Is The Bottom Almost Here?

[james22]

And maybe the market is rightly buoyed by all the other-than-tech stocks that have been left for dead the last ten years? They now recognized as undervalued?

[changegonnacome]

[Gregmal]

1 hour ago, changegonnacome said:

Ok so what does this mean?

 

The trend line is currently where it was going pre COVID. Savings shows a clear one off boost that disappears. It’s entirely stimulus related, duh. Bit worse than pre COVID, sure. Banks have loan reserves. No big deal.
 

Otherwise, I think this crushes your bear thesis because all the current spending/inflation is from services. That’s the last leg of this bs inflation story. Tapped out consumer just means inflation caused by service industry dissipates. Game over for the “must raise rates cuz $9 Big Mac meal” crowd.

Edited October 30, 2022 by Gregmal

[changegonnacome]

6 hours ago, Gregmal said:

That’s the last leg of this bs inflation story

How many years does inflation need to be at 5%+ for you to stop calling it BS?

 

6 hours ago, Gregmal said:

Tapped out consumer just means inflation caused by service industry dissipates.

Tapped out is one way to put - you dont think thats a problem in an economy where consumption is 60%+ of GDP. Great environment for margins/earnings? Especially peak/record margins/earnings.

 

Finally a tapped out consumer, feeling inflations wrath is also an employee heading into EoY 2023 comp discussions motivated to restore purchasing power. Non-farm payrolls growth is going to accelerate into 2023 I think…..we are going to be surprised that underlying inflation might accerlate a bit.

 

Folks getting pay increases, whats wrong with that I hear you say? The only problem is as I’ve said before is the USA is beyond full employment 3.5%…when the natural rate is closer to 5%, nominal spending growth (via wage inflation) is exceeding productivity growth (of goods/services).

 

The gap between nominal spending/income growth (wage inflation) and productivity growth in an economy with full employment………is……….INFLATION.

 

 

[changegonnacome]

Below is exceptionally simple for illustrative purposes and to move any further you have to agree with the idea and I’m not too sure how you can disagree that the US is at FULL FULL employment. Full productive capacity. Staff shortages still everywhere. For hire signs everywhere. Businesses running reduced hours everywhere cause they cant get people. 2X number of job openings for everyone looking for a job.

 

There are no statistically significant pools of labor on the sidelines in this economy, save immigrants outside the USA who would come here but the political system can’t get out of its own way. If we can agree that then we can move on to my illustrative simplistic example of the problem.

 

Year 1:

The USA is soup to nuts a widget economy. Every man/woman/child works in the widget economy and consumes only widgets. It’s a 100% widget economy. Every man/woman and child now works in widgets factories. There is no one left to add to the widget factory. Every inch of which has been filled with automated production lines. There is no obvious easy way to increase capacity. Widget factory USA now has ann absolute max productive capacity of 100 widgets per year. Total nominal monetary spending/income in the economy is $100, all people spend their money on is widgets! - therefore a widget costs $1 to buy. No inflation.

 

Year 2:

Productivity in widget factory USA improves by a measly 2% per year through technological innovation. Widget factory USA in Yr2 can now produce 102 widgets. However nominal spending/income in the economy grew this year by 8% to $108….cause Widget Biden printed $8 extra dollars and sent a bit to everyone - a widget now costs $1.06…..6% inflation. 8% nominal spending growth minus 2% productivity growth = 6% nominal price inflation.

 

6% inflation, in a full employment economy through wage demands, begets 6% nominal income growth or somewhere close to it as employees bargain for NOMINAL pay increases in-line with inflation….……but that doesn’t solve anything cause your productivity growth is stuck at 2% growth…..its PRODUCTIVITY that matters over the long pull not funny money nominal spending/income. Inflation in the classical sense is defined as too much money chasing too few goods and services. Exactly right.

 

You have two choices in widget world to restore price stability………you drive productivity WAY way up……which is just not easy………..or you reduce nominal income/spending…such that for a time productivity growth exceeds nominal spending/income growth or in fact nominal spending goes negative/contracts for a time…… and you get disinflation……then you build out from there…..….the Fed cant do anything on productivity (politicians could, write your senator) so the FED first via (1) Money Supply then via (2) Credit conditions they eventually begin to hit (3)spending/income……and widget world gets price stability back. Price stability is like oxygen for productivity growth - it gives predictability…..which allows for capital investment planning, which actually expands productivity…..which is what matters most over time.

Edited October 30, 2022 by changegonnacome

[Gregmal]

54 minutes ago, changegonnacome said:

How many years does inflation need to be at 5%+ for you to stop calling it BS?

As long as it continues to follow and correlate to a COVID side effect than this whole circus is overdone and it’s bs. 
 

So credit basically is back to where it would have been without COVID happening and savings got a boost from stimulus and then disappeared and over shoots a bit to the downside. I don’t think this matters as much as many think, does the above include all savings or just checking accounts. I mean isn’t one of the biggest arguments about the lowly poor people? They always live paycheck to paycheck. The world isn’t just going to stop because they no longer have savings. We ll just have a normalization on the services side.
 

