On Quality

Plus, fibbing GDP numbers, F-35 flops and half a century repose on a small, Greek island...

(Source: Getty Images)

Bill Bonner, reckoning today from Salta, Argentina...

“There’s only one law that works in Argentina, the law of gravity.”

Investors are still trying to make sense of it. If inflation is going away…why is the Fed threatening more rate increases? And if the economy is so great, why are wages and corporate profits slipping? Fox News:

"The Fed’s been trying to put the brakes on, and it doesn’t look like the brakes are getting much traction," [Larry Summers] said.

Summers has a point. Inflation is easing…but not much. And debt is still going up. In other words, so far, the Fed has failed to turn the ship around. And it’s still taking on water. Here’s the latest from USA Today: 

US credit card debt hit a record high as inflation leaves consumers financially stressed

The latest data is a major reversal from two years ago when Americans were rapidly paying off credit card debt with stimulus money they received. And at the same time, they weren't taking on more debt to pay for big-ticket expenses such as vacations because of the pandemic. 

Real Mischief

Additional debt means that additional money has been put in the system. More money in circulation means more inflation. Remember, it is borrowing that brings new money into existence. The money only disappears when the debt is paid. Or not paid and written off.

Meanwhile, higher prices and lower real wages do their mischief. Here’s another tell-tale item from The Wall Street Journal:

Some 9.3% of auto loans extended to people with low credit scores were 30 or more days behind on payments at the end of last year, the highest share since 2010, according to an analysis by Moody’s Analytics

But wait. These are just numbers. And here in Argentina, for example, the numbers are almost all bad. But the quality of life can still be very high.

Quality is different from statistics. The statistics tell us that more cars are being repossessed. But first, the Repo man comes for the unemployed guy’s car. Then, he comes for your neighbor’s car. So what? It doesn’t really matter until the Repo man drives off in your car. That’s quality.

We’re reaching for a point, here. But we’re not sure what it is…so we will stretch out our arms and see what we can grab.

Time After Time

A few years ago, we saw an interesting story in The New York Times. A man in Chicago, a recent immigrant from Greece, was diagnosed with terminal cancer. He decided to go home to die.  

So, he moved back in with his parents on a small Greek island. To fill the time, he began working in his garden. Gradually, he felt stronger, and worked more and more. And then, in the evening, he got together with his neighbors at the local bar. They drank wine and danced.

Time went by. And he didn’t die; he lived for almost another 50 years.

This was altogether good news to him. But it was bad news to the US GDP. No heroic efforts to save him; the medical system earned nothing from him. No funeral was held. No flowers were bought. No wake was held. No hearse was hired. No casket was bought. No grave was dug and no lawyer got to read the will to the bereaved relatives. 

All in all, it was a very disappointing time for US GDP.    

But thank God for the F-35. Odometer reports:

At a whopping $1.7 trillion, America’s F-35 Joint Strike Fighter is the most expensive weapon in human history. The highly advanced vertical take-off and landing aircraft was supposed to be the low-cost fighter of the future. But after numerous delays, costly overbudgeting, and international partners dropping out, the price tag of the plane has only ballooned.

Things got especially bad when in 2015 the 5th Gen fighter lost in numerous dogfights to older F-16 and F-15 fighter jets.

The Cost of War

The cost of the F-35 program is now estimated – if all goes well – at about the same as Canada’s GDP…including all its new houses, its salaries, its government spending and maple syrup consumption. That money, in Canada, keeps people warm, fed, housed and entertained. Is it really equal to the value of a misbegotten fighter plane?  

GDP tells when the economy is ‘growing’ or when it is in ‘recession.’ If the F-35 were canceled, GDP would take a hit. Would we be worse off?

Numbers don’t fib intentionally. A 3 is fairly reliable. You can even trust a 5 most of the time. But put them into a BLS formula and they become a Congressman. Then, all the prime numbers, and all that are derived from them, become liars. Especially when they have decimals in them.  

More to come…

Regards,

Bill Bonner

Joel’s Note: Speaking of quality… over the weekend we promised dear readers/listeners a full transcript of the latest Fatal Conceits podcast episode, which we recorded last week with long-time friend of Bonner Private Research, Mr. Byron King.

We talk shadow Russian tanker fleets… where to next for gold… BRICS nations and the trend toward de-dollarization… potential war in the South China Sea… and plenty more during our hour-long discussion.

In case you missed it the first time around, you can listen in here… or read the complete transcript (just added under the recording, along with one of Byron’s essays, also promised in the episode, titled: Gaming America’s Next War).

There’s plenty of material in there to help you while away the breezy afternoons as you’re relaxing, stress-free, on your small Greek Island…

Byron King on Russia's Long Shadow

Please enjoy and, as always, feel free to share our work with those you think might enjoy it. Cheers ~ JB