Wednesday, May 27, 2020

Monetary expansion Argentina-style

We are definitely sailing in uncharted monetary waters. In all of US history we've never come even close to today's monetary environment. Chart #1 is one that no economist ever expected to see coming out of the US:

Chart #1

In the 3 months leading up to May 11th (latest data available), the M2 measure of the US money supply has increased at an 82% annualized rate. In the past six months, it's up at a 40% annualized rate, and in the past year, M2 has increased by over 23%, and these numbers will go higher in the next week or two. This is serious, Argentine-style money growth. The big question now is whether so much monetary expansion will give us Argentine-style inflation.

Chart #2

Chart #2 shows the year over year growth rate of Argentina's M2 money supply, which is up 97% in the past year. From late 2010 through early 2018, Argentina's money growth averaged about 30% per year, and inflation was in the neighborhood of 25-30% per year. Given the recent surge in money creation, inflation in Argentina is going to be approaching 100% before too long.

Chart #3

Chart #3 shows what a decade or so of rapid money growth has done to the value of the Argentine peso. Since early 2007, the peso has fallen from just over 3 to the dollar to now 117; that translates into a 97.5% loss of value vis a vis the dollar. Since the Argentine government locked down the economy fiercely in order to fight Covid-19, revenues have all but dried up. The only way it can pay the bills is to literally print money. 

I've been an avid student of monetary policy and inflation ever since I spent four years living in Argentina in the late 1970s. Back then, inflation averaged about 125% per year, and during a visit to the country in the mid-1980s I was fascinated to watch hyperinflation unfold: prices almost tripled within the span of three weeks. In 2015 I wrote a post on the subject of inflation and Argentina, in which I explained that the conditions in Argentina that allowed a huge increase in inflation didn't exist in the U.S., despite the Fed's massive expansion of its balance sheet and the creation of trillions of dollars of bank reserves. Unlike the US, the government of Argentina relies on direct printing of money to finance its deficit, whereas the U.S. government finances its deficit by selling  bills, notes and  bonds. When the Argentine government needs to finance a budget shortfall, it can "borrow" money directly from its central bank in exchange for an IOU, which in practice is never repaid. In essence, the Argentine central bank simply runs the printing presses whenever the government needs money, and the government pays its bills with monopoly money.

Will the same happen to the US? I sincerely doubt it, but it's not impossible.

In 2013 I wrote a post entitled "The Fed is not printing money," which addressed in detail why the Fed's monetary expansion in the wake of the Great Recession was not inflationary. Over the years since then I have consistently argued that the Fed's huge expansion of bank reserves was unlikely to lead to higher inflation since the Fed was correctly supplying reserves to accommodate the banking sector's demand for safe assets (bank reserves are functionally akin to T-bills). Inflation only happens, as Milton Friedman taught us, when the supply of money exceeds the demand for it. And indeed inflation has remained relatively low and stable for most of the past decade—which in effect proves that the Fed was not "printing money."

The key feature of the US monetary system is that the Fed can not create money directly—only banks can do that. The Fed can, however, make it easier for banks to create money by increasing the supply of bank reserves. Banks need reserves in order to collateralize their deposits. The Fed creates reserves by buying securities (e.g., Treasury bills, notes and bonds, and more recently, mortgage-backed securities and some corporate bonds). In effect, the Fed buys securities and pays for them with bank reserves. But crucially, reserves are not money that can be spent anywhere. The Fed simply swaps reserves for notes and bonds, thus transmogrifying longer-term securities into short-term, risk-free securities. Reserves have become equivalent to T-bills, since they are default-free and pay a floating rate of interest.

In times of great uncertainty and surging money demand, like today, the Fed fills the market's need for short-term safe securities by buying riskier securities and paying for them with risk-free reserves. If banks don't want to hold the reserves they can use them to support increased lending, which indeed does result in a monetary expansion. But if that expansion exceeds the market's demand for money, then higher inflation will be the result. The fact that inflation so far has not risen is proof that the Fed's actions have not been inflationary. Excess reserves—which now total $3.2 trillion—have served to satisfy the banking system's demand for risk-free, short-term assets, and more recently to satisfy the public's demand for a massive increase in bank savings deposits and checking accounts, as shown in Chart #4, which in turn has been turbo-charged by all the uncertainties and disruptions caused by the Covid-19 panic:

Chart #4

Looking ahead, the most important question becomes, "What happens when the Covid uncertainties decline and the demand for risk-free assets declines?"