Literally everything continues to follow the same path. Services probably goes strong into year end and then Q one everyone’s had big New Years parties and seen the Rockettes for the first time in 3-4 years…everything, from goods to services, from toilet paper hoarding to housing, is about to come full circle in terms of the demand waves. Services was just the last one because the dense states didn’t open up til this spring. 
 

 

As to the widgets, we’ve been over it with the plastic spoons. Take em away. Shut down factories. Let folks have em. Try opening back up but hampered with restrictions. Price shoots up. Over time producing them ain’t hard, and everything normalizes. Prices ain’t coming down, but they normalize as eventually you can produce enough that people don’t feel the need to pay whatever for them. 

Edited October 30, 2022 by Gregmal

[Gregmal]

Metaphorically this is basically a scenario where you give 100 people a drug with side effects that last a year. This drug is fairly predictable, side effects occur pretty much to a textbook T. Except you give this drug to 10 people at a time, over the course of a year. By Q1, year 2, it may be understandable to be surprised at the variance between how everyone is acting because some people are done with the experience and others just basically got started. But by Q3/4 I don’t think anyone has an excuse to be perplexed by anything regarding the story or the timeline. But here? Somehow the money printing screamers have high jacked the narrative. 

[changegonnacome]

1 hour ago, Gregmal said:

This drug is fairly predictable, side effects occur pretty much to a textbook T.

 
Like the analogy…lets continue with it……..problem with the drug is the half life of increasing nominal spending growth way above productivity is very very long………..once enough of it is administered for a descent period of time (as we have had)……the thing you miss @Gregmalis its extended half life comes from it being incorporated into ALL future contracts of all kinds being negotiated today….wage/construction etc etc…..example railroad union negotiations like Druckenmiller pointed out…they aren’t using forward 5/5’s at negotiating table…like fuck they are….nobody is…..they are doing what humans do….. extrapolating the recent past out into the future and the workers right now have LEVERAGE cause of full employment……https://raillaborfacts.org/news/bargaining-status-faq-2022/…..this railroad deal ain’t going away in 3 months…or by Q1 2023…..right? It’s five years long!

 

My final insight for today, then gonna run so excuse no replies…..in the context of inflation expectations….which for a while I hung on to as a sign that I might be wrong and your thesis @Gregmalcould be right….that this inflation thing was short lived……and would just ‘disappear’ super quick without the Fed even getting going……was that inflation expectations remain anchored in surveys….but as Stan pointed out….that’s the future….I’m walking into my boss in two weeks….I’m not talking about the future, till we settle up the past…..I want 2023 comp to incorporate 2022! CPI….then we can talk about an increase on TOP…..and word on the corridors is we are gonna get CPI+, no problemo.
 

Remember though the widget factory can only grow productivity at 2%.

 

Houston we have a problem.

 

You know it’s name.

 

Edited October 30, 2022 by changegonnacome

[Cigarbutt]

On 10/29/2022 at 8:03 AM, DooDiligence said:

I've always struggled with understanding TGA, RRP operations and the effect on liquidity and markets. Thank you to a few posters here who've chipped away at my ignorance. This substack made the game of musical chairs a little bit more clear to me; but the question still remains, who get's the chair that's too soft / hard and will there be one that's just right?

 

https://thelastbearstanding.substack.com/p/draining-the-repo?r=6gq23&utm_medium=ios&utm_campaign=post

 

edit: I'm already firmly planted in my chair with the knowledge that I may have to sit on the floor for a while if it collapsed. I think my carpet is thick enough to endure the indignity.

{Semi-personal note: Your post (on the noisy surface) attracted as much attention as if you'd have asked if the harmonic dualism theory applied to the increasingly more unstable equilibrium tied to monetary easing and related 'liquidity'. Isn't the theory based on the notion that since minor and major triads transcend into opposite (easing versus tightening) effects on the listener, they should be based on opposite principles? Personal note: sincere condolences for your mother's recent loss.}

 

(Read the following only if you have excess time and your useful time may be better spent (or invested) into reading a recent WSJ piece which technically showed a tight expected correlation between the present World Series' Philadelphia-related outcome and future 'bottoms'.)

-----

Short version

What your substack link describes is really an attempt to ease while the main present intent is to tighten in comparison to the recent inflation episode which was the result of an attempt to tighten (RRP) while the main intent was to ease. 

-----

Longer version

I wonder if credit and money should grow commensurate with real underlying economic activity and if attempts to compensate excessively through (financial plumbing) quasi-permanent liquidity operations may in fact delay correction of other (growing) systemic imbalances.

Deposits are used here as a proxy for monetary and fiscal easing. It seems 'we' the people are getting wealthier since the early 2000s. It also seems that an attempt to wean the 'markets' from this effect in 2018-9 resulted in some discomfort (which eventually showed up in the repo window (not the reverse one that time)) much earlier than the spread of a 'natural' phenomenon which gave way to an opportunity for unprecedented additional easing. So now, there is an attempt to wean the 'markets' once again and the recent Treasury buyback option is another potential way to fine tune future and unfolding events..

