Saturday, March 6, 2021

Inflation... What, Me Worry? Nah..

 Take a look at the following chart and try to convince me that inflation is not an issue.

The Dow Jones Commodity Index is composed of 34% energy, 33% agricultural, 18% industrial metals and 15% precious metals.  Last time it was at this level on August 31, 2011 and interest rates were as follows:

Fed Funds: 0.10% (same as today)

10 Year Treasury: 2.30% (1.98% today)

30 Year Treasury: 3.53% (2.70% today)

In other words, broadly the same.  However..


Fed balance sheet assets: $2.9 trillion ($7.6 trillion today) - 18.5% of GDP (34% of GDP today)

M2 money stock: $9.5 trillion ($19.3 trillion today) - 61% of GDP (86% of GDP)

Federal Debt as % of GDP: 95% (125% today, slated to go to 135% with Mr. Biden's $1.9 trillion)

In simple terms, we are trying to "monetize" our way out of fundamental economic trouble.  But, as history shows, that's impossible. Global commodity prices are climbing in response, and will continue to do so for as long as monetary and fiscal policies continue as present.


  1. Dear Hell,

    I was thinking about your conversation with Cambron, where you mentioned that you do not think America would be so mad that it prints money into oblivion...

    I am going to say something that may sound bad.... but it comes from a good place.

    America is going mad:

    1) 3 of its last 4 presidents are clearly unfit for office. In fact they are arguably so de-ranged that you would not hire them for mid-level clerical work. George-Bush 2; Trump;

    2) Academia in America (and more generally internationally) has gone mad. Almost all Professors don't write their own papers. Among the younger generation, many of them cannot do basic coding or mathematics.

    3) Music industry in America has gone mad.... 90% of songs written by two people?

    4)TV has gone mad... how are Dave-and-Dan show runners for game-of-thrones.... They do not do the directing, their contribution is script-writing, yet (from the last seasons) one can see their writing is clearly below what we would expect of a high school students. They are obviously stealing the writing of others.

    5) Black-lives-matter, de-fund the police, cancel-culture, equalization-of-gender..... how is that a major political movement??? Same goes of the tea-party......

    6) The state of U.S. education is frightening.... All the way to the top, all the way to the bottom. A mid-level Chinese student from one of the top 10 schools can be expected to outperform an MIT grad....

    7) China bullies America's allies Australia and Canada.... Not a word is said....

    The money printing we are seeing is a symptom of far deeper problems... What frightens me is that these problems are not acknowledged, not discussed.

    And that must be the first step... We need a broader discussion. America needs to wake up. The hour is late. God willing, it is not too late.

    1. C'mon, BLM is a legitimate movement. Systemic racism is real and ongoing still. That's what defund the police is a consequence of.

  2. ok.... I meant BLM as a de-fund the police movement.

    Sure, there is racism..... but do the blacks really, really, truly believe that de-funding the police will make their lives better?

    I understand selfishness but this is wasting political ammunition on making your own life worse.... which seems like madness

    1. 'While while some organizations are indeed calling for the abolishment or dismantling of police altogether, "defunding the police" simply means reducing police department budgets and redistributing those funds towards essential social services that are often underfunded, such as housing, education, employment, mental health care, and youth services.'

  3. Hey man, appreciate the time you take to reply. =)

    abt that point... it sounds politically better until you realize that the country is literally printing money.... why should the money come from police departments???.... if not, what then was the original point???

    sighz.... sounds like weak-sauce backtrack to avoid responsibility.... unfortunately, we have the habit of letting such people of the hook with these sort of maneuvers....

    Btw, if you are into this... a lot of the problems seem to come from the U.S. de-funding the prison system, such that they have to use private contractors that are only in for the profit. The result is there is a lot of abuse of the poor and vulnerable, who are most easy to abuse.... and also most often black.... This may not have been the direct trigger of blm but I suspect it laid the foundational problem, from which blm arose.

    Sure... black lives matter.... but the leaders of the blm movement, I feel they are taking their members for a ride.... and they are destroying the ability of their members to lodge legitimate complaints for short term hype and political leverage.

    In a way, it is nothing to me... I am neither black nor in the U.S..... but this is not the way for a community to move forward... Actually I find it puzzling that such leaders can attract a following... More than that... I find it disturbing...

  4. Thank you both for engaging in a very substantial discussion. AKOC, you make very valid social/political/economic points about the US. I must, sadly, agree with you - the American Empire seems to be in a stage of decline - I hope it is not too late to arrest the downward spiral. Yes, Bushtoo and Trump were terrible Presidents. I hope Biden will be better, it's too soon to decide.

    Drawing a parallel with Roman history, if the Reagan/Clinton era was equivalent to Caesar Augustus, Bush II was Tiberius, Trump was Caligula and Biden may end up as Claudius - he's old and infirm enough to match.. :) But he may end up as Nero and watch Rome burn...

  5. =) looking at Rome.... maybe we aren't at the emperor stage yet..... maybe Grachii brothers or Ceaser. Makes for interesting history, terrible life...

    Btw... hell ... do you have some intuition on why this stuff is happening? It can't be coincidence that so many systems are failing...

    Best Regards,

    1. You are right, it's not a coincidence... for starters, history is "scrunching", getting denser in time as comms, tech and transport advances are running at breakneck speed - those are all catalysts for events that would otherwise have happened over longer periods of time.

      Another issue, perhaps the most important of all, is global population growth: currently at 7.9 billion, it was 3.8 billion just 50 years ago. Simply amazing...

    2. yeah... that scrunching thing really seems to be happening... food for thought...

      laugh... I remember when I was dating my wife, we were saying how our historical period seemed so boring compared to others.

      Have to be careful about what we wish for. =)

  6. Interesting conversations and points as always on this blog. Regards to you both from Mexico City.