patrick.net

https://boriquagato.substack.com/p/the-cantil-lying-effect

i have spoken in the past about the cantillon effect. it’s one of those wonderful explanatory ideas that is at once obscure in that very few people know what it is but outlandishly obvious and essentially undeniable once you hear it. ...

ultimately, it’s very, very simple:

those who print new money benefit most from it.

those who get this new money from them fastest benefit nearly as much.

those who get it last are the ones most harmed.

that’s it.

the reason is obvious: when you spend newly created money, you get to buy at the prices from yesterday. you are the new demand and the new spending. you are what starts to cause inflation. but you don’t face it like others will. you’re the one driving up the prices for the next guy. he pays for your profligacy.

and this not only causes all manner up upward pointing wealth redistribution based on proximity to the money spigot, it destroys the fundamental aspects of price and markets that make them free and useful allocators of scarce resources. ...




... taken far enough, you get stories like “workers demanding to be paid 3 times a day and running out on lunch breaks to buy any physical goods they can lay hands upon to try to protect the value of their earnings.”

you get the double whammy of more money supply AND higher velocity of money. inflation goes hyper.

this is weimar, zimbabwe, venezeula, argentina.

and so perhaps it is fitting that newly elected argentine president milei, who has such strong austrian economic grounding, should rise as a sort of populist standard bearer to make this clear.

despite his frequent “hot” outbursts and seeming over-simplification and emotive expression, milei is actually quite a smart and thoughtful guy. he understands this stuff. and he’s explaining it in a way that non-economists can understand.

perhaps this is the argentine “great communicator” for our age. whatever the case, he’s precisely correct here and does a wonderful job of laying this out for a general audience.

now ask yourself the real question: why is it seemingly impossible for the US to produce a presidential candidate with any remotely plausible chance of victory that even seems to understand this idea much less possesses the ability (or perhaps the willingness) to communicate it? ...

the evolution of justification is always the same:

deny
minimize/claim this was the plan
claim this is a good thing
blame it on you once it was obviously bad

... but it also makes those close to the money printer incredibly rich and this is why politicians and their corporate cronies (especially the big money center banks) love this. for them, it’s christmas every day. for the rank and file worker, it’s desiccated holiday trees for $275 and presents they can’t afford.

this is a truly epic scam and one which, once taken past a point, is near impossible to derail or even slow. ...

and until we break the ability to do so by, for example, ending central banks as milei proposes, an idea that’s not nearly as radical as it sounds and that makes more and more sense the more one looks at it or even extends it to ideas like “it’s time to take provision and control of currencies away from governments who clearly cannot be trusted with them” we’re going to make no progress here.

if you think the person in the oval office or the party running congress makes a whit of difference here, i fear you’re fooling yourself.

this has become structural.

a system this powerful, profitable, entrenched, and beholden cannot be fixed. it’s not malfunctioning. it’s working just as was intended.

it just does not work for you.

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Federal Reserve keeps the Fed Funds rate at 5.5% which is the highest its been in about 23 years: https://www.pbs.org/newshour/economy/federal-reserve-keeps-key-interest-rate-unchanged-and-foresees-3-rate-cuts-next-year

Speaking of inflation and economy, a friend of mine applied this past Monday for a $17 per hour cooking job at Panda Express at Panama City Beach's Pier Park.

He said there were 8 other people applying for the same job. Granted, it is off-season (mid November to early March).

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S&P 500 was flat from opening to 2 pm (Eastern), when the Federal Reserve made its rate annoucement.

Now at 3 pm (Eastern) the S&P 500 is up 1.2%.

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Patrick says

WTF with these ugly non-flying cars?

Patrick says

I just watched Asteroid City. Retrofuturist with WHITE PEOPLE in the cast.

I posted two recent articles about the Fed Funds rate.

I wonder if the current Federal Reserve Board wants to synchronized the Federal Reserve Funds Rate to a range of 1.5% to 2% above annual inflation when annual inflation is less volatile.

