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“Let’s do a central bank digital currency.” - @SenWarren

Let’s not. Do you want our children to live in a dystopian hellscape where every transaction is monitored and controlled by central bankers and politicians?

pic.twitter.com/7786ukaYL6

— TFTC (@TFTC21) November 22, 2023

Let's get this out of the way first. This is going to be the least grammatically correct post in TFTC history. I am not a writer. My only "claim to fame" for writing is 13 years ago when Barstool Sports was hiring a Philadelphia writer I knew his writing was too good to be from a Philadelphia school system and it turned out I was right (shout out Mo, great writer, better person) and he lived in Brooklyn and went to Rutgers but somehow that started the career that leads me to write this today. Anyway,

I think we need to build an "internet test" sort of like the driver test you take when you are 16 trying to borrow your mom's car to hopefully get to second base with the girl who is way smarter than you in your 7th-period geometry class for anyone over the age of 50 and especially for politicians.

I know Elizabeth Warren knows nothing about Bitcoin. We all do. We can all rant and rave on Twitter, and give our snarky remarks but really that does nothing. We need a true "internet test" for anyone over the age of 50 to see who actually has any idea what they are talking about on Bitcoin or Internet-related issues.

A car is a powerful tool, so is the internet and it's in every fabric of our lives so why the fuck do people get to talk about it and vote on it when they couldn't pass a simple "internet test" if it was mandatory? I got no clue but I need your help. Let's build an "internet test" A simple 10-20 question test that every time someone talks about Bitcoin or any other emerging technology we can just send to them and say "Take this so I know how fucking stupid you really are" There has to be a way to do this. If someone developer is bored and wants to build this with me, email me louis@mash.com because complaining on Twitter does nothing. Let's see if anyone in politics could pass the "2+2=4" of an internet test.

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Home ownership was supposed to be the American dream, the thing to which the entire middle class could not only aspire but also achieve. That dream has turned into a nightmare, thanks in large part to the Biden administration and the big spenders in Congress. Now home ownership is increasingly out of reach for Americans.

The Federal Reserve Bank of Atlanta began maintaining a Home Ownership Affordability Monitor Index in 2006 because homes were so unaffordable at that time. The latest reading from that index, which has plunged 36 percent since President Joe Biden took office, is the lowest in its history and indicates record unaffordability. It now takes 44 percent of median income—before taxes—to afford a median-price home.

It’s even worse in several major metropolitan areas across the country. The cost of a median-price home is 50 percent of median income in Boston, 55 percent in Miami, 63 percent in New York, 84 percent in San Fransisco, and 85 percent in Los Angeles. But these are percentages of before-tax income, which means the cost of home ownership in some of those places exceeds 100 percent of net income. “No joke,” as Biden would say.

And it’s not just a problem in a few major cities—it’s everywhere. A recent report estimated the affordability of the median-price home for the average American in 572 counties. Going through the data in the report reveals that homes in 99 percent of the country are below the affordability threshold, meaning that they cost more than 28 percent of a family’s income.

>>> How Bidenomics Wrecked America’s Housing Market

What’s even scarier is that measurements like the one from the Atlanta Fed are underestimating the problem. Their index assumes a buyer has a 10 percent down payment, but most people can only comfortably afford a 3 percent down payment. If the median prospective buyer wipes out all his savings, he still only has enough for an 8 percent down payment.

Putting less down means a larger loan, which means larger monthly payments, which means lower affordability. Additionally, interest rates have continued to rise and are now over 7.6 percent, compared with the 6.8 percent used in the Atlanta Fed’s calculations. Home prices have also risen, and both factors further increase the monthly payment on a mortgage.

How we got here is a lesson in excessive government spending.

During the pandemic, the government spent trillions of dollars it didn’t have and created money out of nothing to pay for it all. In 2021, instead of allowing government spending to return to normal levels, Biden and a spendthrift Congress rammed through trillions of dollars in additional spending while the Federal Reserve continued creating money to finance the deficit spending.

The predictable result was 40-year-high inflation. That sent prices, including the prices of homes, through the roof. Artificially low interest rates compounded the problem by allowing people to take on ever-growing mortgages without increasing their monthly payments. Home prices rose even higher.

But inflation caused people’s real (inflation-adjusted) earnings to fall and forced interest rates to rise. This was a deadly combination for home-ownership affordability.

Lower real earnings mean everyone is spending more on food, transportation, energy, etc., with less available in their monthly budget for housing. At the same time, home prices have been pushed to record highs and mortgage rates are at the highest level in 23 years. At the same moment as people have less money to pay for housing, the price of housing has shattered all previous records.

>>> Biden Is Killing the American Dream of Homeownership

To be clear, the foundation for this problem was laid long before Biden became president. The Fed’s persistently artificially low interest rates have been causing asset bubbles for two decades, and its purchase of housing-related financial derivatives has further buoyed housing prices.