If the Fed does not reverse course in a timely manner (e.g., by selling notes and bonds and extinguishing bank reserves), then we will find ourselves flooded with unwanted money. And as Argentina has demonstrated, that can lead to a big increase in inflation.

And that is what my friend Nuni Cademartori is illustrating in the cartoon which follows. Too much money erodes the value of money. I've got stacks of million-peso Argentine notes printed decades ago that today are worth about the same as toilet paper.

Let's hope this does not come to pass in the US:


Robert said...

"Will the same happen to the US? I sincerely doubt it, but it's not impossible."

I was born in 1962. I spent the first 29 years of my life in Argentina. And the next 29 in the US. I speak with some authority when I say "impossible in the US". Argentina did not create the system they were supposed to follow after inception. They merely replicated it. Therefore, the solid foundation that stems from acting on beliefs originated by its creators (a.k.a. US Founding Fathers), is not there. As such, in Argentina, there is little regard to the concept of private property rights and the rule of law. Both principles embedded in the original US Constitution of 1787. And both being essential pre-requisites to establishing capitalism.

Briefly, the Argentine system is broken and has been for decades, if not centuries. It has become so distorted that it has reached the point of irreparable damage. Inflation, bouts of inflation and hyperinflation -in this Argentine context- are the result of a broken system. Monetary or not monetary reasons.

JDonley said...

"The Richest Man in Babylon", written in 1926 and still in print, advises to put your money into 3 equal "piles", real estate [could be your home], and businesses [stocks]. the percentages may need tweaking, but the concept is good. the book is still worth reading. two copies in my meager bookshelf and I still re-read occasionally.

Roy said...


Thank you for adding color.

It is always sad to see people in the USA and other western countries fail to grasp the importance of the rule of law. Just like how those who were not born in Russia fail to see the dangers of socialism. Time and time again people point to the free market and businesses as the source of our power and success yet are unable to see that it is all solidly structured thanks to the rule of law.

Johnny Bee Dawg said...


Free markets, capitalism and prosperity are the logical result of the Rule of Law.
Socialism, Progressivism, voter fraud, coup attempts, and Authoritarianism are what happens when Rule of Law is destroyed.
"I have a phone and a pen."

The Fed has successfully defeated Inflation for several decades, now.
Im hoping they haven't forgotten all the lessons (good & bad) of the past 100 years of Central Banking.

Richard H. said...

Hello Scott, I can't believe you just wrote about this because I have been mulling for years your position that the Fed is not printing money. Well, if the Federal Reserve is buying Government bonds with money "created out of thin air" (through the vehicle of Bank Reserves), what really is the difference? The government is then "air dropping" that money through various programs, very similarly to the anecdote about printed money being airdropped.
Yes, the government bonds are an iou, but everyone knows they cannot be paid back without the Fed there to buy more bonds. The Fed will have to keep buying bonds to keep interest rates from going too high, but this will cause more inflation. Is this not in effect the same as printing money? As to why it did not happen (inflation) during the last go around, well, it did: because of the huge technological productivity of the last years, we would have had falling prices (the offshoot of higher productivity that people have all but forgotten about). This was offset by the Fed's releveraging of money supply. Does this make sense, or am I off base? Richard

Benjamin Cole said...

To quote a friend: "I have absolutely no doubt, and I am 100% certain, that inflation should have been many-fold higher in the US in the last 40 years than it has been!"

Frozen in the North said...

Sure the Feds can "create money" Look what they did a few weeks ago, they bought bonds from US companies -- including Hertz...sure looks like money creation to me! The reality is that, aside from convention, there is nothing stopping the feds from creating money.

I know it sounds counterintuitive, but it is the sade truth that the only break to the Feds creating money has been a convention. Feel free to disagree.

BTW JBD over the last few cycles, the feds have not been controlling interest rates, they have been holding asset prices, they and the ECB have no tools that work anymore since interest rates are zero or near there.

The heath of the economy is in their minds, reflected in the heath of the market. Hence we have the S&P500 only 10% off its all-time high, despite the GDP shrinking by more than 20%. That should tell you something about the intentions of the Feds/Treasury. Companies are going out of business all over the place, but the market is priced for perfection -- which is clearly not the case

wkevinw said...