I remember reading that the 10 Yr Treasury should steady around 3% when annual inflation is tamed at 2%, and that the 30 yr mortgage rate is usually about 1.5% above the 10 Yr Treasury ( ref: https://www.mortgagenewsdaily.com/mortgage-rates/30yr-treasuries )

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https://www.usatoday.com/story/money/2023/12/17/lower-interest-rates-affect-savings-investments-debts/71932702007/

But the campaign of rate increases is probably over, Federal Reserve Chair Jerome Powell signaled on Wednesday. What’s more, Fed officials predict they will lower the benchmark federal funds rate by three-quarters of a percentage point next year, bringing it down from a 22-year high of 5.25% to 5.5% to a range of 4.5% to 4.75%. The current annual inflation rate measured by CPI is at 3.1%.

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https://www.forbes.com/sites/forbesfinancecouncil/2023/12/11/for-decades-fed-funds-remained-higher-than-the-inflation-rate/?sh=239f59a7c3e1

Between November 1980 and November 2002, the Fed funds rate consistently exceeded the U.S. inflation rate. The average fed funds rate over those years was approximately 6.87%, while the average U.S. inflation rate was around 3.70%.

Since the Fed Funds rate and interest rates are at least not increasing, bond mutual funds should fare better in 2024. This holds true for those investing in balanced mutual funds like 60/40 funds (i.e., 60% stocks / 40% bonds).

Banks that own US Treasury assets will see an improvement in their balance sheet also. Bank stocks have been beaten down in 2023.

Look at how hard of a drop for Vanguard's Total Bond Market Fund when the Fed Funds rate increased from 0.25% to 5.5% in 2022 and 2023.



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https://babylonbee.com/cleanArticle/ron-paul-asks-santa-clause-to-end-the-fed-for-the-47th-straight-year

https://sukwan.substack.com/p/midweek-memes-ac4

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From what I recall usually the Federal Reserve maintains the Fed Funds rate above the inflation rate by 1.5%.

This 1.5% gives enough margin as far as ensuring that hyperinflation does not occur due to significant decrease of the Fed Funds rate.

Of course the Great Financial Recession (2008 to 2016) was the exception.

Usually the 10 Year Treasury is around 1.5% above the inflation rate and the 30 Year mortgage rate is 1.75% above the 10 Year Treasury. So a 2% inflation rate would equate theoretically to a 5.25% rate for the 30 Year mortgage.

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The Fed will lower interest rates under 3% as a mild recession leads to a 'soggy 2024,' UBS chief economist says

https://www.businessinsider.com/fed-rate-cut-outlook-economy-recession-forecast-2024-inflation-ubs-2023-12

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ad says

The Fed will lower interest rates under 3% as a mild recession leads to a 'soggy 2024,' UBS chief economist says

Then inflation will rage.

UkraineIsFucked says

ad says

The Fed will lower interest rates under 3% as a mild recession leads to a 'soggy 2024,' UBS chief economist says

Then inflation will rage.

Not sure it will.

If the Fed Funds rate is reduced from 5.5.% (a 23 year high) to 3% and continues quantitative tightening (i.e., not buying any new Treasuries and mortgage back securities) , then it will not create a hyperinflation environment like what occurred during the pandemic with a Fed Funds rate of 0.5% and quantitative easing as well as massive federal government stimulus.

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ad says

create a hyperinflation environment like what occurred during the pandemic with a Fed Funds

There was no hyperinflation during the pandemic.

Inflation and hyperinflation are two different things.

UkraineIsFucked says

ad says

create a hyperinflation environment like what occurred during the pandemic with a Fed Funds

There was no hyperinflation during the pandemic.

Inflation and hyperinflation are two different things.

okay, CPI did peak to 9.1% annually in June 2022 ... it now is around 3.1% ...

true, hyperinflation is like what went on in Argentina such as +30% annual inflation ..

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ad says

true, hyperinflation is like what went on in Argentina such as +30% annual inflation ..

