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Ass Backwards Policy


From Barron’s Stephanie Pomboy: A Grim Outlook for the Economy, Stocks by Leslie Norton

The statistics bear this out. Over the last four years, U.S. nominal GDP growth has gone from 4.3% to 4.1% to 3% to 2.4%. The deflator, the inflation we are supposed to be targeting, went from 1.9% to 1.6% to 1.5% to 1.1%. What greater proof do you need that lower rates aren’t helping and, to the contrary, are making things worse? Growth and inflation are slowing, and it has to do with this aging demographic. Add the emotional and financial scares from the housing-bubble bust, and policy makers have really got it ass-backwards. They’re taxing the economy, not stimulating it.


Ms. Pomboy suggests that in the light of the demographic slowdown, low interest rates may be doing much more damage than good. They are supplying yesterday’s solutions to today’s problems- a major reason I believe Progressivism is exhausting itself

One problem with low interest rates is that it is pushing some folks into risk profiles unsuitable for their station. This will make the next recession, whenever it is, much more painful.

But the government is caught is a Catch 22- if interest rates climb the debt soars out of control. If they remain too low significant groups like the retired, and the essential growth in pension funds, creates a different but significant liability. By their nature government solutions to short term crisis tend to ignore long term consequences.  As the crisis grow ever more frequent there is never enough time to recover in order to return to normal.

The mating call for progressive policies was the infamous quote from John Maynard Keynes, “In the long run we are all dead.”

Try telling that to your kids.

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Power and Blockchain


from Richard Fernandez at PJ Media, The End of the Memory Hole

But just to illustrate how things have changed for the State we now know that Orwell was wrong.  The mathematically dominant method for recording transactions, whether they involve the transfer of financial assets, intellectual property, health records or any type of information is probably going to be the blockchain.  It has three important properties.  First the entire record can be reproduced by anyone from a Genesis cryptographic starting point such that all records will have the same signature if and only if they are the same.  Second, no part of the record can be altered without regenerating the entire block chain from the the branch.  Third,  it is impossible to rewrite the block chain without incurring enormous real costs in electricity and computing power, as guaranteed by the laws of thermodynamics.

The first property means that blockchain by nature is a public ledger.  The second ensures the database can only be falsified in its entirety from the point of change.  The third makes it prohibitively expensive to do so.  Readers of Ray Bradbury’s The Sound of Thunder will recognize these attributes.  From his story we learn you can’t change the past without altering everything; that by crushing a butterfly in the Jurassic we alter not one item in the record but create a whole alternate history.

The possibility of a immutable record is revolutionary in itself.  History has always been a “fiction agreed upon” — until now.  What happens when you can’t lie boggles the mind. The elites are of course working to get on top of it as they did with the Internet and every other disruptive technology. Central bankers from 90 countries, including Janet Yellen, have met to discuss its impact on the financial industry and they are considerable.  It will make it possible for individuals to make universally verifiable ownership claims over their data. When the technique is applied to currency, as with Bitcoin, blockchain makes it impossible to print “free money” since each new block requires actual computing power to generate, giving blockchain currency something of the guaranteed scarcity of gold. In a world built on a pubic ledger, you can’t change the past without invalidating the ledger.  Drop something down the memory hole and the Ministry of Truth burns up with it.


I confess that I am still trying to wrap my head around this concept.  Perhaps Wikileaks is the prose version of Blockchain: information out of the reach of those who can control it for their own ends.

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Determined to Save

From Barron’s Stephanie Pomboy: A Grim Outlook for the Economy, Stocks by Leslie Norton

Post-crisis, the consumer has clearly pulled back. How many months did we have disappointing retail sales numbers that no one could explain? They’d say it’s too hot, too cold, there’s Brexit. But what’s really causing this slowdown in spending is that the post-crisis consumer is determined to save, and do it the old-fashioned way. Historically, when rates go down, people save less. In this cycle, things have completely reversed. Over the same stretch of time that the two-year note has gone from 4% to 1%, the savings rate has doubled. There are mountains of evidence to support my thesis. But every Wall Street analyst and the Fed is using the pre-crisis analytical framework to look at an economy that is fundamentally challenged.

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The Buyer of Last Resort

George Gilder

George Gilder

So there we have it. The unicorn buyer of last resort will be the Fed. The “lender of last resort” for the financial system, the governmental guarantor for all the big banks and other “systemically important financial institutions,” the backup reinsurer for windmill Quixotes, ethanol pushers, and solar prospectors, the last ditch for Fannie Mae and Freddie Mac and other mortgage packagers, the default financier for the trillions of dollars of student loans, for veterans’ hospitals, for underfunded pensions and Medicaid reserves of the states, and above all for the proliferating securities and insecurities of the federal government, this same federal fount of funds and faith is also seen as the savior of Silicon Valley. What assures a soft landing for the hang-gliding unicorns is the Fed. Is the ultimate symbol of our predicament not a bailout for middle-class mortgages but a backup of imaginary money for mythical beasts?

Gilder, George (2016-03-28). The Scandal of Money: Why Wall Street Recovers but the Economy Never Does (Kindle Locations 1791-1797). Regnery Publishing. Kindle Edition.

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Gilded Progressives

from The Great Regression in The National Review by Victor Davis Hanson

At the turn of the last century, “trust busters” of the progressive movement made the argument that the free market was imperiled by crony capitalists, who had, with government collusion, vertically integrated enormous conglomerates and monopolies, strangling free commerce and competition in the steel, oil, and railroad industries. Central to the muckrakers’ advocacy was that the Morgans, Vanderbilts, Rockefellers, Stanfords, and Carnegies were illiberal obstacles to egalitarianism and fairness — in other words, to the aspirations of the “little guy.”

Compare that to the scene today, with the record-setting monopolies of the founders of Apple, Facebook, Google, and Amazon. Internet grandees like Mark Zuckerberg are every bit as opulent in today’s dollars, and live as often in gated estates as did the now derided robber barons of the past — and are no less unethical. They certainly share the same disdain for the working middle classes, as they seek to import cheap foreign tech labor. Yet at least Rockefeller gave us oil, and Carnegie steel; it is hard to calibrate exactly how the country benefits from millions of 20-somethings glued to their Facebook pages.

Google massages its daily news fare to reflect liberal biases. Facebook censures far more social media on the right than on the left. Twitter closes down those it arbitrarily deems incorrect. The only difference is that in the Gilded Age, plutocrats preached the doctrines of self-reliance and hard work, professing that others could follow their golden paths. Today’s versions mouth progressive bromides on the assurance that they easily have the money and influence to navigate around the bothersome concrete ramifications of their own ideological boilerplate. None of them want their families to live in the world that is the logical result of their abstract and guilt-ridden theories.