Hey Matt. Just wanted to say thanks a ton for the look and the opportunity. It's funny, watching your coverage of the '08 crisis got me on my way, though we've never really chatted up until now. Been following you since we were both Democrats (yuk yuk). You're the first 'mainstream' outlet to give me a little shot in the arm after a decade of writing. It means everything, esp. coming from you. -C
Fer sher, and glad I caught it 'from the Hoss's mouf." Glad you're out there swinging, God knows the msm guys aren't worth paying any attention to. I've lived w/o TV for several decades and every time I realize Jim Cramer is. still. there. my eyes roll, but I certainly have my TV's defenestration reaffirmed whenever I see that guy quoted. Au & Ag, that's me!
I listened to the whole thing. investor here love to hear the market is "up". trying to keep up with my retirement and living an ok life traveling once in a while in business and buying a steak.. sent this to my new stock broker young and not going tp think he will respond and my retired one who i think will love it. thanks love learning even if i an a person who bought starbucks and regretted it
It is interesting to pick the "Peak Tesla" call as demonstrating how right you were since Tesla is down since then rather than, for example, the April 2018 podcast where you compared it to Enron, since which Tesla is up literally 1000 percent. [edited to have correct year, I mistakenly said April 2023 at first]
What's your point? It was BS back in 2018 and now even more BS in 2024. I called the Peak in 2023 and its down since then. If you think I'm being disingenuous or something go read Seeking Alpha, there's a million fanboys that'll tell you why Elon is the greatest thing since sliced bread. Also read my disclaimer. I get shit wrong all the time. With Elon, I think he's a liar. Read my latest piece 'The Musk of Desperation' if you want to know more. Either way, not financial advice & good luck to you. Time will tell the tale.
I'm not sure you know what "literally 1000 percent" means, first off. Tesla was like $200 in April 2023 and it's around there now. So its about even, not "up literally 1000 percent" which would mean it 10x'd. Second, when I said peak it was near $300. Literally anytime after that call it has been lower, it has never gotten back to $300 since mid-2022 when I wrote that. Also what is your point?
It's not surprising that the mainstream economic media has fallen -- like other parts of the media -- into being propaganda pushers. Just the other day I watched Gavin Newsom tell Jen Psaki that this was one of the greatest economies of all time, and those dirty right-wingers kept telling lies about how bad things were.
Of course, Gavin doesn't do his own shopping so WTF does he know?
Gavin knows enough to become custodian of the 5th largest economy in the world and screw the rest of us on a consistent basis. I've personally had enough of folks with no power/little power claiming "we're smarter than our rulers." If we are, why can't we dislodge our rulers.
Gavin isn't close to a fool and stands an excellent chance of becoming president - as soon as this November.
Why can’t we dislodge people like Newsome? A- B/c we allow stupid people to vote in this country, and B-Our fiscal setup allows people like Newsome to buy votes with public $$$.
You mean like democracy? Calling Newsome and his supporters stupid might be fun (see yours), but the evidence strongly points to competence at self-advancement, at least. I know plenty of people who fear and respect his skills - he handed De Santis his lunch without a fact on his side after mocking De Santis for being dumb enough to set up the debate. Expect a massive jump in Dem enthusiasm for any candidate not named Biden, especially if Trump is still appealing a criminal conviction come November. These folks aren't screwing around, case you hadn't noticed. I'm guardedly optimistic Trump will pull it out, but these folks have been preparing for the 2024 screwing since November 2016. For them its all day every day - might have something to do with their success rate. Or, we could just point fingers at the dummies, hoping we're not actually facing any mirrors. Maybe outworking them might improve our chances. Just a thought.
I’m not calling Newsome stupid-more like evil and Machiavellian- but anyone who knee jerk pulls the lever for establishment Ds today is either A-benefiting financially from his policies or B-is truly an idiot who refuses to think through and examine issues.
And yes, under our system stupid people are allowed to vote and scumbags are allowed free speech. Wouldn’t have it any other way-but I won’t deny the reality of outcomes.
