It's Climate Change!

The devastation that Hurricane Ian has wrought on Florida is bringing out the usual suspects claiming that none of this would have occurred but for climate change.

Source: https://nbc-2.com/news/local/2022/09/29/swfl-cancellations-closures/

How do you get that type of flooding?

Here is a graph of the ocean levels in Fort Myers as monitored by the NOAA since noon on September 28 until 700pm on September 29.

The red line represents actual water levels and blue line is what is normally predicted.

At its peak, the ocean water level was 8.57 feet. That is over 7 feet higher than normal.

You take that storm surge from the ocean and the level topography along the coast and it does not take much to flood a wide area.

Can we not stop and and grieve some about the damages and losses that the people of Florida have sustained without immediately attempting to politicize it?

I guess not.

Here is CNN's Don Lemon attempting to get the Acting Director of the NOAA Hurricane Center to link climate change to the hurricane.

Source: https://twitter.com/tomselliott/status/1575062381763461124

Don Lemon may have grown up in Florida but he does not seem to have a very good grasp on the history of hurricane activity in that state over the years.

For example, meteorologist Joe Bastardi of weatherbell.com shared the historical hurricane activity in Florida and along the east coast of the United States in a Twitter post that reveals this fact that seems little known.

There were many more hurricanes to hit Florida and the Atlantic coast of the United States in 1916-1965 than in the following 50 years.

There have also only been three hurricanes that have hit Florida since 2015.

Irma   2017

Michael  2018

Ian  2022

Note that there were no hurricanes which made landfall in Florida in 2019, 2020 or 2021. 

Covid must have kept them away.

Florida also did not have any hurricanes that touched the state for nearly 12 years between 2005 and 2017.

No one seems to remember that right now.

A big reason these storms appear so much more destructive is that so much development has been done along the Florida coasts in the last half century.

There are many more people affected and a lot more property damage.

The area of SW Florida which has the most damage from Ian has seen a massive increase in population over the last 40 years.

Fort Myers, Fort Myers Beach, Sanibel, Cape Coral and Bonita Springs are all in Lee County.

Naples and Marco Island are in Collier County.

Population in both of these areas has grown about four times the size they were in 1980. 

Source: https://usafacts.org/data/topics/people-society/population-and-demographics/our-changing-population/state/florida/county/lee-county?endDate=2021-01-01&startDate=1980-01-01

Source: https://usafacts.org/data/topics/people-society/population-and-demographics/our-changing-population/state/florida/county/collier-county?endDate=2021-01-01&startDate=1980-01-01

This chart shows the increase in the overall population of Florida since 1900. 

Over 20 million people inhabit the state compared to less than 4 million who lived there when I first visited the state in 1955.

Of course, when assessing any connection between climate change and hurricane activity it is not wise to just focus solely on this one event or what has even occurred in Florida alone over the years.

What has happened globally with regard to hurricane activity over the last 40 years?

Based on the narrative you would think that there has been increasing global activity to go with rising levels of fossil fuel use and carbon emissions.

However, global data on the number of hurricanes since 1980 (the first year reliable satellite data was available) shows no discernible change in either their size or intensity since then.

Colorado State University tracks this data.

Source: https://wattsupwiththat.com/2022/09/29/after-hurricane-ian-no-trend-in-florida-landfalls-global-activity-trending-down/

A peer-reviewed study published earlier this year found that Atlantic storms had increased since 1990 due to warmer waters that are the fuel that drives hurricane activity.

However, the increase in storms in the Atlantic was more than offset by fewer hurricanes and cyclones in the Pacific which has seen cooling water temperatures.

This was not caused by human-caused climate change but a shift from El Nino to La Lina weather conditions over most of the time period studied.

These are the key points as published in that study "Trends in Global Tropical Cyclone Activity; 1990-2021" as published in the Geophysical Research Letters of Advancing Earth and Space Science.

Source: https://agupubs.onlinelibrary.wiley.com/doi/10.1029/2021GL095774

I am guessing Don Lemon, AOC, Al Gore, Greta Thunberg and Joe Biden are not subscribers.

May all of our thoughts and prayers go out to all those affected by the storm damage in Florida and elsewhere by Hurricane Ian.

The World's Wrongest Man?

I am not sure that anyone besides Dr. Anthony Fauci has been wrong about more things, on a subject that they are lauded by the media to be an expert on, than economist Paul Krugman.

