Hope Less
It's worse than economists expected...
Joel Bowman, reckoning today from Buenos Aires, Argentina...
Work is no disgrace: it is idleness which is a disgrace.
~ From Works and Days, by Hesiod, 8th century B.C.
Inflation was the big news this past week. That, and America’s rapidly vanishing workforce. Is there a connection between the two? Dots... dots... dots...
First, let’s follow the money...
According to the Bureau of Labor Statistics (BLS), consumer prices rose 7.5% last month, their fastest rate in forty years. That figure was “worse than economists expected,” per an article on CNN... although the author was quick to point out that those same economists remained “hopeful that America will reach the peak of the pandemic-era price increases in the early months of 2022.”
We were hopeful, too... until we did a word search in the article itself and found the collocations “money printing,” “balance sheet” and “quantitative easing” turned up zero (0) results. (Just kidding... we brooked no hope from the outset.)
To be sure, hope can be an honorable virtue. It sustains us during trying times, when our mettle is really tested. It might help us endure a period of economic hardship, say, or survive an unjust prison sentence, or even get to the end of a Hannah Gadsby “comedy” routine. (“Is it over yet? Dear God, tell me it’s almost over!”)
And yet, for all its staying power, hope is by nature palliative; not curative.
As much as hope may help us deal with the reality in front of us, in other words, it is practically powerless to alter it. Economists can “hope” all they like that their “transitory” inflation recedes like the tide... but unless the Feds actually power down their printing presses, all their supplications and wishful longings will be in vain.
In the end, there’s only one thing - ceteris paribus - that will cool inflation: less money chasing the same amount of goods.
Falling Behind
On this front, former Federal Reserve insider, Thomas Hoenig, is a rare duck among modern economists. He says the US faces a day of “reckoning” for its profligate ways.
In an interview with Barron’s, Mr. Hoenig shared his thoughts on the impact of inflation for the average American...
People are, if nothing else, sensitive to high inflation. They know what it is doing to them. They know they are losing ground across the board. When you go to the grocery store, you see the inflation and that is what people are paying attention to.
Folks know what’s up, in other words. And they know what’s coming down the pike ain’t pretty. Here, Mr. Hoenig with some more straight-up truth-talkin’...
It’s going to be a very difficult couple of years for the U.S. economy and the Federal Reserve. If they raise rates to bring inflation down, then the hard part begins. Because when that happens and the economy begins to slow, they’ll worry about recession. There’ll be a likelihood they ease policy again even while inflation remains four to five percent.
What does this mean for the average Joe? Hoenig, again...
If you’re a wage earner you’re going to fall behind … you have to borrow more or commit more of your income to housing.
And energy. And food. And clothing. And, well... at some point, even the most Hopeful Harry begins to wonder...
If wages aren’t keeping pace with inflation... if the Feds steal the value of a dollar quicker than one can earn it... if tomorrow is being auctioned to pay for yesterday’s debts... what’s the point of working at all?
Mind the Slippage
Which brings us to the connective tissue between Dots One and Two... task and reward, work and wage, job and bacon.
We hear a lot about monthly jobs reports... and their inevitable revisions. But what jobs are we really measuring here? And what of the myriad variables? The pliable inputs? Data “slippage”?
What about seasonal jobs vs. lifelong careers? Full time vs. part time? U6 vs. U3? Hospitality vs. manufacturing? Minimum wage vs. high-rollers? Private vs. Government? What about population adjustments? Demographic shifts? Onshore vs. offshore? Stopgap vs. permanent positions?
Clearly, the figures are prone to being goosed, obfuscated, tortured... made to sing like a prison canary. One measure, the labor participation rate, shows the American workforce growing steadily for half a century, from around 1950 through 2000, before rolling over in cyclical decline...
(Source: US Bureau of Labor Statistics)
Could the corruption of honest money have anything to do with this trend? And what might an acceleration of that debasement portend for the months and years ahead? And finally, what would the Bureau of Labor Statistics (BLS) be without the Labor, other than pure BS?