Related to contemporary discussions about financial plumbing 'liquidity', there this article released (content 2021-2) and prepared by an interesting fellow (Rajan) who produced unease in an elite central banking crowd when he suggested, in 2005, that people in charge should perhaps, at times, think (independently) outside the box.

Liquidity, Liquidity Everywhere, not a Drop to Use: Why Flooding Banks with Central Bank Reserves May Not Expand Liquidity | BFI (uchicago.edu)

The link is probably not worth reading. Short summary follows. There is a highly quantitative component but the 'message' is really more qualitative: temporary and last-resort solutions should be temporary and last-resort? An alternative is to try to fine tune an increasingly (and potentially) more unstable equilibrium. 

In a presentation made available in the early 2010s, when discussing central liquidity operations and such, Mr. Brian Bradstreet (in charge of fixed income investment for Fairfax float) suggested that 'we' may simply have to take our medicine but that was before he realized that it could be very costly to be right and early. 

 

 

[SharperDingaan]

Hate to tell you this - but you're both out to lunch 

The US CPI rate peaked at 9.1% in July 2022; the index number at the time was 296.3. Three months later (Oct), with every successive month a decline, the CPI rate was 8.2% with an index number of 296.8. Annualize the 3-month change ((296.8/296.3)-1)x4, and the 'current' CPI is around 0.67% /year.

https://www.usinflationcalculator.com/inflation/current-inflation-rates/

 

The US 5-yr treasury currently yields 4.183% nominal, or a 'current' real return of around plus 3.51%. One can do the same calculation for the remaining years to come up with the estimated real return yield curve, then draw your own conclusions. 

https://www.marketwatch.com/investing/bond/tmubmusd05y?countrycode=bx

 

Either a great many folks with a Bloomberg Screen don't know how to work it, or we are all being fed a 'line'. Yes the 12-month consumer 'headline' rate is terrible, raising the price of mortgages and anything/everything purchased, but it isn't reflecting current results. However, it is a great vote getter!

 

So what? You can have both high inflation (9.1%) and almost deflation (0.67%) at the same time. Two parties strongly arguing both cases, and both right, implies an inflexion point that is close by.

 

May we all do well 

 

SD

Edited October 30, 2022 by SharperDingaan

[changegonnacome]

1 hour ago, SharperDingaan said:

Three months later (Oct), with every successive month a decline, the CPI rate was 8.2% with an index number of 296.8. Annualize the 3-month change ((296.8/296.3)-1)x4, and the 'current' CPI is around 0.67% /year.

https://www.usinflationcalculator.com/inflation/current-inflation-rates/

You’ll notice I don’t speak about current CPI, and also we could spend all day talking about Core PCE…all the ex-energy good stuff….I’m aware of your nuanced point, I know MoM data, I’ve seen it…you’ve cherry picked CPI you know that is (1) the wrong /most favorable measure ….….but it even CPE also as a data set has tonnes of head fakes as you well know, base effects, FX / $ strength.

 

You’ll notice I never talk about CPI/CPE…..I only ever reference in any real sense nominal spending/income growth….I always speak about non-farm payrolls increases annualized against productivity growth….the BLS data & productivity data is where one should look…most folks don’t get it so I use the word inflation as a proxy/shorthand…..THIS place…..is domestic inflation…it gets to be a like a rash too….it flares up and flares down….I predict another flare up in Q1 2023 BLS data as wage increases negotiated now roll thru….annualized CPI and even CPE are kind of poor proxies for the direction of travel…you have to go up cash flow statement of the macro economy as Dalio/Bob Prince/bridgewater do ….income/spending growth against productivity this is where the devil is for those who wish to look at him……one man’s spending is another man’s income..,..,you can only eat/consume incremental productivity gains….you do not get to eat/consume incremental nominal increases in spending/income..there are no free lunches as anybody who works in finance knows

Edited October 30, 2022 by changegonnacome

[DooDiligence]

6 hours ago, Cigarbutt said:

{Semi-personal note: Your post (on the noisy surface) attracted as much attention as if you'd have asked if the harmonic dualism theory applied to the increasingly more unstable equilibrium tied to monetary easing and related 'liquidity'. Isn't the theory based on the notion that since minor and major triads transcend into opposite (easing versus tightening) effects on the listener, they should be based on opposite principles? Personal note: sincere condolences for your mother's recent loss.}

 

(Read the following only if you have excess time and your useful time may be better spent (or invested) into reading a recent WSJ piece which technically showed a tight expected correlation between the present World Series' Philadelphia-related outcome and future 'bottoms'.)

-----

Short version

What your substack link describes is really an attempt to ease while the main present intent is to tighten in comparison to the recent inflation episode which was the result of an attempt to tighten (RRP) while the main intent was to ease. 

-----

Longer version

I wonder if credit and money should grow commensurate with real underlying economic activity and if attempts to compensate excessively through (financial plumbing) quasi-permanent liquidity operations may in fact delay correction of other (growing) systemic imbalances.

