The Soft Landing Is The LZ For MMT
“They really (hawk) but we just (walk) because we have no time.” (Run DMC)
Summary:
· Ownership of global threats and opportunities is changing hands in line with the political imperative in the nations involved.
· Waller vs Summers will set a new full employment definition precedent.
· The Soft Landing on American women will inform the new full employment definition.
· The American WUMAD cohort may prefer to resist than to be “Friend Shored”.
· “Shadow Chairman Summers” is not the enemy of the FOMC, he is now its leader.
· COVID-Zero has attained official recognition parity status with COVID-19.
· COVID-Zero is Post-Washington Consensus and COVID-19 is “Friend Shored” Washington Consensus.
· Re-nationalization via the Cheka is the invisible hand of COVID-Zero.
· Mr. JGB-san should be renamed Mr. MMT-san.
· The Great Walk Out joins the Great Resignation on the Oligopolists’ lists of reasons to create Stagflation.
· The self-fulfilling prophets of technical analysis are self-fulfilling the 1990s global macro thesis repeat.
· UK ex ante Dishevelling Up has been revealed as a deliberate policy U-Turn on Levelling Up immediately ex post facto the Brexit-driven election victory.
· Nationwide Dishevelling Up is driving economic privatization and Bank of England nationalization in the New Jerusalem.
· The debt-enslaved Free Zone of New Jerusalem will turn Japanese unless it turns Chinese first.
Keep your eyes on the invisible hands (and the visible masks) ….
· The new “Friend Shoring” Washington Consensus is in conflict with the Post-Washington Consensus beneficiaries.
(Source: the Author)
Assets are changing hands, in the global economy, in the line with the political imperative of each nation.
It’s all a big game. Some play to win.
Generally speaking, economic threats are being nationalized globally. Political opportunities are being selectively redistributed, to minimize the political threats that correspond with them for the redistributors. Economic threats and opportunities are being more selectively redistributed in the political milieu.
It is hard to keep one’s eyes on the hands, and the cards, being redistributed until one understands the logic behind the process. Once understood, logic makes it easy to predict and even anticipate the placing of the cards. Policymakers’ Three Card Monte then becomes more like a Tarot reading for the observer.
· A Key Signals proprietary indicator signals that the FOMC is, once again, totally off with its timing, this time, on monetary policy tightening.
(Source and caption by Key Signals)
In the West, economic opportunities involve a private/public sector partnership. This economic model has been exploited, with style, by a family partnership, which plays to win, on either side of the private/public sector partnership. In this family, there is no Chinese Wall, so to speak, on sensitive policymaking intel that can become market intel.
The Constitution’s checks and balances, on the executive power of the President, have some unfortunate consequences, unforeseen by the Founding Fathers. Perhaps, because they were essentially Masonic slave keepers, the Founding Fathers assumed that distributing executive power, amongst themselves, in separate Houses, would perpetuate the consensual fraternally-rewarding status quo that they all wanted to prevent the British from taxing to death. They just couldn’t see far enough into the future, beyond Independence, though.
When the Constitutional governance system moved from slave-owning to competing, a whole new dynamic, of conflicted self-interests, was introduced that made the old Masonic brotherhood unstable. There were, and still are, too many Chiefs and no Indians, so to speak.
The President became a slave to the Two Houses, by nature of the checks and balances on him. The inhabitants of the Two Houses had no such checks and balances and were, hence, free to exploit their Liberty in order to maintain their popularity, with those who put them there, whilst lining their pockets in the meantime. Equality and Fraternity were sold off to the highest bidders.
Fast forward, to today, and the President is checked and balanced, but the other executive representatives are not. Speaker Pelosi can, thus, go off on one, to Taiwan, and provoke WW3. Senators, Congressmen, and their lobbyists can add several zeros to the various bills, and trade barriers originally intended to legislate a competitive global standing for the American economy. The system is out of control and it is taking the global economy to the brink of conflagration.
Evidently, President Biden has understood that this “Sputnik Moment” has got a nuclear warhead, so he is trying his best to dial down the threat level from DEFCON1. He has also been on the horn with his opposite number, in China, to make sure that the Chinese also step back from the brink, in proportionate fashion, before it all ends in a mushroom cloud. Unfortunately, Biden’s weak popularity affords him no political clout with his own party or with the Republicans. The Constitutional shackles upon him are, therefore, strengthened by his lack of political capital. He is not so much a Lame Duck as a Hobbled Duck.
President Biden is lucky, however, in that, his opposite number does not have to contend with the same degree of anarchy from his government officials. There are, however, some signs that President Xi is not totally in control of all of them. One hopes that he has control of his military, at least.
· Political power now grows, innocuously, out of the barrel of a syringe.
(Source: the Author)
In China, the threats and the opportunities, seemingly, all belong to President Xi Jinping. The threats from him, thus, appear to present themselves as opportunities for him.
Oftentimes, the players play each other whilst also playing with the observer’s perception. Hence Speaker Pelosi’s recent visit to Taiwan, whilst ruffling Xi Jinping’s feathers, also allows the Chinese President to display fine patriotic feathers which distract the Chinese population from the economic misery of his COVID-Zero policy.