Do you read what you type before you hit post? "Competence at self-advancement", "handed de Santis his lunch without a fact on his side" touted as good things?
The metric for competence in politics is winning power - period - coz without it one accomplishes what we have so far - endless wars and the permanent screwing of the lower orders. I'd prefer to offer our kids something a bit more. But that's me.
It is just now starting to be understood. It's a great economy for the top 30-40%, but a very poor one for the rest. The evolution of societies into separate bubbles is not only social, it's growingly economic.
Not surprising that things are going well for people with access to the literal money printer -- and not surprising that things are NOT going well for the rest of us, who pay for it via the debasement of our savings and labor.
"...the crony capitalism that gives free market capitalism a bad name, which then seduces idiots into thinking that socialism is the answer, when that would be an even worse catastrophe."
I've been happily married for 15 years but I just fell in love again!
In the second half of "The Wealth of Nations," Adam Smith mercilessly attacked crony capitalism, then called 'Mercantilism.' The word 'capitalism' wasn't coined until some fifty years after Smith's death in 1790. Smith was a staunch defender of human capital, i.e., labor, but Karl Marx mangled that idea into his ridiculous, 'Labor Theory of Value.' Words matter!
Raven, what are your thoughts about energy blindness? If you aren't familiar with it, see Nate Hagens. Also, have you heard of a guy named Simon Michaux?
It's amusing to me. My late husband said basically he felt from 2000 our whole economy was BS. He felt it could not be sustained. Then 2008 happened. He was right, but he was not happy with what they did to "fix" it. He passed in 2013.
I believe he'd be even more vindicated now and unhappy.
«My late husband said basically he felt from 2000 our whole economy was BS. He felt it could not be sustained.»
Most of "the west" has not recovered from the 2001 dot.com crash.
«Then 2008 happened. He was right, but he was not happy with what they did to "fix" it.»
It is even worse than that: some important aggregate indicators started to fall in 2004-2005, and the 2008 crash was more a consequence than a cause. Government statisticians have been since then working hard to "improve" the indices they publish, but some of the raw data is pretty bad.
The "circle of prosperity" is shrinking, and the gap between those inside it and those outside it is growing ever bigger. No major party is willing to represent those outside the "circle of prosperity", they are just "losers" and "suckers".
Fiat money is the biggest fraud ever perpetuated on the lumpenproletariat plebs by the ruling classes. It makes the invisible man in the sky story look possible. Like the invisible man in the sky story it works because of the genetic flaw that the nasty little henchman Yuval Noah Harari explained so well in "Sapiens". Homo Sapiens can and do believe "stories" and the more fantastical the better. If you tell >99% of the people that the Bank that created the credit to allow you to buy the house and indebted you for hundreds of thousands of dollars didn't have the money and just typed it into a computer and poof, you were on the wrong side of the balance sheet you wouldn't believe it, it's just too fantastical but that's the way it works. Now there are rules about the bank having "reserves", likely ~10% for a mortgage but that's also Fiat money conjured up in a different way. The system works not too bad as an adjunct to the real economy but when the the financial system IS the economy and is used to get a Free lunch by Rentier extraction from the bulk of the world you know it can't last forever. There aren't enough courtiers and Compradors to keep it going when a competitive system arises, enter China with a real economy building real stuff at home and abroad. Now you try and maintain your extraction hegemony through the same old Compradors, sanctions and even wars but the Compradors can turn on you like in Niger or become so strong they can beat you at War, see Russia that you wind up eating your own people. See Amerika, the real underbelly of poverty and misery. The Chinese system is so much better. The government controls the financial system unlike the West where the financial system controls the government. The economy produces REAL WEALTH. The people are happier because their lives are getting better and the philosophy is one of harmony and good business rather than Rentier extraction. After 5 or 6 hundred years of extraction it's overdue for change and I just hope the neoliberal neoconservatives don't blow up the world instead of accepting changes.
We love it because everyone loves easy credit and deferred accountability. Creates a pattern of a good decade or two followed by an interval of tough times we can blame on someone else (the Jews, big banks, companies profiteering, whatever), so it also works politically.