Krugman is a Nobel Prize winning, former Princeton economics professor and New York Times columnist that seems to get almost everything wrong.

Here is a famous Krugman prediction from election night 2016 when it became evident that Donald Trump was going to be elected President of the United States.

Krugman told us that economic armageddon was upon us.

Source: https://www.nytimes.com/interactive/projects/cp/opinion/election-night-2016/paul-krugman-the-economic-fallout

Krugman believed the stock market would never recover due to the fact that Trump had been elected.

He concluded his column by stating we were heading to a global recession, with no end in sight.

What followed?

One of the strongest bull markets in history that was only tamed by the Covid pandemic.

However, even with Covid, the S&P 500 ended up 88% higher from the night of Trump's election until he left office on January 20, 2021.

What about that global recession?

It never occurred either until Covid policies resulted in mass lockdowns around the world.

Even with Covid, world and United States GDP per capita was higher when Trump left office compared to when he was elected.

Could Krugman have been more wrong?

Krugman is also the guy who last Fall was telling everyone that we should not be concerned about inflation.

It was likely just a temporary blip.

Credit:https://www.sltrib.com/opinion/commentary/2021/11/13/paul-krugman-history-says/

How did Krugman know?

He said an important indicator was the bond market.

Oh, and for what it’s worth, the bond market is in effect predicting a temporary bump in inflation, not a permanent rise.

Since Krugman made that statement long-term treasury bonds are down over 30%.

 

The 10-year Treasury bond is headed to its worst year in history.

 

Just since January 1 the 10-year Treasury bond yield has gone from 1.5% to nearly 4.0%.

Earlier this month Krugman was claiming that Bidenomics has been good for American workers.

Source: https://www.foxnews.com/media/new-york-times-paul-krugman-insists-bidenomics-have-benefited-american-workers-with-huge-employment-boom

However, that "huge employment boom" really is just bringing the U.S. employment situation back to where it was right before Covid.

There were 152.5 million employed in the U.S. in March 2020. There are 152.7 million today.

Source:https://www.bls.gov/news.release/pdf/empsit.pdf

Real wages (Wages minus inflation) have also fallen almost every month since Biden was elected.

Source: https://twitter.com/RolandBakerIII/status/1547231872685449223/photo/1

Real average weekly earnings have declined by 3.4% over the last year.

I don't believe most workers would agree with Krugman that we are in "boom" times.

You would think the fact that  Krugman has been wrong about so much that he might scale back his ego and his statements.

You would be wrong.

Here is Krugman on September 24 telling us not only that he invented the academic field devoted to currency crises but there is also nothing to suggest that a currency crisis looms for the UK in the near term.

A day later.

Of course, anything that Krugman has gotten wrong lately does not compare to his prediction about the future of the internet in 1998.

Fact check by Snopes.com.

TRUE.

Who is the world's wrongest man?

Paul Krugman could certainly give Dr. Fauci a real run for the money.

However, Fauci still gets the nod because the things he was wrong about cost so many so much.

The only one's damaged by Krugman have been those foolish enough to believe anything he says.

Interest Rate Winners and Losers

Interest rates are rising.

This is creating winners and losers.

The big winner is anyone who is relying on interest income.

For example, let's take someone who has had money invested in Vanguard's Federal Money Market Fund.

This fund invests in very short-term U.S. government debt securities with the objective of providing current income to investors while maintaining a stable $1 net asset value.

This is an alternative to a bank savings account for many investors.

Look at the distribution yield on this fund over the last 12 months. 

It has risen from .01% to 2.49% in seven months.

For someone with $100,000 invested, they would not have earned $100 in interest income from this investment in 2021.

Investors in this fund today can expect about $2,500 in annual income---a 25x increase.

Winner.

A big loser today is anyone who is in the market to buy a home and needs a mortgage loan.

30-year mortgage rates are now over 6.5%.

The monthly mortgage payment on the median asking price home in the United States is now about 50% more than it was a year ago.

Source: https://www.redfin.com/news/housing-market-update-welcome-to-the-new-weird/

Stock market investors are also big losers as interest rates rise. 

Stocks get much more attractive as interest rates decrease and much less attractive as rates increase.

The ultra low interest rates of the last decade persuaded many investors to abandon interest income investments in favor of stocks. There was simply no return to be had.

