interest rates are the only thing they have ever known. The problem here is that lower rates do not necessarily lead to a stronger economy. </p><p>Part of the problem is that we are seeing the best of this data being revised downward month after month. This news is generally not highlighted on the front page but buried where it is less noticed. <b>What could go wrong in a system where the<a href="https://www.nbcnews.com/politics/2024-election/-nightmare-special-counsels-assessment-bidens-mental-fitness-triggers-rcna137975"> President has been declared so mentally impaired that he cannot be held responsible for handling documents</a> related to our security and safety?<i><br /></i></b></p><p>While Americans seem unable to stop spending, signs are rising that we are reaching the point where lenders would be foolish to extend more credit to them. Today credit card debt is at an all-time high, car repos soaring, commercial real estate is close to crisis mode, and consumer savings rates are very low. All these trends point to trouble ahead. </p><p>Adding to these woes is that inflation is
not done, residential housing affordability is terrible while the fed
deficit soars and unfunded debt obligations are creeping up. In some sense, it is pathetic that some investors' bright hopes are centered on history's record of Presidential collection years as being positive for the stock market. This is clouded, of course, by something we have heard a lot about, and been warned about, recency bias.<br /></p><p>This is our<b> </b>tendency to overemphasize the
importance of recent experiences or the latest information that we have witnessed when estimating future events. Recency bias often takes us in the direction of thinking that recent events are more of an indication of how the future will
unfold than they really are. Considering the direction of the stock market for decades, recency bias paves the way to thinking other than a few short-lived pullbacks it is always up, up, and away.</p><p>Still, some of the data coming out is concerning. <b>If you take a close look at job creation numbers you will find that as of late an explosion in the number of new jobs being created in the government and its money-funded healthcare sector. This is not good news, a healthy economy needs private sector growth.</b> There is evidence we may soon start to see private sector layoffs soar as companies try to remain profitable when they are forced to refinance debt at higher interest rates. </p><p>The Bureau Of Labor Statistics (BLS) birth-death model <a href="https://www.ft.com/content/072482b0-05ab-4d61-8947-2a6d94b49b94">may be skewing much of the current employment data.</a> Part of this is due to the increased use of Employee Identification Applications also known as EINs. The need to have an EIN is tied to getting a 1099 tax form which in 2000 was dropped from 20,000 dollars to 600 dollars. </p><p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://www.ft.com/__origami/service/image/v2/images/raw/ftcms%3A33a1599e-62bf-4d62-b7e5-28095ed6c88b?source=next-article&fit=scale-down&quality=highest&width=700&dpr=1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="393" data-original-width="700" height="225" src="https://www.ft.com/__origami/service/image/v2/images/raw/ftcms%3A33a1599e-62bf-4d62-b7e5-28095ed6c88b?source=next-article&fit=scale-down&quality=highest&width=700&dpr=1" width="400" /></a></div><br />This has promoted many new applications for the easy to apply for EIN. However, these are not new businesses or increasing employment simply moving existing commerce into another part of the economy. Here it is important to remember, that many new businesses don't amount to diddly-squat. Most close within a year often leaving behind unpaid bills. Unpaid debts may create jobs but not the productive kind the economy needs.<br /><p></p><p>When trying to get a handle on where the economy is headed, it is also important to consider data showing the personal savings rate has collapsed.<i> </i>Data reports indicate for many people, real income is down. This means many people are living
paycheck to paycheck. In short, people do not have discretionary income to save even with a record number of people working more than one job.</p><div class="separator" style="clear: both; text-align: center;"><picture style="margin-left: 1em; margin-right: 1em;"><img alt="" class="inline-images image-style-inline-images" data-entity-type="file" data-entity-uuid="465adb70-bdec-45fc-b0cc-73f77dbe2be0" data-responsive-image-style="inline_images" height="303" src="https://assets.zerohedge.com/s3fs-public/styles/inline_image_mobile/public/inline-images/bfmECA7.jpg?itok=hwGXzq7u" width="500" /></picture></div><p><i></i></p><p>Also telling is that the BLS has sharply slashed the number of estimated hours that everyone was working,<i><b> </b></i>from 34.3 to just 34.1. This is a big drop. The last time the workweek was this low was when the economy was shut down during covid. Other than the covid lockdowns, we have to 2010 to find such a short workweek. that was this anemic.</p><p>Some economy watchers argue we have been in a rolling recession and we are closer to the end of it than the beginning.<span class="yt-core-attributed-string yt-core-attributed-string--white-space-pre-wrap"><i> </i>Still, if we return to </span>the idea the main factors holding up the American economy are growing debt and
government spending we have a problem. It does not help that America's yearly trade deficit just came in at a staggering $773.4 billion.<b> </b><a href="https://www.quiverquant.com/news/Record%20High%20in%20U.S.%20Exports%20as%20Trade%20Deficit%20Narrows%20Amidst%20Economic%20Resilience#:~:text=The%20December%20trade%20deficit%20rose%20by%200.5%25%20to,U.S.%20GDP%20growth%20of%202.5%25%20for%20the%20year.">The article in this link, spins this a positive development</a>, after all, it is a huge decrease from the prior year.<i> </i></p><p>Other factors feeding into the economic picture are also fogging reality.<i> </i>For example, a boom in
the construction of manufacturing plants started in mid-2021. <a href="https://wolfstreet.com/2024/02/03/eyepopping-factory-construction-boom-in-the-us-chip-makers-on-forefront-but-chips-act-funds-havent-even-been-disbursed-yet/">Last year companies plowed an annualized $220 billion into this sector, which is up by 170% from December 2019.</a> This will have long-term ramifications for the economy as does the fact that this surge in construction will not continue forever.</p><p>I would like to end this post by circling back to the issue of jobs. An article that appeared on Zerohedge gives us something to ponder. <a href="https://www.zerohedge.com/economics/inside-most-ridiculous-jobs-report-recent-history">It called the last jobs report the most ridiculous in recent history.</a> Based on the numbers, it<i> </i>claims that all the job creation in the past four years has gone to
foreign-born workers, but there has been zero job-creation for native-born workers since July 2018! </p><p>In addition, the Zerohedge article points out that while in January the BLS claims 353K payrolls were added, the <a href="https://www.bls.gov/news.release/empsit.t01.htm">Household survey </a>found that the number of actually employed<i><b> </b></i>workers dropped by 31K. <span class="yt-core-attributed-string yt-core-attributed-string--white-space-pre-wrap">Those of us who believe economic cycles cannot be eliminated only kicked down the road where they wallop even a bigger punch than if allowed to occur see a lot of reasons to question where the economy is headed. </span></p><p><span class="yt-core-attributed-string yt-core-attributed-string--white-space-pre-wrap"> </span></p><p><span class="yt-core-attributed-string yt-core-attributed-string--white-space-pre-wrap"> </span><span style="font-size: small;"><i><b>(Republishing this article is permitted with reference to Bruce Wilds/AdvancingTime Blog)</b></i></span><a data-image-external-href="" data-image-href="/s3/files/inline-images/bfm4015_0.jpg?itok=cLBMbls5" data-link-option="0" href="https://www.zerohedge.com/s3/files/inline-images/bfm4015_0.jpg?itok=cLBMbls5"><picture></picture></a></p>Bruce Wildshttp://www.blogger.com/profile/10181323607060607040noreply@blogger.com0tag:blogger.com,1999:blog-2992740250270600844.post-89878583155258629102024-01-28T11:35:00.000-08:002024-01-28T11:35:05.367-08:00Advancing Time: Economic Transition Should Be A Natural Progression<a href="https://brucewilds.blogspot.com/2024/01/economic-transition-should-be-natural.html?spref=bl">Advancing Time: Economic Transition Should Be A Natural Progression</a>: In the Beginning, Everything Is New Economic transition should be a natural progression less altered by government intervention. This ...Bruce Wildshttp://www.blogger.com/profile/10181323607060607040noreply@blogger.com0tag:blogger.com,1999:blog-2992740250270600844.post-73884300911228310132024-01-28T11:27:00.000-08:002024-01-28T11:30:02.442-08:00Economic Transition Should Be A Natural Progression<p>
</p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right; margin-left: 1em; text-align: right;"><tbody>
<tr><td style="text-align: center;"><a href="https://3.bp.blogspot.com/-7et-IfAQ7LU/WdIso-w9ysI/AAAAAAAADGs/khLVG5B3L2EgabVEDepBgk-TZtLrO0BXwCEwYBhgL/s1600/early%2Bst.jpg" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="315" data-original-width="480" height="210" src="https://3.bp.blogspot.com/-7et-IfAQ7LU/WdIso-w9ysI/AAAAAAAADGs/khLVG5B3L2EgabVEDepBgk-TZtLrO0BXwCEwYBhgL/w320-h210/early%2Bst.jpg" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="font-size: medium;"><b>In the Beginning, Everything Is New</b></span></td></tr>
</tbody></table><p>
Economic transition should be a natural progression less altered by
government intervention. This thought is reinforced by the history of
government intervention which reveals the failings of government to be
efficient. I had to go deep into the archives of AdvancingTime to find this piece. It looks at the natural transition and progression in the economy that takes place when allowed. It is important to revisit this concept of economic evolution to understand what may be the best path forward. </p><p>The goal of this updated piece is to focus on how we might view a
developed country versus one that is in its early stages of economic
development. To do this, it might be helpful to think of a country in the early
stages of development as a newly planned development on the edge of
town. In the early stages of development, a great deal of money is spent
on building the infrastructure necessary for the planned community,
this includes roads, bridges, utility lines, and moving dirt. All this
may go on for many years as homes and commercial buildings are
constructed, all this creates jobs and new investment opportunities.