There is very little constituency for slower growth and living within our means if you look at human history. Ever since we invented money, we debased it and then stole stuff from people with assets. The dog returns to its vomit, as the gods of the copybook headings tried to warn us.
I have a degree in finance and spent a lifetime in business, and this guy puts the fat part of the bat squarely on the ball. Always remember that government wants inflation, always.
I do remember the textbook answer as to why a little bit of inflation is good. If there is deflation, then money is worth the same or more tomorrow than it is today. This incentivizes a lack of investment and spending over stuffing cash in your mattress. It gives an advantage to incumbents with less risk. Leaving a little bit of inflationary buffer is practically necessary because monetary policy cannot hope to perfectly target a 0% inflation rate. I buy the argument.
But how much is "a little bit"? The Fed used to target a 1% inflation rate, but then increased it to 2%. I have heard - and this is second or third hand knowledge I'm relating here - that the 2% target was chosen, rather than 1%, because it gives employers more flexibility to lower wages over time. Not getting a nominal raise is hard on morale, and the 2% target gives employers more room to give "raises" up to 2% a year without actually having to pay more in real money.
The claim is that a 1% buffer is for the Fed to have some play when avoiding deflation, and the additional 1% on top of that is play for the private sector to keep wages under control.
Again I'm not sure of the accuracy of the claim about the rationale behind the 2% target. I do know that the target was raised to 2% in the 90s from a previously lower target. I dug up this article which says none other than Janet Yellen pushed it as a policy, and it originated somewhat arbitrarily in New Zealand. Historically, inflation was higher when we targeted a 1% rate rather than a 2% rate, which makes me think Yellen's stated reason for the 2% target in the article is at least a bit suspect, and lends credence to the claim that upping the target was done to help control wages. https://sites.lsa.umich.edu/mje/2023/09/04/why-the-2-inflation-target/
I'm not totally convinced of either story although it's probably clear I favor the wage control argument. Happy to discuss if someone can shed more light on this.
If you really want to go down a rabbit hole, try to figure out how, why and when the Fed agreed upon the 2% target. You're right about New Zealand. But why did they choose 2%? Why not 2.2% - or 1.5%? I told myself years ago, there *has* to be a good reason for it - someone with some complex Excel spreadsheet somewhere has pinned 2% at the critical juncture of an algebraic equation that holds the entire economy and world together, right? Right? Spend a day looking and let me know what you find out.
Falling prices in one sector of the economy is not deflation as I'm talking about it. Deflation is when prices fall for all goods and services because the money supply is inadequate to keep up with the growth of the economy.
Milton Friedman agreed with Hayek that it was a 'fatal conceit' to think government could fine tune the economy or the money supply, so he proposed a flat 2% growth in the money supply, matching approximately the long-term growth rate in the underlying economy.
“which then seduces idiots into thinking that socialism is the answer, when that would be an even worse catastrophe.” I have to ask you to define “socialism”. One element of socialism is workers using their collective power to demand a more just share of the profits. Are they idiots?
In this context I mean a socialist state planned economy. And when the state is running everything, "workers using their collective power to demand a more just share of the profits" is nothing but a quick way to end up in jail, or in some countries, dead.
The Constitution and its faith that human freedom, dignity and moral reason is enough to propel the human race toward a brighter future is exactly why rigged game ideological utopians and the fascists they serve are trying to dismantle the Republic. We need a national conversation about $$$$$$.
Politicians realize that socialism is risky as when you run things people might hold you accountable. Much better through regulation and threats to tell other people how to run things. When your dreams of how an industry can be run turn out to be disastrous you can blame the industry or Heinlein’s “bad luck”. Like California’s insurance market, for a topical example
I misunderstood. I was referring to Sweden, Norway, Finland, and to a lesser extent other European countries, which all enjoy a higher quality of life, lower health care costs, reduced income inequality, (with higher taxes on extreme wealth), lower rates of homelessness (or completely eliminated in some cases). They engage in socialism to a greater extent than we do of course. Were you referring to the South American socialist countries? We all now they had a fair chance to succeed, like their European counterparts (I’m fucking kidding of course). Can you explain a bit more?
