Why This Time Actually May Be Different
Among other things that I’m not—not a scientist, for example—I’m also not an economist or a financial analyst. Nevertheless, I did—years ago—read Ken Rogoff’s book This Time Is Different. Rogoff basically did an historical study in which he punctured the hubris of the people running economies, who had—serially, and with utter disregard for history—persuaded themselves that this time their irresponsibility would go unpunished because, you’ve got it, this time was different. As Rogoff noted, whatever time it was, it was never different. The piper always had to be paid, and usually in a pound of flesh that the little people had to pay.
Zerohedge has an interesting article today that riffs off the title of Rogoff’s well known book:
Why This Time Is Different (And Not In A Good Way For Powell)
What the author does, after a lengthy lead-in, is explain why we’re just now experiencing inflation, after a decade of monetary madness. Basically, he says: follow the money. For years the funny money was used to prop up the Wall Street Casino. Then came Covid and the insane lockdowns, and the little people decided it was time for them to get a piece of the action, too. Or maybe the politicians, realizing what could be in the wind, decided to act preemptively to placate the populace. The result was, the little people were bought off. So, whereas the first time we didn’t experience retail inflation (just financial inflation) because the little people were denied a share in the funny money, this time is different: This time we’re experiencing inflation because the funny money has flowed throughout the real economy.
Well, I’m not an economist, as I said, and that’s what I took away from the article. Here’s the nub of it:
This mad undertaking has also shown the impacts of QE are dependent on where the fake money ultimately flows. This important distinction is why the Fed’s efforts to control consumer price inflation are doomed. Let’s explore…
Where the Fake Money Flows
When the Fed first began creating credit out of thin air to buy Treasury notes and mortgage backed securities, hard money aficionados were revolted. Many prophesized that a Weimar Germany type hyperinflation was just around the corner.
And why not?
As night follows day should not price inflation follow money supply inflation?
Well, yes. Of course. But what type of price inflation? That’s the real distinction…
From 2008 to 2015, the Fed’s balance sheet inflated from $800 billion to about $4.5 trillion. Over this time, college tuition and health insurance costs went through the roof. But to the delight of Paul Krugman and other statist economists, price increases for most consumer goods and services were moderate.
Perhaps cheap labor out of Asia helped prevent consumer prices from dramatically inflating. Still, we posit that moderate consumer price inflation between 2008 and 2015, even with QE, was mainly a function of where the fake money flowed.
...
Specifically, the money supply inflation from 2008 to 2015 flowed to financial assets. Stocks, bonds, and real estate prices boomed. Speculative fever boomed too, along with financial engineering schemes like companies using low cost debt for corporate share repurchases.
...
From 2015 to late 2019, the Fed attempted to draw down its balance sheet. But after dropping about $700 billion, to roughly $3.8 trillion, all hell broke loose. In September 2019, overnight money market rates spiked and the Fed had to backstop the repo market.
This breakdown in the repo market was soon overshadowed by the mass money printing instituted to bailout the consequences of government mandated lockdowns. Upwards of $5 trillion was created out of thin air to buy Treasury notes and mortgage backed securities. Only this time it was different…
This Time It’s Different
The 2008-09 bailout of Wall Street opened people’s eyes and minds to what’s possible. Thus as the Fed went into full big business bailout mode in 2020, the plebs started asking…where’s the people’s bailout? Where’s QE for the people?
...
A $1,200 stimulus check was nice, and all. But a $2,000 monthly payment is way better. So why stop there?
When money’s free, the supply’s infinite…ain’t it?
Thus more stimmy checks were delivered like manna from heaven. And many working stiffs discovered it was more prosperous not to work.
But if everyone’s home watching Netflix – or getting rich trading cryptos in the metaverse – who’s left to make pizzas or milk cows? And at what price?
The federal government’s fiscal deficits for fiscal years 2020 and 2021 were $3.13 trillion and $2.77 trillion, respectively. That’s nearly $6 trillion of fake money – money supplied via Fed purchases of Treasury notes with credit created out of thin air – that was spent directly into the economy over 24 months.
