- America and inflation: “A ship with no captain”
- “Sticky” inflation demolishes Fed speak
- Here comes climate-change rationing (U.K. style)
- Doubling down on already-failed sanctions
- American merchants of war… A daytime TV host on East Palestine’s “deplorables”… And more!
“What happened to America? For me it seems like a ship with no captain, an eroded and leaking hull, damaged sails, drifting toward the reef.”
Yesterday we posed the admittedly broad question, “What happened to America?” The reader response, poured into a Word document, extends to 33 pages.
(Curiously, we got 43 pages’ worth in late 2020 when we asked what “socialism” and a socialist “takeover” mean to you.)
We’ll include a smattering of responses today and Monday, and then devote all of Tuesday’s edition to your feedback.
For the moment, however, we turn our gaze as usual to the economy and the markets…
Sifting through The 5’s voluminous archives, we discover our first use of the word “sticky” to anticipate persistently high inflation came on April 14 of last year.
Proof once again how we aim to stay ahead of the curve: Look at how interest in the term “sticky inflation” — as measured on Google Trends — has more than quadrupled this month alone.
And that’s before the Commerce Department came out this morning with “core PCE” — the Federal Reserve’s preferred measure of inflation. When people at the Fed speak of their 2% inflation target, it’s core PCE they’re talking about.
Core PCE for January is up 4.7% year-over-year. Among dozens of economists polled by Econoday, the average guess was 4.3% and the highest was 4.5%.
Literally none of them saw this coming. Inflation is once again drifting away from the 2% target.
Sorta reinforces what JPMorgan Chase CEO Jamie Dimon told CNBC only yesterday: “I have all the respect for [Fed Chair Jerome] Powell, but the fact is we lost a little bit of control of inflation.”
Dimon is an insufferable tool overseeing an institution that commits serial felonies… but he’s not wrong.
Cue the market freak-out on the “Fed will raise rates higher for longer” narrative: As we write, all the major U.S. stock indexes are deep in the red:
- The Dow is holding up best, down 1.3% to 32,710. All of the Big Board’s gains for 2023 are gone
- The S&P 500 is down 1.5% at 3,950, the lowest in over a month. Turns out the technically important 4,100 level couldn’t hold after all
- The Nasdaq is down 2.1% to 11,348. That said, the tech-heavy index is still up 9% year-to-date.
Bonds are also getting hit hard — prices down, yields up. The yield on a 10-year Treasury note is approaching 3.95%, the highest since early November.
Precious metals are getting no love, gold at $1,809 and silver below $21. Crude is little moved, a penny below $75.
“The infamous ‘Fed pivot’ (to rate cuts) is nowhere in sight and may not even happen until 2024,” says Paradigm macroeconomics authority Jim Rickards.
Significantly, Jim wrote that for his Countdown to Crisis readers on Wednesday — well before these new numbers.
“The Fed’s mission,” he continues, “is to beat inflation by demand destruction through rate hikes.”
Jim is confident the Fed will eventually succeed: There will be no “soft landing” for the economy. There rarely is amid a Fed rate-raising cycle.
The signs are there already: “Fundamental data and technical indicators for both the U.S. and the global economies are weak,” Jim says, “despite what is being said about recent strength in employment and retail sales.”
The great job numbers released at the start of February? “The reality is that almost all of the ‘job creation’ reported for January consisted of a one-time statistical adjustment imposed by BLS as a result of updated Census Bureau population statistics from January 2022.” We won’t go into the weeds today but suffice it to say “almost all of the January so-called job gains were statistical noise.”
The great retail-sales numbers released a few days ago? Those too “appear due to a number of one-time factors,” says Jim. “Christmas sales were weak. Consumers returned to stores in January to take advantage of post-Christmas sales, inventory clear-outs and higher Social Security payments due to the highest annual inflation adjustments in 40 years.”
Meanwhile, the “yield curve” remains inverted: As mentioned above, the 10-year T-note yields 3.95% this morning… but you can earn over 5% if you lend Uncle Sam your money for only six months.
“When market professionals price long-term rates lower than short-term rates (that’s the definition of inversion), it means they expect a recession or worse,” Jim points out.
“These inverted yield curves began last summer and were last seen in the summer of 2008. We all know what happened then. The Fed may not pay attention to inverted yield curves but the most sophisticated investors do. A severe recession is almost certainly on the way.”
[Ed. note: Amid the market’s February sell-off, readers of Rickards’ Insider Intel bagged a 203% gain in just 26 days. And that’s on top of Insider Intel’s 2022 track record — the best among every Paradigm research service. (Details here.)
Our customer care team has just issued a $557 credit to your account — good toward an Insider Intel membership. Of course, there are terms and conditions on this offer — but we think they’re ones that you’ll like. See for yourself at this link.]
That was fast: The Biden administration has already settled on someone to implement its green agenda at the World Bank.
He’s former Mastercard CEO Ajay Banga. The White House will look to him to shift the World Bank’s focus toward funding zero-carbon energy and infrastructure projects.
Banga will take over from Trump appointee David Malpass, who’s set to exit a year ahead of schedule after deigning to question conventional wisdom about climate change.
➢ On a related note: We didn’t realize until today that in addition to “climate czar” John Kerry, the Biden administration has a “clean energy czar” who is none other than Democratic Party godfather John Podesta, now 74 years old. Evidently he took the gig last September — which gives him huge authority in doling out the $370 billion in green tax credits and incentives under the Inflation Reduction Act. They don’t even care about appearances anymore, do they?
Also on the subject of climate change, we present the following as a public service announcement…
There it is in one of Britain’s prestige broadsheets, The Times. “Second World War-style rationing of petrol, household energy and meat could help to fight climate change, British scientists have recommended.”