One may conclude, quite logically, that each player requires the existence of the other player to define itself and drive its own little schemes. Why, then, would any player destroy its nemesis, with nuclear weapons, and, thereby, lose its own franchise?
The strategic objective of the game is to keep it playing for as long as possible. So, Speaker Pelosi is correct when she says that America will not “abandon” Taiwan, and President Xi Jinping is correct when he rails against her perceived imperialism. If this dialectic were to end, it would be game over for the political and economic systems involved.
Think of it in P&L terms. If there was no enemy, there would be no massive American (or Chinese) fiscal stimulus. There would then be no P&L driver for Madam Speaker’s P&L. With no American fiscal stimulus, and perceived military threat, there would be no reason for President Xi Jinping to abrogate the PCPC’s complete control to himself.
The author draws the skeptical readers’ attention to the masks worn by Speaker Pelosi and President Tsai Ing-Wen during the Taiwan visit. Both officials are in compliance with the COVID-Zero policy as applied by Xi Jinping. China’s COVID-Zero protocols are, therefore, also, effectively, observed in Taiwan. The same COVID-Zero protocols, on the Mainland, preclude massive anti-American demonstrations on the streets. This demonstration has the risk of becoming a massive bank run since this is what Chinese people seem to care more about than their cousins in Taiwan right now. The narrative on the streets is, therefore, framed by the Chinese state-controlled press.
Hence, the only “masked” Chinese responses to Pelosi’s visit are a bunch of meaningless sanctions and saber-rattling military drills. To do nothing would appear weak. The skill is in doing nothing whilst appearing to do everything.
Pelosi got sanctioned, big deal!
China’s Red Team war-gamed, its annual war game, as always, the invasion of Taiwan, a little closer to the Taiwan shoreline, and with more lethality than the usual, symbolic intent and capability this year. Again, big deal!
Taiwan’s Blue Team can now escalate and refine its own defense strategy, going forward, based on what this year’s war game taught.
Evidently, President Xi Jinping is not yet in complete control of the state media. “Chairman Rabbit” has ostracized President Xi for alleged pusillanimity. Clearly, further investigations and incarcerations will follow.
Those still unpersuaded, by this author’s Bay of Pigs analogy, may wish to read, and watch, the recently released Bloomberg version of events; and note the timing of this story as well as the headline. The Bloomberg editorial headline is that China is winning in South America. This journalistic source and view are guaranteed to provoke a response in Washington.
(Source: the Author)
This author suspects that the wily President Xi Jinping will hit America, in its backyard, thereby reciprocating the perceived Taiwan insult in kind. This Bay of Pigs moment would then strengthen the American resolve and strategy to stay in the game.
The Pentagon has been playing the “Friend Shoring”, overlapping, yet discrete, Praetorian Guard role, of the Purple Team, in this latest round of the war game thanks to its distancing from Pelosi. This role was more than just cosplay, however.
From this vantage point, the US military brass can play the Reds off against the Blues, so to speak. The cover legend, for the playing-off role, was explained by Secretary Austin as the necessary implementation of the real-time mitigation steps required to deal with all the outcomes of the Pelosi visit.
The real results of the war game are national security classified. All involved have been informed about the potential outcomes of the real event, should it occur.
Vae victis!
Half-Time Draw, but Team USA had more possession ….
Suddenly, China seems to be on the back foot.
(Source: the Author)
In the last report, this author had the USA going into the changing rooms ahead, at half-time, in the economic Super Power League match versus China.
To all intents and purposes, China’s Belt and Road strategy currently mirrors the IMF’s role in the old Washington Consensus Trinity configuration. The IMF is the crisis lender, that seeks to enforce its rules and regulations upon those nations that the World Bank got into unsustainable debt. Today, China is now playing the role of the IMF, instead of the World Bank infrastructure lender, now that the Belt and Road associated debts can’t be paid. China built a wall of debt in the countries that it built out its Belt and Road in. Presumably, this debt infrastructure strategy was deliberate.
China Don’t Surf the Web, or the Belt and Road ….
The infamous Belt and Road appears to be loosening its hold on the global economy. Even Alibaba, and his Party Thieves, seem to be on the back foot.
(Source: the Author)
Thus, as noted in the last report, China’s Belt and Road Capex hasn’t gotten off the ground this year. Instead, its debt enforcer role has taken over.
Apparently, the half-time scores are level if one narrowly focuses on trade game stats. China’s ability to run trade surpluses in H1/2022 has mitigated capital flight in line with the “Friend Shoring” gridiron play executed by the USA in the half.
This author notes that it is a game of two halves.
· The new “Friend Shoring” Washington Consensus is in conflict with the Post-Washington Consensus beneficiaries.
(Source: the Author)
This author also notes that China’s trade surpluses are deficits in other emerging nations. Whilst China may exert more control over these nations, through trade flows, American leverage over the same nations increases by nature of the US Dollar’s strength over their currencies. The strengthening US Dollar, thereby, gives the “Friend Shoring” Washington Consensus discussed in the last report greater game management stats.