Deposits are used here as a proxy for monetary and fiscal easing. It seems 'we' the people are getting wealthier since the early 2000s. It also seems that an attempt to wean the 'markets' from this effect in 2018-9 resulted in some discomfort (which eventually showed up in the repo window (not the reverse one that time)) much earlier than the spread of a 'natural' phenomenon which gave way to an opportunity for unprecedented additional easing. So now, there is an attempt to wean the 'markets' once again and the recent Treasury buyback option is another potential way to fine tune future and unfolding events..

Related to contemporary discussions about financial plumbing 'liquidity', there this article released (content 2021-2) and prepared by an interesting fellow (Rajan) who produced unease in an elite central banking crowd when he suggested, in 2005, that people in charge should perhaps, at times, think (independently) outside the box.

Liquidity, Liquidity Everywhere, not a Drop to Use: Why Flooding Banks with Central Bank Reserves May Not Expand Liquidity | BFI (uchicago.edu)

The link is probably not worth reading. Short summary follows. There is a highly quantitative component but the 'message' is really more qualitative: temporary and last-resort solutions should be temporary and last-resort? An alternative is to try to fine tune an increasingly (and potentially) more unstable equilibrium. 

In a presentation made available in the early 2010s, when discussing central liquidity operations and such, Mr. Brian Bradstreet (in charge of fixed income investment for Fairfax float) suggested that 'we' may simply have to take our medicine but that was before he realized that it could be very costly to be right and early. 

 

 

 

Thank you for your condolences. I spent a lot of years doing everything I could for, and with, my Mom and was fortunate to have been able to hold her hand until the end.

 

Regarding the production of tension in harmony. Tension is produced by moving away from tonic (the point of rest). Whether a chord is minor or major is not so relevant as its position within the harmony. Is it leading away or towards tonic?

 

Functional harmony in a major key runs from iii vi ii V I, where the IV can sub in for the vi (2 common pitches), and the vii° can sub in for the V since the vii° also performs a dominant function (both present instability and consistent voice leading which sends you back to the tonic).

 

Functional harmony provides a smooth progression which leads the ear away from tonic (where tension gets created), and then heads back to tonic resolution (the point of rest). This is a simplistic view which doesn't take into account tonal shifts created by secondary dominants, and altered and borrowed chords.

 

In jazz, you find ii V I's rather than the IV V I progression that dominates pop music. You'll also hear a lot of extensions and alternate voicing's which give jazz its distinctive color.

 

I'm currently working on a loop song which uses a basic minor jazz harmonic progression (i9 ii11 V⁺b9), with some added tension on the dominant. The right hand plays rootless voicing's and the left plays the roots with some non-harmonic tones thrown in. The altered (augmented dominant with a flat 9), adds additional tension that really hammers home what key you're in and points the ear to a tonic resolution. (see and hear the attachments, if you dare)

 

The EP part is my Yamaha P121 Rhodes voice. The beats come from an arpeggiated Yamaha MOXF6 drum kit. The guitar is an arpeggiated MOXF6 voice, and the bass is played on both the P121 & the MOXF6. It's designed to be a loop performance with the parts being brought in separately. The piano parts will; NEVeR be arpeggiated!

 

Disclaimer: I'm terrible at mixing & mastering tracks so turn your volume down a few notches for the full recording. Also the transcription of the 1st 2 systems is poor. I can't seem to dictate the rhythms as I'm playing them. The 3rd system is not on the recording but the transcription nails the syncopation perfectly. I also spell the V⁺b9 using an F instead of a correctly spelled E# because who the F wants to read an E#?

 

Back to the economic discussion. I realize that I will likely never understand Fed / Treasury operations or their effects, and will just stick to my low level gazes at individual businesses and make up stories regarding their futures.

 

edit: I just realized that the end of that recording didn't resolve to tonic. It does when the looper starts the phrase again, which is the nature of loop performance. Kind of leaves you hanging and illustrates the tension of not resolving to tonic though.

 

E Piano only.aif Funky Bumps.pdf

Edited October 30, 2022 by DooDiligence

[SharperDingaan]

No worries.

 

I was just looking for a distinction between current (short-term) and long-term (1 yr). 60-day is too short, 120-day a little long; 90-day was a compromise, and the CPI peak tipped the balance. Overall I think that CB's are doing a great job, but sadly it's not going to be recognized for quite some time yet.

 

It's also great to see Canada both facilitating/backstopping the issuance of Canadian Ukrainian bonds, and actively managing the ESG/CSR associated with the coming CBDC and blockchain/fintech rollouts. Nobel prize worthy, but sadly not issuable to a 'pseudonym' !!

 

SD  

Edited October 30, 2022 by SharperDingaan

[changegonnacome]

53 minutes ago, SharperDingaan said:

Overall I think that CB's are doing a great job, but sadly it's not going to be recognized for quite some time yet.