Rule of Law- yes, Adam Smith wrote plenty about this, saying that a justice system (justice generally) is a requirement to be provided by government. The government should enforce various items that support property ownership, etc. by the people. Rule of law (& order) is a prerequisite for free markets.

Terrorists often target market areas because they not only get lots of human targets, but it puts a fear in people to engage in commerce. This makes everybody poorer and gives the terrorists more power. (just as example of the need for law and order).

Further note: Smith was not an anarcho-libertarian (sometimes poorly referred to as laissez-faire capitlist). Just another example: he advocated government (public) schools.

cbt696 said...

I am concerned that there is actually a very real threat that the expanding national debt, fear of higher interest rates and inflation will require that the FED manage the economy in a low growth path for decades to come. Low growth will encourage political solutions which will lead to a continuing migration away from free markets. More and more of the policies that Reagan and supply-siders tried to steer America away from during the 1980s.

President Trump risks being seen by history as a brilliant electoral tactician whose focus on November 2020 allowed him to inadvertently sacrifice America’s basic liberties to placate the knee jerk criticisms of a numerically illiterate media and an easily discredited clique of haphazard modelers. Many, many epidemiologists had the right answers to the important questions, but they could not get the media’s attention. His worst mistake was his decision to give Dr. Fauci a national audience for an ever changing narrative of errors and hysteria.

A few links touching on today’s blog.
“The Fed is ill-equipped to engage in corporate lending. Congress made the Federal Reserve a "monetary authority"—but now wants it to be a "national investment authority" as well.[3] In the process, the Fed's credibility and independence will be tested. The line between monetary and fiscal policy is quickly vanishing as the Fed gains more and more power, in the hope that it will save the real economy. However, restoring economic growth requires revitalizing real markets, not creating pseudo markets.” James Dorn, Cato Institute

The prohibition against the FED engaging in direct purchases of US Treasuries seems little more than a regulatory afterthought, certainly nothing like the constitutionally guaranteed liberties we have just acquiesced to surrendering:

“This post reviews the history of the Fed’s direct purchase authority. (A more extensive version of the post appears in this New York Fed staff report.)

Federal Reserve Banks actively used their “direct purchase authority” during World War I and for a decade and a half afterward. Direct purchases typically occurred when Treasury cash balances ran low shortly before a tax payment date or the settlement of a public securities sale. The Fed would then purchase a one-day certificate of indebtedness, rolling over the investment one day at a time until Treasury’s coffers had been replenished and the debt could be retired.

In 1935 Congress acted to prohibit direct purchases of Treasury securities by Federal Reserve Banks. Treasury officials were not happy with the prohibition. In a letter to the chairman of the Senate Banking Committee, Under Secretary of the Treasury T. J. Coolidge questioned “whether in times of emergency it might not be important to permit a direct loan. This might have been the case in the bank holiday in 1933 had there been a sizeable note issue coming due when the banks were closed. It might be the case in time of war.”

The historical record does not provide a clear explanation for the prohibition. In the 1940s, Marriner Eccles, the Chairman of the Board of Governors of the Federal Reserve System, suggested that the prohibition might have been intended to prevent excessive government expenditures or chronic budget deficits.“

Funny how every problem starts looking like a war where mobilization requires more sacrifice by the citizens and more sacrifice is enforced by recognizing fewer and fewer freedoms.

cbt696 said...

Norway Ends Mass Testing

Norway, which admitted Tuesday that lockdown was unnecessary and not scientifically justified, announced yesterday that they will end large-scale, U.S.-style testing and shift to only testing symptomatic patients for diagnostic/treatment purposes:

"If 12,000 random people were tested in Norway today, the Norwegian Institute of Public Health estimated in a press release issued on Monday, 15 would test positive, of which only one would have a real coronavirus infection."

Denmark: No Rebound and No Second Wave

Denmark opened up businesses and schools a month ago and has seen no increase in infections, hospitalizations, or deaths.

Reuters reports: "Denmark is 'very unlikely' to be hit by a second wave of coronavirus, the country’s chief epidemiologist said.

“No country has seen an actual second wave yet. Some countries have seen the spread go up and down,” state epidemiologist Kare Molbak said. “But with the knowledge we have today, I find it very unlikely that we’ll see second wave.”