<i><br /></i>
</p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: left; margin-right: 1em; text-align: left;"><tbody>
<tr><td style="text-align: center;"><i><a href="https://2.bp.blogspot.com/-RnP0NiiRvgI/WdIzB-HNWKI/AAAAAAAADG4/BSwMSOfNJ8EcFnh5ia_cVLTzm9OxSdURACLcBGAs/s1600/repair%2Ba.jpg" style="clear: left; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="270" data-original-width="400" height="270" src="https://2.bp.blogspot.com/-RnP0NiiRvgI/WdIzB-HNWKI/AAAAAAAADG4/BSwMSOfNJ8EcFnh5ia_cVLTzm9OxSdURACLcBGAs/s400/repair%2Ba.jpg" width="400" /></a></i></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="font-size: small;"><b>At Some Point, Focus Moves Towards Repair And Restore </b></span></td></tr>
</tbody></table><p><i>
</i>At a certain stage of development, we reach a tipping point and a change
takes place in the nature of how we spend our resources. As
developments mature over time a larger percentage of outlays are spent
on things like maintenance, updating, and upgrading existing buildings
and infrastructure as needed, windows and roofs weathered by nature are
replaced and parking lots are repaved and sealed. Rather than pouring money
into strictly new construction, we find as an economy matures its rhythm
changes and the focus should become sustaining what has been created to
maximize our prior investment and extend its use.<i> </i></p><p>An example of the natural transition that takes place over time is how during the early 1900s just after the automobile became popular among
the masses garages began to appear in cities. These replaced the structures built for horses. In the neighborhoods being
built at the time garages were constructed for one car and fairly
narrow to accommodate the cars of the time. When cars became larger and
families started owning more than one automobile these garages were no
longer adequate and had to be enlarged. This example is used to
highlight the fact that as lifestyles change neighborhoods change and
evolve to better fit our needs and desires. </p><p>Over time with each new
invention, we alter our homes and the economy as well as a way of
adapting to the new realities life fosters upon us. In a perfect world, we would see developed areas not only continue to be
maintained but steadily evolve and move forward. Construction
tends to reflect the lifestyles of those living during the planning and
building phase. Rather than bulldozing these buildings, I contend it would often be better to upgrade and preserve the best characteristics unique to the era in which buildings were
conceived and do so in a way that makes economic sense. When it comes to buildings this means things such as adding insulation, replacing windows, or upgrading electrical panels.</p><p>Much of mankind has adopted mantras such as "move forward or die" and
"newer is better." These often repeated sayings tend to be short-sighted and discount
what those before us have brought to the table. <b>Failure to recognize
this economic transition and reflect upon the natural progression of
society ushers in conflicts and even war. Part of this comes from shortsighted politicians trying to produce the ever-growing growth we have been told the majority of voters want. This
shortsightedness helps to explain why here in America we never hear
politicians on the national scene call for conservation unless it is
during an emergency. <a href="https://brucewilds.blogspot.com/2021/02/the-dreadful-c-word-conserve.html">Consumers conserving, reducing waste, and any talk
of government austerity usually conflicts with the goals of lobbyists
hell-bent on creating growth at any cost.</a></b><a href="https://brucewilds.blogspot.com/2021/02/the-dreadful-c-word-conserve.html">
<i><br /></i></a>
</p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right; margin-left: 1em; text-align: right;"><tbody>
<tr><td style="text-align: center;"><i><a href="https://2.bp.blogspot.com/-PVv-q4CAz5E/WdYorhw3zfI/AAAAAAAADH4/SI8jr3MBwSAjXgjT8BPH51ckLj14bqnwACLcBGAs/s1600/wartt.jpg" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="1054" data-original-width="1600" height="263" src="https://2.bp.blogspot.com/-PVv-q4CAz5E/WdYorhw3zfI/AAAAAAAADH4/SI8jr3MBwSAjXgjT8BPH51ckLj14bqnwACLcBGAs/s400/wartt.jpg" width="400" /></a></i></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="font-size: small;"><b>War Is Wasteful And Disrupts The Natural Progression</b></span><i><span style="font-size: small;"><b> </b></span></i></td></tr>
</tbody></table><p><i>
</i>The idea that the way to grow is to increase our population is flawed.
Simply adding mouths to feed and efforts to merely add new workers to
replace those retiring creates additional demand but is flawed and
shortsighted and ignores many other problems. Just getting bigger is not always better and we
must recognize even trees do not grow to the sky. At some point, we
must face reality. <b>War is often the byproduct of such growth and war has
proven to be a poor answer to creating a better world. </b>The bottom-line
is we should focus on a transition toward a future that is sustainable
over the long term.<i><br /></i>
<i><br />
</i>When it comes to the economy, the pathway of natural transition means
finding new ways to manufacture and deliver goods. Unfortunately, the
shift from a growth economy to one that is sustainable over time is very
difficult to make for many countries. Change can create a slew of social
as well as economic problems. Sadly, we find that today the trend, often driven by governments trying
to stimulate growth, has become to encourage a total remove and replace.<i> </i>This
is seen in the way new regulations make things obsolete. </p><p>While ending the life of structures and systems prematurely may create jobs it also creates a lot of waste. Such waste is not new. We witnessed a huge amount of waste years ago when America rapidly switched its broadcast system from analog to digital, and hundreds of televisions were dumped into landfills.<a href="https://brucewilds.blogspot.com/2023/04/is-it-wise-for-those-in-power-to-push.html"> It seems that today this is again happening as we are pushed into electric vehicles. </a><br /><br />The world of tomorrow will create many new challenges as automation reduces the need for workers. This will cause us to struggle with creating jobs that make people feel useful and create lives that have a purpose. The toxic mix of big predatory companies and big government interrupts the natural transition and overpowers individual choice. <br /><br />When discussing such things it is easy to extend the conversation to things like income inequality and even more interesting issues. Such as, what do people deserve from society merely because they are born? Do individuals have an obligation to give back to society and not simply take and make demands upon it? These are questions we will continue to grapple with going forward and most likely the correct answer is embedded in reflection and thought.</p><p> </p><p><span style="font-size: small;">(<span><b><i><b>Republishing this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)</b></i></b></span></span></p>Bruce Wildshttp://www.blogger.com/profile/10181323607060607040noreply@blogger.com0tag:blogger.com,1999:blog-2992740250270600844.post-19505435531295406802024-01-17T05:56:00.000-08:002024-01-17T17:26:21.571-08:00Advancing Time: Stimulus Can Flow From Monetary Or Fiscal Policy<a href="https://brucewilds.blogspot.com/2024/01/stimulus-can-flow-from-monetary-or.html?spref=bl">Advancing Time: Stimulus Can Flow From Monetary Or Fiscal Policy</a>: Since 1982 whenever the economy has gotten into trouble the Fed has cut rates, often hard and fast. This has created a huge reliance on mone...Bruce Wildshttp://www.blogger.com/profile/10181323607060607040noreply@blogger.com0tag:blogger.com,1999:blog-2992740250270600844.post-20919016561843310962024-01-17T05:46:00.000-08:002024-01-17T05:53:23.246-08:00Stimulus Can Flow From Monetary Or Fiscal Policy<p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://th.bing.com/th/id/R.d83c3b16e89258b9b74c0b5df91fa274?rik=0oAJw1625O4lvA&riu=http%3a%2f%2fstatic1.squarespace.com%2fstatic%2f565909c5e4b0acafe1162cf8%2f56591901e4b0e1971709640f%2f56e5ebd40442621615cef858%2f1457954388573%2fHelicopter_Money.jpg%3fformat%3d1500w&ehk=vwLS6eIVpfE82hHaAfdOaO9i1mAnwEFqN5%2fNFtAgVQg%3d&risl=&pid=ImgRaw&r=0" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="533" data-original-width="800" height="213" src="https://th.bing.com/th/id/R.d83c3b16e89258b9b74c0b5df91fa274?rik=0oAJw1625O4lvA&riu=http%3a%2f%2fstatic1.squarespace.com%2fstatic%2f565909c5e4b0acafe1162cf8%2f56591901e4b0e1971709640f%2f56e5ebd40442621615cef858%2f1457954388573%2fHelicopter_Money.jpg%3fformat%3d1500w&ehk=vwLS6eIVpfE82hHaAfdOaO9i1mAnwEFqN5%2fNFtAgVQg%3d&risl=&pid=ImgRaw&r=0" width="320" /></a></div>Since 1982 whenever the economy has gotten into trouble the Fed has cut rates, often hard and fast. This has created a huge reliance on monetary stimulus. This is the handle the Fed has taken to controlling economic activity over the last several decades. It is also one of the main reasons markets are expecting lower rates going forward. <p></p><p>The other way to kick the economy to a higher level is through government spending or fiscal stimulus. This is also known as government money printing. The national deficit has exploded in the last fifteen years which indicates both types of policies are being overused. Unfortunately, expanding government fiscal policy often results in money being poorly spent, or flat out wasted, while leading to high government deficits. </p><p>This comes across as a MMT answer to economic growth which potentially leads to high inflation. <a href="https://brucewilds.blogspot.com/2023/12/the-nature-of-government-bureaucracies.html">An ugly often discounted fact is that it also results in a "bigger" government with a larger footprint.