China’s Belt and Road strategy, therefore, strengthens the US Dollar’s global hegemony. If China wishes to break the US Dollar-based global economic architecture, and infrastructure, it needs to change its play in H2/2022 and beyond. It is interesting to note that the Belt and Road investment strategy has not been applied in H1/2022. This could mean that China is changing the game. It could also mean that China cannot afford to play the Belt and Road game.
It has also been a game of two halves for the Fed. The first half has been one of monetary policy tightening. There are also signs, from the crowd’s response, that the Fed gained the upper hand towards the end of the half.
Away from home, therefore, China is scoring the odd own goal. On his home turf, however, President Xi Jinping has been racking up the goals in the domestic league opposition’s net.
The Cheka takes it back on the cheap ….
· “COVID-Zero” is a strategic policy tool, which suggests that COVID-19 is a strategic weapon.
· “COVID-Zero” is entering a multi-year rolling lockdown phase that will obstruct Chinese investment and trade flows.
(Source: the Author)
This author’s diagnosis, of the COVID-Zero strategy pandemic, has recently become the same prognosis, of the informed cognoscenti, although the assertion that COVID-19 is a weapon, by default, has not yet been made by them.
That being said, some of the cognoscenti are now imagining the possibility that China remains locked down indefinitely. This author notes that those asking the question belong to the milieu that seeks to maintain the role-playing status quo, of the great game, between the main protagonists, because this game maintains the political status quo and order of things.
· Xi Jinping’s “Sputnik Moment” is a Chekist response to perceptions that he is losing his grip.
· “COVID-Zero” has become the Cheka.
(Source: the Author)
The last report discussed how China’s COVID-Zero strategy was redistributing wealth, from the private sector to the PCPC. The dots are gradually being connected in the media. The latest observation is that there is a two-tier capital market structure in existence in China.
Whatever the root cause, COVID-Zero has now attained pandemic parity (cult) status with COVID-19. This observation, hence, prompts the author to conclude that COVID-Zero is the Post-Washington Consensus that he claims is now in conflict with the “Friend Shoring” Washington Consensus.
Chinese national champions may now borrow cheaply, versus their private sector peers who are shut out from capital markets. The said private sector peers must now consolidate, amongst themselves, in order, to survive and compete. Consolidating is, however, futile if the borrowing tables remain tipped in favor of the PCPC. Ultimately, the PCPC house wins and the winner may even take all of the productive sectors of the economy.
The PBOC is seemingly, happy, or has been instructed, to drive the consolidation process that may ultimately become a nationalization process. The central bank has been draining liquidity, consistently, thereby, starving the private sector of much-needed financial support. The PBOC calls the modicum of liquidity currently provided “reasonably ample”. Presumably, “reasonably ample” is defined, subjectively, by the Cheka, as the volume of monetary aggregates required to liquidate all private-sector competition, and to, thereby, fund consolidation into the public sector.
Re-nationalization, via the Cheka, is the invisible hand of COVID-Zero. China is, hence, even less investable than before.
In America, some observers are on the pitch. They think it’s all over. They might well be right.
The Fed is still playing on until the final whistle is blown on inflation.
Not done, and lovin’ it ….
· Neel “Ex Culpa” Kashkari has lost his credibility.
(Source: the Author)
Since his incorrect insight about inflation, incited derision, and his sobriquet, Minneapolis Fed president Neel “ Ex Culpa” Nashkari’s communication, and guidance, have become measured. In this modality, Kashkari simply communicates a commitment to strive to hit (note not to overshoot) the Fed’s 2% inflation target.
It would seem that Kashkari is still not done, with living up to his false prediction sobriquet, however. His latest prediction is an attempt to arrest the Hard Landing signal from the inverting yield curve. Kashkari recently tried to steepen the curve, into Soft Landing shape, with his own prediction that rate cuts, next year, are “extremely unlikely”.
· James Bullard attempts alchemy to conjure the Soft Landing.
(Source: the Author)
Although not done, with tightening, St Louis Fed president, and Alchemist, James Bullard is certain that a soft economic landing can be conjured up.
Similarly, like Bullard, Cleveland Fed president Loretta Mester intends to press on with tightening until inflation has shown months of convincing signs of defeat.
Like Bullard, and Mester, San Francisco Fed president Mary Daly’s “modal” outlook is “nowhere near” ending monetary policy tightening.
There are, however, greater forces at play than the Fed’s inflation mandate. Fed speakers may think, and guide, that tightening is far from done, but they are wrong yet again.
The New York Fed’s latest consumer credit survey broadly painted a picture of an economy that is in landing mode. Loan and mortgage delinquencies are just starting to rise. This landing is in the transition phase from soft to hard.
Consumers are subsisting on inflation with their credit cards. This subsistence thesis was supported by the latest consumer credit data that has not been adjusted for inflation. Since inflation picked up in March 2021, consumer credit has been causally elevated
The rising loan delinquencies problem is most acute for the young, the asset poor, and the poorly paid. Inflation is an exaggerated headwind for this group also. The rolling back of fiscal support, from the various COVID relief programs, is a significant headwind driver for this cohort. The Fed is becoming an even greater headwind with its monetary policy tightening, also.