Agree. Forget their past stupidity in keeping the purchases up and rates low in 2021. All we have is now and the future. This Fed is saying the right things, right now…..I commend the language…..the references to the risks being around doing too little versus too much are 100% correct…….folks are in for a surprise next week with all this pivot bullshit…….the screams of pain in the economy, mainly via unemployment haven’t ticked up yet to justify a pivot….a slowdown in 75bps hikes to 50bps, sure but when did that become a pivot? I’ll tell you when…..to institutional sales people getting on CNBC desperate to hold on to your 401k, IRA moneys no matter what happens …..heaven is only around the corner if you can stand the pain folks  …..there is nothing to pivot away from as a central banker……yet…the equity markets down 20%, who gives a shit……...if the past is prologue…..spineless central bankers chicken out (pivot) too early….and only in the face of inevitable unemployment numbers ticking up…and unfortunately too early to slaw the inflation dragon ….let’s see what this crowd do.
 

It’s a dastardly job being a central banker in an inflationary cycle…..everybody hates your guts, literally everybody. The average human being crumbles under such exogenous pressure. 
 

 

Edited October 30, 2022 by changegonnacome

[UK]

https://www.wsj.com/articles/rocky-treasury-market-trading-rattles-wall-street-11667086782

 

Andrew Kreicher, a director at Wells Fargo, said liquidity in Treasurys has been about the worst he has seen over a sustained period recently. “There are so many systems in other asset classes that use Treasurys as a building block,” he said. “If you have rot in the foundation, the whole house is at risk.” While many agree trading Treasurys remains smoother than during the worst moments of 2020’s pandemic-fueled market breakdown, the current unease has built gradually over months without a single precipitating event, said Deirdre Dunn, co-head of global rates at Citi. Some traders believe the Fed’s rapid interest-rate increases are the main cause. Treasurys—especially shorter-term notes—closely reflect expectations for the Fed’s overnight rates, so quick changes can cause choppy moves. This week, the Fed is expected to raise rates by 0.75 percentage point for the fourth straight meeting. Other traders lay some blame on rules enacted after the global financial crisis that make it more expensive for banks to keep Treasurys on their balance sheet. Big banks function as Treasury-market dealers, helping match buyers and sellers. When they step back, trading stalls, said Ariel da Silva, director of fixed income at Wealth Enhancement Group, a wealth-management firm. Given the current regulatory regime, “It doesn’t behoove them to take on the inventory,” he said. Investors rely on easy Treasury sales to obtain quick cash for debt payments, margin calls and a variety of other pressing short-term needs. When that process hits hiccups, financial trouble can spiral, said Jim Caron, a fixed-income portfolio manager at Morgan Stanley Investment Management. “If the Treasury market isn’t working, nothing is working,” he said.

[Gregmal]

Here we go again.

 

https://seekingalpha.com/news/3897557-the-stock-market-boils-down-to-one-question-this-week-goldman

 

 

Everything you own, and everything you do, all comes down to J-Pow this week. What words does he say? 
 

 

Control(don’t say manipulate!) the narrative. ALWAYS

 

-Goldman Sachs

[dealraker]

3 hours ago, changegonnacome said:

You’ll notice I don’t speak about current CPI, and also we could spend all day talking about Core PCE…all the ex-energy good stuff….I’m aware of your nuanced point, I know MoM data, I’ve seen it…you’ve cherry picked CPI you know that is (1) the wrong /most favorable measure ….….but it even CPE also as a data set has tonnes of head fakes as you well know, base effects, FX / $ strength.

 

You’ll notice I never talk about CPI/CPE…..I only ever reference in any real sense nominal spending/income growth….I always speak about non-farm payrolls increases annualized against productivity growth….the BLS data & productivity data is where one should look…most folks don’t get it so I use the word inflation as a proxy/shorthand…..THIS place…..is domestic inflation…it gets to be a like a rash too….it flares up and flares down….I predict another flare up in Q1 2023 BLS data as wage increases negotiated now roll thru….annualized CPI and even CPE are kind of poor proxies for the direction of travel…you have to go up cash flow statement of the macro economy as Dalio/Bob Prince/bridgewater do ….income/spending growth against productivity this is where the devil is for those who wish to look at him……one man’s spending is another man’s income..,..,you can only eat/consume incremental productivity gains….you do not get to eat/consume incremental nominal increases in spending/income..there are no free lunches as anybody who works in finance knows

 

[Dinar]

10 hours ago, changegonnacome said:

Below is exceptionally simple for illustrative purposes and to move any further you have to agree with the idea and I’m not too sure how you can disagree that the US is at FULL FULL employment. Full productive capacity. Staff shortages still everywhere. For hire signs everywhere. Businesses running reduced hours everywhere cause they cant get people. 2X number of job openings for everyone looking for a job.

 

There are no statistically significant pools of labor on the sidelines in this economy, save immigrants outside the USA who would come here but the political system can’t get out of its own way. If we can agree that then we can move on to my illustrative simplistic example of the problem.

 

Year 1:

The USA is soup to nuts a widget economy. Every man/woman/child works in the widget economy and consumes only widgets. It’s a 100% widget economy. Every man/woman and child now works in widgets factories. There is no one left to add to the widget factory. Every inch of which has been filled with automated production lines. There is no obvious easy way to increase capacity. Widget factory USA now has ann absolute max productive capacity of 100 widgets per year. Total nominal monetary spending/income in the economy is $100, all people spend their money on is widgets! - therefore a widget costs $1 to buy. No inflation.