That process is now being reversed. 

We can see the pain being administered in this process every day of late.

Of course, the other biggest loser is the United States government which now has almost $31 trillion of debt it must pay interest on.

That really translates to the ultimate losers in the end.being the American taxpayer or those who depend on federal government spending.

The problem is that not only is the debt rising but the interest that must be paid on the debt is rising as well.

Source: https://usdebtclock.org

I doubt that many Americans grasp how serious this combination of rising debt levels and interest rates is.

This chart from Charlie Bilello provides some perspective of what this already means.

Interest expense has gone from $482 billion to $716 billion over the last twelve months.

As the debt and interest rates increase, the cost to finance the debt is rising dramatically.

Another chart from Bilello shows the difference in U.S. Treasury yields on 9/13/22 compared to 12/31/21.

Source: https://compoundadvisors.com/2022/10-chart-thursday-9-15-22

We are at the point now that a 1% increase in the average interest rate paid by the federal government will increase interest expense on the debt by over $300 billion per year.

A 2% interest rate rise will increase interest costs by over $600 billion.

A 3% increase in interest rates will increase interest costs by almost $1 trillion annually.

If you think these increases are far-fetched, a 3% pont increase in the average interest rate paid on federal debt would only take us to about a 5% overall rate. The U.S. was paying this average interest rate in 2009. It was paying 11.3% in 1981 in average interest rate costs the last time we had inflation anywhere near to what we have today.

For context, consider what the U.S. government is currently spending annually on various spending categories beyond interest on the federal debt.

The U.S is spending about $750 billion this year on defense spending.

The U.S is spending another $750 billion on all other so-called discretionary spending (education, law enforcement, government administration, public health, housing etc).

The remaining $4 trillion is spent on what are called mandatory programs.

Social Security   $1.2 trillion

Medicare, Medicaid and Obamacare subsidies    $1.7 trillion

Welfare, food stamps, etc.   $600 billion

Federal, military retirement and veterans' benefits    $500 billion. 

Something has to give if interest rates continue to increase as well as the U.S. federal debt.

This analysis indicates that interest expense will consume almost 40% of all federal revenues by 2052. It is less than 10% right now.

Source: https://www.pgpf.org/analysis/2022/09/higher-interest-rates-will-raise-interest-costs-on-the-national-debt

There appear to be no good answers on how this is going to play out if this accumulating mountain of interest expense is going to be paid.

Taxes are going to have to go up a lot.

Or federal spending is going to increasingly get crowded out by the necessity of paying the interest on the federal debt.

Or the Fed will have to reverse course on interest rates to save the federal government which will result in hyper inflation which will eventually wipe most of the federal debt away (and the fortunes of those who invested in the federal government debt and securities).

Makes sure you do what you need to do to be a winner rather than a loser as interest rates rise along with the federal debt.

Goodbye Mom and Dad

 I recently came across a letter a U.S. Air Force Academy first year cadet sent home.

Dear Mom and Dad Care Giver and Care Provider,

Things are going well here at the Academy.

I am learning a lot of things that will make me a better Air Force officer, warfighter and leader with character.

It is hard to believe that we were ever able to fight and defend our country without the diversity, inclusion, justice and identity-based training we have received.

I know I came here in order to be an Air Force pilot or be in the Space Force but this training has made me aspire to be a Diversity and Equity officer when I graduate.

My roommate has his  zie girlfriend partner visiting this weekend. He My roomie said she zie may be able to fix me up with a girlfriend  friend of hers zis for the football game on Saturday.

As you can see, I unconsciously slip into microaggression mode from time to time but I fortunately caught my mistakes before signing off.  Sorry for the cross outs above but I did not have time to rewrite the letter. 

I have to get to my next training session. In the last session we had to list all the animals we could think of that started with the letter G. I am thinking that we may be asked to do animals that begin with H today. 

I have one already in mind. HORSE.

Care Provider,  that came to me as I thought of the picture of your favorite horse, Man o' War, that you have in your office.

What a beautiful animal but I think you might want to take it down because we just don't know who you might be offending with that name.

Love,

Your son first born,

Tru

(P.S. I have decided that I should no longer be called Truman. I know you named me after Grandpa Care Provider but I don't want to risk offending someone here or to jeopardize my future career.

Yes, the letter is fictitious.