Researchers at the University of Leeds say rationing could cut carbon emissions “rapidly and fairly”… although it would have to be introduced cautiously. We reproduce a chunk of the Times article verbatim, to capture the proposal in all its horror…
The researchers argue that, as a first step, governments would need to regulate sectors such as the oil industry, with the importing of fossil fuels “banned or restricted” in certain areas. This would create a scarcity of fossil fuels, with rationing then introduced to “manage the scarcity,” they explain.
A release issued with the study notes: “Governments could ration specifically selected goods, such as flights, petrol, household energy or even meat or clothing.” The paper adds: “Governments could limit the number of long-haul flights an individual could make in a year or they could limit the amount of petrol one can buy in a month.”
An alternative method would be through the “modernization of rationing with carbon cards, like bank cards, to keep track of your carbon allowance rather than ration cards,” the study adds. The researchers recommend that people should not be allowed to trade or sell their carbon allowance, arguing: “It is feasible that allowance-based schemes could exist with non-tradable allowances.”
Note well: The University of Leeds is the same institution that put out the study we cited in 2021 that said for America to meet its carbon targets under the Paris Agreement of 2015… a typical family of four would have to live in a space of 640 square feet and the average adult’s travel would be limited to the energy equivalent of no more than 40 gallons of gasoline each year.
To mark the first anniversary of Russia invading Ukraine, the G-7 nations are doubling down on their already-failed sanctions against Russia.
“The U.S. early Friday levied sanctions against more than 200 additional individuals and entities,” says The Wall Street Journal. “Washington and its allies largely targeted Russian companies and individuals, but also hit alleged procurement networks across Europe, Asia and the Middle East that Washington says are supporting Moscow’s war effort.”
Treasury Secretary Janet Yellen, meanwhile, is putting Beijing in particular on notice: “Not only have we been clear with the Chinese government, we’ve also made it clear to Chinese firms and to Chinese banks that we would not tolerate trade deals that helped Russia to evade sanctions,” she tells MSNBC. “We will crack down and enforce our sanctions and the consequences will be very severe.”
Heh… Beijing issued its response even before Yellen opened her mouth. We heartily encourage you to check out Sean Ring’s take at our sister e-letter The Rude Awakening for the details.
Back to the mailbag, back to “What happened to America” and back to the reader we cited off the top of today’s issue…
“We are supposed to be the beacon of liberty,” he writes, “and for the past several decades we’ve exported nothing but debt and war, enslaving and subjugating other nations, while a class of lying, selfish kleptocrats has pillaged our treasury for all it could. Our government does not solve problems — on the contrary it creates them, exacerbates them or, in the case of East Palestine, just plain ignores them.
“You said yourself, and I agree, that the county voting solidly Republican may well have factored into the bidet administration blowing it off. He is that petty and arrogant, so it makes sense. To top it off, he goes to Ukraine and promises them another half billion of our tax dollars. It could not be clearer that he cares more about a foreign nation and enriching the cronies who really are in charge than he does about helping Americans.
“Then, given the way government officials lie, which seems to be a prerequisite, I can see how people would be inclined to believe the fallout from this train derailment is much worse than the talking heads are saying it is.
“In short, it comes down to zero faith in a government that so often over the past decades has failed us, the People, miserably — and, worse, has taken numerous actions to harm us in every way that matters, particularly when their actions enrich the in crowd. It’s safe to say any government action that benefits We the People is by accident rather than by design.
“My thanks, as always, to you and the whole Paradigm family for all you do.”
The 5: As it happens, a public figure said the quiet part out loud…
But it goes both ways. Imagine if 9/11 were to happen today. Would folks in red states express their solidarity as they did back then? I suspect many of them would say something like, “Those decadent New Yorkers had it coming.”
We return to the prescient words of George Carlin from 1992: “That’s all you ever hear about in this country is our differences. That’s all the media and the politicians are ever talking about: the things that separate us, things that make us different from one another.
“That’s the way the ruling class operates in any society: They try to divide the rest of the people; they keep the lower and the middle classes fighting with each other so that they, the rich, can run off with all the ****ing money. Fairly simple thing… happens to work.
“You know, anything different, that’s what they’re gonna talk about: race, religion, ethnic and national background, jobs, income, education, social status, sexuality, anything they can do to keep us fighting with each other so that they can keep going to the bank.”
The only thing we’d add is that for many of them it’s not even about the money. It’s about the power. “Power entirely for its own sake,” as the villain O’Brien said in 1984. Power because they get off on making other people bend to their will.
Again, more of your “What happened to America” responses Monday and Tuesday… but for now we take up other odds and ends in the mailbag.
“Well, I live 14 miles south of East Palestine in Calcutta, Ohio. I am sure that this has been a significant problem for some people in EP. It should not have happened as, it appears, the train crew knew that there was a problem with some locked-up wheels.
“But I have seen absolutely no problems here and any problems appear to be very local.”
On the subject of Jimmy Carter legalizing home beer brewing, a couple of comments…
“Jimmy Carter was the worst president in my memory. But for all that, I will always think he was a great man. Thank you for pointing out some of the few good things about his presidency.”
Adds another: “We should also tip our hat to then Sen. Alan Cranston (D-California). The senator worked to get craft brewing legislation into a transportation bill (H.R. 1337). In 1978, it got to President Carter’s desk.”
The 5: Alan Cranston — now there’s a blast from the past.
Wasn’t until I looked him up on Wikipedia that I remembered he was one of the “Keating Five” caught up in the late-1980s savings-and-loan scandal. Between that and a battle with prostate cancer, he opted not to run for a fifth term in 1992. Cranston came out of the scandal much worse than some of his compatriots [*cough* John McCain *cough*].
Have a good weekend,
Dave Gonigam
The 5 Min. Forecast