As the delinquency contagion ripples out, to those who have stronger credit histories, the economic headwind will get stronger. Tax receipts will also begin to weaken, thereby weakening the underlying credit quality of the US Treasuries on the Fed’s balance sheet. In addition, the Fed is engaged in weakening this asset quality, and their prices, by hiking interest rates. Other global central banks, that have followed suit, are already showing significant unrealized losses on their balance sheets. The Fed is not immune from this contagion, it is simply the last shoe to fall.
You’re all done now, so just love it and leave it ….
· The Fed will stop tightening, and then expand bank reserves “Just in Time”, and “Just in Case”, there is a recession.
(Source: the Author)
In a previous report, this author explained how central bank, self-inflicted, balance sheet shrinkage led to bank reserve contraction that weakened the economy. The weakened economy, then, undermines the tax base, thereby, undermining the value of the assets on the central bank balance sheet. With undermined balance sheet assets, the central bank then has to undermine the reserve liabilities it creates in the banking system. With weakened reserves, the commercial banks then weaken their lending to the economy.
The reader should, therefore, understand that a central bank will at some stage always have to abandon monetary policy tightening even if inflation remains undefeated. Central bankers then talk, with brio, about the supply-side nature of inflation, and the need for supply-side fiscal stimulus with structural reforms. If one listens, carefully, this is what, in essence, is being said right now.
Easing in times of financial distress, caused by inflation, or deflation is what central banks do. They do so, to balance their balance sheets and avoid realizing losses. A central bank inherently cannot avoid monetary inflation, by default, unless it were to return to the Gold Standard.
(Source: the Author)
All such underminings may then become a doom-loop, that leads to a recession. Hence, despite central bank assertions, of inflation-fighting credibility, the only thing that they really care about is economic growth.
The global economy is now at the tipping point where central banks suddenly become more concerned about growth, even though they have not defeated inflation. In fact, they never defeat inflation, they just find new ways to redefine and, thereby, de-emphasize it for a while.
· The Reserve Bank of New Zealand is the first developed economy central to declare insolvency and the restart of the global MMT process.
(Source: the Author)
The last report discussed how the Reserve Bank of New Zealand was the first to blink, at its balance sheet losses, and, thereby, signal the return of Modern Monetary Theory (MMT).
The Kiwis continue, to try to live, their fantasies, well beyond their dreams. With no tax receipts to spend, on bailing out the Reserve Bank, thanks to a weakening economy, Jacinda Ardern now wishes to bail out the Samoans before the Chinese do. Well, at least this fantasy may be cheaper than trying to stimulate the domestic economy. And, who says that the Chinese can afford to bail out the Samoans, anyway?
There’s a lot of hypocrisy, surrounding MMT, doing the rounds at the moment, which, presumably, means that it is imminent.
Mr. JGB-san over at the MOF, in Japan, has opined that his ministry is preparing for the day when the BOJ is not the largest buyer of JGBs anymore. He did not say that this preparation will lead to less JGB issuance though. Evidently, a new fiscal agency to warehouse the fiscal deficit is under construction. The BOJ can then buy the debt issued by the new fiscal agency, without increasing its JGB holdings per se. Mr. JGB-san is no liar, he is just changing his name to Mr. Other-name-for-JGB-san. This author would like to call him Mr. MMT-san.
Any other developed nation central that laughs at New Zealand, shouldn’t, because this is a fate that awaits them all. The ECB is actually cheating, because it is funding an attempt at inter-nation spread contraction whilst it, simultaneously, makes the situation worse by hiking interest rates. The Europeans are just not as honest as the New Zealanders.
(Source: the Author)
The last report poked fun at the hypocrisy, of the ECB, for undermining its attempts, to fight fragmentation, by simultaneously fighting inflation with the rate hikes which elevate the fragmentation risk.
This absurd behavior has apparently cost the ECB, dearly, in terms of the amount of balance sheet expanded with Italian assets. The rate hike, and the attendant rise in Italian yields, have also pushed the ECB closer to insolvency.
ECB insolvency, in this case, does not automatically lead to a recapitalization, from taxpayers, however. Insolvency would, normally, lead to the largest ECB shareholder, Germany, consolidating its stake and increasing its control over the central bank. German national finances, unfortunately, cannot afford this normal solution either. So, the Germans have no choice other than to accept MMT, in principle, even though they fully intend to haggle over the accounting rules applied to it.
One can (and has) imagine(d) Christine Lagarde saying “I told you so”, about MMT, to Bundesbank President Joachim Nagel, at the next Governing Council meeting, assuming that his own Chancellor Olaf Scholz has not already done so.
The latest ECB Economic Bulletin games out Lagarde’s “I told you so”, in a way that the central bank would like it to unfold. The central bank estimates that the Eurozone’s governments are spending twice what they will regain, from taxes, on mitigating the COVID-19 and Ukraine war economic, and social, legacies that they have inherited. Consequently, the central bank recommends fiscal austerity, and Green supply-side investment/innovation, in relation to rationing and prioritizing spending. What is not mentioned is how, and when, this austerity, and rationing, will lead to recession and slower inflation, which then obliges the ECB to start Q-Easing again.
The US Treasury has, also, just called last orders on the Fed’s quantitative tightening party.