However, I couldn't help thinking what one of those young cadets might be writing to their parents about the new Air Force Academy training program.

Source: https://www.foxnews.com/politics/air-force-academy-diversity-training-tells-cadets-to-use-words-that-include-all-genders-drop-mom-and-dad

A diversity and inclusion training by the United States Air Force Academy in Colorado instructs cadets to use words that "include all genders" and to refrain from saying things like "mom" and "dad."

The slide presentation titled, "Diversity & Inclusion: What it is, why we care, & what we can do," obtained by Fox News Digital, advises cadets to use "person-centered" and gender-neutral language when describing individuals.

"Some families are headed by single parents, grandparents, foster parents, two moms, two dads, etc.: consider ‘parent or caregiver’ instead of ‘mom and dad,'" the presentation states. "Use words that include all genders​: ‘Folks’ or ‘Y’all’ instead of ‘guys’; ‘partner’ vs. ‘boyfriend or girlfriend.’"

This is the activity to name as many animals beginning with the letter G as possible.

It was designed to then compare answers to that of your squad to show the value of diversity of views and knowledge.

 

One slide in the presentation claims that D&I training is critical for "developing warfighters" to be "prepared to lead the USAF/USSF with character."

An Air Force Academy spokesperson said in a statement to Fox News Digital that the D&I training is to help prepare cadets for "warfighting effectiveness." 

I bet you feel safer and more secure already.

Doesn't this make you wonder who is in the leadership positions in our military today to sign off on this stuff and believe that it was going to result in a better fighting force?

What is incredible in all of this is that our military is facing shrinking numbers of young individuals who even have the the bare minimum in qualifications to be able to serve.

75% of Americans between the ages of 17 and 24 do not even meet the minimums to serve based on pure fitness standards due to education, drug use, mental issues, criminal history or obesity.

Source: https://www.novinite.com/articles/215900/75+of+US+Youth+are+Unfit+for+the+Military

Military recruiting this year has reached crisis levels.

Source: https://www1.cbn.com/cbnnews/national-security/2022/september/military-recruiting-hits-crisis-level-lows-americans-urged-to-return-to-a-society-of-service

The U.S. Army has only reached 52% of its recruiting goals for the fiscal year that ends September 30.

The other services are doing better in their recruiting but none will meet their goals this year.

For example, this is what an Air Force general recently told Congress.

"We've reduced our pilot shortage by 250 airmen, yet we still have over 1,600 pilot vacancies," Gen. David Allvin, USAF, told lawmakers during a recent military readiness hearing.

All of this is even more inexplicable considering that the target audience for military recruiting is probably people who are anti-woke by nature. They want to be warriors and our leadership seems more interested in turning them woke. 

Of course, this is the same military who last year was unwilling to consider any exemption requests (including religious) for the mandatory Covid vaccines.

The National Guard is on the verge of discharging 20,000-25,000 service members who had concerns about the vaccine.

Why would they follow through on these discharges in light of the readiness numbers? 

With what we know now, does any of this make sense?

You can also count on Biden's student loan cancellation executive order to only make matters worse for military recruitment.

Many college students join ROTC programs in order to pay for college and avoid student debt. Even more significant, many surveys show that 70% or more of all enlistments into our voluntary armed services is motivated by the opportunity for education benefits under the GI bill. 

I can assure you that the cancellation of student loans (and expectation that this is just the first step of more to come) will do nothing to help military recruitment.

Do liberals understand that cancelling student loan debt may eventually lead to the need to reinstate the military draft? It is an unintended consequence that should not be ignored.

We live in a world where little makes sense any more.

Men are not necessarily men.

Women may be men.

Men may be women.

Men may even become pregnant.

Weird people are called normal and normal people are called weird.

Whites cannot wear their hair in dreadlocks and blacks cannot open Mexican restaurants or they risk being accused of "cultural appropriation".

To add to all of this our military leaders seem more concerned with potential micro aggressions (asking someone about their Mom and Dad) than macro aggressions (threats from China, Russia, Iran and other enemies).

What is next?

Might I suggest prayer?

Are You Going To Get The Omicron Booster?

The Omicron booster is out and being heavily promoted by the Biden administration and the public health bureaucracy.

In fact, Joe Biden's Covid response coordinator, Dr. Ashish Jha, said this when the new booster was first rolled out several weeks ago. His recommendation was to get your Covid booster in one arm and a flu shot in the other.