In the years immediately preceding the pandemic, the Fed had begun a tighter monetary policy, which helped blunt the inflationary impact of government spending in 2020. But Biden’s continued overspending, excessive borrowing, and oppressive regulating—along with creating money to pay for it all—gave the problem a violent shove into overdrive.

For example, impractical corporate-average-fuel-economy and heavy-haul-emissions standards—along with higher fees on coal-power plants and leases for oil and gas wells on public lands—have all increased energy and transportation costs, which have trickled down throughout the economy, raising prices everywhere.

Had Biden not imposed these regulations and merely allowed spending to return to previous levels, the problem, and $2 trillion annual deficits, could’ve been avoided. But now we’re trapped in a nightmare it’ll be hard to wake up from.

This article was originally published on Heritage.org

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Are we about to repeat the lost decade of the 1970's?

Today’s stagflationary economy -- with high inflation and slow growth -- will look familiar to anybody who lived through the 1970’s.

Not only the stagflation, but the social unrest, decaying cities and political polarization all feel eerily familiar to those who thought gas lines, bellbottoms, and Captain and Tennille were all behind us.

For the past year my base case has been that we're repeating the 1970's economy. The most salient feature of which was a double-peak staginflation that ultimately lasted roughly 8 years.

Perhaps this time paired with a 2008-style financial crisis that will ultimately convert into even more inflation.

What Happened in the 70’s?

The story starts in the late 1960’s, when the federal government went with “guns and butter.” Meaning enormous welfare spending on Lyndon B Johnson’s “great society” on top of the Vietnam war and the other myriad wars our military industrial complex demands.

Guns and butter drove up inflation: It had averaged around 1% from 1952 to 1964, but starting rising in 1965, hitting nearly 5% by 1968 and 6.5% by 1970.

At the time foreign countries could redeem their dollars for gold held by the US government. America’s inflation led these countries to fear the dollar would be worth less in future, so they began selling their dollars for gold. Most notably France, which sent a battleship to pick up 92% of the reserves they’d parked with the US in 1940 to pay for warplanes.

At this point Nixon could have tried to cut spending to reassure other countries — and reassure the American people — that the dollar was solid. Instead, of course, he “temporarily” suspend gold conversion. Which effectively killed the gold standard that had acted as that last constraint on US deficits and money printing.

As always when government breaks something, 53 years later we’re still under that “temporary” suspension.

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From Nixon to Stagflation

Once Nixon broke gold conversion, the gloves were off. Nixon's Shock led to a decline in inflation for a single year, at which point it began a relentless march up, hitting 12% by 1974.

By the way, the Arab oil embargo, which is widely scapegoated for the 1970's inflation and was in response to US support for Israel, didn't even start until inflation was already 8%. It certainly didn't help quadrupling oil prices, but inflation was already soaring -- oil just piled on.

Facing 12% inflation, like today the Fed furiously hiked rates. Which did bring down inflation for a couple years. At the cost of a savage recession as the private sector was choked off -- note that, like today, government spending didn't fall, just private spending. In the first quarter of 1975 the economy contracted by 5% annualized, reported at the time about twice that.

This scared the Fed, which is constantly walking a tightrope between public anger about the inflation they cause and public anger about the recessions they cause. So the Fed pulled back and allowed rates to plunge once again into negative territory.

This sent inflation soaring again -- the infamous "camel back" shape I talk about in the daily videos.

The Second Stagflation

This second inflation was actually much worse than the first, lasting almost twice as long -- more than 5 years versus the original 3 years — and hitting even higher levels of price increases.

At the time commenters worried that inflation might be permanent.

But it was at that moment that the country got the hero it needed: Fed Chair Paul Volcker. Ironically appointed by the inflationist Jimmy Carter, Paul set to work hiking rates to previously unimaginable levels, hitting 17% by 1980 and 19% by 1981.

This, predictably, set off a series of savage recessions that cost Carter the presidency -- unemployment hit 10% and stayed there for a year. But public anger over inflation had gotten to the point tough medicine was needed, and indeed 19% rates finally killed the inflation, leading to the "Morning in America" economy of the 1980's.

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The 1970’s were brutal for workers, they were brutal for households struggling to buy food, and it was brutal for investors — adjusting for inflation, stocks didn’t recover until 1995. They held up better than dollars, of course, which never recovered.

At the same time, the 70’s were harmless, even glorious, for any investor who held real assets. Housing kept up with inflation, as it tends to do, and given cheap Fed money going into the 70’s homeowners actually came out ahead.

Meanwhile, gold went up 15-fold, even faster than oil. Silver went up 8-fold. We can only imagine what Bitcoin might have done.

Lessons for Today

My biggest fear is that if we’re reliving the 1970's it could last a lot longer this time. For two reasons: Volcker and Debt.