…
What to make of it…
This week, minutes from the Fed’s December meeting were released. Finally, the minutes show, committee members are concerned about inflation. The Fed may even begin reducing its balance sheet and raising the federal funds rate this year. Stocks sold off and Treasury yields spiked upward on this revelation.
Should the Fed go forward with these credit tightening plans you can expect asset prices to deflate. But what about consumer prices?
Not likely. And that’s why this time it’s different…
Who thinks with that going down the people will be satisfied with BS about CRT and J6 and the Covid Cult? Not likely. Not if history has anything to teach us. In that sense, it’s highly unlikely that this time will be different.
https://m.youtube.com/watch?v=u8j51XZegsk
An oldie but a goodie, Richard Werner , the Robert Malone of QE theory explains the way it works in terms the layman can understand and offers insight into why the appearance of inflation in consumer goods means the fed has already fumbled the ball. Local banks lending to small businesses for productive economic purposes is the key to sustainable growth of the economy. Which makes sense when you think about it. Create money in the system ( in the form of the bank loan to the business) but to the purpose of generating new/ more products or services for that newly created money to chase. No inflation. If on the other hand you create money in the system but to the purpose of simply providing consumers more purchasing power (in the form of federal government relief checks and other so-called welfare payments) then you have more dollars chasing the same amount of goods and services. Inflation. Previous QEs went to asset purchases so we have stock market inflation and monsters like blackrock and vanguard. This time the fed is pumping money into the consumer economy. You bet it's different this time.
This offers a great opportunity to try out our Multiverse Framework thinking (ie, considering a given topic/ news through several different lenses/ narratives and see which holds up best to other data points we've already verified.
So, viewing the Fed and monetary policy through the Tom Luongo Lens, we'd intuit that the Fed is essentially a tool of Wall Street and Big Banks Big Corp, so their actions will always defend those institutions, particularly vs the ECB and EU. This lens seems a bit incomplete as it doesn't seem to account for the actions of the federal government and their determination to dump blizzards of money on all of their cronies. Then again there does seem to be some tension if not conflict between the Fed and Congress/ Exec.
Another lens would be the Globalist Cabal view. This lens sees the Fed actions as part of the general plan to debase the dollar and pave the way via financial meltdown to a digital, global currency that the Globals can control and control the People as well.
Another lens would be the Criminal Cartel lens where the Fed is just one of many members who have their own plans, agendas, motives, and power centers. Like any Cartel, the members try to work together for mutual benefit as much as possible but there are necessarily conflicts and areas where members work against each other, particularly when one member threatens the power or profits of another or undermines clear interests. In this view, the Fed may be its own Member or a tool of others. Either way, the Uniparty is at odds w the Fed. It's not clear whether the Cartel can decide to intentionally crash the economy or continue propping it up. This involves a debate among members as to winners and losers, risks of popular revolt, risks as to foreign powers.
I favor the Cartel view but there are many other lenses out there including aliens, Q, devolution, and politics as usual. I think we're seeing real infighting among the members, genuinely uncertain about what to do. Certain members like the Fourth Branch seem to want more civil division and crackdowns on dissent--- more authoritarianism. The Uniparty is divided between more authoritarianism and go slow approach to avoid further waking the People. The Davosi and EU want to push ahead w more Scamdemic fever and lockdowns to get the digital currency in place and universal population microchipping. The Deep State bureaucracy wants status quo. The Military Industrial Complex wants a nice, manageable war w an enemy everyone can hate and fear--- they think the Scamdemic has lost its usefulness. Anyway, this is what's driving the chaotic policy that veers all over the place. They can't decide and different members are pushing ahead w their own plan in the absence of consensus.
The Cartel may be breaking up. If that happens we may see one or more powerful members offer themselves to the People. For example, what if the Pentagon suddenly announced an end to forced jabs and ramped up its criticism of SPOTUS and the Fourth Branch? What if it elevated patriot voices etc? It could easily play into the Devolution Lens. (Maybe the Military Industrial Complex is the originator of the whole Q/ Devolution talk, as a lever and backup plan in case things don't go to their liking w the Cartel? ). It's a critical juncture. The Cartel either finds consensus or the members start looking for their own lifeboat.
Get Local.