Source: https://nypost.com/2022/09/07/wh-covid-head-god-gave-us-two-arms-to-get-double-shots/

Of course, I am still trying to figure out how the new booster was authorized for emergency use after only being tested for efficacy on eight mice at a time when Biden himself has admitted the pandemic is over.

Source: https://www.bbc.com/news/world-us-canada-62959089

We are told to not be concerned about the 8 mice because the CDC and FDA tell us that human trials are ongoing.

According to documents on the CDC website, human tests of Moderna's version of the new booster are still "ongoing." Right now, there is only final evidence from  "8-10 mice" per group."

The FDA's website shows for Pfizer the agency also relayed on the final study evidence from "8 mice." But human trials are also ongoing. So far, the new boosters "showed a similar local reaction and systemic event profile." That means side effects appear to be about the same including "mild to moderate injection site pain, fatigue, and muscle pain."

How has the uptake gone for the new Omicron booster?

It is early but it does not appear that there are millions of people lining up to get jabbed again thus far.

This CDC graph shows total daily vaccine doses delivered since they were first introduced in December, 2020.

Source: https://covid.cdc.gov/covid-data-tracker/#vaccination-trends

 

Since the new boosters have been made available total vaccine doses are running about 250,000 per day.

Within the first couple of weeks when the Covid vaccines were first made available the uptake was running about 1 million doses per day and that is when vaccines supplies were still too low for broad distribution.

When the first boosters were made available widely last October we were seeing about 1,500,000 doses per day.

At first glance it appears that a lot of Americans are not buying what is being sold by the Biden administration and the public health bureaucracy.

One prominent vaccine advocate has come out and stated he will not personally take the Omicron booster until he sees more data.

Dr. Paul Offit is Director of the Vaccine Education Center at the Children's Hospital of Pennsylvania and also sits on the FDA's Vaccine Advisory Committee.

Offit voted against a general authorization of the Omicron boosters at the FDA meeting in August on the new vaccines.

Offit is merely balancing benefits and risks of the vaccine which is what everybody should have been doing from the very beginning.

I find it particularly interesting to contrast the U.S. approach about the new boosters compared to some other countries around the world.

In Denmark, the official recommendation now is that no one under the age of 50 will be offered Covid vaccinations except those who are particularly vulnerable.

Source: https://www.sst.dk/en/english/corona-eng/vaccination-against-covid-19

Denmark is also no longer allowing any children under age 18 to receive the Covid vaccines except in very rate circumstances.

 

Source: https://www.sst.dk/en/english/corona-eng/vaccination-against-covid-19

Is Denmark ignoring "the science"?

What is particularly interesting is New Zealand, which previously had the most draconian Covid policies imaginable, and which mass vaccinated almost everyone, has reversed course with the new boosters.

When Prime Minister Jacinda Ardern was asked at a recent press conference about the new Omicron Covid boosters she had a rather shocking answer.

“There’s not many who are going down that track.”

Is New Zealand ignoring "the science"as well?

Are you going to get the Omicron booster?

My advice is the same as I gave in January, 2021 in a blog post entitled, "Are You Going To Get The Vaccine?" right after the Covid vaccines were first introduced.

 

The biggest misconception I see in people regarding the vaccine is that they believe it will prevent them from being infected with Covid or if loved ones are vaccinated it will prevent the transmission of the virus to them. This would seem to be an obvious assumption and a primary reason to get the vaccine.

Incredibly, there is no evidence that any of the Covid vaccines will prevent transmission of the virus.

As I wrote when these vaccines were under development, that was never a stated objective or goal of the vaccines. They merely were intended to minimize the symptoms if you get the infection. For myself, I am taking a wait and see attitude on whether I am going to get the vaccine.

I think a lot of questions will be answered about the true efficacy of the vaccines as well as their safety over the next 6-12 months.

Right now I would also feel more comfortable waiting for the vaccines that have been developed using the more traditional development methods and avoiding the mRNA vaccines.

The only thing I know for sure is that the media and the "experts" have painted the most negative and dangerous narrative they could involving Covid-19. They are also portraying the vaccines in the most positive light they can.

Neither narrative should be trusted. The risks of Covid to most people is a much smaller than most are led to believe. At the same time, the benefits of the vaccine are much less and there also can be real risks attached to these vaccines that should not be overlooked.

