Crime and Punishment

Inflation "alarmism," political perps and power from the people...

(Source: Getty Images)

Joel Bowman, reckoning today from Buenos Aires, Argentina...

"A politician is a fellow who will lay down your life for his country." 

~ Mary “Texas” Guinan

Many are the brave, the patriotic... and the easily led. Barely a year ago, working Americans were urged to ignore what they saw before their eyes and felt in their pocketbooks: That prices were rising and, moreover, that they were rising faster than wages.

Back in July, when the inflation rate was running at a “mere” 5.4%, Senate Banking Committee Chairman Sherrod Brown charged his colleagues with a peculiar kind of monetary hypochondria, for seeing a mountain where there was but a molehill.

“They won’t say aloud what this ‘inflation alarmism’ is really about,” observed the democratic senator from Ohio, “they simply don’t want workers to have more power.” 

Chairman Brown, a career politician backed by an arts degree in Russian studies from Yale University, added insult to inanity when, at the very same meeting, he exhorted his fellow congressmen to “join the fight to make housing more affordable” and to help “curb Wall Street greed and excess.”

Now, we’ve never met Chairman Brown. For all we know, he could be even dumber than he sounds. But surely even a Yale graduate must recognize that the quickest way to disempower the average worker is to undercut the purchasing power of his savings. 

That is to say, generation-high inflation may seem like “alarmism” to multi-millionaire senators like the tone-deaf Chairman, but it’s a daily, sobering reality for the middle and working class Americans he so earnestly affects to serve... and whose taxpayer-funded salary he so breezily banks. 

Indeed, Chairman Brown has been serving his constituents - good and hard - for his entire adult career. Since entering public office, at the cocksure, world-improving age of 23-years old, Sherrod Brown has amassed a personal fortune estimated at roughly $10 million. Nice work, if you can get (someone else to pay for) it. 

But how does a humble public servant - one who has made a career railing against “greed and excess,” no less - build an eight-figure pile, 83+ times the median US household net worth, on a dot.gov salary? 

Ah, that’s a question for another day, dear reader. Maybe an upcoming Sunday Sesh... 

Suffice to say, working class “inflation alarmists” barely had time to digest the insult when they were told, in quick succession and from multi-decamillionaire politicians, that rising prices were merely “transitory,” then that they were actually good for the economy and then, most recently, that they were after all part of one’s patriotic duty... the “price we must pay”... you know, because... Ukraine. 

Nothing to do with $800 billion dollar federal boondoggles junky stimulus “recovery” programs, the likes of which senator Brown cast the final vote in favor of back in 2009... 

Nothing to do with the Fed “quantitatively easing” $8 trillion dollars into the economy’s track-marked veins since then... 

Nothing to do with pinning interest rates to the floor... or $1.9 trillion candy scrambles to fight The Covid... or $2 - $5 trillion in Build Back Whenever programs... (Manchin’s apparently ready to trade horses again...)

Yippee! Spending other people’s money has never been so easy!

Of course, one doesn’t need a bachelor’s degree in Russian studies from a fancy college to understand that, even if it is Brown and his gilded ilk doing the crime, it will be honest, hard working Americans copping the punishment. 

It’s central bank shenanigans of this sort that BPR Investment Director Tom Dyson calls, in no uncertain terms, “one of history’s great economic crimes”…

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Here’s a snippet from Tom’s monthly newsletter, delivered to paid subscribers this past Wednesday...

Saving is built into the DNA of mankind. You prepare for future (and unknown) economic risks by setting aside some of your surplus now. You delay consumption and gratification because you might need it later. Saving is the basis of capital formation and investment. 

Central banks, and especially the Fed, went against human nature by lowering interest rates to zero. By trying to avoid a recession and trying to eliminate the business cycle, they’ve tried to change human nature. Instead, they’ve distorted it. 

My own conviction is that the Fed committed one of the great crimes of economic history by pushing interest rates negative and then stoking inflation. It robbed savers of their purchasing power. It also undermined the delicate balance between savers, investors and consumers and inflated the greatest speculative bubble of all time, in all things. 

You should be thrilled–as I am–at the prospect that bank accounts could pay 5% again, bonds could pay 10%, great stocks trade at fair values and pay attractive dividends… and there’s no inflation. We’ll see. In the meantime….

Why are markets rising?

I’m wondering something. Why does the stock market seem to surge higher every time Powell tells us he’s going to aggressively raise interest rates? It’s not the reaction I would have expected. Higher interest rates should draw capital away from the stock, bond and property markets and into savings products.

But maybe something else is going on? Could Powell be acting as a beacon to foreign investors and his hawkish speeches are drawing savings from around the world into the USA and into dollar-denominated assets?

I haven’t seen this theory anywhere else and I’ve got no way to corroborate it. But I’m watching this carefully. If this is the case, it suggests raising interest rates won’t tighten financial conditions and won’t eradicate inflation. 

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While it’s true that there is a lot of negative sentiment out there, it’s also the case that certain industries perform better during difficult times, like recessions. 

In this month’s newsletter, Tom focused on exactly these kinds of opportunities. “When prices rise,” he wrote, “people tend to spend more on staples (food, gas, toiletries) and less on discretionary things (restaurants, movies, vacations). They also tend to spend more on things that can alleviate (or dull) the psychological pain of a recession.”

Along with one potential short play he’s got an eye on, Tom also introduced a “counter-cyclical, possibly immoral (‘sin stock’) idea” hovering a penny above his “buy zone.” 

Typically, so-called “sin stocks” perform well during economic downturns, and this one could prove an excellent opportunity to offset the “inflation volatility” he expects to continue for the foreseeable future... 

If you’d like to begin receiving Tom’s in-depth investment research, join us at Bonner Private Research today...

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And now for Bill Bonner’s missives from the past week...

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That’s all from us for today. Tune in tomorrow for your regular Sunday Sesh, where we take a closer look at all those faultless leaders, deftly guiding the ship to rock and ruin...

We also have an “on the spot” video we recorded with Bill Bonner up in the Calchaquí Valley, Salta. 

Until then…

Cheers,

Joel Bowman