The Treasury recently announced the prospect of bigger deficits. Since the US economy is weakening these deficits cannot be sustained with tax revenues. Since the Fed thinks that it is still tightening monetary policy, these fiscal deficits will have to be financed, externally, in a global economy that doesn’t have the US Dollar liquidity to finance them. The rise in yields, from the prospect of bigger deficits, also pushes the Fed’s balance sheet losses even further into the red zone.
· The Fed may embrace Macklem Doctrine when it sees the unrealized losses on its balance sheet from the recent spike in yields.
(Source: the Author)
This confluence of unhappy events now means that the US Treasury and the Fed have aligned interests not to let the spike in yields spoil their action. Thus, monetary policy tightening is over and MMT can begin again.
· Fed Governor Christopher Waller defines “Patriotic Monetary Policymaking” as an unconditional commitment to be conditional on the President’s financial stability policy problems.
· The Summers’ (Hard) Soft-Landing may become the Biden Soft Landing.
(Source: the Author)
In order for MMT to begin again, inflation must be discounted. This discounting will be achieved with a new definition of full employment, and what this author calls the adoption of a Patriotic Monetary Policymaking mandate.
· Larry Summers and Fed Governor Christopher Waller are about to fight publicly over the Hard versus Soft Landing hypotheses, with Beveridge Curve weapons, in order to redefine the Fed’s definition of full employment consistent with the current political imperative.
(Source: the Author)
A new definition of full employment will allow the Fed to start easing again in the face of the alleged tight labor market.
The dialectic that will lead to this new definition, of full employment, is already in process between Larry Summers and Fed Governor Christopher Waller. The current state of the debate is in the intellectual trash-talking phase, where both sides undermine the credibility, of one another, by poking holes in the data and assumptions of each rival hypothesis.
Anecdotally, the Soft Landing thesis team would seem to have the initiative at the moment.
Anecdotally, Elon Musk is seemingly trying to manifest the Soft Landing into the share price of Tesla (TSLA). According to Musk, inflation is “Past Peak”.
· The Soft economic landing zone portends a domestic Hypergrowth Phase inflection point, for the US economy, that will be stronger than for its global competitors and trade partners.
(Source: the Author)
This author suspects that Musk may soon be opining the Hypergrowth Phase thesis also.
· The Summers’ Curse becomes the Summers’ Blessing in order to cross the Manchin Tipping Point and receive the blessing to become the next Fed Chairman.
(Source: the Author)
The reader should be in no doubt, by now, that a new definition of full employment will be the monetary policymaking precedent of the current Waller vs Summers case.
Summers is, in fact, no longer fighting the Fed. He has proved his point, already, by being correct about inflation. Now, he intends to cement his position, in the ascendency, by calling the peaking of inflation whilst keeping his Hard Landing call as prescient as ever. He seeks to extend his winning streak, by cautioning the Fed not to prematurely call victory, over inflation, by prematurely ending the tightening cycle. Obviously, this raises the probability of a recession.
Summers’ caution resonates with the likes of an array of Fed speakers including Mary Daly, Loretta Mester, and Neel Kashkari; who all clearly perceive the same risk from prematurely ending the tightening phase. In effect, these speakers are not his enemies. They are his disciples. Having got inflation all wrong, they now follow Summers and not Powell. Summers is, hence, the Shadow Fed Chairman already. Why not, then, make the appointment official?
Larry Summers would like this new definition to have a higher unemployment target point than Waller. In essence, since Summers has staked his credibility and job application, to become Fed Chairman, on his Hard Landing thesis, he must now nudge his scenario into life. Waller, on the other hand, needs his Soft Landing for his own credibility purposes. The unemployed are the collateral victims, and pawns, in this intellectual dual.
· Patriotic monetary policymaking may soon be framed as the creation of a stable disinflationary foundation on which the President can Slam Dunk.
(Source: the Author)
Patriotic Monetary Policymaking has been with us for some time, already. The political imperative to support the “Techno-Economic War” effort against China has given it some urgency. The strapline, to sell this initiative, is that the Fed is creating a stable inflationary base to launch the supply side fiscal stimulus that will lead to lower inflation through productivity gains.
The balance of risks, tipping towards recession, has now caused Richmond Fed president Thomas Barkin to shill for the Soft Landing. Barkin’s shilling frames a slowly unfolding victory, over inflation, as the basis for the Soft Landing. The reciprocal Fed balance sheet position is one that unwinds imperceptibly, thereby expanding over time through compounding and reinvesting.
· Chairman Powell partially confirms that a new definition of full employment is pending.
· Mary Daly’s Long Duration trade thesis/guidance puts the Chateau Greenspan ’94 Bull Flattening vintage on ice in “Speaker Pelosi’s Bottom”.
· The Fed will stop tightening, and then expand bank reserves “Just in Time”, and “Just in Case”, there is a recession.
(Source: the Author)
As noted by this author, San Francisco Fed president Mary Daly is nothing, if not loyal to Chairman Powell. She has, thus, found it necessary to reach into her inner fears, about inflation, to back up what Larry Summers saw as Powell’s “indefensible” call that the Fed is back at neutral. Daly believes that a 50-Basis points rate hike, versus the generally assumed 75 is a “reasonable” assumption, for the next FOMC meeting, given the currently incoming data.