</a> To be clear, since the beginning of 2022, spending on manufacturing construction has soared. It is difficult to tell when this government fiscal spending will run out of juice and slow. Much of this construction is due to a combination of companies re-shoring supply chains as well as government spending. </p><p>When the spending from government fiscal policy slows the economy will most likely also slow. This is especially true if the new manufacturing plants are highly automated and do not create a lot of new jobs. Another factor we face is the cost of products flowing from them may also be higher than those America had been importing from low-cost countries.<br /></p><p>These policies are two distinctly different animals. It is important to remember that the growth generated from low-interest rates also has some drawbacks. This takes us to the issue of where is the stimulus coming from.<b> It is very likely that stimulating the economy through monetary policy and stimulus from fiscal spending have different long-term implications for inflation. </b></p><p>Inflation, disinflation, and deflation are often misunderstood terms and so are the reasons driving them. Part of this comes from the confusion generated by government numbers versus real inflation. Real yields matter, and the government uses a method that tends to promote lower inflation figures or underestimate what we really face. It is only over the long term we can see how different and how bad these trends have become. </p><p><br /></p><p><span style="font-size: small;"><i><b>Republishing this article is permitted with reference to Bruce Wilds/AdvancingTime Blog)</b></i></span></p>Bruce Wildshttp://www.blogger.com/profile/10181323607060607040noreply@blogger.com0tag:blogger.com,1999:blog-2992740250270600844.post-11046144263229038032024-01-11T04:51:00.000-08:002024-01-11T04:51:44.068-08:00Advancing Time: "It Will All End Badly" This All Points To A Massi...<a href="https://brucewilds.blogspot.com/2024/01/it-will-all-end-badly-this-all-points.html?spref=bl">Advancing Time: "It Will All End Badly" This All Points To A Massi...</a>: While the economy and financial system chug forward, the idea we have charted a course that will end in ruin remains. Looking down the road ...Bruce Wildshttp://www.blogger.com/profile/10181323607060607040noreply@blogger.com0tag:blogger.com,1999:blog-2992740250270600844.post-79427371630103276512024-01-11T04:30:00.000-08:002024-01-11T04:50:44.745-08:00"It Will All End Badly" This All Points To A Massive Reset<p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://1.bp.blogspot.com/-4MCxi8QOKsA/UafK89JRrTI/AAAAAAABKdg/O12vqEWV7KI/s342/us-collapse1.png" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="256" data-original-width="342" height="240" src="https://1.bp.blogspot.com/-4MCxi8QOKsA/UafK89JRrTI/AAAAAAABKdg/O12vqEWV7KI/w320-h240/us-collapse1.png" width="320" /></a></div>While the economy and financial system chug forward, the idea we have charted a course that will end in ruin remains. Looking down the road the numbers do not work. When they are not jockeyed,
jerked around, and falsified numbers tend to tell the truth. This was the message voiced by the late, Allen Meltzer. Born in 1928, Meltzer was viewed by many
economists as
America’s foremost expert in monetary policy even though he was little known by the
masses. <p></p><p>Recognized for his wisdom and
achievements in economics, Meltzer was a professor of
political economy at Carnegie Mellon University and a visiting fellow at
the Hoover Institution. He authored the three-volume “A History of the
Federal Reserve” and for over 25 years he chaired the Shadow Open Market
Committee, a group that meets regularly to discuss the policy of the
Federal Reserve.<br />
</p><div style="text-align: right;">
</div>
<table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: left; margin-right: 1em; text-align: left;"><tbody>
<tr><td style="text-align: center;"><a href="https://www.youtube.com/watch?v=FEnbNRe3Muo&list=PLKlAaRGVRcbIvZsHjSoP-LfOnt5p4Ll0K&index=5" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="182" data-original-width="252" height="231" src="https://1.bp.blogspot.com/-b516JsRKkqQ/Xp-vaitMckI/AAAAAAAAFWc/prqe5OaE0l02fu7XuDjMQ1fEYSTbPccOwCLcBGAsYHQ/s320/all%2Bmet.jpg" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><a href="https://www.youtube.com/watch?v=FEnbNRe3Muo&list=PLKlAaRGVRcbIvZsHjSoP-LfOnt5p4Ll0K&index=5"><b><span style="font-size: small;">Allen Meltzer On YouTube</span> (click to start)</b></a></td></tr>
</tbody></table><p>
<b>To say Meltzer was not a fan of the economic policies that unfolded since 2008 is an understatement. “We’re
in the biggest mess we’ve been in since the 1930s,” he was quoted as saying, before he went on to claim that, “We’ve
never had a more problematic future.”</b> <br />
<br />
In a Wall Street Journal opinion piece on June 30, 2010, titled
"Why Obamanomics Has Failed" Meltzer wrote about some of the biggest enemies facing future
economic growth. He went on to say that the
administration's stimulus program failed. Two overreaching reasons explain the failure of
Obamanomics. First,
administration economists and their outside supporters neglected the
longer-term costs and consequences of their actions. Second, the
administration and Congress have through their deeds and words
heightened uncertainty about the economic future.</p><p>A few years later, in May of 2014, Allen Meltzer penned a piece that appeared in the Wall
Street Journal. His opinion was highly valued, not only
because it is based on his long-developed work and studies, but because of his age, he had far less motivation to lie than many of those currently
involved in forming policies today. In the article, which is copied below, Meltzer gave his take on
where the economy was headed. The fact he died in 2017 does not lessen his insight. Meltzer wrote;</p><p style="margin-left: 40px; text-align: left;"><i> The U.S. Department of Agriculture forecasts that food prices will
rise as much as 3.5% this year, the biggest annual increase in three
years. Over the past 12 months from March, the consumer-price index
increased 1.5% before seasonal adjustment. These are warnings. Never in
history has a country that financed big budget deficits with large
amounts of central-bank money avoided inflation. Yet the U.S. has been
printing money—and in a reckless fashion—for years.</i></p><p style="margin-left: 40px; text-align: left;">
<i> The Obama administration has run huge budget deficits every year, which, together with the Bush
administration, amounted to $6.7 trillion from 2006 to 2013. The
Federal Reserve financed almost $3 trillion of these deficits by
purchasing Treasury bonds and notes. The Fed has also purchased massive
amounts of mortgage-backed securities. Today, with more than $2.5
trillion of idle reserves on bank balance sheets, there is enormous fuel
for greater inflation once lending and money growth rise. </i></p><p style="margin-left: 40px; text-align: left;"><i>To avoid the kind of damaging inflation the U.S. experienced in the
1970s and early '80s, the Fed could raise interest rates, including the
interest it pays banks on reserves, inducing banks to hold most of the
$2.5 trillion of reserves idle. But interest rates high enough to
discourage borrowing and lending would likely send the economy into
another damaging recession.</i></p><div class="media-object wrap" data-layout="
wrap" style="margin-left: 40px; text-align: left;">
</div><p style="margin-left: 40px; text-align: left;">
<i> Fed Chairwoman <a href="http://topics.wsj.com/person/Y/Janet-Yellen/5513">Janet Yellen</a> recently admitted that the central bank doesn't have a good model of inflation. It relies on the Phillips Curve, which
charts what economist Alban William Phillips in the late 1950s saw as a
tendency for inflation to rise when unemployment is low and to fall when
unemployment is high. Two of the most successful Fed chairmen, Paul Volcker and <a href="http://topics.wsj.com/person/G/Alan-Greenspan/6">Alan Greenspan</a>, considered the Phillips Curve unreliable. The Fed's forecasts of inflation ignore Milton
Friedman's dictum that "inflation is always and everywhere" a result of
excessive money growth relative to the growth of real output. </i></p><p style="margin-left: 40px; text-align: left;">
<i> The Fed
focuses far too much attention on distracting monthly and quarterly
data while ignoring the longer-term effects of money growth. The
country's present dilemma originated in 2008 when the Fed properly and
forcefully prevented a collapse of the payments system. But long before
idle reserves reached $2.5 trillion, the Fed didn't ask itself: What
can we do by adding more reserves that banks cannot do by using their
massive idle reserves? The fact that the reserves sat idle to earn
one-quarter of a percent a year should have been a clear signal that
banks didn't see demand to borrow by prudent borrowers. </i></p><p style="margin-left: 40px; text-align: left;">
<i> The
Fed's unprecedented quantitative easing since 2008 failed to lead to a
robust recovery. The unemployment rate has gradually declined, but the
main reason is that workers have withdrawn from the labor force. The
stock market boomed, bringing support from traders, but the rise in
asset prices of equities didn't stimulate growth by inducing investment
in new capital. Investment continues to be sluggish. </i></p><p style="margin-left: 40px; text-align: left;">
<i> And some
side effects of the Fed policies have had ugly consequences. One of the
worst is that ultra-low interest rates induced retired citizens to take
substantially greater risks than the bank CDs that many of them relied on
