Put on the Feed Bag

Mr. Sow-L (rhymes with Powell) is Chairman of the FEED (Feed Everyone Every Day). All the remarks below were taken from a recent barnyard speech he made in Washington D.C. 

Mr. Sow-L wanted to reaffirm that the FEED will not back away from its plan to require us to eat less each week. He overfed us for quite a while and he admitted it was time to remove the feed bag. While SOW-L indicated that we would definitely start us on a new and healthy diet, he was reluctant to begin it right now preferring to pin down the actual start date as sometime before Hell freezes over. 

Until then, he promised to keep force-feeding us another $120 billion ears of corn per month because he noted that many of us show acute signs of hunger, especially while watching reruns of the Little Rascals  on late night TV. 

He admitted that sticking with the $120 billion per month figure has been causing dramatic weight gain among the sow and pig population, but he believes that the weight gain has been the result of global warming and the Georgia Tech football team's record. It makes no sense to Sow-L to begin to reduce the number of corn ears in such an uncertain environment, especially since the Delta Delta Delta fraternity at Georgia Tech is going into Pledge Week.

His plan, therefore, is to hold numerous meetings over numerous months with his FEED Board over sumptuous salads and Twinkies to ascertain whether or not it is prudent to reduce the figure of $120 billion of ears to something more reasonable like $119 billion additional ears of corn. 

He admitted that adding so many ears of corn to the hog and pig population might cause even fatter results, but then reiterated that if the Tri-Delt thing kept up, it could spread to the GDI population. And then we would all be in real trouble. 

Nancy Pigosy and President Ride-M supported Mr. Sow-L's points and each promised to do what they could do separately to help the situation by using their debt powers to support infinite dollar outlays for feed, not only for pigs, hogs, and sows, but also for horses, cattle, sheep, and small dinosaurs. 

The FEED's next meeting is September 21-22 where they plan to assess the animal feed/weight issue again. Should the herds be growing in waist size, they will ponder the possibility of slowing growth to an extra $119 billion but they warned that such an extreme change could be unsettling to the gilt population.

One reporter pointed out that even a reduction to $119 billion was still a gigantic increase in corn and he wondered out loud when the FEED would begin to actually remove some of those gigantic piles of maize. Sadly he was stripped and whipped and relieved of his FEED badge.  Everyone knows that an actual reduction in corn piles could lead to mass starvation and possibly herpes. 

Inflation Madness

There are lots of people writing about inflation now. I guess it is cool now that inflation is higher. 

I don't mean to be a macro snob but I think inflation is one of the hardest things to understand and to write about. 

It seems simple on the surface. You go to the store one day and an apple costs a dollar. You go the next day and it costs two dollars. You didn't get a raise in your salary so if you buy the inflated apple, you now have a dollar less to spend on JD and artichoke hearts. 

Simple. Now extend the apple example to a basket of goods and services people usually buy each month and you can do the same kind of comparison. If it costs more to buy that bundle of goods and services this month, then we say there was inflation. If the cost of those goods was to fall this month we could call that deflation. 

What else? While we know inflation means we can buy less for a given income, what happens if your income is changing too?  That's were it starts to get more interesting. That's where we start saying more about the impact of inflation. Suppose inflation is 5% this year and you got a 6% raise? Hmmm. That means you can buy more goods and services -- not less. 

So what do we have to consider to know the impact of inflation? We need to know all the sources of income --- wages, salaries, benefits, dividend income, interest income, gambling profits, housing appreciation....please stop me. Clearly this means several things.

First, it means that inflation will likely have different impacts on different people. Kiltie might be doing great because he is a great investor while Gibson is suffering because of the decline in his rentals of surf boards. 

Second, if we can somehow add together all the various income sources of all the people, then we can talk about the macro impact of inflation. If price change is greater than income change, then we can say we have a national impact of higher inflation. 

Third, it is important to think about temporary versus more permanent changes in the impact of inflation. Economic data jumps around each month. There is a lot of noise in most economic time series. Like your weight. It goes up some one day; down some another day. What matters most to your belt is the trend. Is it getting looser or getting tighter?