 

Year 2:

Productivity in widget factory USA improves by a measly 2% per year through technological innovation. Widget factory USA in Yr2 can now produce 102 widgets. However nominal spending/income in the economy grew this year by 8% to $108….cause Widget Biden printed $8 extra dollars and sent a bit to everyone - a widget now costs $1.06…..6% inflation. 8% nominal spending growth minus 2% productivity growth = 6% nominal price inflation.

 

6% inflation, in a full employment economy through wage demands, begets 6% nominal income growth or somewhere close to it as employees bargain for NOMINAL pay increases in-line with inflation….……but that doesn’t solve anything cause your productivity growth is stuck at 2% growth…..its PRODUCTIVITY that matters over the long pull not funny money nominal spending/income. Inflation in the classical sense is defined as too much money chasing too few goods and services. Exactly right.

 

You have two choices in widget world to restore price stability………you drive productivity WAY way up……which is just not easy………..or you reduce nominal income/spending…such that for a time productivity growth exceeds nominal spending/income growth or in fact nominal spending goes negative/contracts for a time…… and you get disinflation……then you build out from there…..….the Fed cant do anything on productivity (politicians could, write your senator) so the FED first via (1) Money Supply then via (2) Credit conditions they eventually begin to hit (3)spending/income……and widget world gets price stability back. Price stability is like oxygen for productivity growth - it gives predictability…..which allows for capital investment planning, which actually expands productivity…..which is what matters most over time.

There is a third choice - expand the labor force.  Cut welfare & similar programs (Section 8, Medicaid, food stamps, subsidies for telephone, utilities, and the list goes on) and watch how labor force magically expands

 

[Blugolds11]

3 minutes ago, Dinar said:

There is a third choice - expand the labor force.  Cut welfare & similar programs (Section 8, Medicaid, food stamps, subsidies for telephone, utilities, and the list goes on) and watch how labor force magically expands

 

 

Honestly I think thats a pretty simplistic view of the "problem/challenge". 

 

Now to be clear, I dont have an answer or fix for the problem, just that I know enough to know that its not that simple. I think its easy to assume that there are a significant number of people that leach off the system/safety net and if that net is gone they would be forced to work and be productive to support themselves. I think that is looking at the problem through your own lens, because that is what you think a logical/reasonable person would done, who has the tools in their toolbox to do so. 

 

I have a cabin in a neighboring state that is located in the poorest county in the state. Over half the county is on assistance. It doesnt take anything more than a trip into town, away from the tourist/resort/recreational areas to see the real "locals" and its plain to see that if I had a simple business (lawn mowing, shoe store, farm) I would not hire them to do anything that was important, they simply are incapable. Alot of these folks in the rural areas make "people of Walmart" seem like GQ magazine. 

 

Remove these programs and what happens to these people? When you are unable to work in the changing economy, with increasing technology and you have no skillsets...what do you do? Does crime increase? Jail/prison populations increase? The taxpayer will pay for these "folks" one way or another, correct?

 

There is a significant portion of the population that simply cannot compete in todays workforce IMO. Everyone likes to point to the college grad who doesnt want to get a job and lives in the parents basement or has the liberal arts degree working at a coffee shop collecting assistance and demanding college loan repayment...but I think those are the minority, I think there are many who are just not able to market themselves due to lack of skill/intelligence etc. 

 

https://www.amazon.com/gp/product/0029146739/ref=ox_sc_saved_image_4?smid=A1QJ4UH6FW3UH1&psc=1#customerReviews

 

Like I said I dont have an answer to the problem, some would say that a UBI is the answer, and I dont know that I agree with that either, but the fact of the matter is that the problem is real, I dont think its what right would have us believe, a bunch of lazy deadbeat free-loaders...and I dont think its exactly what the left says either, hard working folks who cant make ends meet, I think its somewhere in the middle and perhaps a significant portion is something that neither side is touching on. Its not going away and if I had to guess I would say its getting worse and will continue to get worse and I dont know how you address that, economically, and ethically. The gap widens and widens. 

 

Some will say, anybody can go be a walmart greeter, or mcdonalds is paying $20/hr now! True, but there are only so many of those jobs also...and they might not even be able to hold down one of those jobs due to a variety of mental issues. Compounding the problem is that many of these folks have children and the cycle continues. 

 

The above example assumes that everyone is capable of working at the widget factory...and Im just saying I think there is a larger number than people think that are not capable of working at the widget factory...even if that is sweeping the factory floors...

[Cigarbutt]

8 hours ago, DooDiligence said:

 

Thank you for your condolences. I spent a lot of years doing everything I could for, and with, my Mom and was fortunate to have been able to hold her hand until the end.

 

Regarding the production of tension in harmony. Tension is produced by moving away from tonic (the point of rest). Whether a chord is minor or major is not so relevant as its position within the harmony. Is it leading away or towards tonic?