They have social democracy. What that means is that the government takes your money and makes consumption decisions for you rather than you making your own decisions with your own money. Instead of paying lower taxes but $15k out of pocket for health insurance the government takes some of that money and buys health insurance for you. They do the same with child care. Rather than paying for people to care for your children the government takes your money and hires those people to care for your children. Essentially you are paying for your own benefits (which may be provided cheaper and more efficiently, or could be stuff you don’t want at all) but you don’t have a lot of competition or choice.
Works fine in some fields. Works in healthcare because the US pays through the nose for innovation. Here is an example. Let’s say governments decide that cars are necessary but people “waste” so much money buying things that aren’t needed- fancy interiors, too powerful engines, electronic gizmos, etc. Basic transportation from point A to B should be standardized and cheap. So the government puts out a bid for the supplier of a simple, cheap vehicle that will be given to everyone. Except it is 1976 and the government chooses the three wheeled Reliant of Mr Beam fame. If everything from them on was contracted with the government, would we have hybrids now? Anti-lock brakes? Self-driving safety features?
Indeed. As soon as a socialist system raises living standards, a CIA orchestrated regime change is a certain outcome. If that doesn’t work, it’s sanctions and embargoes. Can’t have the threat of a good example.
Interesting, I have friends living here in US half the year, who wouldn’t necessarily agree with you. They go back, because their children and grandchildren are there. They don’t see their children having the same wealth building ability available. Just sharing their comments to us
“One element of socialism is workers using their collective power to demand a more just share of the profits.” Is that actually an element of socialism? It seems more like an element of capitalism in which there is a capitalist ownership class and a working class? Isn’t socialism more of a government ownership structure with the workers as independent actors? Admittedly, an economy run by crony capitalists who have captured the government would make it difficult to unionize, but it doesn’t seem like a truly socialist country would allow unionization either. The union effort would be the same as voting.
I’m not certain that Scandinavian countries currently qualify as “truly socialist”. They have demonstrated a commitment to shared prosperity, reduced income inequality, support for young families, and reducing or eliminating homelessness, and as mentioned before, the encouragement of worker unionization. These countries certainly have elements of capitalism, but with the extent of state involvement and focus on shared prosperity they embody what most everyday people would call “socialism”.
Interesting to see these two spheres that I follow intersect. Been a reader/listener of QTR for a while. Matt, I strongly recommend you look into Doomberg next. His posts are first-thing reading for me, with yours coming in a close 2nd if we're being honest. Give him a look.
Irons is speaking fire and truth. It’s too bad that most public intellectuals don’t have the brains or the balls to draw a sharp line of understanding between free market capitalism and crony capitalism.
Hey Matt. Just wanted to say thanks a ton for the look and the opportunity. It's funny, watching your coverage of the '08 crisis got me on my way, though we've never really chatted up until now. Been following you since we were both Democrats (yuk yuk). You're the first 'mainstream' outlet to give me a little shot in the arm after a decade of writing. It means everything, esp. coming from you. -C
Fer sher, and glad I caught it 'from the Hoss's mouf." Glad you're out there swinging, God knows the msm guys aren't worth paying any attention to. I've lived w/o TV for several decades and every time I realize Jim Cramer is. still. there. my eyes roll, but I certainly have my TV's defenestration reaffirmed whenever I see that guy quoted. Au & Ag, that's me!
Hey
Taibbi’s a “mainstream outlet.”
Uh oh.
Funny right?
Jokes aside, awesome for any investor.
Especially interested in the sovereign debt issue.
Thanks for cutting me in.