in the past. Decisions of this kind end in tears. Another is the loss
that bondholders cannot avoid when interest rates rise, as they have
started to do.</i></p><p style="margin-left: 40px; text-align: left;">
<i> Accumulating data from the sluggish loan market
and the weak responses of employment and investment should have alerted
the Fed that the growth of reserves and the low interest rates haven't
been achieving much. Similarly, the Fed should have noticed in recent
years that instead of a strong housing-market recovery, not many
individuals were taking out first mortgages. Many of the sales were to
real-estate speculators who financed their purchases without mortgages
and are now renting the houses, planning to resell them later. </i></p><p style="margin-left: 40px; text-align: left;">
<i> Most
of all the Fed years ago should have recognized that the country's
economic problems weren't arising from monetary factors. Instead of
keeping interest rates low to finance deficits, the Fed should have
explained that costly regulation, increased health-care costs, wasteful
spending, and repeated threats to raise tax rates were holding back the
recovery. </i></p><p style="margin-left: 40px; text-align: left;">
<i> Broadly speaking, the Obama administration has pursued a course the opposite of that taken by the Kennedy and Johnson
administrations in the 1960s (and the Reagan administration in the
1980s). Kennedy-Johnson enacted across-the-board tax cuts: Promoting
growth came first, redistribution later. By putting redistribution first
and sacrificing growth, the Obama administration got neither. Ironically,
despite often repeated demands for increased redistribution to favor
middle- and lower-income groups, the policies pursued by the Obama
administration and supported by the Federal Reserve have accomplished
the opposite. </i></p><p style="margin-left: 40px; text-align: left;">
<i> When the president campaigns in the midterm election, he
will talk about the relative gains by the 1%. Voters should recognize
that goosing the stock market through very low interest rates, not to
mention the subsidies and handouts to cronies, have contributed to that
result. We are now left with the overhang. Inflation is in our
future. Food prices are leading off, as they did in the mid-1960s before
the "stagflation" of the 1970s. Other prices will follow.</i></p>The point of this post is to clarify that just because we have muddled
along putting band-aids on our economy does not mean that we have
accomplished a great deal.<b> The Trump economy was a continuation of
deficit spending and the Biden economy has been even worse. Both have postponed the day of reckoning but most likely
made it far worse. Allen Meltzer was a true old-school economist who understood this. </b><p>The time the Federal Reserve bought for the country
to come to terms with its many problems post-2008 has been squandered at a great
cost. While many people claim the American economy was great before
covid-19 hit, others like me who work on Main Street beg to differ. For
years, an ugly reality has been masked by easy money and deficit
spending. </p><p>Rather than being trapped in the here and now, economists might be wise
to reflect more on history. We can learn much from the failings of those
who lived before us. If Meltzer was still with us it is very likely he
would be appalled at the state of things today.While it is difficult to time when our false economy will
finally give up the ghost, it is clear this will all end badly. Today, the biggest question before us is when.<br /></p><p> </p><p><span style="font-size: small;"><i><b>(Republishing this article is permitted with reference to Bruce Wilds/AdvancingTime Blog)</b></i></span></p>Bruce Wildshttp://www.blogger.com/profile/10181323607060607040noreply@blogger.com0tag:blogger.com,1999:blog-2992740250270600844.post-92104828872852068842024-01-08T15:47:00.000-08:002024-01-08T15:47:57.823-08:00Advancing Time: Defined Pension Plans Have Put Many Workers At Risk<a href="https://brucewilds.blogspot.com/2024/01/defined-pension-plans-have-put-many.html?spref=bl">Advancing Time: Defined Pension Plans Have Put Many Workers At Risk</a>: Over the years, we have seen a tremendous shift in risk from companies offering pensions to workers in the private sector. According to the ...Bruce Wildshttp://www.blogger.com/profile/10181323607060607040noreply@blogger.com0tag:blogger.com,1999:blog-2992740250270600844.post-89541162772143329302024-01-08T09:46:00.000-08:002024-01-08T09:46:54.612-08:00Defined Pension Plans Have Put Many Workers At Risk <p>Over the years, we have seen a tremendous shift in risk from companies offering pensions to workers in the private sector. According to the LBS, 401(K) and other defined pension plans have rapidly been replacing traditional pension plans. From 1980 until 2008, participants in pension plans fell from 38% to 20% of the workforce. During the same time, employees participation in defined-contribution plans rose from 8% to 31%.</p><p>This has been great for many of these workers providing they made it through the 2008 financial crisis. Since then the stock market has soared. Unfortunately, Wall Street has been ripping off many of these investors by charging them fees at every turn. Adding to the problem these workers face is that there is a good chance America is about to drop into recession. </p><p>This means stocks may be about to head downward. This could take a big toll on the retirement savings of many Americans. Of course, those in retirement and nearing retirement would feel the most pain. It
does not help that Americans have been encouraged over the years to
spend and incur debt rather than save. This encouragement came from
politicians hooked on the idea consumer spending creates a strong
economy. </p><p>This and low-interest rates for savers have resulted in many people retiring with little savings. This will leave them dependent on the government which is already deep in debt to care for them in
their older years.<i> </i>Those of us that have studied the numbers don't see any easy way forward. Simply put, something has to give and most
likely promises will be broken.</p><p><i><span class="style-scope yt-formatted-string" dir="auto"></span></i></p><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto;"><tbody><tr><td style="text-align: center;"><i><a href="https://ggc-mauldin-images.s3.amazonaws.com/uploads/editorial/171012_OP_Boomers_image2.jpg" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="385" data-original-width="630" height="244" src="https://ggc-mauldin-images.s3.amazonaws.com/uploads/editorial/171012_OP_Boomers_image2.jpg" width="400" /></a></i></td></tr><tr><td class="tr-caption" style="text-align: center;"><i><span style="font-size: medium;"><b>While This Is An older Chart, Little Has Changed. Reality Is Not Pretty </b></span><br /></i></td></tr></tbody></table>For years those in power have hidden and sheltered
Americans from the harsh truth that the numbers simply do not work but
history shows politicians would rather kick the can down the road than
deal with reality. <b>To the many people who have been looking forward
to a comfortable and leisurely life in their older years. The fact that
things could deteriorate is a reason for concern. </b><p>In our busy
world that is full of distractions, many holders of 401 accounts have
put them on autopilot figuring that when they need it the money will be
there. All in all the factors mentioned above, including the fact that
inflation is not dead, come together in a way that will leave many older
Americans behind a financial eight-ball. Those in charge of such things
have created a situation where with the high level of debt that exists
defaults on loans could soar. </p>In such a situation, both businesses and investors
will incur big
losses. This <span class="style-scope yt-formatted-string" dir="auto">threat
to 401Ks and pension plans is real and would make many boomers collateral damage in any effort they make to correct</span> the mess they have created. <b>Those in or nearing retirement should make an extra effort to reduce risk and keep their savings safe.</b><b> <br /></b><p>(<span style="font-size: small;"><b><i><b>Republishing of this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)</b></i></b></span></p>Bruce Wildshttp://www.blogger.com/profile/10181323607060607040noreply@blogger.com0tag:blogger.com,1999:blog-2992740250270600844.post-29224222628328799112024-01-05T05:05:00.000-08:002024-01-05T05:05:02.217-08:00Advancing Time: Our National Debt Has An Ugly 34 Trillion Dollar H...<a href="https://brucewilds.blogspot.com/2024/01/our-national-debt-has-ugly-34-trillion.html?spref=bl">Advancing Time: Our National Debt Has An Ugly 34 Trillion Dollar H...</a>: If you have not heard, America's national debt now has a 34 trillion dollar handle. It crossed the threshold as 2024 rolled in. This is ...Bruce Wildshttp://www.blogger.com/profile/10181323607060607040noreply@blogger.com0tag:blogger.com,1999:blog-2992740250270600844.post-69259652302284117672024-01-05T05:01:00.000-08:002024-01-05T05:01:44.730-08:00Our National Debt Has An Ugly 34 Trillion Dollar Handle<p>If you have not heard, America's national debt now has a 34 trillion dollar handle. It crossed the threshold as 2024 rolled in. This is a sobering number and future budgets provide little hope the current trend will change. Today we are looking at an America that is running a wartime deficit at a time of peace. The emergence and acceptance of Modern Monetary Theory have turned
our
economic system upside down. Skeptics of its substance and
sustainability have been brushed aside. </p><p><b>With
America's national debt now blowing past 34 trillion dollars, it is