 

Functional harmony in a major key runs from iii vi ii V I, where the IV can sub in for the vi (2 common pitches), and the vii° can sub in for the V since the vii° also performs a dominant function (both present instability and consistent voice leading which sends you back to the tonic).

 

Functional harmony provides a smooth progression which leads the ear away from tonic (where tension gets created), and then heads back to tonic resolution (the point of rest). This is a simplistic view which doesn't take into account tonal shifts created by secondary dominants, and altered and borrowed chords.

 

In jazz, you find ii V I's rather than the IV V I progression that dominates pop music. You'll also hear a lot of extensions and alternate voicing's which give jazz its distinctive color.

 

I'm currently working on a loop song which uses a basic minor jazz harmonic progression (i9 ii11 V⁺b9), with some added tension on the dominant. The right hand plays rootless voicing's and the left plays the roots with some non-harmonic tones thrown in. The altered (augmented dominant with a flat 9), adds additional tension that really hammers home what key you're in and points the ear to a tonic resolution. (see and hear the attachments, if you dare)

 

The EP part is my Yamaha P121 Rhodes voice. The beats come from an arpeggiated Yamaha MOXF6 drum kit. The guitar is an arpeggiated MOXF6 voice, and the bass is played on both the P121 & the MOXF6. It's designed to be a loop performance with the parts being brought in separately. The piano parts will; NEVeR be arpeggiated!

 

Disclaimer: I'm terrible at mixing & mastering tracks so turn your volume down a few notches for the full recording. Also the transcription of the 1st 2 systems is poor. I can't seem to dictate the rhythms as I'm playing them. The 3rd system is not on the recording but the transcription nails the syncopation perfectly. I also spell the V⁺b9 using an F instead of a correctly spelled E# because who the F wants to read an E#?

 

Back to the economic discussion. I realize that I will likely never understand Fed / Treasury operations or their effects, and will just stick to my low level gazes at individual businesses and make up stories regarding their futures.

 

edit: I just realized that the end of that recording didn't resolve to tonic. It does when the looper starts the phrase again, which is the nature of loop performance. Kind of leaves you hanging and illustrates the tension of not resolving to tonic though.

 

 

E Piano only.aif 3.63 MB · 2 downloads Funky Bumps.pdf 26.76 kB · 1 download

-The musical part

Thanks for the info. Tension and release, interesting. To my untrained ear, your recording reminded me of Stevie Wonder (i hope you see this as a compliment). You may enjoy some of those 'progressions':

6 Stevie Wonder Back Door progression II-7 V7 examples tutorial - YouTube

-The transition to RRP and TGA

Using inter-disciplinary knowledge may be helpful to try to grasp some aspects of complex systems. Alternative views are fine but the Fed may be seen as some kind of orchestra conductor (maestro..). Of course, musicians (private market participants) on the floor (in the real economy) are everything but some need to write (and apply) the rules of the game.

Otherwise, cacophony?

-The transition to a potentially shared investment interest (US commercial banks)

The Fed directly and indirectly funnelled a lot of money into the financial plumbing system in early 2020, relaxing liquidity rules for banks (similar in scale and scope to WW2 epoch) and then did not extend the SLR relaxation rule which diverted a lot of money away from the typical bank deposits to money markets funds which eventually turned to the RRP window in order to search for yield (2.2T still 'sitting' there, musical chair style).

As of the end of September 2022, 6-7% of commercial banks' assets were excess reserves which earn a tightening level of interest (3.15% now and soon to increase) and banks are not really increasing rates on deposits so banks did well during easing (despite tightening net interest margins) and are poised to do even better with further money tightening (assuming some kind of soft landing..).

 

[Dinar]

1 hour ago, Blugolds11 said:

 

Honestly I think thats a pretty simplistic view of the "problem/challenge". 

 

Now to be clear, I dont have an answer or fix for the problem, just that I know enough to know that its not that simple. I think its easy to assume that there are a significant number of people that leach off the system/safety net and if that net is gone they would be forced to work and be productive to support themselves. I think that is looking at the problem through your own lens, because that is what you think a logical/reasonable person would done, who has the tools in their toolbox to do so. 

 

I have a cabin in a neighboring state that is located in the poorest county in the state. Over half the county is on assistance. It doesnt take anything more than a trip into town, away from the tourist/resort/recreational areas to see the real "locals" and its plain to see that if I had a simple business (lawn mowing, shoe store, farm) I would not hire them to do anything that was important, they simply are incapable. Alot of these folks in the rural areas make "people of Walmart" seem like GQ magazine. 

 

Remove these programs and what happens to these people? When you are unable to work in the changing economy, with increasing technology and you have no skillsets...what do you do? Does crime increase? Jail/prison populations increase? The taxpayer will pay for these "folks" one way or another, correct?

 

There is a significant portion of the population that simply cannot compete in todays workforce IMO. Everyone likes to point to the college grad who doesnt want to get a job and lives in the parents basement or has the liberal arts degree working at a coffee shop collecting assistance and demanding college loan repayment...but I think those are the minority, I think there are many who are just not able to market themselves due to lack of skill/intelligence etc. 

