Category Archives: Inflation

PAULI ON THE PILLARS OF REPUBLICAN & DEMOCRATIC POLITICS

BAB's A List, Democrats, Economy, Federal Reserve Bank, Inflation, libertarianism, Republicans

By Myron Pauli

The 2015 Republicans rest upon 3 fundamental pillars:

[1] SUPPORT OF “FAMILY VALUES”: whereby government promotes abstinence education, school prayer, and the old “Leave It To Beaver” lifestyle of sexual abstinent; of heterosexuals who married until death do us part with no drugs, abortions, or much booze. Those values were nostalgic and on the way out even in Beaver’s 1950s. While Bruce Jenner may no longer suffer gender confusion; many can appreciate that a nation that worships an Olympic athlete who is considering lopping off his manhood suffers moral confusion. The old time ideals still hold sway especially among the rural white Protestants in the “Red States”.

[2] CUTTING TAXES ON THE WEALTHY: In other words, “supply side economics” from the 1980s where tax rates of 70% were cut while the Federal Reserve jacked interest rates to 18% and led to renewed prosperity when inflation was finally conquered. People forget that Ronald Reagan and Bob Dole raised payroll taxes and that government spending skyrocketed. The “supply side” formula did not work under Bush-II and most people see that the bailouts enrich Wall Street megabanks and that billionaires like Donald Trump buy politicians of both parties, and don’t shy away from using eminent domain laws to grab private property and bankruptcy laws to default on $5 billion of debt. The middle-class treads water and the “working class” drowns (as its jobs disappear overseas or are lost to robots) while the Fiorinas come in, fire employees, tank the stock, and walk away with $100,000,000. Nevertheless, the “supply side” idea has enough libertarian appeal and sufficient economic common sense to garner political support.

[3] GLOBAL WARMONGERING: Where the neocons make war on demons intent on destroying us – Afghans, Yemenis, Libyans, Russians, Chinese, Syrians, Iranians, “terrorists,” and where we pump billions into defense contractors. The “bad guy” drumbeat never stops, with every beheading or “Russians expanding influence” or some or other existential threat to Peoria—such as Saddam Hussein’s nuclear-armed cruise missile “mushroom cloud”—constituting a reason to keep up the drumbeat. Fear is not only a great motivator but wins votes as well.

The 2015 Democrats have their basic pillars:

[1] TO BE THE MAJORITY OF THE “MINORITIES”: Immigrants, Hispanics, non-whites, non-Christians, non-heterosexuals, and feminists with enough identity grievances constitute a Democratic majority. Lesbians and Muslims may not have common cause, but do have a common enemy. Blacks and Asians have little love for one another, but the enemy of my enemy is my friend; and rural, heterosexual, anti-immigrant, white Protestant men are The Enemy.

[2] CIVILIAN GOVERNMENT EMPLOYEES/DEPENDENTS: Discounting the military and defense contractors who lean Republican, millions of academicians, Amtrak employees, elderly, students, welfare recipients, firefighters, Sallie Mae employees, social workers, TSA gropers, and their families get their compensation from the government. This forms an almost unstoppable bulwark even if a small percentage of that constituency are Republicans. Money means self-interest and money talks.

The libertarians, constitutionalists and non-interventionists who’re not into the Red and Blue- State identity politics only have apathy and cynicism to turn to. Also stuck in the middle of this muck are old rural white, gun-owning Jacksonians like Confederate descendant James Webb who started as a Democrat, left the party of McGovernization, worked as Reagan’s Navy Secretary, and then returned to the “old Democracy” after watching the neocon plutocrats of Bush-II screwing over his rural Virginian constituents.

Webb and others are as much political orphans as the libertarians.

The political season opens up with 2/3 of Republicans rejecting their own politicians for 3 candidates who never served in any public capacity. The Democrats are stuck with an openly corrupt ex-Secretary of State and Presidential spouse who raises billions from the Wall Street crowd. Or an aging Marxist who does not even belong to the party.