Source above : Stephen Moore, Committee to Unleash Prosperity


The Most Important COVID-19 Statistic: 43% Of U.S. Deaths Are From 0.6% Of The Population

Richard H. said...

Hello Benjamin - your quote "I have absolutely no doubt, and I am 100% certain, that inflation should have been many-fold higher in the US in the last 40 years than it has been!"
Your friend is wrong though; it has been many-fold higher. The huge improvement in technological productivity over the last 40 years, and the resulting lower prices that brings to everyone, has been canceled out by the money supply inflation of the last 40 years - resulting in little price change. The benefits of technology has been largely lost on the average guy - but not asset prices. Richard

Rick Jones said...

I lived in Argentina from 2006 through 2009, and I would not compare the U.S. to it in almost any significant way. There are a lot of things that appear similar superficially, but there are too many deep-seated cultural differences going back to earliest colonial days, combined with the pervasive toxicity of the Peron legacy, to make a meaningful comparison.

cbt696 said...

“Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one.”
“During seasons of great pestilence, men have often believed the prophecies of crazed fanatics, that the end of the world was come.”
Charles MacKay (Extraordinary Popular Delusions and the Madness of Crowds)

Video recap of a tragic fiasco:

“The urge to save humanity is almost always only a false-face for the urge to rule it. Power is what all messiahs really seek: not the chance to serve.” H. L. Mencken

randy said...

I'm late 50s and I cannot remember a time I've been so disturbed by the collective news. Not after 9/11, or 2008 Great Recession, or even my vague memories of Vietnam or Nixon or the race riots. I can endure it but very sad and worried for my kids and their generation.

randy said...

Yes it is trumps latest behavior that pushed me over the edge.

Flying Robot said...

Inflation is an interesting phenomenon. One the one hand, inflation has been quiescent for decades. I purchased a '97 base level Camry for $18.5K almost 25 years ago; if you bargain I suspect the current equivalent is about 25% higher, perhaps $23K, representing less than 1% annualized inflation. Otoh, it seems like there were inflationary pressures surfacing in several countries overseas when the CV-19 pandemic shut things down. Now that we're opening back up, I imagine it will take a year or two for the global economy to reach a similar place. I think your question is therefore even more pertinent to retirees and older investors... if the Fed fails to act just as fast to reduce the money supply, I am wondering if we may see the first significant global inflation in 18-24 months?

Inflation is the key exposure for many retirement portfolios, including mine. Stocks provide some limited level of long term protection, but bonds are pretty vulnerable. I nibbled on short-term TIPS in late February, and am considering a modest rotation from stable value holdings into TIPS for the next 18 months or so.

Johnny Bee Dawg said...

More all time highs. God Bless Donald.
"Buy when there is blood in the streets."

Meanwhile, I like Mark J. Perry's measure of inflation: number of hours of work required to buy goods and services over time.
He likes to pull out old Sears catalogs and newspaper ads to see the prices, and compare to average salaries and wages back then vs. prices and wages today. Its eye-opening.
These days it takes less hours of work to buy almost everything in life, except college, and health care.
Those 2 are priced by government interference.

Let's see how it goes.

cbt696 said...

“CNBC reports that Sweden, which avoided a hardline lockdown during the COVID-19 pandemic, saw its economy grow in the first quarter.

The Swedish economy expanded at a far superior rate than many of its European counterparts over the first three months of the year, data published Friday showed, following the government’s decision not to impose a full lockdown to contain the spread of the coronavirus.

The Nordic country’s statistics office reported gross domestic product (GDP), the broadest measure of economic health, grew at an annual rate of 0.4% in the first quarter.

Sweden’s GDP increased by 0.1% in the first quarter, when seasonally adjusted and compared to the final three months of 2019. The median forecasters in a Reuters poll of economists had expected to see a 0.6% contraction on a quarterly basis.

The results are presumably a surprise to many.

Both critics and supporters of Sweden’s “lighter touch” policy have pointed out though its fatality rate is better than many of its European neighbors⁠—France, Belgium, Italy, Spain and the UK⁠—the Swedes were nonetheless expected to see an economic contraction in the first quarter.“

In full:

randy said...

I'm sure intentions were benign, but maybe not the best time to use the phrase "buy when there is blood in the streets".

Richard H. said...

