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2018-07-17 12:19 by Karl Denninger
in Monetary , 467 references Ignore this thread
Powell Truth Bomb
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Powell said something very interesting in his Q&A -- that addressing the lack of wage growth is "outside of what monetary policy can do -- but is within what Congress can do."

He's right.

Then there are the grand-standers -- such as the Indiana Senator (unworthy of being named other than "sack of crap") who went after Powell with a screed about soybean prices being very low by historical standards.

There was also much grandstanding about opioids.

But essentially zero discussion was offered on exactly what Congress has done to cause both of those problems.

Specifically, it's been the "open and free trade abuse" which was specifically engendered by Congress that has led to both issues, and that is something we cannot address without resolving trade and economic policy.  Monetary policy is not only unable to materially change the trajectory in a positive way the side effects, all of which would be bad, would certainly outweigh the intended effects.

I have brought the fundamental reality of all of this up myriad times: The intentional distortions that come from enabling the exploitation of slave labor and environmental destruction through alleged "free trade" policy destroys the job market for everyone on the left side of the bell curve of intelligence and ability.

This is the intended effect of such policies.  Our Congress and our Administrations on both sides of the aisle have intentionally screwed half the population.  That the screwed have yet to find their pitchfork and torch, but some have turned to opioids and other means of distraction, should not surprise.

But that this in turn destroys local, state and federal budgets due to the presence of a welfare state shouldn't surprise either; that outcome is ordained by arithmetic when you screw half the population out of a job yet at the same time promise government "help" to all who need it.

Indeed there's a fairly decent (but cynical) argument to be made that the entire purpose of such a welfare state is to prevent the 50% on the left side of the bell curve from deciding to show up in DC and erect a gallows on the National Mall to water the grass with -- an outcome that would otherwise be rather likely when you hose 150 million people!  You don't really think that a mere million cops and available military folks would be able to put down a revolt comprised of 150 million, do you, especially when a decent percentage of those folks would likely side with those doing the revolting!

There has been exactly zero evidence thus far that anyone in Congress has or will do a damn thing about any of this; indeed all they've done is demand more screwing for those on the left of that bell curve!  Trump's trade policy changes are actually serving as a corrective force in this regard, in that they both can and will drive some of that formerly-slave labor back to the United States which will employ some of the people on the left side of the curve.  It will also, however, reset internal demand for some commodities that have had artificial boosts in the previous 20 years that never should have existed in the first place, specifically for soy and corn.  Erasing the subsidies and insanity of corn-based ethanol would help reset that back as well.  You can argue that this is "bad" from the lens of today's perspective but exactly how is it "bad" to remove artificial stimulus and demand that never should have existed and which resulted in other people getting screwed?

Now the corn or soy farmer screams, but who put him in that place originally and who did he screw on the way up?  Does that person get any sort of recompense?  Of course not; he or she doesn't count, right?

Folks, it is a fundamental truth that if you kill the so-called "global supply chain" games that on any dispassionate analysis simply amount to seeking slave labor and environmental destruction for profit you will wind up with the shipping costs of doing things "over there" overwhelming the real (not abuse-based) savings you could have through such a system.  Moving things costs money and thus the less of that you can do the less overhead you have, all other things being equal.

This will inevitably mean that production will move closer to consumption.

This is a good thing, not a bad one.  Shortening supply lines in all directions means less delay, a more-responsive market in terms of supply:demand balance, better and more-accurate price discovery, more competition and jobs for those on the left side of the bell curve right here in America.

It also means that for those products to be sold somewhere else (e.g. in China) the best option will be to build them there.  Ditto for Mexico, Europe, Canada and elsewhere.  What's wrong with that?   Do they not have people on the left side of the bell curve too?  Is cost efficiency not important to manufacturers and suppliers in other than the United States?

Let's cut the crap folks -- the garbage foisted on Americans over the last 30 years needs to end.

I'm astonished that those on the left side of the genetic lottery have not risen up and literally sacked both State and Federal Governments by this point along with the so-called "industry titans", especially given the smug, in-your-face pronouncements from people like Zuckerpig about how we all need to be prepared to pay a "universal basic income" due to AI.