I listened to the whole thing. investor here love to hear the market is "up". trying to keep up with my retirement and living an ok life traveling once in a while in business and buying a steak.. sent this to my new stock broker young and not going tp think he will respond and my retired one who i think will love it. thanks love learning even if i an a person who bought starbucks and regretted it
I bought Starbucks in 1990
It is interesting to pick the "Peak Tesla" call as demonstrating how right you were since Tesla is down since then rather than, for example, the April 2018 podcast where you compared it to Enron, since which Tesla is up literally 1000 percent. [edited to have correct year, I mistakenly said April 2023 at first]
What's your point? It was BS back in 2018 and now even more BS in 2024. I called the Peak in 2023 and its down since then. If you think I'm being disingenuous or something go read Seeking Alpha, there's a million fanboys that'll tell you why Elon is the greatest thing since sliced bread. Also read my disclaimer. I get shit wrong all the time. With Elon, I think he's a liar. Read my latest piece 'The Musk of Desperation' if you want to know more. Either way, not financial advice & good luck to you. Time will tell the tale.
My point is obvious. It is not a success to claim a peak call when you had it wrong every other time. It is a broken clock effect.
Love the disclaimer at the end of the article. That should be every financial writer's disclaimer. Keep up the good work.
Love to see it.
I'm not sure you know what "literally 1000 percent" means, first off. Tesla was like $200 in April 2023 and it's around there now. So its about even, not "up literally 1000 percent" which would mean it 10x'd. Second, when I said peak it was near $300. Literally anytime after that call it has been lower, it has never gotten back to $300 since mid-2022 when I wrote that. Also what is your point?
It's not surprising that the mainstream economic media has fallen -- like other parts of the media -- into being propaganda pushers. Just the other day I watched Gavin Newsom tell Jen Psaki that this was one of the greatest economies of all time, and those dirty right-wingers kept telling lies about how bad things were.
Of course, Gavin doesn't do his own shopping so WTF does he know?
Gavin knows enough to become custodian of the 5th largest economy in the world and screw the rest of us on a consistent basis. I've personally had enough of folks with no power/little power claiming "we're smarter than our rulers." If we are, why can't we dislodge our rulers.
Gavin isn't close to a fool and stands an excellent chance of becoming president - as soon as this November.
Guy was eating a place called 'French Laundry' while the rest of us were locked home surviving off of french dressing and doing laundry.
THIS 👆🏼
A real arrogant prick.
Why can’t we dislodge people like Newsome? A- B/c we allow stupid people to vote in this country, and B-Our fiscal setup allows people like Newsome to buy votes with public $$$.
You mean like democracy? Calling Newsome and his supporters stupid might be fun (see yours), but the evidence strongly points to competence at self-advancement, at least. I know plenty of people who fear and respect his skills - he handed De Santis his lunch without a fact on his side after mocking De Santis for being dumb enough to set up the debate. Expect a massive jump in Dem enthusiasm for any candidate not named Biden, especially if Trump is still appealing a criminal conviction come November. These folks aren't screwing around, case you hadn't noticed. I'm guardedly optimistic Trump will pull it out, but these folks have been preparing for the 2024 screwing since November 2016. For them its all day every day - might have something to do with their success rate. Or, we could just point fingers at the dummies, hoping we're not actually facing any mirrors. Maybe outworking them might improve our chances. Just a thought.
I’m not calling Newsome stupid-more like evil and Machiavellian- but anyone who knee jerk pulls the lever for establishment Ds today is either A-benefiting financially from his policies or B-is truly an idiot who refuses to think through and examine issues.
And yes, under our system stupid people are allowed to vote and scumbags are allowed free speech. Wouldn’t have it any other way-but I won’t deny the reality of outcomes.
Do you read what you type before you hit post? "Competence at self-advancement", "handed de Santis his lunch without a fact on his side" touted as good things?
The metric for competence in politics is winning power - period - coz without it one accomplishes what we have so far - endless wars and the permanent screwing of the lower orders. I'd prefer to offer our kids something a bit more. But that's me.
I don't have rulers. That you think you do demonstrates the depth of the problem the Republic faces.
It is just now starting to be understood. It's a great economy for the top 30-40%, but a very poor one for the rest. The evolution of societies into separate bubbles is not only social, it's growingly economic.
Not surprising that things are going well for people with access to the literal money printer -- and not surprising that things are NOT going well for the rest of us, who pay for it via the debasement of our savings and labor.
