Jelly Roll Joe
If corporate CEOs really were prosecuted for price increases — much like the show trials in Moscow in the 1930s or the ‘struggle sessions’ in Mao’s China — the country would slip backward and starve.
Thursday, May 16, 2024
Bill Bonner, writing today from Dublin, Ireland
Here’s the news from yesterday. First, the latest inflation data came out. Producer prices were a little higher than expected, but no big deal.
More interesting was this, from Fox:
Dozens of Democratic lawmakers signed a letter to President Biden, pleading with him to act on high grocery prices that have been slow to fall as inflation has come down.
The premise of the letter is, of course, preposterous. Biden plants no wheat. He is not about to set up a jelly roll factory. There is no way for him to lower food prices honestly. What’s more, a Fed study, announced yesterday, said corporate greed was not the cause of price increases. CNN:
Economists at the SF Fed found that corporate price gouging was not a primary catalyst for the inflation surge of 2021 to 2022.
But that didn’t stop the children’s crusade in Congress. Fox continues:
Sen. Elizabeth Warren, D-Mass., led the letter on Monday morning, calling on Biden to "exercise your executive authority to take additional action to address rising food prices without congressional action." Democrats asked Biden to direct his administration's Department of Justice to "prosecute actors in the agricultural and food sectors for price fixing and other anticompetitive behavior" and task the Commodity Futures Trading Commission (CFTC) and the Federal Trade Commission (FTC) with creating a joint task force with the purpose of investigating the manipulation of food prices.
That’s right. She wants Biden to use threats... and penalties — the brute force of government – to punish businesses that raise prices.
Of course, if they could be lowered by “executive authority” prices would never go up. The feds have plenty of lawyers; they could put all the major food company CEOs in jail... that would get prices down, wouldn’t it?
In the blatantly fraudulent language of modern politics this is called a “progressive” proposal, even though it would drag us back into the darkest days of price controls, shortages, and poverty.
System Collapse
And if corporate CEOs really were prosecuted for price increases — much like the show trials in Moscow in the 1930s or the ‘struggle sessions’ in Mao’s China — the country would slip backward... like the Soviet Union... until the whole system crashed and was discarded.
In other words, instead of worrying about the real cause of inflation — themselves! — lawmakers want to sic Justice Department lawyers on businesses that raise prices.
We looked at this as ‘self-limiting corruption’ yesterday. The more of it they do, the faster the system collapses.
Another way to look at it, which might be more helpful, is that as elites get more and more power, they become less benign, more out-of-touch with reality and more parasitical. Then, their societies gradually shift from voluntary, ‘gentle commerce,’ to coercive rules, regulation, laws and policies.
The shorthand version:
In win-win deals between willing participants, people pay one another to improve each other’s lives and thereby produce ‘wealth.’
Win-lose deals on the other hand, backed by government coercion, redistribute wealth…and destroy it. People get less of what they want (wealth) and more of what their rulers want them to have.
Heaven, Earth, Stocks, and Gold
There are more things in Heaven and Earth than are contained in our philosophy. But let’s work with what we’ve got. If correct, there are broad swings in markets — from bull to bear... fear to greed…and importantly, win-win to win-lose.
We’ve developed a leisurely trading strategy, our Dow/Gold timing model, to capture these market swings. If you’d begun following the model a hundred years ago — simply buying stocks at a Dow/Gold ratio of 5 and returning to gold when the ratio reached 15 — you would have bought stocks in 1924 and enjoyed the wild ride until 1929.
Ten little ounces of gold would have turned into 30 ounces, when you sold out. Then, you would have bought stocks again in 1932 and held on until 1959... for another 3x gain. Now you would have had 90 ounces of gold. The next move was in 1975... buying stocks and selling them in 1998... for another 3x gain.
In and out of stocks... only three times in a century... and you transformed $200 worth of gold into $644,000. No muss. No fuss. Probably the simplest, laziest, least ambitious ‘trading’ model ever. And it’s not even designed to make money, but merely to preserve wealth. (The full report on our Dow/Gold Trading Model is posted on our website, including the refinements that make it a little more complicated but vastly increase its returns.)
(Note: The updated version of this year’s Dow/Gold Report will be published on Wednesday, May 22nd, 2024)
What this shows is that there are enduring market patterns.
But there are other patterns too. Market patterns are not completely isolated from political... and mega-political patterns. Economist Murray Rothbard showed, convincingly, that Hoover and FDR actually prolonged and deepened the Great Depression. Then, LBJ’s Great Society and Vietnam war brought the inflation of the ‘70s.
More recently, 1982-2022, the Fed stopped inflation and then, in 2009, delayed a much-needed correction by pushing down interest rates to absurd lows (one percent for a full twelve months). Stocks rose for another twelve years, while investors gained more than 25,000 Dow points.
And now that the Primary Trend has turned, the parasite class seems to be doing all it can to make the downturn worse…turning it from a routine market trend into a political and social disaster. How? By squeezing out ‘gentle commerce’ in favor of its bombs abroad and bully tactics at home.
Stay tuned.
Regards,
Bill Bonner
PS Tom’s updated annual version of his Gold Report will be published next Wednesday, May 22nd, 2024 to paying subscribers.
Research Note, by Dan Denning
The communist solution to high grocery prices is starvation. For the sake of equality, we must all starve together. In capitalism, you either work or starve. In communism, you work AND starve. Key difference.
What are the billionaires doing right now? Not starving. But what did they do in the first quarter? Michael Bury—who shorted the housing market famously, as chronicled in the movie The Big Short—bought the Sprott Physical Gold Trust (PHYS).
Stanley Druckenmiller says he used the Perplexity AI software to find the five most liquid ADRs in Argentina and bought those. We asked Perplexity the question (although we’re not sure we asked it in exactly the same way). It gave us this list (not recommendations, by the way): YPF Sociedad Anonima ( YPF, oil and gas), Grupo Financiero Galicia (GGAL), BBVA Argentina (BBAR), Grupo Supervielle (SUPV), and Telecom Argentina (TEO).
And Ray Dalio? He believe’s there’s a 35-40% chance of civil war in America. Dalio’s firm, Bridgewater Associates, owns 2% of Sprott Inc. (NYSE:SII).
When I was a child, and watched how the hippie’s, communist and liberals acted in my neighborhood of NY City, with the drug craze, anti-American rhetoric and school promoted hatred and disrespect of elders, it was then at a young age that I realized liberalism was a mental disorder. I’ve been explaining it to people for decades, even had an old radio personality take my saying and become famous for that fact. If you still have any doubt of that truth, look at the democrat party today. If you can’t see it, you are most likely a liberal, and the rest is self explanatory 😵💫
Those elected to serve in Washington tend to come from the elite class, and whatever their roots, they are now part of that class, and thus their loyalty and motivations tend to serve the interests of that class. And they are surrounded and supported by the leaders and employees of the federal agencies and apparatus who tend to share similar interests.
Those elected to office are motivated to seek re-election, but find it easier to manipulate the media - even through blatant violations of the First Amendment - than to actually try to help their constituents. And of course, the help that is needed most is to reduce dramatically the regulatory load, which is directly contrary to the interests of the regulatory apparatus that they have built up.
Sad to say, I don't think we can elect our way out of a problem we have elected our way into. Many will protest that they didn't vote for our current situation, which is true, but here we are. I am reminded of the quote by Lysander Spooner: Our Constitution is unfit for purpose. It either authorizes such behavior as we now behold, or is powerless to prevent it.
Of course, there is also the quote, attributed to Jefferson, I think, that says: Our constitution was designed for a virtuous and honorable people, and will not serve for any other.