Utter nonsense; what these people champion and exploit is in fact slavery and, when making things, intentional environmental destruction.

Given demographic realities within the United States and our refusal to enforce immigration laws along with so-called "free trade" it is also racism in that in the US it is brown and black people who are disproportionately (by a wide margin) screwed, and among other nations those who get screwed via the slave labor systems and environmental destruction are almost to an individual of brown or black skin.

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Fred_
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So it was what always happens with congress and the fed? All congress wants to know is how much wealth it can continue to extract and how much 'free' s*** it can continue to 'give' away without collapsing the whole thing.

Got it. Thanks for the update.

You want the economy to take off? I mean really and truly grow? Cut the individual tax rate to zero, throw the entire federal register onto a bonfire, and give the states their land back for our use. But this would be closer to freedom and dear slave, we can't have that.
Tickerguy
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You forgot "throw every single hospital administrator and pharma exec and board member in prison for felony violations of 15 USC."

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Winding it down.
Wifi
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One More
inline


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Hurricane Evacuation Plan
1.Grab Beer
2.Run Like Hell
Wifi
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Seagrove Beach
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One more
 

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Hurricane Evacuation Plan
1.Grab Beer
2.Run Like Hell
Redjack
Posts: 79
Incept: 2018-01-29

Iowa
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Farmer's son.

Sadly, you are spot on. Dad tried to play it straight. Didn't accept .gov money because once you do, you get addicted to it. He ended up folding a few years ago as a result, but a 60 year run is pretty good in any industry.

Still have a lot of family that farms. They are very angry right now because the money train is ending. Beans are way low, corn also, and pork is going to crash once China finds another supplier.

I hate to see it, but that is the way commodities play out.
Tickerguy
Posts: 153849
Incept: 2007-06-26
A True American Patriot!
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Any ACTUAL producer can hedge by selling forward futures (in other words, be SHORT the contract.) They have absolutely NO EXCUSE because unlike a speculator that can be wiped out by doing that they're able to DELIVER AGAINST THE CONTRACT to satisfy the short.

Ag futures exist FOR THIS VERY REASON; they allow ANY agricultural producer to lock in the price they will get paid for years on a forward basis. The problem with doing it is that if prices rise you don't get any MORE money, because you already sold the contract short. If you do NOT sell forward your output for a few years out into the future then you are a ****ing SPECULATOR because you are betting that the price tomorrow will be higher than the price TODAY!

WHEN that doesn't work out you have absolutely NO reason to bitch. None.

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Winding it down.

Redjack
Posts: 79
Incept: 2018-01-29

Iowa
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Again, you are correct.

I was taught commodities on my Daddies knee. He always had a "bit" that he would not sell ahead, just in case. The goal was to cover your input costs with your acceptable margin, and leave that "bit" for fun money. Worked pretty well, and for most cycles we made decent money.

He never got to far ahead in pork futures (say over two breeding cycles) because he had seen disease wipe out a herd a few times, and didn't want to get caught swimming naked.

That happened in the mid 90's when we got a new virus that hadn't hit North America. Because of our work, they made a great vaccine, but Dad had to stop farrowing hogs for a while (also led me to become an engineer and not a farmer). What I see today is a lot of people gambling that they can beat the futures market. It worked for a while, a good run, but now they have so much debt that at the current bean prices they won't be able to make the payments on the rolling stock and land they bought up in the fat times.

When you get greedy in commodities, you often find yourself on the menu.

Tickerguy
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Incept: 2007-06-26
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Ag futures are the reason CBOT and CME exist; the CME was originally the "Chicago Butter and Egg Board", which as the name implied was an agricultural commodities exchange.

If you do stupid things you win stupid prizes. Those bleating about going "all-in" before they get their hole cards need to stick their own shotgun in their mouth and pull the trigger; they are THAT stupid, greedy or both and deserve exactly what they get.

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Winding it down.
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