The truth undoubtedly lies somewhere in the middle but it is next to impossible for the average person to decipher what it is. 

My advice to anybody is to do as much research as you can. Don't take anything you are told at face value. Make sure you understand the risks and benefits of the vaccines. 

If you do that you will be in a much better position to make an informed decision on whether you should get the vaccine.

Yes, I really wrote this a month after the Covid vaccines were first introduced.

With the benefit of almost two years of hindsight, whose advice on the topic was more honest, informed and accurate?

Dr. Fauci or BeeLine?

I will let you you be the judge of that. 

Will in Short Supply

 

Credit: https://fixwillpower.com/blog/21-willpower-quotes/

Credit: https://fixwillpower.com/blog/21-willpower-quotes/

I am reminded of these quotes as I consider much of what is going on in the world today.

For the most part, there is an easy answer about much of what needs to be done. 

What is missing is the willpower to do it.

For example, Major League Baseball has been concerned for some time about the length of its games.

When I was young I use to look at the box scores of all the games in the paper every day,

It was not often a game lasted more than 2-1/2 hours.

The average game now consumes 3 hours and 10 minutes.

MLB has been trying to trim the time of games the last few years.

It has introduced pitchless intentional walks. Relief pitchers must now face at least three batters before they can be replaced. In extra innings games, each team starts with a runner on second place in an attempt to end the game quicker.

Last week the MLB Competition Committee approved a pitch clock for the 2023 season with a goal of speeding up the game.

MLB pitchers will have 20 seconds to begin their throwing motions with runners on base and will get 15 seconds to do so with the bases empty. 

A pitcher who does not comply with the new rule will be assessed a ball for the delayed pitch.

What I found interesting is that the rules of baseball have had a rule on the books for a long, long time that requires the pitcher to deliver the ball to the batter within 12 seconds.

However, the rule has never been enforced. There was no will to do it.

MLB Rules of Baseball-Rule 8.04

When the bases are unoccupied, the pitcher shall deliver the ball to the batter within 12 seconds after he receives the ball. Each time the pitcher delays the game by violating this rule, the umpire shall call "Ball."

The 12-second timing starts when the pitcher is in possession of the ball and the batter is in the box, alert to the pitcher. The timing stops when the pitcher releases the ball.

The intent of this rule is to avoid unnecessary delays. The umpire shall insist that the catcher return the ball promptly to the pitcher, and that the pitcher take his position on the rubber promptly. Obvious delay by the pitcher should instantly be penalized by the umpire.

Did MLB really need the Competition Committee to write a new rule?

The only thing that was lacking was the WILL to enforce the rules already established. 

The same lack of WILL is apparent in our immigration policy.

The law is very clear. The current immigration laws go back decades and decades.

The only problem is the lack of will to enforce the law that is already on the books.

It has been more or less the same for most of the last 40 years regardless of whether Democrats or Republicans were in power. Donald Trump was the one exception but he did not get much help from Congress in trying to fix the problem.

There has not only been the lack of will to enforce existing law but there has also been a lack of will to change the law with an updated immigration reform bill.

The Democrats lack the will because the lack of enforcement means many more immigrants get into the country today than would ever be allowed under any immigration reform policy that could pass the Congress.

The Republicans lack the will because they know that any immigration reform bill would likely increase the legal limit that is in the law today. They simply lack the will to face their supporters on the issue.

We are also experiencing an extraordinary lack of will by the Federal Reserve in dealing with inflation today.

It is true that the Fed has been raising interest rates. However, it looks to be too little and much too late.

When Paul Volcker headed the Federal Reserve in the late 1970's and early 1980's, and was dealing with similar inflation pressures, he aggressively increased interest rates.

The Fed Funds rate was pretty close to the inflation rate when Volcker first took over the Fed. That made real interest rates about 0%.

We are in a much worse position today.

As inflation really spiked in 1980 real interest rates (1-year T-bill minus inflation) dropped to -6%. That is when Volcker took very aggressive action. He kept raising interest rates until the real rate was almost 8%.

Before Jerome Powell's Fed started increasing interest rates earlier this year real interest rates were -7%.

Inflation is still  running over 8% with nominal interest rates of less than 4% resulting in a -4% real rate.