While a majority will stay home on election day, the only major motivation to vote is fear of the other party!

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Barely a Blog (BAB) contributor Myron Pauli grew up in Sunnyside Queens, went off to college in Cleveland and then spent time in a mental institution in Cambridge MA (MIT) with Benjamin Netanyahu (did not know him), and others until he was released with the “hostages” and Jimmy Carter on January 20, 1981, having defended his dissertation in nuclear physics. Most of the time since, he has worked on infrared sensors, mainly at Naval Research Laboratory in Washington DC. He was NOT named after Ron Paul but is distantly related to physicist Wolftgang Pauli; unfortunately, only the “good looks” were handed down and not the brains. He writes assorted song lyrics and essays reflecting his cynicism and classical liberalism. Click on the “BAB’s A List” category to access the Pauli archive.

‘Taper Tantrum’ About Life With Less Quantitative Easing

China, Debt, Economy, Federal Reserve Bank, Inflation

Essentially, the monetary upheaval being experienced has come about because of a mere threat of the withdrawal of quantitative easing. The sell-off that “took the Dow Jones down more than 10 percent from its peak valuations” must be seen in the context of “seven years of zero percent interest rates,” avers fancier and Austrian Economist Peter Schiff. At work are gains that have come about likely not “from bona fide improvements in the economy,” but due to “the twin props of Quantitative Easing and zero percent interest rates.”

“The Fed has already removed one of the props, and it’s no accident that the markets have gained no ground whatsoever in the eight months since the QE program was officially wound down. As the market considers a world without the second prop, a free fall could ensue. …”

… Stock valuations [have been] extremely high and earnings are falling and the economy is clearly decelerating. The steady march upward in stock prices has been enabled by a wave of cheap financing and share buybacks. There are very few reasons to currently suspect that earnings, profits, and share prices will suddenly improve organically. This market is just about the Fed.

And Donald, “The Fed Is Spooking the Markets, Not China.”

‘Monetary Rigor Mortis’

Debt, Economy, Federal Reserve Bank, Inflation

Intrinsically, libertarians of the Austrian School of Economics know all too well what’s afoot across global financial markets. As of Friday, the Dow was at 16,450, down 1,018 points for the week. Yet, search libertarian websites high-and-low and you’ll be hard pressed to find decent commentary on the state of financial markets. Doug Casey and Jeff Berwick agree that financial collapse is imminent, writing that “we are now exiting the eye of the hurricane and rapidly heading towards what he terms the Greater Depression, and Jeff Berwick believes a collapse is being planned for September, moving the world closer to a one world government.”

Monetary rigor mortis is David Stockman’s term for what’s underway. Doug Noland fleshes things out at Stockman’s Contra Corner:

… Global financial tumult has now attained sufficient momentum so that even U.S. markets can no longer remain comfortably oblivious. Yet, for most in the U.S. there remains little worry: the economy is sound, housing is booming, Silicon Valley is heroic, the banking system is rock solid, and the corporate sector is awash in cash. The U.S. economy is viewed as insignificantly exposed to China’s economic slowdown – and to global issues for the most part. Analysts speak of a “normal” stock market pullback – yet another buying opportunity. There is, however, little normal about current global financial, economic and geopolitical backdrops.

The last seven years have witnessed unprecedented EM debt expansion, led by what should be a frightening ballooning of Chinese Credit. In particular, Chinese and EM banks have coalesced into historic lending growth and balance sheet (assets and liabilities) expansion. This week saw indications of what has the potential to erupt into an Asian and EM banking system crisis of confidence. Faith that Chinese and EM government officials have the situation under control is surely being shaken. This is a game-changer for global finance and for the world economy. Financial conditions are tightening around the world – and this has zero to do with a possible September Fed (“baby step”) rate increase. …

… there’s a recurring theme that is especially pertinent these days. Financial and economic Bubbles invariably prove much more resilient than Bubble analysts presume. And, at the end of the day, the excesses and consequences go beyond what even the hardcore “bears” could anticipate. The adage around our office became: “It’s Always Worse Than You Think.”