Despite the headline number, to the contrary, the latest employment situation report speaks to the Soft Landing scenario. Female employment dynamics surged. This doesn’t just mean that mothers have found daycare facilities. The insidious truth is that women are paid less than men. Consequently, a surge in female employment is a disinflationary, albeit tight labor market, indicator.
The Soft Landing, is, in fact, landing on American women. This author, therefore, concludes that the new definition, of full employment, under construction at the Fed, is one that will have to take into account this embarrassing gender-pay discriminatory detail of the Soft Landing.
America has a growing problem of what to do with unemployable men, especially white guys who like to carry guns and follow Donald Trump on social media. The acronym WUMAD, for White Unemployable Male Armed and Dangerous springs to mind, when looking at this threatening cohort. The Jan 6th Committee should tread carefully in its legal zeal, for the risk of provoking something more secessionist from this militant cohort. “Friend Shoring” may be targeted at this cohort, but their participation is by no means assured.
The Democrats hope and pray, that John Fetterman will resonate with the WUMADs. The Republicans have got nothing to offer, them, but Trump in 2024.
There will be some Oligopolists gleefully rubbing their hands about the pricing power afforded them by the recent female surge.
Q2, also Stagnated by Oligopolists ….
The New York Fed’s Global Supply Chain Pressure Index (GSCPI) shows that the situation is swiftly reverting to the mean level of pressure. Despite this news, there are operators at critical nodes in supply chains who would beg to differ. These beggars can apparently still be choosers, because they are the supply chain itself, and can, thereby, get away with anything that they want to in relation to pricing.
The Maersk shipping line recently boasted of its ability to bake higher long-term inflation expectations, into the global economy, by raising long-term contract prices in the face of short-term declining volumes. Costs were up 21%, volumes were down 7%, but revenue was up 64% thanks to aggressive rent-seeking. Bravo! But there’s not exactly a lot of competition in this space, is there? Shooting fish in a barrel seems to be more like shooting fish in a shipping container in this case.
(Source: the Author)
Incoming earnings reports have highlighted how a small handful of hands, on the critical nodes in global supply chains, have still been able to exploit the situation in pursuit of shareholder value. This pursuit has widely manifested itself as Stagflation for the majority of their customers.
The continued economic slowdown, in Q2, has provided the opportunity, to further the pecuniary motive, for these Oligopolists in the global supply chain. Maersk has become the doyen of this practice and the poster boy of earnings in the sector.
Maersk recently guided to expect another profits blowout. The company has become adept at translating economic weakness into supply chain tightness. Since there is little competition, in its space, Maersk can idle its operations more than the global economy is slowing, thereby, preserving its pricing power. Supply is managed to always be less than demand. It’s the perfect business model for Stagflation. In addition, the model perpetuates the Stagflationary conditions on which it is based. It is all perfectly legal until governments decide that the price of goods supplied to their voters is more important than the quantity of the goods supplied.
The Oligopolists have an ace up their sleeve in the margin expansion game. Tough negotiating, with supply chain workers, leads to new wage offers which are viewed, by the workers, as too low. The workers then go on strike, thereby, creating the supply chain problems that the Oligopolists exploit by raising prices. Strike action is, however, an economic headwind for the economies where this little game of pass-the-inflation parcel is being played.
Wage bargaining, then, becomes a war of attrition, in which the workers must calculate how long they can hold out with rising prices and no strike pay. Eventually, the workers must return, to work, to pay their debts; and will, out of necessity, accept wage increases that still lag their cost-of-living benchmarks. Central bank rate hikes just accelerate this compromise, because the workers lack the scale individual balance sheets, of their employers, to deal with the rising costs of living and debt servicing.
The apocryphal words divide and conquer are apposite in this situation. Stagflation outcomes, and margin expansion, for the Oligopolists, are the norm. The Great Resignation was just a myth to give the Oligopolists another excuse to raise their prices.
Based on the recent hand-wringing, by policymakers, about tight grain supplies, from Ukraine, this author deduces that the volume of global supply is still more worrisome than the price of supply.
At the domestic level, in the US, however, the price of supply and, hence, the derived CPI data is more of a concern. Within its own jurisdiction, the American legal and political executive can have more influence over Oligopolistic pricing behavior.
1997 and all that ….
Summary:
· The 1990s global economic scenario is hiding in plain sight.
· Joining the dots from G20 Indonesia, to the Munich Security Conference, Russian Defenders of the Fatherland Day, and The State of the Union Address extends the multi-polar pattern.
· As went Saddam’s Iraq, so goes Putin’s Russia.
· Meaningless high spot commodity prices on screens are the reference point for meaningful discounts in the “constrained” physical markets.
· Macklem Doctrine is a catalyst for the long-term disinflationary economic growth forces unleashed from Ukraine.
(Source: the Author)
As the red ink stacks up on, central bank balance sheets, thereby, impairing their ability to respond, to a global recession that they are driving, cynical invisible hands wish to exploit the situation to force the collective fiscal and monetary policy response, in the form of MMT.