First, Volcker. We’re very unlikely to get another savior because Paul Volcker was, from Washington's perspective, a huge mistake. His boss lost his job. In fact his party — the Democrats — lost their near 50-year monopoly on the Senate as control flipped durably for the first time since the Great Depression.

Washington won’t make that mistake again. Next time they’ll kick the can as long as possible.

The second reason is debt. In the 1970’s Nixon had just killed off the gold standard, and we didn’t have anywhere near the amount of debt that we have today. The federal debt in 1970 was just $380 billion. Today, of course, it’s over $33 trillion. Almost 100 times larger.

That means 19% rates would utterly destroy public finances. To give a sense, paying 19% on $33.7T in debt would be $6.5 trillion in debt service alone. On top of the deficits we already have, that would mean roughly $8 trillion in annual deficit — 40% of everything the American public earns in debt alone. There’d be nothing left to eat.

Meanwhile, similar levels of debt have built in the financial system, with private debt up roughly 50 times since the 1970’s. Business debt alone is up 40-fold. That means a 1970’s stagflation, even if it only lasts 5 years, would likely launch at least a 2008-style financial crash that would complicate things for a Fed whose reponse to every financial crisis is to pump up the money printing.

Conclusion

Of course, I could be wrong that we’re repeating the 70’s.

Perhaps because the pandemic lockdowns wiped out enough businesses that we’ve cleared the deadwood and will skip the next recession. Or perhaps because the Fed selling off government bonds — “Quantitative Tightening” — does the job.

Still, history says expect the worst. Because in 110 years the Federal Reserve has never brought down inflation at this pace without a deep recession.

Possible but very, very unlikely.

And when that recession hits, 110 years of Federal Reserve says they’ll respond exactly exactly how they did in 1975: With rate cuts that launch a second stagflation.

Could it be even worse? Sure, if the Biden administration keeps coming up with ideas so stupid they approach the catastrophic 1930’s Hoover-FDR agenda that turned a boring stockmarket correction into the Greatest Depression in a century.

Still, 1970's with a financial crisis is my base case. In which case a prudent investor would keep a bias towards hard assets — real estate, precious metals, and Bitcoin if you’ve got the risk appetite. All paired with a prudent spending and earning profile.

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Originally published on profstonge.com

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As you’re probably aware, Hollywood is completely shut down right now because both the writers and actors are on strike.

But there are a couple more strikes coming up that will affect you if they happen because they’ll shut down a great deal of our supply chain: UPS and Yellow.

Photo by Daphne Fecheyr on Unsplash

Craig Fuller, CEO of Freightwaves, said, “A Yellow shutdown (almost certain) and UPS strike would be a catastrophic/unprecedented shock to supply chains. Massive volatility, across all modes.”

If you haven’t heard of Yellow Transportation, they hold about 10% of what’s known as the less-than-truckload (LTL) business. Yellow has been hemorrhaging cash for years, and is now on the verge of bankruptcy. On top of that, the Teamsters are close to a strike—as soon as Monday—because Yellow has stopped paying into the pension fund. That has caused customers to drop Yellow, making matters even worse.

Meanwhile, the Teamsters are also butting heads with UPS, although the situation there looks somewhat more optimistic than Yellow: From The Washington Post:On Wednesday, UPS and the Teamsters, the union representing UPS workers, announced that after a two-week impasse, they had agreed to resume negotiations next week with time running out before the Aug. 1 deadline.While the two sides have resolved most of their issues, with UPS agreeing to install air conditioning in vans and eliminate a lower paid class of workers, they remain at odds over pay and benefits for part-time workers who make up more than half of UPS’s workforce.“I think it’s likely a work stoppage will occur and the key question at this point is how long it will last,” said Alan Amling, a fellow at the University of Tennessee’s Global Supply Chain Institute and a former UPS executive.

And UPS workers are already staging dress rehearsals for a strike:

As the strike deadline has neared, so-called “practice pickets,” or dress rehearsals for the potential strike, have sprung up outside UPS facilities from Hawaii to New York, with hundreds of Teamsters UPS members in brown work uniforms marching and chanting: “What do we want? Contract!”

All of this really hinges on what UPS and the Teamsters decide on in this week’s upcoming contract negotiations. While the industry is well-prepared for Yellow’s downfall, it’s not prepared for a shutdown of Yellow and UPS at the same time:

His projection of how a UPS strike would play out foresees that LTL carriers would be “flooded with freight opportunities.” Volume also would “show up” at FedEx, the U.S. Postal Service and parts of the DHL network. But the problem is that “they simply aren’t going to have the capacity” to handle the freight moving out of the UPS network.

Bottom line: if you have anything sitting in your online shopping carts, now would be a good time to buy it.

And if you’re a trucker or mechanic in the business, Freight Waves has advice on how to prepare your shipping company going bankrupt. If you work for Yellow, take your tools home now!

Article was originally from unprepared.life