Plainly said, Gavin Newsom is an asshole.
"...the crony capitalism that gives free market capitalism a bad name, which then seduces idiots into thinking that socialism is the answer, when that would be an even worse catastrophe."
I've been happily married for 15 years but I just fell in love again!
In the second half of "The Wealth of Nations," Adam Smith mercilessly attacked crony capitalism, then called 'Mercantilism.' The word 'capitalism' wasn't coined until some fifty years after Smith's death in 1790. Smith was a staunch defender of human capital, i.e., labor, but Karl Marx mangled that idea into his ridiculous, 'Labor Theory of Value.' Words matter!
I keep a notebook of gems like this...intellectual ammunition, I call it.
Loved QTR’s disclaimer, honesty at last!
"I have nothing to offer anybody except my own confusion" - Kerouac
Or the old Lenny Bruce line:"Show me preacher with two suits and I'll show you hustler."
“All I know is that I know nothing” Socrates
One of the first financial (or any) substacks I subscribed to and sent me off in a lot of interesting and beneficial directions.
Cool. Thanks.
Raven, what are your thoughts about energy blindness? If you aren't familiar with it, see Nate Hagens. Also, have you heard of a guy named Simon Michaux?
A hard dose of reality. Thanks.
Thank you for sharing Quoth the Raven and exposing us to another source of independent thought!
It's amusing to me. My late husband said basically he felt from 2000 our whole economy was BS. He felt it could not be sustained. Then 2008 happened. He was right, but he was not happy with what they did to "fix" it. He passed in 2013.
I believe he'd be even more vindicated now and unhappy.
«My late husband said basically he felt from 2000 our whole economy was BS. He felt it could not be sustained.»
Most of "the west" has not recovered from the 2001 dot.com crash.
«Then 2008 happened. He was right, but he was not happy with what they did to "fix" it.»
It is even worse than that: some important aggregate indicators started to fall in 2004-2005, and the 2008 crash was more a consequence than a cause. Government statisticians have been since then working hard to "improve" the indices they publish, but some of the raw data is pretty bad.
The "circle of prosperity" is shrinking, and the gap between those inside it and those outside it is growing ever bigger. No major party is willing to represent those outside the "circle of prosperity", they are just "losers" and "suckers".
Sorry for your loss. Sounds like a great guy, deeply rooted in common sense, with great intuition...
Indeed. Very missed, but life goes on, and chapter pages turn.
Fiat money is the biggest fraud ever perpetuated on the lumpenproletariat plebs by the ruling classes. It makes the invisible man in the sky story look possible. Like the invisible man in the sky story it works because of the genetic flaw that the nasty little henchman Yuval Noah Harari explained so well in "Sapiens". Homo Sapiens can and do believe "stories" and the more fantastical the better. If you tell >99% of the people that the Bank that created the credit to allow you to buy the house and indebted you for hundreds of thousands of dollars didn't have the money and just typed it into a computer and poof, you were on the wrong side of the balance sheet you wouldn't believe it, it's just too fantastical but that's the way it works. Now there are rules about the bank having "reserves", likely ~10% for a mortgage but that's also Fiat money conjured up in a different way. The system works not too bad as an adjunct to the real economy but when the the financial system IS the economy and is used to get a Free lunch by Rentier extraction from the bulk of the world you know it can't last forever. There aren't enough courtiers and Compradors to keep it going when a competitive system arises, enter China with a real economy building real stuff at home and abroad. Now you try and maintain your extraction hegemony through the same old Compradors, sanctions and even wars but the Compradors can turn on you like in Niger or become so strong they can beat you at War, see Russia that you wind up eating your own people. See Amerika, the real underbelly of poverty and misery. The Chinese system is so much better. The government controls the financial system unlike the West where the financial system controls the government. The economy produces REAL WEALTH. The people are happier because their lives are getting better and the philosophy is one of harmony and good business rather than Rentier extraction. After 5 or 6 hundred years of extraction it's overdue for change and I just hope the neoliberal neoconservatives don't blow up the world instead of accepting changes.