Credit: Longtermtrends.net

We are a long, long, long way from being anywhere close to what Paul Volcker did to stamp out inflation in the 1980's.

Does the Federal Reserve have the WILL to do what is necessary to combat inflation?

It does not appear that they do when only raising interest rates .75% at a time.

Let us also not forget that the Fed is holding close to $9 trillion of U.S. treasury securities and mortgage-backed securities from its Quantitative Easing (money printing) program that was initiated in 2008 and went into hyperdrive in the last two years.

These are debt securities the Fed "purchased" that did not require the private debt market to fund the money.

The Fed simply created the money out of thin air.

We were told that all of this QE would eventually be unwound through a Quantitative Tightening (QT) program.

It would seem that this should be moving forward at some pace about now to rein in inflation.

However, in the last year, the Fed has increased its balance sheet by over $500 billion. 

This is despite the fact inflation was already over 5% a year ago, well above the Fed's stated 2% target.

Source: https://www.federalreserve.gov/releases/h41/20220915/?utm_source=substack&utm_medium=email
Credit: https://rudy.substack.com/p/more-fun-in-the-new-world?utm_source=email

Even more telling is that in the last week the Fed balance sheet actually increased rather than decreased.

You have to ask if there is enough WILL to do what is necessary?

Yes, I know raising interest rates is going to be painful.

However, it is going to be a whole lot more painful if inflation is not brought under control.

Is there anything I can point to where WILL is not in short supply right now?

I suggest looking to Ukraine.

There are a lot of questions about what is going on in Ukraine and the extent to which the United States should be funding and arming the Zelensky regime there.

However, you cannot discount the WILL of the Ukraine people to resist and fight for their country.

You also have to ask how much WILL the Russian army has to wage war in that theater considering the events of the last couple of weeks.

The Ukrainians are advancing and the Russians are retreating.

Who would have thought that possible six months ago?

I guess it just goes to show what the right weapons and a lot of WILL can do.

The Economics of Inflation

Inflation is not going away soon.

The new CPI number was released for August yesterday and came in at a 8.3% year over year rate.

That makes six consecutive months where the headline number has been over 8%.

The 8.3% number seemed to surprise analysts and economic observers who were anticipating a lower number.

It did not surprise BeeLine. I made this prediction about where the CPI was going in these pages last June.

At some point, we should see some moderation in the index if for no other reason than the base index gets higher with each succeeding month,

At some point the CPI number will come down. That doesn't mean current prices are going to go down.

If gas prices are the same next year that would be a 0% increase in the CPI index. Keep in mind the CPI is only measuring price changes over the last year. The base the CPI is being measured against is getting larger every month for the inflation that started just over a year ago.

Looking at the data I would expect inflation to remain at least 8% through September assuming there is not a total meltdown of the economy that will drastically cut demand pressures. 

The high inflation number apparently dashed hopes that the Federal Reserve would soon be pausing or reversing interest rate increases.

This led to a massive sell-off on Wall Street.

Source: https://www.wsj.com/livecoverage/stock-market-news-today-09-13-2022

A year ago we were told that inflation was transitory.

The same story was told by Joe Biden, Secretary of Treasury (and former Federal Reserve Chair) Janet Yellen and current Fed Chair Jerome Powell.

They obviously didn't know what they were talking about.

We then heard that all of the inflation was due to supply chain issues coming out of Covid.

Or it was Putin's fault.

However, the New York Federal Reserve recently published an analysis that showed most inflation we are seeing has been caused by DEMAND issues rather than supply issues.

Two-thirds of inflation was due to aggregate demand shock issues in the economy.

Simply stated this means too much money chasing a limited supply of goods and services.

Where did all that money come from?

This is a chart showing the growth in the money supply (M2) over the last 10 years.

I added a trend line to the FRED chart below to show how massive the increase supply in the money supply has been in the last two years.

Of course, a lot of this was done to facilitate massive government spending programs in the wake of Covid.

The Fed increased the money supply nearly 40% in less than two years.

This is the primary cause of the inflation we are seeing right now. Too much money was created chasing a limited supply of goods and services.

Students in Economics 101 learn about the effects of supply and demand on prices in the first week of class. However, that lesson appeared to have been forgotten by our economic policy makers over the last two years. 

It is interesting to consider this same concept in looking at prices and inflation in the UK and Russia right now.