Comparing Sweden (or other Scandinavian countries) to the rest of the world reminds me of a comment Milton Friedman once made. It was in response to somebody saying something like "if they can do it in Scandinavia, we can do it here". Friedman said something to the effect that we do do it here, it is just only in Minnesota. The point being, of course, that Minnesota, having a large Scand. make-up, will have the same social outlook, work ethic, etc.
Moreover, the logic of comparing Sweden with Finland (who did lock down) is another bad comparison for the same reasoning; Sweden (or Finland for that matter) didn't need a government lockdown to force them to change their behavior, they were going to do it anyway. These are homogeneous societies that we would do well not to bring comparisons to again. Richard

Johnny Bee Dawg said...

I meant BUY in light of the riots that began last week.
Everybody is fine with protests....most of all Trump.
Due process is better than lynch mobs. ALWAYS.
But this is just coordinated looting and anarchy. Infiltration & False Flags.
Brian Wesbury showed video of mysterious 3 foot-high stacks of bricks delivered to various street corners in Minneapolis on Friday, without any construction going on. Hmmmm.
Baby Daughter in L.A. watched a 20,000 person crowd gather to loot Rodeo Drive. George Floyd, obviously.

Antifa riots got worse in the DEM controlled cities this weekend. Police ordered to STAND DOWN. No National Guard.
Numerous videos on Twitter of Antifa coordinators paying gang members, and giving instructions for looting.
The good news is that the Soros-funded AntiFA (Anti-First Amendment) organization got designated a "Terrorist Organization" by the DOJ.
Will Twitter & Facebook stop promoting them, now, and delete their accounts like they do conservatives??
Barr is planning to "unmask" (legally) some of their communications with their DEM Party operatives.

This weekend reminds me of Trotsky meeting repeatedly with Jacob Schiff in NYC in 1917 before sending over the ex-cons on the ship with the gold. Except this is more incompetent than Bolsheviks. (Hat Tip, Antony Sutton, Hoover Institute, Stanford University. God Bless Antony Sutton!)

Friday was one of my best UP days this year, which is why I posted that comment. All time highs.
Futures down 150-200 this afternoon. Meh.
Market never missed a beat during Ferguson. We will have to see how this goes.

Stay safe out there! And have fun!

Johnny Bee Dawg said...

Isn't it interesting that the offending Cop worked security for YEARS at the same night club that George Floyd also worked security for years?
What are the odds? I wonder if they knew each other?
Life is full of coincidences.

randy said...

JBD - I get it man. Well aware of the Al Sharpton, Southern Poverty Law Center, Jessie Smollet, and myriad of left wing political opportunism and hypocrisy. I get that there is a lot of opportunistic instigating going on, and Antifa is criminal. I get that there are a lot of make myself feel good white protesters that go back to their lattes. I get that most of the racial preference initiatives are massively counter productive, and cynically endorsed.

Still, I just couldn't stomach this:

Earlier Thursday, Mr. Trump said, "I feel very, very badly" about George Floyd's death while handcuffed and in the custody of Minneapolis police. "That's a very shocking sight."

The president's language got more aggressive as violence boiled over in Minneapolis Thursday night. "These THUGS are dishonoring the memory of George Floyd, and I won't let that happen," he tweeted. "Just spoke to Governor Tim Walz and told him that the Military is with him all the way. Any difficulty and we will assume control but, when the looting starts, the shooting starts. Thank you!"

Even if the rage is being fanned with political opportunism, there are a lot of real people hurting and fed up. They need leaders who are more on their side than not. Genuine. I'm exhausted with the President that attacks and divides at every opportunity. Maybe have to reach back to Bill Clinton and/or Bush Sr for the last time we had a leader who genuinely tried to bring people together. Not looking for a debate - take it for what it's worth. I never thought I'd say this but I've reached the point that the poisonous nature of Trump is so bad I MIGHT vote for anything else. God help me, here comes Stacey Abrams.

I haven't read the full story yet but the headline about the sheriff in Michigan that laid down his gear and joined hands with the protesters is the kind of story I want to hear more of.

McKibbinUSA said...

Reposted on my Twitter account

cbt696 said...

The president, governors and every other political personality have foolishly shedded the constitution on the advice of “experts” in order to protect their poll numbers and election prospects. Now we have 40M out of work, with free cash and wearing masks. What could go wrong?

Recall the following dialogue written by Robert Bolt for “A Man For All Seasons” (1966)

• William Roper: So, now you give the Devil the benefit of law!

