Friday, April 10, 2020

Perverse incentives.

But the sum total of all the news is a growing awareness of the potential consequences – which is why it feels the ongoing market euphoria is unlikely to last. Surely even the most rabid market bull can’t ignore reality this bad, and its likely to get worse. As the real economic news gets worse.. reality bites.

Unfortunately, that is not how markets work. Markets price the opportunities that stem from manipulation and distortion. Central banks and the Authorities have done everything possible to support the global economy. Markets are delighted at the buffet of opportunities that have been created![1]

That there's a useful insight to add to one's kitbag of supposed economic understanding. Markets do yeoman's work in sorting out efficiency from moribund dreaminess. But not necessarily at all times and in all places. Maybe they sometimes work to select out the prettiest whore.

The idea that markets are not perfect, ably highlighted above, is a central argument of mine where it comes to assessing "capitalism." The left delights in pointing the finger at the current economic mess and flight from reality as "capitalism" whereas what they disingenuously term "capitalism" bears as much relationship to the real article as a man with stage four cancer can be said to be possessed of a healthy body.

Lift up the hood of your car and regard there that magnificent bit of engineering – the engine. That's emblematic of true capitalism that, when properly stimulated, monitored, and regulated delivers everything that you want from it. The political class of the last 100 years, however, have pursued an approach to economics – and politics – that assumes that inputs (oil, water, fuel) and stoichiometry are irrelevant and that only some kind of short-term torque and RPM are the sole variables of concern. Stated differently, the political class has favored the cornucopia/pi┼łata as the image of what they should strive for. Tomorrow's is a century away, dude.

I humbly indulge in occasional forays into financial analysis as a Junior Guru, Second Class. In this regard I'm a lot like the lawyer who put on a medical malpractice seminar I went to one time in Chicago. He said he knew nothing about medicine but for the occasional foray into gynecology. So it is with me and financial, fiscal, monetary, and economic matters. Mostly I try fitfully to get a handle on basic electron flows and what motors get revved by what current sources and amperages.

Debt service seems to me like the most hugest vampire in the coffin waiting for sunset but that's just me. But there are others:

  • congressional/presidential spending that crowds out investment in productive activities;
  • malinvestment in speculative equities and assets in the desperate search for enough yield or appreciation to fund retirement AND stay ahead of (cancel out) inflation (thereby ignoring sound, basic investment opportunities like the Woodpile Report Global Headquarters and Jiffy Screen Door Repair enterprise); and
  • monetary abracadabra that inures to the benefit of the 1%, guns malinvestment, encourages more desperate consumer use of debt, makes a mockery of the prudence our ancestors understood to be necessary for life, and ensures as night follows day massive inflation.

(Cue footage from Walt Disney's "The Sorcerer's Apprentice.")

Does anyone over the age of five believe that the debt that's being racked up will ever be repaid? Or believe that the Fed and the Congress are in anything but full frontal panic mode throwing money now at turnstile jumpers and dog walkers hoping that the whole enterprise will stay afloat for another NFL season? Or that ANY person of any prominence in the political or financial world cares one whit for a restoration of common sense in our national affairs?

Taking away the punchbowl at the national Knucklehead Convention brings on anguished cries of "Austerity!!!" and suggesting there be a return to the basics of a healthy capitalist economy sets all the hounds abaying over "Neoliberalism!!!"

The culture as a whole is indifferent to any honest search for truth in national life. Confucius's rectification of names is an idea long past its emergency implementation date. It just doesn't look like there is anyone driving this rolling trainwreck-to-be.

Mr. Trump is so out of touch that he thinks that a soaring stock market is a sign of health and yet more Fed rate reduction is vital when, in fact, basement-level interest rates are fueling a massive bubble. The overall result of this makes me axe where were the brainiacs and flinty-hearted number crunchers of Wall Street, the Dept. of Commerce, and the President's Council of Economic Advisors as this unfolded?

Was adult leadership too much to ask for? Did the suits and Sitzsprinkers think that massive monopoly (especially media monopoly); tech giant censorship; a surveillance society; corrupt federal law enforcement; a corrupt media; offshoring; mass third-world immigration; fiscal diarrhea; monetary fantasy; soaring debt; a massive, parasitic, hostile underclass; abandonment of the Constitution, endless war and regime-change garbage, and AntiFa street and lecture hall thuggery would somehow set the stage for a new effing Golden Age?

Notes
[1] "Consequences & Why COVID-19 Is The MacGuffin." By Bill Blain, ZeroHedge, April 9, 2020 (emphasis removed).

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