The tactics deployed, in nudging this collective response, appear to be the preying upon the palpable fears of a 1997-style Asian Debt Crisis reprise. On this occasion, the smoking gun appears to have been placed in Russia’s hands, thereby, extending the narrative to the Russian Debt Crisis of 1998 that took the nation down and prompted a further round of global economic stimulus.
To complete the 1990s thesis, all that is required are a few good algorithms to interpret a similar pattern, of price discovery, that then created a similar trend to that recorded on the 1990s trendline.
The said good algorithms are currently doing the necessary, for the self-fulfilling technical analysis prophecy, required to keep trend followers and their assets under management enslaved, as useful idiots, for the policymakers spinning the global macro thesis.
The same good algorithms, of price discovery, are swiftly discovering the bad 1990s global macro policy mix that caused Britain to temporarily suspend its membership of the civilized global polity.
“Dishevelling Up” does “Nationwide Privatization” and Bank of England Nationalization ….
British politicians have a unique ritual tradition of eating their own, and themselves in the process. As the political cannibalism unfolds, the cannibals reveal the hidden truths behind the original lies of those that they consume. As the truth comes out, they take each other and their political parties down with them.
The treachery and lies, which are the essence of the quintessentially English political milieu, have reached the new lows at which image re-branding is required.
Presumably, the classical education of the cannibals involved has informed their digestive methods and creativity. The result is Shakespearian in appearance.
The political show starts off, like Julius Caesar, with the stabbing of the leader, by a close friend who is quickly joined by more distant friends in the frenzied attack. Then, as the suspicions and competitions, for the vacant crown, progress, the ritual slaughter starts to look like the last act of Hamlet.
The bodies are starting to pile up, Hamlet-style, thereby, obscuring the shiny new re-branded image of the Conservative Party.
The alleged rebranded image, of the post-Johnson Conservative Party, may be different but everything else remains the same.
· UK “Levelling Up” has been abandoned as “Dishevelling Up” has gone nationwide.
(Source: the Author)
The last report explained the latest noble lie from the UK Government. So far behind, in the polls, are the Conservatives, that they need a new national political bandwagon to ride, rather than one aimed narrowly at the latent Xenophobic fears within the traditional Labour-voting heartlands.
Consequently, an economic policy, and brand image, aimed at making the UK a cheap global Freezone competitor, to the emerging economies, has been crafted. Evidently, this model infers lower wages, and lower living standards, immediately, but this inference cannot be delivered upon this side of an expected general election.
Thus, the Conservatives have rebranded the, narrowly aimed, failed promise of the “Levelling Up” bandwagon as a Nationwide Free Zone. Britons apparently, never, never, never shall be slaves, because they will all live in a Free Zone.
Some residents, of the said UK Free Zone, shall, however, be wage slaves. Life as a wage slave will be similar to that endured by the oppressed antecedents, of the New Freezonians, who worked in the Dark Satanic Mills of the Industrial Revolution. The myth that the new Free Zone will have loads of high-paying technology jobs has, already, been exposed, as an “empty slogan”, by an impartial cross-party committee, rather than a sincere declaration of industrial intentions and capabilities.
This new “empty slogan” joins the growing litany, of noble lies, along with Brexit and Levelling Up on the libretto that the New Jerusalem is being sung from by the Conservative Party.
The New Jerusalem’s wage slaves will, also, soon become further indentured, as debt slaves, in the newest noble lie, in the litany, which encourages them to pay for the hovels, which they cannot really afford to buy, over the rest of their miserable lives. The lie is, in effect, the transfer of wealth from slave/debtor to property developer.
This Mortgage Slave Lie has the same feel as the Student Loan Lie that was sold, to the same individuals, when they were becoming indentured child-labourers/A-level students. Hence, already in debt for an education, that they cannot afford, the indentured youths can strap on some more chains, of debt-slavery, with a roof over their heads. The Government will, generously, give them tax cuts, so that they do not have to take on additional debt to pay off their compounding Student Loans and their amortizing for-life mortgages.
· The Bank of England thinks that it is highly likely that the UK economy will swiftly turn Japanese in 2023.
(Source: the Author)
Some potential young debt slaves may decide that it’s not worth having kids anymore. How the government then finances itself, with no future pipeline of Free Zone slaves, is a question for the Bank of England’s balance sheet to answer. This author once said that the Bank of England thinks that the UK economy is turning Japanese. This observation, and prediction, appear to be well justified.
There’s a vague hint of Adam Smith’s Wealth of Nations about all this Free Zone empty sloganeering. Smith, and Ricardo, both understood that returns to labor shrank as returns to capital expanded. Marx and Engels commentated, at great length, on how this game of diminishing return to labor played out. The Labour Party owes its existence to these observed diminishing returns to labor. The Conservatives also seem to understand the consequences and are offering income tax cuts, along with noble lies, by way of compensation, and vote-buying, to the financially distressed voters/workers.
· The UK is aggressively 1980s rebooting, Submerging Markets style, whilst its European trade partners reboot in a more peaceful fashion, and America tries to reboot 1990s style.
(Source: the Author)
Based on the purported competitive business model, behind the Free Zone strategy, it is difficult to see how the tax revenues, for HMRC, will pay off the accrued COVID debts and ongoing outgoings of current UK fiscal spending.