Sanctions were placed on Russia by the UK, the European Union and the United States as a tool to increase pressure on Russia and attempting to influence the popular opinion of the Russian people against Putin and the Ukraine war.

Those sanctions have had the effect of reducing the supply of Western goods and services into Russia. Companies like McDonald's, Starbucks, Heineken and Coca-Cola announced they were halting business in Russia.

Many other large retail names also did the same.

Credit: https://www.thesun.co.uk/news/19698308/russia-uk-prices-sanctions-food/amp/

This reduction in supply undoubtedly made these items impossible to get or made them very expensive on the secondary market.

At the same time, the sanctions limited Russia's ability to export Russian products that might normally go to the UK and other Western countries such as vodka, caviar and other food items. This has created a greater supply of these goods to be sold to Russian consumers.

Of course, the Western countries no longer will buy Russian oil although they desperately want Russian natural gas to continue to flow to Europe to keep the lights on.

Russia has had no problems selling its oil and gas to other counties and the worldwide price of both has gone higher since the Ukraine war started insuring there is plenty of money in Putin's coffers. Russia has also been able to demand payment in Russian rubles rather than U.S. dollars (the normal form of payment) for their oil and gas. This has propped up the ruble's value in currency trading.

The end result of this is that prices of those things that people need to live day to day (food and energy) have declined or remained affordable in Russia while prices on these things in the UK and Europe are out of control.

Putin may be also be using some of the cash he is getting from oil and gas sales to subsidize the price of food and energy knowing that people are less likely to rise up when the costs of these items are stable compared to not being able to get their Starbucks coffee every day on the way to work.

This is an example of a comparison of prices between the UK and Russia as recently reported in a UK newspaper, The Sun.

Source: https://www.thesun.co.uk/news/19698308/russia-uk-prices-sanctions-food/amp/

Yet another interesting example of the forces of supply and demand on prices and inflation.

For comparison, here are a few of the price increases of individual items in the U.S. CPI index in yesterday's report over the last year.

It is the highest inflation rate for food at home (groceries) in 43 years--- +13.5%.

Bread +16.2%

Margarine. +38.3%

Eggs  +39.8%

Of particular interest, is the fact that health insurance costs are +24.3%. That is the largest yearly increase in history.

Does anyone remember Obama and Biden claiming that the "Affordable Care Act" was going to reduce health care insurance costs?

That might suggest to you how much inflation is going to be reduced by the "Inflation Reduction Act" that Biden and the Democrats celebrated yesterday on The White House lawn.

Source: https://www.foxnews.com/politics/biden-celebrates-inflation-reduction-act-inflation-rises-august

Energy +23.8% in the U.S.

It is infinitely better than Europe but is still squeezing the budgets of every American.

Of course, what comes next as Winter approaches and energy becomes an even bigger potential issue in Europe and elsewhere?

When economists want to know what comes next with consumer prices they look at producer prices.

The Producer Price Index (PPI) measures price increases that domestic producers are experiencing for their output. If their prices are increasing its means that either they will pass those costs in their prices to consumers or, if they cannot, those costs will have to be absorbed and effect the bottom line of the business. 

What is the most recent PPI number in Europe?

37.9%.  By comparison, the latest PPI number in the U.S. is 9.8% ( the August PPI number will be released this morning ((9/14/22)).

Source: https://www.investing.com/economic-calendar/ppi-935

Compare that number to the 5-year trend in Europe.

Eurozone PPI (YoY)
Source: https://www.investing.com/economic-calendar/ppi-935

The latest CPI in the Eurozone is 9.1%. That is a long way from 37.9%.

Basic economics tells us that the 9.1% is either going to go up further toward 37.9% or we will see more and more European businesses under financial stress that will result in closures, job losses and a recession, if not a depression.

One other economic reality is that supply and demand forces equalize over time.

It is the natural order unless government interferes with that process.

When demand exceeds supply, demand will eventually be diminished or destroyed, or supply will increase to meet demand.

For example, this is an interesting chart from Sweden that compares consumer confidence (potential demand) with total inventories (supply) in that country to show that process is well under way.

Central bankers like to say that when we are in times like this their goal is to bring the economy down into a soft landing.

Considering where we seem to be, those bankers need to have the skills of Pete "Maverick" Mitchell to avoid a hard landing let alone a crash from the ride they have taken us on.