#PabloPicasso’s Sublime Art And #Inflation

Art, Debt, Economy, Inflation

Picasso’s “Les femmes d’Alger” in French, “The women of Algiers” in English, and “Women of Aljeers” [sic] in CNN “English,” is a sublime piece of art. But as heavenly as this painting is, there is more to the price it fetched this month in auction than the power of Picasso at his best (although I still adore the master’s blue period. See “Blue Nude, 1902 by Pablo Picasso” below). It’s what happens when lots of money chases a one-of-a-kind asset, against the backdrop of low to no interest rates …

The Babbling Brooke (BB), aka Brooke Baldwin of CNN, did a frivolous segment on the work of art that commanded “a cool $179 million.” For information, BB turned to Manhattan art dealer Richard Pleitgen, who has been “in the art business for 57 years.”

The transcription, however, appears inexact. I heard live the explanation given by Pleitgen for the painting’s price. He explained that interest rates were such (so low) that unfathomably wealthy individuals needed to park their money some place.

True to type, Babbling Brooke giggled during what I thought was a lesson—Pleitgen’s—on inflation. Here she was doing a “fun” segment on a Picasso masterpiece and her guest was talking low- to no interest rates (as set by the Fed).

Pleitgen was on the money. If anyone can locate the TV segment, please send it along.

[11:45:06] BALDWIN: Could you be interested in owning an incomparable piece of art? I’m certainly a Picasso fan. I don’t know if I could shell out a cool $179 million, though. This painting by the iconic artist sold for a record-breaking amount at an auction here in New York City. Pablo Picasso’s 1955 canvas, “Women of Aljeers,” part of the series. It was snapped up by an anonymous buyer and was the centerpiece of the event. Last time at auction, it sold for a merely $31.9 million, that was in 1997.

Let me bring in Manhattan art dealer, Richard Pleitgen.

Richard, you were telling me you have been in the art business for 57 years. RICHARD PLEITGEN, MANHATTAN ART DEALER: Yes.

BALDWIN: You were there.

PLEITGEN: Yes.

BALDWIN: Five people were ultimately, over the phone, fighting over this beautiful art, going up incrementally, going up by a million, starting at $120 million. Take me in the room and tell me what it was like.

PLEITGEN: You sort of get hardened to these numbers.

BALDWIN: Did you blink at that amount of money?

PLEITGEN: I didn’t expect to bring that much, but I didn’t blink at it. I was this also when it sold for $32 million in 1997.

BALDWIN: Who was buying — listen, I studied Spanish, loved Picasso, cubism. The idea of spending that kind of money — who has that kind of money? Are we talking actors, celebrities, investment bankers, Warren Buffetts of the world?

PLEITGEN: Well, you know, frankly, to spend that kind of money, $179 million on a painting — imagine what kind of wealth you’ve got to have. A billion dollars would never do it. You’re not going to spend 17 percent of your wealth on a painting. You’re talking about really vast narns are prepared to spend that kind of money. I don’t even know who would spend $105 million on an important on central park that you’re never going to live in. The kind of money that exists out there is prodigious.

BALDWIN: If you were there when it went for $30 million something in the late ’90s and it’s $179 million today, in 50 years, is what will it be worth? He laughs at me. He laughs. He scoffs. Make a guess. Let’s be crazy. Make a wild guess.

PLEITGEN: I don’t know because, you know, if interest rates rise, so people have an alternate place to put money, some of these prices may drop —

BALDWIN: You could get a sale on a Picasso. I was kidding. I was kidding. OK. We’ll see, so in 50 years, if any of us are around to potentially bid on it.

Richard, thank you very much. I appreciate it.

Manhattan art dealer on the Picasso that went for just about $180 million.

Thank you, sir. I appreciate it.

PLEITGEN: You’re welcome.

[SNIP]
Again, I believe the transcript is inexact here.