That may be the hardest thing when it comes to understanding the impact of inflation. Let's suppose prices in June go up a bunch. It might be a one month thing. Maybe it is caused by weather in June. So you see that the inflation rate in June was high -- maybe 10%. A reasonable thing is to ask how much inflation has gone up over the last year, ending in June. Despite taking a longer term perspective in June, that big increase might calculate to a large increase in inflation over the past year. Was it a one-month thing or was it a 12 months thing?

That's what happened this year. Inflation went up by 5.4% in June compared to the previous June. A one year increase of 5.4%. That was worrisome. But really, it was mostly all happening in a few months. So we have to wait and see.

I looked at CPI data since 2011. Yes, inflation from July 2020 to July 2021 was 5.4%. In the previous three years (2018 to 2020) inflation averaged about 1.8% over each year.  How do you get from 1.8% per year to 5.4%?

Mostly because you had Covid and that caused negative inflation from February 2020 to to June of 2020. Almost half a year where the CPI never got above its value in February of that year. It was not until February of 2021 that the CPI began rising again. It rose a bunch between February and July of 2021. 

What's the point? The point is that the rise of inflation to 5.4% is almost meaningless. It is covid induced and reflects prices falling and then rising. 

It is difficult to make any forecast of the future from this information. Its like steering your boat in a storm. You cannot make rational forecasts during a storm. Inflation has been tossed around in a storm. When the storm is clearly gone, then maybe we will have something to say.

When the storm clears, maybe the impacts of excessive money creation or government deficits will be more recognizable. Maybe all the experts should wait and give a chance for the clouds to clear. 

Bernie Sanders Wants Bold Action

Below I cut and pasted words from an article published in the Wall Street Journal by Bernie Sanders. I promise that while I didn't want to take all his words, I did not misrepresent his meaning. I took enough words so you could see what this guy wants to do to our country. 

Looking at each individual item, you might say he sounds reasonable. There is a lot in the USA that should be fixed. 

But pay attention to his last line where he concludes by saying "it is time for bold action."

Make no mistake, he wants to do it all at once within the scope of a $3.5 trillion Reconciliation Package. 

I don't need to say much else. I just ask you to read his words and then wonder if we can handle bold action. He is not the least bit shy here. And he shows absolutely no worry that we can make significant progress on so many fronts. You might say that if you don't wish big you won't ever reach your dreams. I could also say that if you wish too big then maybe you are in the wrong profession. Is he a politician or a preacher? 

It reminds me of you or me declaring that we are going to get really smart. It is time to act and so we are going to become really smart with respect to biology, economics, physics, astronomy, leg pain, cooking, habits of crows, and a few other things. 

It sounds good, right? But really, how do you quickly become an expert in all those areas? Bernie has no worry about doing a lot of things boldly at once. His actual words are below my summary of his list. What do you think? 

My summary: Make rich people pay their fair share of taxes, reduce the greed of pharmaceutical companies, reduce child poverty by extending tax credits, reduce our dysfunctional child care system by capping childcare expenses, expand higher education and job training by making community colleges free, guarantee paid family and medical leave to all, expand Medicare for seniors by making hearing aids and glasses free, provide healthcare to all uninsured people, provide enough doctors, dentists, and nurses in underserved areas, help seniors and others with disabilities to get care without leaving their homes, make unprecedented investments in affordable housing, provide pathways for citizenship for undocumented persons, move our transportation, electrical generation, buildings and agriculture towards clean energy,  and hire hundreds of thousands of young people to protect our natural resources and guard against global warming. 

That's all he wants to do. All we need is bold action. Below is much of the article he wrote. 

Bernie Sanders: Why We Need the $3.5 Trillion Reconciliation Package

• August 3, 2021

By: Bernie Sanders; Wall Street Journal

THE AMERICAN RESCUE PLAN BOOSTED THE ECONOMY DURING THE PANDEMIC. BUT IT DIDN’T GO FAR ENOUGH.

The bad news is that the American Rescue Plan didn’t address the long-neglected structural crises that many U.S. families face.

 We need structural reforms to improve the lives of U.S. families. If Democrats can’t get Republican support for these reforms, then we have to do it alone through the reconciliation process.

But we will use it (the reconciliation process) to support the middle class and struggling families and, in the process, create millions of good-paying jobs.