 

https://www.amazon.com/gp/product/0029146739/ref=ox_sc_saved_image_4?smid=A1QJ4UH6FW3UH1&psc=1#customerReviews

 

Like I said I dont have an answer to the problem, some would say that a UBI is the answer, and I dont know that I agree with that either, but the fact of the matter is that the problem is real, I dont think its what right would have us believe, a bunch of lazy deadbeat free-loaders...and I dont think its exactly what the left says either, hard working folks who cant make ends meet, I think its somewhere in the middle and perhaps a significant portion is something that neither side is touching on. Its not going away and if I had to guess I would say its getting worse and will continue to get worse and I dont know how you address that, economically, and ethically. The gap widens and widens. 

 

Some will say, anybody can go be a walmart greeter, or mcdonalds is paying $20/hr now! True, but there are only so many of those jobs also...and they might not even be able to hold down one of those jobs due to a variety of mental issues. Compounding the problem is that many of these folks have children and the cycle continues. 

 

The above example assumes that everyone is capable of working at the widget factory...and Im just saying I think there is a larger number than people think that are not capable of working at the widget factory...even if that is sweeping the factory floors...

We are told that there is a shortage of people to work at Dunkin Donuts, there is a shortage of people to work in childcare and in old age homes, these people cannot do these jobs?

[dealraker]

In the southern half of my county in NC 18% of the working age men are on disability.  I can assure you they aren't liberals, they DO NOT vote democratic, and they are not black or Hispanic...so start somewhere the grievance thinking other than that.

 

But working skills, either physical or mental or even emotional are very limited.   What do we do?  I certainly do not know.  I know many of these men and some do work for cash off-and-on or in some cases quite a bit of part time seasonal work when needed.

 

But that is not out of the ordinary.  Up in the top half of the county, particularly the local city, the Hispanic population of 11% has a disability rate of working age men of less than 1% and the city rate overall is far lower than the rural areas in the southern more rural parts.  

[Dinar]

10 minutes ago, dealraker said:

In the southern half of my county in NC 18% of the working age men are on disability.  I can assure you they aren't liberals, they DO NOT vote democratic, and they are not black or Hispanic...so start somewhere the grievance thinking other than that.

 

But working skills, either physical or mental or even emotional are very limited.   What do we do?  I certainly do not know.  I know many of these men and some do work for cash off-and-on or in some cases quite a bit of part time seasonal work when needed.

 

But that is not out of the ordinary.  Up in the top half of the county, particularly the local city, the Hispanic population of 11% has a disability rate of working age men of less than 1% and the city rate overall is far lower than the rural areas in the southern more rural parts.  

I am sorry, but I do not understand your point.  I did not mention race or ethnic origins, so why are you implying that I am saying that this is a black or hispanic problem?   

 

In NYC, I know for a fact that this is a very big problem among immigrants from the former USSR.  Am I allowed to say this or will you brand me anti-Russian/Ukranian/Armenian/etc zealot?   Does the fact that I am from the former USSR absolve me of this "terrible" sin?

Edited October 31, 2022 by Dinar

[Gregmal]

See I guess I just think that there’s different levels of “acceptable” inflation that doesn’t necessarily have to translate into widespread alarm. Services is like ground zero for this. Not everything is for everyone and not everything is a life necessity. If Dunkin needs to pay workers more, and then raise prices, that’s just economics and if their product is supported by the market, it’s fine, and if not, the business has to adjust, or go away.

 

Strawberries are probably another good example day to day for my family. My little kids love them. Some days they’re $2.50 per box. Other days $5.99. Some days I just won’t buy them. I’ll buy something else. I am not entitled to strawberries at whatever price I want.
 

But getting back to services and not strawberries, not everyone is entitled to restaurant food. Same as not everyone being entitled to concert tickets. Anyone in Philly find World Series tickets unaffordable? That’s just life. Remember Beanie Babies? Folks wanted them, and paid crazy amounts for them. They didn’t need them. Then they got overproduced and the market got fixed.
 

The stuff people need? I don’t see widespread affordability issues as it relates to anything solvable by hiking rates. Fix energy policy and building/construction process. Rising rates is backfiring horrible for the biggest component of the equation, shelter. And we re still woke on energy. So I’m many ways it’s a round peg in a square hole situation. 
 

On the “poverty line” folks debate… well, same as looking at tax revenue. Isn’t their economic impact, whether we send them extra money or not, pretty negligible to the entire pie anyway? This whole thing just seems radically overdone and analyzed. 

[dealraker]

48 minutes ago, Dinar said:

I am sorry, but I do not understand your point.  I did not mention race or ethnic origins, so why are you implying that I am saying that this is a black or hispanic problem?   

 

In NYC, I know for a fact that this is a very big problem among immigrants from the former USSR.  Am I allowed to say this or will you brand me anti-Russian/Ukranian/Armenian/etc zealot?   Does the fact that I am from the former USSR absolve me of this "terrible" sin?

You missed my point.  Skills anyone?  Or is it culture?  We are dealing with low performing isolated people here, you can't just compare ours to yours.  But they share not working.

Edited October 31, 2022 by dealraker