important to keep the numbers in perspective. A Trillion Dollars Is Roughly $3,300 Per Person In America. Not every
taxpayer, but every man, woman, and child.</b> It is
important to remember most of these people don't pay taxes. </p><p>To us who believe in old-school
economics, debt matters and is tied directly to interest rates and
inflation. For years central banks across
the world claimed a lack of inflation as the key
that allowed their QE policy to continue, however,
now that inflation has started to raise its ugly head much of their flexibility has been lost. <br /></p><p><b>In short, the chart below </b><span style="font-size: small;"><b>shows, that </b></span><b>our future is filled with huge ugly deficits.</b><br /></p><h3 class="figure_number">Total Deficits, Primary Deficits, and Net Interest Outlays</h3><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto;"><tbody><tr><td style="text-align: center;"><img alt="" class="_idGenObjectAttribute-3 adjust-img-width" height="217" src="https://www.cbo.gov/sites/default/files/images/full-reports/2023/58848-fig1-1_deficit-interest1.png" style="margin-left: auto; margin-right: auto;" width="400" /></td></tr><tr><td class="tr-caption" style="text-align: center;">Data source: Congressional Budget Office. See <a href="http://www.cbo.gov/publication/58848#data"><span class="hyperlink">www.cbo.gov/publication/58848#data</span></a>.</td></tr></tbody></table><p></p><div class="post-body entry-content" id="post-body-4592462661758498418" itemprop="description articleBody"><b>For
years the argument that "<a href="http://brucewilds.blogspot.com/2018/08/this-time-is-different-but-is-it-really.html">This Time Is Different</a>"
has flourished but history shows that periods of rapid credit expansion
always end the
same way and that is in default.</b> This also underlines the reality that
any claims Washington makes about the budget deficit being under control
is a total lie. Sadly, America is not alone in spending far more than it takes in and running a
deficit. This does not make it right or mean that it is
sustainable.</div><div class="post-body entry-content" id="post-body-4592462661758498418" itemprop="description articleBody"><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right; margin-left: 1em; text-align: right;"><tbody>
<tr><td style="text-align: center;"><a href="https://1.bp.blogspot.com/-gRWrTGxhp-o/W1XKYV5ChoI/AAAAAAAAD9k/QQDNglzDrV8y06EHSIr09xs2cEKUZoFWQCLcBGAs/s1600/us-debt-graph-2020.jpg" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="1397" data-original-width="750" height="400" src="https://1.bp.blogspot.com/-gRWrTGxhp-o/W1XKYV5ChoI/AAAAAAAAD9k/QQDNglzDrV8y06EHSIr09xs2cEKUZoFWQCLcBGAs/s400/us-debt-graph-2020.jpg" width="213" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="font-size: small;"><b><span style="font-size: xx-small;"><a href="http://www.usdebtclock.org/">Click (Here) To View The National Debt Clock</a></span></b></span></td></tr>
</tbody></table> </div><div class="post-body entry-content" id="post-body-4592462661758498418" itemprop="description articleBody">Much of the world's so-called economic growth is the result of
government spending. This has created a
false economic script and like a Ponzi scheme, it has a deep
relationship to fraud.
Global debt has surged since 2008. Throughout history, debt has always
had consequences. </div><div class="post-body entry-content" id="post-body-4592462661758498418" itemprop="description articleBody"> </div><div class="post-body entry-content" id="post-body-4592462661758498418" itemprop="description articleBody">Much of the <span class="field-content">massive debt
load hanging above our heads in 2008 has not gone away it has
merely been transferred to the public sector where those in charge of
such things feel it is more benign.</span><span class="field-content"> A</span><span class="field-content"> series of off-book and backdoor transactions has
transferred the burden of loss from the banks onto the shoulders of governments and the
people. Still, the debt exists. Shifting the liability from one sector to another does
not alleviate the problem</span>.<i><br /></i>
<br />
When the 2018 financial year budget was first unveiled it was projected to be $440 billion. <b>An
under-reported and unnoticed report painted a far bleaker picture. The report titled the<a href="https://www.whitehouse.gov/wp-content/uploads/2018/07/19msr.pdf"> “Mid-Session Review”</a> forecast the deficit much higher than originally predicted.</b>
The newer report predicted the deficit would come in at $890 billion which is more than double what they
predicted in March of 2017. </div><div class="post-body entry-content" id="post-body-4592462661758498418" itemprop="description articleBody"> </div><div class="post-body entry-content" id="post-body-4592462661758498418" itemprop="description articleBody">We should remember that not many years ago, some Washington optimists were
forecasting that deficits would begin to decline in 2020 and that we
would
even have a small surplus of 16 billion in 2026. Since then, partly due to Covid-19 those in charge of spending have blown the
lid off that glimmer of hope and replaced it with
more trillion-dollar deficits going forward.<br />
<br />
Back then, the summary
that began on page one of the Mid-Session Review came across as
a promotional piece using terms like MAGAnomicics. The report even went so far as to
assure us that the deficit would fall to 1.4 percent of the GDP in 2028, from what was then 4.4 percent.<span style="font-size: xx-small;"><b> </b></span>It praised and
touted the Trump administration for its vision and great work.
<b>This is a time when it would be wise to remember numbers don't lie but the people using them do. </b>That report is an example of how to re-frame a colossal train
wreck into something more palatable. </div><div class="post-body entry-content" id="post-body-4592462661758498418" itemprop="description articleBody"><br /></div><div class="post-body entry-content" id="post-body-4592462661758498418" itemprop="description articleBody">As
a result of the American economy having survived
with little effect what was years ago was described as a "financial
cliff" the American people have become emboldened and now enjoy a false
sense of security. Today
instead of dire warnings we hear news from Washington and the media
that this is simply another situation that we will have to navigate through, in short, it is business as usual. <br />
<br />
<table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right; margin-left: 1em; text-align: right;"><tbody>
<tr><td style="text-align: center;"><a href="https://3.bp.blogspot.com/-nQuInsK2xVc/WDI7jdcejRI/AAAAAAAACQc/tSE2xJ_G3pUG1_BEpM3_-MJ1k4gcm3s2gCEw/s1600/heritagechart.jpg" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" height="400" src="https://3.bp.blogspot.com/-nQuInsK2xVc/WDI7jdcejRI/AAAAAAAACQc/tSE2xJ_G3pUG1_BEpM3_-MJ1k4gcm3s2gCEw/s400/heritagechart.jpg" width="330" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="font-size: small;"><b>In 2019, National Debt Hit 23 Not 12 Trillion dollars</b></span></td></tr>
</tbody></table>
The chart to the right predicted that by 2019 the national debt would
top 12 trillion dollars, instead it hit 23 trillion. <b>Projections
made by
the government or any group predicting budgets based on events that may
or may not happen at some future date are simply predictions and not facts. This means that such numbers are totally
unreliable. </b>The ugly truth many
people ignore is that starting in 2018 entitlements became the major force carrying the deficit higher into
nosebleed territory. <i><br /></i>
<i><br />
</i>It is very disturbing that so many people have forgotten or never
taken the time to learn recent financial history. <a href="http://brucewilds.blogspot.com/2017/10/decades-of-economic-perspective-hold.html">By recent, I'm referring to the last fifty to one hundred years.</a> The
path that Fed Chairman Paul Volcker set right decades ago has again
become unsustainable and many people will be shocked when this reality
hits. Do not underestimate the value of insight gained from decades of
economic perspective. It tells us the economy of today is far different
from the way things have always been.</div><div class="post-body entry-content" id="post-body-4592462661758498418" itemprop="description articleBody"><i> </i></div><div class="post-body entry-content" id="post-body-4592462661758498418" itemprop="description articleBody">Back
in September of 2012, I wrote an article reflecting on how the
economy of today had been greatly shaped by the actions that took place
starting around 1979. Interest rates, inflation, and debt do matter and
are more significant than most people realize. Rewarding savers and
placing a value on the allocation of financial assets is important. </div><div class="post-body entry-content" id="post-body-4592462661758498418" itemprop="description articleBody"> </div><div class="post-body entry-content" id="post-body-4592462661758498418" itemprop="description articleBody">Many Americans living today were not even born or
too young to appreciate the historical importance and ramifications of
the events that took place back then. The impact of higher interest
rates in the 1980s had a massive positive impact on corralling the growth of both
credit and debt.<i> </i>Still, over the years that impact has diminished. In 1980 it was about billions of dollars of
debt, today it is about trillions of dollars. Something has gone very wrong. We should expect what is happening today to affect and shape the level of interest rates for decades.<i><br /></i>
<i><br /></i><i><br /></i>