Here is some of what is in the $3.5 trillion reconciliation package that the Senate Budget Committee agreed to:

We are going to end the days of billionaires not paying their fair share of taxes by closing loopholes, while also raising the individual tax rate on the wealthiest Americans and the corporate tax rate for the most profitable companies in our country.

We will take on the greed of the pharmaceutical industry, which charges U.S. residents the highest prices in the world by far for prescription drugs. Under our proposal, Medicare will finally be allowed to negotiate prescription drug prices with the industry.

We will end the absurdity of the U.S. having the highest levels of childhood poverty of almost any major nation by extending the Child Tax Credit so families continue to receive monthly direct payments of up to $300 a child.

We will radically improve our dysfunctional child-care system so that no working family pays more than 7% of its pretax income on child care, and we will provide universal pre-K to every 3- and 4-year-old.

We will expand higher education and job-training opportunities for students by making community college tuition-free for all Americans.

We will end the international disgrace of the U.S. being the only industrialized country not to guarantee paid family and medical leave. Women shouldn’t have to return to work a week after giving birth because they have no paid leave and can’t afford to stop working.

We will expand Medicare for seniors to cover dental needs as well as hearing aids and glasses. We will also make sure that we have enough doctors, nurses and dentists in underserved areas, while expanding Medicaid to provide healthcare to the uninsured.

We will give hundreds of thousands of seniors and people with disabilities the ability to get the care they need in their own homes instead of in expensive nursing facilities.

We will also address homelessness and the national housing crisis by making an unprecedented investment in affordable housing.

Further, we will provide undocumented people living in the U.S. with a pathway to citizenship, including Dreamers and the essential workers who courageously kept our economy running in the middle of a deadly pandemic.

Perhaps most important, we will begin the process of shifting our energy system away from fossil fuels and toward sustainable energy to combat the existential threat of climate change. This effort will include a nationwide clean-energy standard that moves our transportation system, electrical generation, buildings and agriculture toward clean energy. We will also create a Civilian Climate Corps, which will hire hundreds of thousands of young people to protect our natural resources and fight against climate change.

Now is the time for bold action.

Vietnam and Unfair Competition

Our leaders in Washington have been complaining about Vietnam and how they manipulate their currency so as to generate unfair competition for the USA. Their currency is known as the dong and that's another story but the rub comes because it is alleged that they purposely create and sell a lot of dong in international currency markets so as to cause the dong to depreciate against the dollar and other currencies. 

President Biden has backed away from naming Vietnam an unfair competitor, a label created by President Trump. But there remain negotiations between our nations and Vietnam has promised not to engage in predatory exchange rate practices. The light still shines on them. 

One of my points is that this currency depreciation is an old story and doesn't exist if data is true. But even if it were true, complaining about Vietnam brings about my second point. That is we must have gotten really desperate to complain about a country that is both poor and tiny. 

Vietnam has 98 million people who earn on the average $3,600 per year. Yes you read that right. The average US citizen makes $63,000 per year. 

While their GDP per year is $355 billion, ours is  $22 trillion. Yep, they produce one third of a trillion and we produce about 66 times that. 

Here is a good one to think about. We export to the world each year $2.6 trillion of goods and services. We import $3.2 trillion. Vietnam exports $290 billion. While Vietnam punches above its weight in trade, their total exports to the entire world only amount to about 9% of what we buy from the world. Or put another way, even if we stopped all imports of Vietnamese goods and services, US imports would still be $2.9 trillion and our trade deficit would still be about $300 billion.

We are worried about unfair competition from Vietnam?

Back to the Vietnamese currency issue. Between 2003 and 2012 the dong depreciated against the dollar by 35%. Between 2012 and 2021 the depreciation was a total of 14%. Between 2019 and 2021 it was zero. Zilch. Nada. 

Hmm. We all know that Vietnam is a developing country. It is a poor developing country. A novice boxer needs to attend to a lot of skills and practice before entering the ring. Vietnam is in a very competitive ring. We have bigger eggs to fry than to complain about unfair competition from Vietnam. 

                                    Vietnam   USA

Population  (millions)         98          333

Percapita GDP ($)          3,600     63,000

Nom. GDP (Billions $)      355     22,000

Exports (Billion $)             290       2,600

Imports  (Billion $)             NA       3,200

Holiday

 Hi all,

I'm on holiday this week. Enjoy your week off. 

Best,

Larry