Meanwhile…
BPR Investment Director, Tom Dyson, has been keeping an eye on ways you can navigate the “inflation volatility” he sees ahead. As he explains below, Tom has engaged “maximum safety mode” on his family savings, stashing most of his wealth in gold… while also scouting out opportunities in what he calls “Old Economy” value plays.
These are steady, stalwart companies, operating in lucrative industries with plenty of cashflow, that have been generally overlooked in the mad rush to find the
”next shiny thing.” You can sign up to receive Tom’s weekly investment updates, in addition to all our private research, for less than $2/week, right here…
And now, here’s Tom Dyson with a postcard from his hometown in the UK...
Greetings from Chiswick, London!
Penny has started karate lessons at the church. Dusty and Miles also go to the church, for the after school Youth Club. And they’ve started winter cricket training in the gymnasium at the local school.
Other than that, we’re all just working hard on our studies. Kate and the kids are doing homeschool and I spend my days looking for inflation-nullifying old economy stocks that pay dividends and writing research that will help my readers husband their savings through the inflation that’s coming…
My family and I are a vagabond family. We travel from place to place, live out of a suitcase and homeschool the kids on the road. I left my career (in publishing) four years ago. We live off our savings and investments now.
We’re currently in London, squatting in my late mother’s townhouse which sadly, we inherited last year. We’re going to have a really fun few months living here and then we’re going to sell it and fly away… onto some new adventure, possibly in Mexico.
On Thursday, the Bureau of Labor Statistics reported its latest inflation reading. Prices are up 7.5% over the last 12 months. I worry a lot about inflation. As a family who lives off its savings, inflation is a HUGE risk to our future prosperity.
Secondly, I worry a lot about stock market valuations. The S&P 500 is trading at its highest valuations in history, which means, we can assume the S&P 500 won’t generate any return for investors over the next decade.
Finally, I worry about the integrity of national currencies. They’ve made such a mess of the world’s financial system, and spawned so much debt, I just don’t see how we can keep our savings in traditional bank accounts anymore, especially when they don’t pay any interest.
What’s a hobo family like ours to do?
We’ve put almost all our savings into gold. Then we’re going to go to a country where the cost of living is very cheap, and wait out the storm there. Finally, we’re going to try to earn a little income and capture a little growth from the stock market, with some tactical trades. Luckily, I’ve just spent the last three years learning all I can about mining, energy and shipping… so we’re well prepared for the inflation that lies ahead…
Tom
P.S. Here are the kids entertaining some friends from the neighborhood who came over for a visit last week…
And now for Bill Bonner’s missives from the past week...
The Land Before Financialization
The two big money makers of the last quarter century have been Wall Street and Silicon Valley. It’s been a puzzle to us. A real economy is based on give and take. And, generally, the more you give… the more you get.
Calling it Quits
Young people, 16-24, spend an average of 21 hours per week – equal to half of a full-time job – on social media. Unlike our money, time can’t be faked. Wouldn’t it be better to use it learning something useful?
The Some of Us
The government is never “all of us.” It’s some of us. There are those who govern and those who are misgoverned. Naturally, ambitious people aim for the cushy, front-row seats.
What We Paid For
In the early 70’s, about one out of every ten dollars of income came from government-managed ‘transfers.’ Now, it is one out of every three dollars. In gross dollar terms, that’s an increase from around $30 billion to over $3 trillion.
American Idle
If Freud is right, and work and love are the primary sources of human happiness, there must be a lot of idle, unhappy people. With no work to fill their time, maybe love becomes more important? Alas, that too seems to be out of reach.
And finally…
Don’t forget to look out tomorrow for our weekly Fatal Conceits podcast... the show about money, markets, mobs and manias.
In this week’s episode, we spoke with Harvard-trained geologist, all-round energy expert and man-of-letters, Byron King, about the Great Transition, renewable pipe dreams and the looming “molecule crisis.”
All that and plenty more, in tomorrow’s Sunday Sesh.
Until then...
Cheers,
Joel Bowman
Hope?
I would ask all economists to Hope in one hand and Crap in the other and see which hand fills up first.
By the FED not acting to the last two updates on inflation, confessing it is no longer "transient", but waiting to do anything until their next meeting is that like saying "Let them eat cake!" until we raise rates?