</div><div class="post-body entry-content" id="post-body-4592462661758498418" itemprop="description articleBody"> </div><div class="post-body entry-content" id="post-body-4592462661758498418" itemprop="description articleBody"> <span style="font-size: small;"><i><b>(Republishing this article is permitted with reference to Bruce Wilds/AdvancingTime Blog)</b></i></span></div>Bruce Wildshttp://www.blogger.com/profile/10181323607060607040noreply@blogger.com0tag:blogger.com,1999:blog-2992740250270600844.post-32868900792791751412023-12-26T05:06:00.000-08:002023-12-26T05:06:38.408-08:00Advancing Time: The Nature Of Government Bureaucracies Is To Expand<a href="https://brucewilds.blogspot.com/2023/12/the-nature-of-government-bureaucracies.html?spref=bl">Advancing Time: The Nature Of Government Bureaucracies Is To Expand</a>: Across the world governments are broke and they won't stop spending. Expansion into all sectors of the economy has become a thing. Addin...Bruce Wildshttp://www.blogger.com/profile/10181323607060607040noreply@blogger.com0tag:blogger.com,1999:blog-2992740250270600844.post-70066048192934484452023-12-26T05:00:00.000-08:002023-12-26T05:00:08.703-08:00The Nature Of Government Bureaucracies Is To Expand<p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://th.bing.com/th/id/R.ff9867ec8d8de869f17ac6a6e2d5c44c?rik=k4S6fvPPzXTRlQ&riu=http%3a%2f%2fblog.chron.com%2ftxpotomac%2ffiles%2f2011%2f11%2fCapitol-Money-Dollars-Govt-Spending1-300x225.jpg&ehk=mSq4GVvuyK6O3SfIEXf2t0cMaXL%2bIkV%2bj%2fexKaT7q8I%3d&risl=&pid=ImgRaw&r=0" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="225" data-original-width="300" height="240" src="https://th.bing.com/th/id/R.ff9867ec8d8de869f17ac6a6e2d5c44c?rik=k4S6fvPPzXTRlQ&riu=http%3a%2f%2fblog.chron.com%2ftxpotomac%2ffiles%2f2011%2f11%2fCapitol-Money-Dollars-Govt-Spending1-300x225.jpg&ehk=mSq4GVvuyK6O3SfIEXf2t0cMaXL%2bIkV%2bj%2fexKaT7q8I%3d&risl=&pid=ImgRaw&r=0" width="320" /></a></div>Across the world governments are broke and they won't stop spending. Expansion into all sectors of the economy has become a thing. Adding regulations to the private sector is a Trojan horse that weakens the private sector that drives economic growth. All in all the expansion of governments brings with it a fair amount of negative ramifications. One of the biggest is corruption, another is the concentration of wealth, and with this, the concentration of power. <br /><p></p><p><b>To fulfill the promises they make, governments often get involved in things that harm people, these include war, subsidizing parts of the economy, or steering things, by hook or crook.</b> During the pandemic and years of low-interest rates, this trend accelerated. Still, the cost of fulfilling these promises is outrunning their ability to pay for them, this is evident in the rapid growth of sovereign debt. </p><p>With interest rates moving higher the cost for a government to carry its national debt has exploded. The idea we are looking at higher rates for longer as central banks move us to a more sustainable return to normal does not lessen the pain taxpayers face. It also lessens the options governments face to finance their programs going forward.</p><p>The role of Government in America has changed, over many years we have seen a shift away from Adam Smith’s idea of limited
government. This has occurred on federal, state, and local levels. Much
of this has been in the form of mandates. Often unfunded they are
fostered upon businesses, organizations, and private citizens. Governments also mask their expansion by outsourcing functions, this reduces the image of growth. <br /></p><p>There is a new dance that officials have developed over the years, politicians and bureaucrats, deterred from expanding or funding programs
by a few vigilant citizens, wait and find creative ways to reach their
objective at a later date. <b>By creating special bonds, attaching fees to
needed services, or narrow taxes governments fund new authorities, commissions,
and districts. These often unneeded quasi-government organizations then
reach out to expand the influence and power of their directors. </b></p><p>Another way governments push forward their expansion is through public–private partnerships. these are long-term arrangements between a government and private sector institutions to perform what is spun to be beneficial to the populace. This area is ripe with both cronyism and corruption. Typically, it involves private capital financing government projects and services up-front often with government guarantees and promises from taxpayers that users will create a profit for the project over time. These often become boondoggles or white elephants. <br />
<br />
Instead of focusing on the business of government and simplicity, this proactive movement consisting of “cuteness” cloaked in a veil of flexibility and
diversity continually expanding. Make no mistake, those in government are
proud of their pet projects. They allow bureaucrats to experiment and try
new things without the personal financial risk that a businessman must
take. The problem is that they are being creative on our dime.<br />
<b></b></p><div class="separator" style="clear: both; text-align: center;"><b><a href="https://th.bing.com/th/id/R.50d698586453ee88a9f30ad90e951700?rik=%2fP6D79cEbWfGsQ&riu=http%3a%2f%2f1.bp.blogspot.com%2f-L8b_Csou5SI%2fTcg3HPjLxqI%2fAAAAAAAACjY%2f3puJtsqB5h0%2fs1600%2ffat%2bass%2bof%2bgovernment.jpg&ehk=gwBrEos90gAZGZ%2bnM%2bmfFWLmq8jw7aHIpQ720hsRMKU%3d&risl=&pid=ImgRaw&r=0" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="402" data-original-width="604" height="213" src="https://th.bing.com/th/id/R.50d698586453ee88a9f30ad90e951700?rik=%2fP6D79cEbWfGsQ&riu=http%3a%2f%2f1.bp.blogspot.com%2f-L8b_Csou5SI%2fTcg3HPjLxqI%2fAAAAAAAACjY%2f3puJtsqB5h0%2fs1600%2ffat%2bass%2bof%2bgovernment.jpg&ehk=gwBrEos90gAZGZ%2bnM%2bmfFWLmq8jw7aHIpQ720hsRMKU%3d&risl=&pid=ImgRaw&r=0" width="320" /></a></b></div><b>Nowhere is the expansion of government more apparent than in the area of
social services.</b> By replacing the word "want" with the word "need"
those seeking a larger and stronger safety net have created a hammock.
<b>Many non-working Americans exist under the notion that they have a right
to things like a car, free food, cell phones, internet, and free or supper low healthcare coverage and society must supply these items. </b> <br />
<br />
The fact is, the government can't be everything to everyone. At what level should we
supply those who choose not, to or claim they are unable to carry their
share of the burden? Those choosing to describe themselves as victims
need to take more personal responsibility. Waiting for the government or
someone to do things for you is a recipe for disaster. Claiming
entitlements is a form of theft, those who take them do so at the expense of
others. <br />
<br />
Politicians do have a way of distancing themselves from
responsibilities. Former Senator Tom Dashel claimed that business
"lobbyists in Washington often blocked change." Someone should remind our
elected officials that at the end of the day unless the Constitution
has been changed that lobbyists are still not allowed to vote!<br />
<br />
<b>I should remind those who are less cynical about government that the
House and Senate have placed themselves in the enviable position to
receive automatic pay raises unless they specifically vote against the
increase.</b> This seldom occurs. Is it any wonder that government grows unchecked in such an
environment? The big problem is that spending by governments has a poor history of creating solid economic growth. <br /><p></p><p>So I ask, what is fair? This transfer of wealth from those who work to those who wish to take continues to grow in a political system where a vocal minority has great sway over legislation. If unchecked government grows - it is the nature of bureaucracy to
expand. The use of sun-set legislation is
underused or the bar set far too low when it comes to extending and renewing
government bodies. The best time to kill a monster is when it's small and that time has passed.</p><p> </p><p><span style="font-size: small;"><i><b>(Republishing this article is permitted with reference to Bruce Wilds/AdvancingTime Blog)</b></i></span></p><p></p>Bruce Wildshttp://www.blogger.com/profile/10181323607060607040noreply@blogger.com0tag:blogger.com,1999:blog-2992740250270600844.post-36597271814003081882023-12-17T09:09:00.000-08:002023-12-17T09:09:23.256-08:00Advancing Time: Market Crosscurrents Pose Massive Danger<a href="https://brucewilds.blogspot.com/2023/12/market-crosscurrents-pose-massive-danger.html?spref=bl">Advancing Time: Market Crosscurrents Pose Massive Danger</a>: The recent rally in the stock market flowing from what almost appeared to be a victory lap on the part of Fed Chair Jerome Powell gives the ...Bruce Wildshttp://www.blogger.com/profile/10181323607060607040noreply@blogger.com0tag:blogger.com,1999:blog-2992740250270600844.post-26748911960825410332023-12-17T08:39:00.000-08:002023-12-17T09:04:48.256-08:00Market Crosscurrents Pose Massive Danger<p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://th.bing.com/th/id/OIP.fE4h6csmFs3OL7D9boQ4xQHaF7?rs=1&pid=ImgDetMain" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="379" data-original-width="474" height="256" src="https://th.bing.com/th/id/OIP.fE4h6csmFs3OL7D9boQ4xQHaF7?rs=1&pid=ImgDetMain" width="320" /></a></div>The recent rally in the stock market flowing from what almost appeared to be a victory lap on the part of Fed Chair Jerome Powell gives the impression inflation has been vanquished. Many market pundits have taken this to mean upward momentum is not ready to abate. Still, market crosscurrents pose massive danger, in short, things could go several different ways. <p></p><p>Adding to the recent confusion of why the markets are moving up is
whether liquidity is, or is not being added to the financial system.