There is certainly no scope for public investment in, productivity-boosting initiatives like education and infrastructure. Private equity will, thus, have its tax-free cake and eat it. Consequently, austerity and misery will continue to be heaped on the newly submerging economic classes of UK workers. The reader may, now, understand why the UK needed to be outside the EU if it were to pursue this Free Zone crusade.
· A trial by the WTO may swiftly become an appeal to the IMF, as the UK’s unsustainable economy is exposed by the global capital markets.
(Source: the Author)
Worse is yet to come, as the UK’s beggar-thy-neighbor Free Zone infuriates the WTO, and trade partners, to a level at which they apply reciprocal sanctions and tariffs. At this point, the combination of trade sanctions and domestic austerity will militate for a new UK economic model, and a new government to drive it.
Then it will be game on for the Britain Project, with its 1990s Tony Blair DNA. This game is already happening in the high street shops that are selling out of 1990s fashion.
(Source: the Author)
By then, a new political movement may have matured to the level of a political party that can clean sweep the national elections.
The treachery and lies may lethally wound the Conservatives well before the new political movement has matured to party status.
The treachery and lies have swiftly removed the dagger, from Boris Johnson’s back, and plunged it, into Rishi Sunak’s ribs, although it must be said that the former Chancellor was doing a pretty good job of shooting himself in the foot in any case. Sunak’s shot has also fatally wounded the Conservative party.
Presuming to ingratiate himself, into the green and pleasant Conservative heartlands, Sunak eagerly took credit for the “Dishevelling Up” strategy observed by this author. According to Sunak, this was his exclusive mission as Chancellor of the Exchequer. Thus, the promise of Levelling Up, in return for the Red Wall vote, was immediately abandoned, and reversed, the moment the Conservatives took office after their Brexit-driven election triumph. One may assume, that this swift U-Turn was always the plan even when the Levelling Up and Brexit lies were being peddled on the election campaign trail.
As noted, by this author, the Red Wall landslide Conservative vote was, in fact, stimulated, and mobilized, in no small part, by the deliberate strategy of relocating the bulk of immigrants, and asylum seekers, into this traditional Labour voting territory. Sunak’s deliberate removal of economic resources, from these targeted immigration destinations, further militated the native voters by making it appear that the new foreign arrivals were getting all the fiscal benefits that he and Johnson had promised them.
The former UK Chancellor, it would seem, already, had some impeccable “Butlering” credentials of his own, in the Subcontinent. Hence, it was business as usual, for him, to indirectly dole out economic assistance to his other homeland. Further assistance is currently being demanded, with menaces, rather than via encrypted chat, by the Tata dynasty. UK taxpayer funding is being demanded, or else the dynasty’s Welsh steel interests will be closed.
The former Chancellor’s impeccable “Butlering” credentials have become infamously known as the “VIP Lane”. Amongst other financial services, this route was a fast lane to generous COVID procurement contracts, with little oversight, which has cost the UK taxpayer dearly.
(Source: the Author)
Sunak also failed to inform his Middle-Englander audience that the funds, he redirected, from the Brexit-voting, and former Labour-voting regions, through his “VIP Lane”, went to causes a little closer to his home, and his heart. Presumably, this next dramatic revelation will come from the tabloids, in due course.
Thus, the financial proceeds of the Conservative policy of “Dishevelling Up” were diverted to the friends and family of those doing the dishevelling up. It did not go to the Conservative heartlands that had been told that they had been left behind. Abandoned and insulted, these heartlands could well turn very nasty for the Dishevellers-in-Chief.
· The Bank of England thinks that it is highly likely that the UK economy will swiftly turn Japanese in 2023.
(Source: the Author)
The Bank of England has already taken a dim view of the Conservative’s economic plan. This has prompted the Conservatives to attack the Bank, and promise to make it less independent. And why wouldn’t they? In classic Johnsonian style an agency, outside government control, is blamed, then ostracised, and finally taken prisoner. Just as the EU, and immigrants, have been blamed now it is time for the Bank of England to be blamed for the UK’s economic failure.
Given the inherent weakness of the Free Zone model and the global shitstorm from the WTO ahead, Sterling is in danger. This danger would normally prompt the Bank of England to jack interest rates up in defense of the currency. This is basically what happened when the UK’s economic policy undermined its compliance with the Exchange Rate Mechanism (ERM) regime. Brexit serves as the recent iteration of divergence from the EU, requiring tighter monetary policy settings to mitigate currency weakness.
Sadly, such a jacking up of interest rates will also jack up the losses, on the Bank of England’s balance sheet, from the legacy of COVID-related asset purchases. The Bank will, thus, be insolvent and the Conservative government will neither have the tax revenues nor the political inclination, to bail out the central bank.
Based on these foreseeable most likely outcomes, the Conservatives have decided to dispense with all semblance of political niceties and basically nationalize the Bank of England, now, on the cheap. Modern Monetary Theory (MMT) to, then, follow the bursting of the Free Zone model bubble. It doesn’t sound Japanese, at all, it sounds more like what the Chinese Chekists are doing right now.