We love it because everyone loves easy credit and deferred accountability. Creates a pattern of a good decade or two followed by an interval of tough times we can blame on someone else (the Jews, big banks, companies profiteering, whatever), so it also works politically.
There is very little constituency for slower growth and living within our means if you look at human history. Ever since we invented money, we debased it and then stole stuff from people with assets. The dog returns to its vomit, as the gods of the copybook headings tried to warn us.
Throw in some paragraphs ^^ and it'll get read. I had to stop, too old to read a wall of words. What I did read was on track.
Sounds like you’ve been reading Michael Hudson. If not, you would appreciate his perspective.
once the economy debt bubble pops, it’s either gonna be the Storming of the Bastille or the Stalinist gulags. yer guess is as good as mine...
I have a degree in finance and spent a lifetime in business, and this guy puts the fat part of the bat squarely on the ball. Always remember that government wants inflation, always.
Means a lot. Appreciate it.
I do remember the textbook answer as to why a little bit of inflation is good. If there is deflation, then money is worth the same or more tomorrow than it is today. This incentivizes a lack of investment and spending over stuffing cash in your mattress. It gives an advantage to incumbents with less risk. Leaving a little bit of inflationary buffer is practically necessary because monetary policy cannot hope to perfectly target a 0% inflation rate. I buy the argument.
But how much is "a little bit"? The Fed used to target a 1% inflation rate, but then increased it to 2%. I have heard - and this is second or third hand knowledge I'm relating here - that the 2% target was chosen, rather than 1%, because it gives employers more flexibility to lower wages over time. Not getting a nominal raise is hard on morale, and the 2% target gives employers more room to give "raises" up to 2% a year without actually having to pay more in real money.
The claim is that a 1% buffer is for the Fed to have some play when avoiding deflation, and the additional 1% on top of that is play for the private sector to keep wages under control.
Again I'm not sure of the accuracy of the claim about the rationale behind the 2% target. I do know that the target was raised to 2% in the 90s from a previously lower target. I dug up this article which says none other than Janet Yellen pushed it as a policy, and it originated somewhat arbitrarily in New Zealand. Historically, inflation was higher when we targeted a 1% rate rather than a 2% rate, which makes me think Yellen's stated reason for the 2% target in the article is at least a bit suspect, and lends credence to the claim that upping the target was done to help control wages. https://sites.lsa.umich.edu/mje/2023/09/04/why-the-2-inflation-target/
I'm not totally convinced of either story although it's probably clear I favor the wage control argument. Happy to discuss if someone can shed more light on this.
If you really want to go down a rabbit hole, try to figure out how, why and when the Fed agreed upon the 2% target. You're right about New Zealand. But why did they choose 2%? Why not 2.2% - or 1.5%? I told myself years ago, there *has* to be a good reason for it - someone with some complex Excel spreadsheet somewhere has pinned 2% at the critical juncture of an algebraic equation that holds the entire economy and world together, right? Right? Spend a day looking and let me know what you find out.
The history of the personal computer industry would suggest that declining prices do not negatively impact investment or innovation.
Falling prices in one sector of the economy is not deflation as I'm talking about it. Deflation is when prices fall for all goods and services because the money supply is inadequate to keep up with the growth of the economy.
Milton Friedman agreed with Hayek that it was a 'fatal conceit' to think government could fine tune the economy or the money supply, so he proposed a flat 2% growth in the money supply, matching approximately the long-term growth rate in the underlying economy.
“which then seduces idiots into thinking that socialism is the answer, when that would be an even worse catastrophe.” I have to ask you to define “socialism”. One element of socialism is workers using their collective power to demand a more just share of the profits. Are they idiots?
In this context I mean a socialist state planned economy. And when the state is running everything, "workers using their collective power to demand a more just share of the profits" is nothing but a quick way to end up in jail, or in some countries, dead.
The Constitution and its faith that human freedom, dignity and moral reason is enough to propel the human race toward a brighter future is exactly why rigged game ideological utopians and the fascists they serve are trying to dismantle the Republic. We need a national conversation about $$$$$$.