Not even that is Hyperinflation.

UkraineIsFucked says

Not even that is Hyperinflation.

ok like 1920s Germany

If you don't understand how bad inflation is already, go out and get a minimum wage job in any state, and live on that. Used to be possible...

NuttBoxer says

If you don't understand how bad inflation is already, go out and get a minimum wage job in any state, and live on that. Used to be possible...

Correct. Around here, that $15/hour sounds great until you realize any nearby apartments rent for $1700/mo and you cannot afford even an old car when you have food and utilities to pay. Hope you like you roommate.

https://babylonbee.com/cleanArticle/selena-gomez-explains-to-taylor-swift-how-the-federal-reserve-creates-boom-and-bust-cycles-through-manipulation-of-interest-rates-and-fiat-currency

100%

I get angry when I repeatedly hear about how my tax dollars are being used in efforts to destroy me.

* Unlimited "immigration" where immigrants are given money, housing, and preferential treatment.
* Garbage DIE positions paid for with tax money.
* Racist affirmative action policies that cheat my kids out of their chances in schools funded by tax money.
* Corrupt LE/judicial/intelligence agencies who go after the people they're suppose to protect, paid for with tax money.
* Foreign aid money laundering schemes

It just goes on and on.

It's all tied into this captive dollar system. If you can break out of it, stop using their money, stop funding your own destruction, it would be a big step forward. Of course, they'll say any means of doing so is illegal, but I'm done with taking orders from a lawless, murdering cabal. They have no moral high ground on anyone. They only have the threat of violence at this point. So, treat them like you would an occupying force. Trade, barter, hide, subvert and deny everything.

Karloff says

Trade, barter, hide, subvert and deny everything.

Yeah, they want a digital currency system to outlaw the use of cash.

They can track your spending and shut it off, as well as make sure you are paying taxes such as a small business owner.

I think The American Redoubt movement has applied this concept as far as trade and bartering to avoid the use of being tracked such as credit cards, checking accounts, etc.

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NuttBoxer says

If you don't understand how bad inflation is already, go out and get a minimum wage job in any state, and live on that. Used to be possible...

Was it really?

UkraineIsFucked says

Central Banks like bullets don't have agency to enact/raise taxes. That is what legislatures do.

Yes they do. The Central Banks can simply increase interest rates, whenever they damned well please. They can deny a loan to congress. They can printe a trillion dollars and hand it out to a few 1000 "friends" to buy strategic industries.

It's our actual government. They can buy anything from a person to a war. They have unlimited funds. They aren't audited. You have no idea how corrupt it is, and as long as people don't know how fucking corrupt it is, it's going to stay this corrupt. The people that run the Federal Reserve don't work. Why would they? All they make, is money.

richwicks says

Yes they do. The Central Banks can simply increase interest rates, whenever they damned well please.

That's not a tax.

Buy a dictionary.

richwicks says

Yes they do. The Central Banks can simply increase interest rates, whenever they damned well please. They can deny a loan to congress. They can printe a trillion dollars and hand it out to a few 1000 "friends" to buy strategic industries.

I thought the law and/or its charter only allows the Fed to buy US Treasuries and mortgage backed securities.

I agree Rich as far as denying a loan as they can refuse to engage in quantitative easing (QE) to add more US Treasuries to their balance sheet.

At least the Fed's balance sheet shows $7.7 trillion compared to its all time high of $9 trillion in 2022. It was $4 trillion in early 2020 and $4.5 trillion in January 2016.

https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm

...
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To be more accurate, they can attempt to manipulate interest rates. And lowering rates increases inflation, which is the largest tax on us. If you only believe taxes are what comes out of your check, that's because central bankers are very good at lying.

Interest rates, just like everything else are subject to free market forces.

AD says

Technically, he didn't want the money because the Hutts who ran Tatooine forced everyone to use THEIR issued money and charged an exchange 'fee' when converting Republic money.