It appears bank lending is contracting but other things are happening behind the scenes in swap rates and yield curves. While some of us point to the Fed saying it is tightening and reducing
its balance sheet some economists point to a back channel inflow of
liquidity juicing the system. </p><p><b>A case can be made that recent market action remains more about liquidity than interest rates. A lack of liquidity can be
poisonous. <a href="https://Liquidity Is More Important Than Interest Rates.html">When you need money, whether the amount is small or large,
not
being able to get it can lead to a life-changing or grave outcome.</a></b><a href="https://Liquidity Is More Important Than Interest Rates.html"> </a> Interestingly, as noted above, the liquidity issue remains unresolved. Central banks are well aware that contagion from one area can spill over into other sectors of the
economy and markets. This is why China continues to inject liquidity into its market. How much of that money is getting out of China is an issue. <br /></p><p>So, here we sit, new market highs at a time when many economy watchers are voicing concerns the economy is rapidly slowing and the Fed is already behind the curve in dropping rates. The counterargument being floated is that all is well and we are in the midst of a soft landing or no landing. The latter is the optimistic view that we have entered a Goldilocks moment and the markets are set to go ever higher. </p><p>Those taking the stand a quick reversal of Fed policy and looking at rapidly falling rates may be failing to consider trees don't grow to the sky. It could be argued a major pullback is necessary to avoid a much more severe problem or bigger disaster in the future. <b>Inflation is a key component in assessing where things go from here. </b>Again, I point to <span style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"></span><span style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><i><a href="https://brucewilds.blogspot.com/2023/09/the-hard-asset-inflation-paper-asset.html">The Hard Asset Inflation / Paper Asset Deflation Theory</a></i></span></span></p><p>Much of the current market danger stems from the fact the fluid financial and economic
situation is highly leveraged. If something breaks, the amount of money
needed to backstop and halt a collapse of the system will be far larger
than anything we have seen in the past. Remember a massive drop in asset prices and the value of bonds directly impacts pension funds and many other aspects of our financial structure. <br /></p><p>A great deal of what we call growth has been, or is now financially engineered by companies buying back their own shares and other companies rather than growing organically. This risk is constantly being downplayed as more and more of the concentration of wealth pushes takes place, into just a few companies. A case and point often raised is the huge market capitalization of what is known as the "magnificent seven."<br /></p><p>As usual or maybe even more than usual, we should continue to factor in the idea things could be shaken by another pandemic, massive war including the use of nuclear weapons. The whole idea that stocks climb a wall of worry and fall like a stone underlines the fact that markets are <span style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">non-linear and do not move in a straight line</span></span></span></span>. People tend to slip into a generally optimistic feeling of complacency and discount this reality. </p><p>Lower inflation figures strongly into the euphoria we see in the market. Much of this has been driven by lower gasoline prices which are likely to prove temporary and the idea the costs of "shelter" or keeping a roof over your head will soon decline. These notions brush aside several important facts such as the rising cost of labor and other factors feeding into housing. These include insurance, soaring maintenance costs, and rising taxes. All of these are expected to move higher in the future. <br /></p><p>A bond fella recently recently made the case that <a href="https://www.youtube.com/watch?v=coeLPzV0j3s">yields would drop as inflation falls.</a> Several pundits have speculated the Fed must "know something, or be spooked" to have changed course. Pulling on this thread could lead us back to the notion <a href="https://Did Someone Flip The Economic Lever To Off In China?html">China's economy is in free-fall</a> and it is the main reason rates will be falling everywhere. This has resulted in the notion we will see super strong demand for bonds during a recession even if the supply is huge. <br /></p><p>Still, buying long-term bonds to hold is far different than buying them to hold. Long term we have to look at the future of fiat money and inflation from currency debasement. I'm not convinced it is wise for investors to lock themselves into any fiat currency long-term as things could change rapidly.</p><b>Consider
the possibility that the Fed is yielding to pressure rather than making a policy change based on choice. By prematurely
declaring inflation as no longer an issue it takes pressure off
government bonds and banks. </b>When we look back at how this plays out it
is likely the importance of liquidity and the money supply will prove
far more important than minor changes in interest rates. <p>In a recent video delving into <a href="https://www.youtube.com/watch?v=9ffXbQfwPP0">inflation in commodities,</a><span class="yt-core-attributed-string yt-core-attributed-string--white-space-pre-wrap" role="text"><a href="https://www.youtube.com/watch?v=9ffXbQfwPP0"> Daniel Lacalle claimed there are only three ways to halt inflation</a> and inflation is fueled by monetary conditions. Lacalle says the only way to stop inflation is raise interest rates, reduce the amount of money in the system, or to create an aggregate demand reduction of credit.</span></p><p><span class="yt-core-attributed-string yt-core-attributed-string--white-space-pre-wrap" role="text">The public sector, or to qualify, governments are busy thwarting all these factors. As long as governments and central banks continue to overspend and print money the inflation beast will remain a ferocious creature.</span></p><p><span class="yt-core-attributed-string yt-core-attributed-string--white-space-pre-wrap" role="text"> </span></p><p><span class="yt-core-attributed-string yt-core-attributed-string--white-space-pre-wrap" role="text"> </span><span style="font-size: small;">(<span><b><i><b>Republishing this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)</b></i></b></span></span></p>Bruce Wildshttp://www.blogger.com/profile/10181323607060607040noreply@blogger.com0tag:blogger.com,1999:blog-2992740250270600844.post-31204968945495059522023-11-26T09:22:00.000-08:002023-11-26T09:22:39.560-08:00Advancing Time: The Devastating Impact Of Reverse Wealth Effect<a href="https://brucewilds.blogspot.com/2023/11/the-devastating-impact-of-reverse.html?spref=bl">Advancing Time: The Devastating Impact Of Reverse Wealth Effect</a>: Most people find the pain of losing wealth exceeds the joy they get from gaining. While consumers feel more financially secure and confident...Bruce Wildshttp://www.blogger.com/profile/10181323607060607040noreply@blogger.com0tag:blogger.com,1999:blog-2992740250270600844.post-28364414216357719432023-11-26T09:16:00.000-08:002023-11-26T09:16:58.742-08:00The Devastating Impact Of Reverse Wealth Effect<p>Most people find the pain of losing wealth exceeds the joy they get from gaining. While consumers feel more financially secure and confident they spend more freely, the reverse is also true. Get ready for the "reverse wealth effect" to kick in. If this happens it will be a real ball breaker. The wealth effect is<b> </b>a behavioral economic theory based on people spending more as the value of their assets rise. Even decades after its economic bubble popped, Japan stands as a monument to the devastation the reverse wealth effect can unleash.<br /></p><p>The<a href="https://brucewilds.blogspot.com/2023/10/lulled-into-complacency-again-yes-it.html"> complacency that has developed from years of markets moving ever higher has insulated huge numbers of investors from the reality bad times may be in the cards</a>. In addition to complacency the market is being supported by the idea the moment any bad thing happens the Fed will pivot. In such a situation the expectation is the Fed put will kick in. This translates into it might be better to tough out a drop because it may not be possible to get back in when the market V bottoms out of the drop. <br /></p><p><b>Higher for longer is a force that has yet to play out. </b><span class="yt-core-attributed-string yt-core-attributed-string--white-space-pre-wrap"><span class="yt-core-attributed-string--link-inherit-color" style="color: #131313;">The bond markets scream caution. The mixed signals flowing from the debt market have left open the possibility the bond markets could become a wrecking ball. This would result in the FED being forced to intervene and the potential for a debt death spiral.</span></span><b> We must not forget that for over a decade, super low or negative
interest rates forced people to invest in stock markets in search of
yield. As this money is pulled out of stocks and returns to safer
alternatives stocks may decline striping people of their paper gains. <br /></b></p><p><span class="yt-core-attributed-string yt-core-attributed-string--white-space-pre-wrap"><span class="yt-core-attributed-string--link-inherit-color" style="color: #131313;">Circling back to the crux of this post, m</span></span>uch of the rationale behind<i> </i>QE has been that it creates what the Fed calls a “Wealth Effect.”<i>
</i> For years this has been a key driver of central bank policy.<i> </i><span>This view is firmly embedded in the macro-econometric models used by the Fed. </span>The