Politicians realize that socialism is risky as when you run things people might hold you accountable. Much better through regulation and threats to tell other people how to run things. When your dreams of how an industry can be run turn out to be disastrous you can blame the industry or Heinlein’s “bad luck”. Like California’s insurance market, for a topical example
I misunderstood. I was referring to Sweden, Norway, Finland, and to a lesser extent other European countries, which all enjoy a higher quality of life, lower health care costs, reduced income inequality, (with higher taxes on extreme wealth), lower rates of homelessness (or completely eliminated in some cases). They engage in socialism to a greater extent than we do of course. Were you referring to the South American socialist countries? We all now they had a fair chance to succeed, like their European counterparts (I’m fucking kidding of course). Can you explain a bit more?
They have social democracy. What that means is that the government takes your money and makes consumption decisions for you rather than you making your own decisions with your own money. Instead of paying lower taxes but $15k out of pocket for health insurance the government takes some of that money and buys health insurance for you. They do the same with child care. Rather than paying for people to care for your children the government takes your money and hires those people to care for your children. Essentially you are paying for your own benefits (which may be provided cheaper and more efficiently, or could be stuff you don’t want at all) but you don’t have a lot of competition or choice.
Works fine in some fields. Works in healthcare because the US pays through the nose for innovation. Here is an example. Let’s say governments decide that cars are necessary but people “waste” so much money buying things that aren’t needed- fancy interiors, too powerful engines, electronic gizmos, etc. Basic transportation from point A to B should be standardized and cheap. So the government puts out a bid for the supplier of a simple, cheap vehicle that will be given to everyone. Except it is 1976 and the government chooses the three wheeled Reliant of Mr Beam fame. If everything from them on was contracted with the government, would we have hybrids now? Anti-lock brakes? Self-driving safety features?
Indeed. As soon as a socialist system raises living standards, a CIA orchestrated regime change is a certain outcome. If that doesn’t work, it’s sanctions and embargoes. Can’t have the threat of a good example.
Interesting, I have friends living here in US half the year, who wouldn’t necessarily agree with you. They go back, because their children and grandchildren are there. They don’t see their children having the same wealth building ability available. Just sharing their comments to us
“One element of socialism is workers using their collective power to demand a more just share of the profits.” Is that actually an element of socialism? It seems more like an element of capitalism in which there is a capitalist ownership class and a working class? Isn’t socialism more of a government ownership structure with the workers as independent actors? Admittedly, an economy run by crony capitalists who have captured the government would make it difficult to unionize, but it doesn’t seem like a truly socialist country would allow unionization either. The union effort would be the same as voting.
I’m not certain that Scandinavian countries currently qualify as “truly socialist”. They have demonstrated a commitment to shared prosperity, reduced income inequality, support for young families, and reducing or eliminating homelessness, and as mentioned before, the encouragement of worker unionization. These countries certainly have elements of capitalism, but with the extent of state involvement and focus on shared prosperity they embody what most everyday people would call “socialism”.
Interesting to see these two spheres that I follow intersect. Been a reader/listener of QTR for a while. Matt, I strongly recommend you look into Doomberg next. His posts are first-thing reading for me, with yours coming in a close 2nd if we're being honest. Give him a look.
Irons is speaking fire and truth. It’s too bad that most public intellectuals don’t have the brains or the balls to draw a sharp line of understanding between free market capitalism and crony capitalism.
I think it’s the socialists who push all the crony capitalism bullshit and then point at that and say capitalism doesn’t work.
It’s certainly the socialists who push renewables and EVs and all the government taxpayer support for that and call that market forces.
Or when they get government to put regulations and red tape in the way of useful energy and industry and say that is the market speaking.
Trudeau does that all the time here, a guy who wouldn’t know what a market was if it fell on his head
The socialists have been so successful they socialized Wall St-public bailouts for all their stupid games!
I was a QTR fan for years from seeing his posts on Zerohedge. I was happy to find him on Substack. Keep up the great work, everyone.
Thanks Matt, enjoy both of you!