notion, widely adopted by central bankers, is that by inflating asset
prices to make the wealthy (the asset holders) even wealthier, these
people will spend more of what they see as free money from asset price
inflation. The premise is that this additional spending will create
additional demand for goods and services thus providing jobs for the
masses. </p><p><b>Sadly, several times over the years the wealth effect
formula has slid off the tracks and most likely will again. Consumption
does not create wealth, it creates debt. The example that stands out in
the minds of most people is from back in 2008.</b><i> </i>By loaning
money against homes with little scrutiny as to the borrower's ability to
repay them the Fed created a financial bubble with broad implications.<i> </i>It
could be argued that since 2008, Fed policy has never really addressed
that mess but attempted to paper over it by printing money and expanding
debt through quantitative easing. <i><br /></i></p><p></p><h3 class="post-title entry-title" itemprop="name"></h3>
<div class="post-header">
<div class="post-header-line-1"></div>
</div>
<p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://th.bing.com/th/id/OIP.YP88NLpW6pr4xqH5HhORewHaDk?pid=ImgDet&rs=1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="228" data-original-width="474" height="154" src="https://th.bing.com/th/id/OIP.YP88NLpW6pr4xqH5HhORewHaDk?pid=ImgDet&rs=1" width="320" /></a></div><p>In
a world where optimism and hope have dominated the investment landscape
for over a decade, we should be prepared for reality to raise its ugly
head. This time is not different and debt does matter. As pointed out by
many economists over the years, low-interest rates and easy money, do
not always result in a strong vibrant economy. Japan's failure to
recover from its bubble bursting decades ago remains proof of this.</p><p>The problem is that the policy track we have been on may of driven consumer buying, but it also created a lot of debt and waste. This has been great for certain sectors of the economy such as the financial sector but it has failed to generate the kind of growth that makes an economy strong.<br /></p><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto;"><tbody><tr><td style="text-align: center;"><a href="https://cms.zerohedge.com/s3/files/inline-images/bfmB3EB.jpg?itok=LPwuXNf8" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="496" data-original-width="800" height="248" src="https://cms.zerohedge.com/s3/files/inline-images/bfmB3EB.jpg?itok=LPwuXNf8" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-size: medium;"><b>Wealth Effect Policies Have Failed To Generate Enough "Real Growth"</b></span><br /></td></tr></tbody></table><br /><p></p><p>Looking
back throughout history we see the policies that breed the Wealth Effect can slide
off track or lose their effectiveness while creating risk. At some point, the combination of easy-to-borrow money
at low-interest rates tends to morph into a<i> </i>high-risk environment<i> </i>of
increased speculation and leverage. In short, savers and investors
seeking a return on their savings are forced out of traditional accounts
because such investments get ravaged by inflation.</p><p></p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right;"><tbody><tr><td style="text-align: center;"><a href="https://th.bing.com/th/id/R.26042f5d137cfdd5e8b0dc71e8f47805?rik=2ZFYnd0VjCG6oQ&riu=http%3a%2f%2fmarketbusinessnews.com%2fwp-content%2fuploads%2f2017%2f05%2fWealth-Effect.jpg&ehk=%2fJU1xinPiTCNUqUgq24wd314aZqQ%2fGhmWwKJSP9IW1I%3d&risl=&pid=ImgRaw&r=0" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="565" data-original-width="597" height="303" src="https://th.bing.com/th/id/R.26042f5d137cfdd5e8b0dc71e8f47805?rik=2ZFYnd0VjCG6oQ&riu=http%3a%2f%2fmarketbusinessnews.com%2fwp-content%2fuploads%2f2017%2f05%2fWealth-Effect.jpg&ehk=%2fJU1xinPiTCNUqUgq24wd314aZqQ%2fGhmWwKJSP9IW1I%3d&risl=&pid=ImgRaw&r=0" width="320" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-size: medium;"><b>Many Consumers Bought Into This</b></span> <br /></td></tr></tbody></table><p>We must not forget the 2008 financial crisis resulted in the worst economic disaster since
the great depression of 1930. It is also referred to as the global
financial crisis (GFC). It should be noted the Fed's response to the GFC has gotten a great deal of well-deserved bad press for driving inequality
and fracturing society. <b>Since 2008 it has become apparent the Fed has
created an unfair system that is broken, unfair, and corrupt.<i> </i>This has affected different generations in rather specific ways.</b></p><p></p><p>The amount of debt generated since 2008 screams that wealth effect policies are not working.
Not only have they failed to create a healthy economy but they feeding into a self-feeding loop of more debt. Following the GFC
the Federal Reserve and the Bush administration spent
hundreds of billions of dollars to add liquidity to the financial
markets. They worked hard to avoid a complete collapse. They almost
didn't succeed.<b> Today we are spending not billions, but trillions of dollars to keep the same corrupt policy moving forward. </b></p><p><b>Investors should treat the wealth effect with caution because it is susceptible to harsh reversals. </b>Since the GFC, attempt after attempt has been put forth to change the tide, but still, we have watched the<i> </i>middle class shrink. The elephant in the room when it comes
to growing the economy is how "the broken window theory" is spun and
interpreted. The
gist of this theory is that if a window is broken, the subsequent repair expenditure will have no net
benefits for the economy. Still, it is not uncommon to see
destruction touted as a good thing because it promotes spending. </p><p>In truth, the
broken window idea of destruction is good discounts several
facts. One has to do with where the
money is coming from but whether it is from an insurance company or
someplace else, it still means the money is diverted from being used on
another
purchase. Repairing
a broken window is maintenance spending which doesn’t improve growth
because it doesn’t improve productivity. This expenditure would have
occurred anyway.
The only thing a broken window does is cause maintenance spending
to occur earlier and lower the useful life of the window. Maintenance
spending may keep the economy going it doesn’t provide a
boost. Instead, it is better to invest the money in something which
creates wealth by increasing productivity.<br />
<br />
<b>Many people and even economists have real misconceptions as to how
the economy works. Where money flows and who it enriches is a key component of economics. </b>This is a blind spot many people have. Years of being told everything revolves around
spending has diminished the important role savings plays in the scheme
of a balanced economy. Fans of Keynesian economics that encourage government spending to
stabilize the economy during a downturn tend to discount the importance
that where and how money is spent matters a great deal. </p><p></p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right;"><tbody><tr><td style="text-align: center;"><a href="https://d1yhils6iwh5l5.cloudfront.net/charts/resized/51194/large/Wealth_Effect__3.png" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="450" data-original-width="800" height="180" src="https://d1yhils6iwh5l5.cloudfront.net/charts/resized/51194/large/Wealth_Effect__3.png" width="320" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-size: medium;"><b>Wealth Effect Policy Has Flaws</b></span> <br /></td></tr></tbody></table>In
the end, this all comes back to the fact current policies are
presenting us with diminishing returns while increasing risk. Sadly,
financial corruption has played a huge role in getting us here.<b> Never
before in our history have Presidents, Fed Chairs, and politicians in
general been able to exploit their power and gain massive wealth
following their time as so-called public servants. A big part of our
current problems is<i> </i><span style="font-size: medium;"><span style="font-size: small;">the
elite top-down efforts to control our society has
created a permanent government. Today an army of government workers,
most un-elected have been empowered to nibble away at our rights.</span></span></b><i><b><span style="font-size: medium;"> </span></b></i> <p></p><p>Bubbling up to the surface is the recognition the Fed has to shoulder a huge responsibility in pushing inequality higher.<span style="font-weight: normal;"> Powell has even gone so far as to claim there was little demand for loans below $1 million. </span>Sadly,
the same policies that dump huge money into larger businesses because
it is an
easier and faster way to bolster the economy give these concerns a huge
advantage that devastates its smaller competitors.</p><p>The long-term
ramifications of destroying smaller businesses hurts America in the
long run. It eliminates competition, reduces opportunity, and over time
fuels inflation. This drives my angst directed at companies such as
Amazon and big tech. The policy of making people feel better so they
spend more than they can afford is part of voodoo economics. It has sent jobs abroad and increased our consumption of imported goods resulting in massive trade deficits.<i> </i>Good economic policy encourages personal responsibility and is rooted in saving not spending. <b>Consumption does not create wealth, it creates debt. </b><br /></p><div><div><div><div><div><p><b> </b></p><p><span style="font-size: small;"><i><b>(Republishing this article is permitted with reference to Bruce Wilds/AdvancingTime Blog)</b></i></span></p></div></div></div></div>
</div><p></p>Bruce Wildshttp://www.blogger.com/profile/10181323607060607040noreply@blogger.com1