• Sir Thomas More: Yes! What would you do? Cut a great road through the law to get after the Devil?

• William Roper: Yes, I'd cut down every law in England to do that!

• Sir Thomas More: Oh? And when the last law was down, and the Devil turned 'round on you, where would you hide, Roper, the laws all being flat? This country is planted thick with laws, from coast to coast, Man's laws, not God's! And if you cut them down, and you're just the man to do it, do you really think you could stand upright in the winds that would blow then? Yes, I'd give the Devil benefit of law, for my own safety's sake!

cbt696 said...

Wuhan Virus Watch:
New England Journal of Medicine – Wearing mask outside health care facilities offers little protection
Leslie Eastman | 5/31/2020 - 4:00pm

No major increase’ in coronavirus in 21 re-opened states.
Denmark & Finland report no increase in virus after schools re-opened.
Leading scientist urges faster exit from UK’s lockdown.
The lack of evidence lockdowns actually worked is a world scandal


Johnny Bee Dawg said...

Trump immediately ordered a Federal investigation into Floyd’s death, and requested the officer be charged ,Federally.
Trump called George Floyd’s family to offer condolences.
Trump clearly enunciated the difference between the protestors...WHOM HE PRAISED, and the looters, whom he condemned.

Trump called the looters “THUGS”. He carefully chose his words by first reviewing video tape of Barack Obama’s speech during the Ferguson riots. Trump used Barack Obama’s exact wording.

Trump wants the National Guard called out to stop the looters from robbing, burning and destroying our most vulnerable citizens’ neighborhoods. Whenever a Mayor has done so, it’s worked. The cities being sacked by vandals have been ruled by DEMs for decades.
That’s just a fact, and it’s stark.

Not sure how any of that makes people mad at Trump.

Johnny Bee Dawg said...

Meanwhile, the virus is off the front page...and for good reason!
Maybe because there’s nothing but good news on the Virus front.

“In reality, the virus clinically no longer exists in Italy,” said Alberto Zangrillo, the head of the San Raffaele Hospital in Milan in the northern region of Lombardy, which has borne the brunt of Italy’s coronavirus contagion.

“The strength the virus had two months ago is not the same strength it has today,” said Matteo Bassetti, head of the infectious diseases clinic at the San Martino hospital in the city of Genoa.
“It is clear that today the COVID-19 disease is different.”

Hospitalizations in Georgia have fallen in half since they reopened.

Countries which eased their lockdowns back in mid-April.
Reported new infections on 30/05:

Austria - 30
Czech Republic - 34
Denmark - 40
Norway - 15

Way down

Even NPR Tweeted last nite:
“Antibody tests are finding thousands of people who were infected — but never became seriously ill.
And when these mild infections are included in coronavirus statistics, the virus appears less dangerous.”

Readers of this blog knew these events were going to transpire.

cbt696 said...

Please, never let this happen again!

The US bureaucracy’s failure to send a consistent message or arrive at a well targeted approach to suppressing Covid 19 is the single biggest policy disaster in 230 years. Fauci, Trump, Cuomo, Newsome et all instead jumped at a politically correct, haphazard collection of arbitrary designations of essential and non essential activities having little more than fantasy and magical reasoning to support them. They wrapped it up in a lockdown that cratered the economy and miraculously left the most vulnerable as the most exposed to death.

Here we are
• 40M out of work
• trillions in waste
• a hospital system devastated by misdirected priorities
• undiagnosed and untreated illnesses which’s will trail out for years

The entire social fabric of this nation has been harmed because our all knowing political elite chose to over rule the fundamental liberties that all Americans are guaranteed by natural rights and the US constitution. This is the same constitution than our leaders are sworn to protect, but discarded without a thought.


On Wednesday night, Norway's prime minister Erna Solberg went on Norwegian television to make a startling admission: she had panicked. Some, even most, of the tough measures imposed in Norway's lockdown now looked like steps too far. "Was it necessary to close schools?" she mused. "Perhaps not."

It was a preemptive step only a leader with Solberg's folksy, down-to-earth style could get away with. "I probably took many of the decisions out of fear," she admitted, reminding viewers of the terrifying images then flooding their screens from Italy.


Nobel Laureate: “An Error That Has Cost The World Many, Many Trillions Of Dollars”

"Epidemiologists - and I’m not talking about you guys - don’t think anything wrong about being a factor of 10 too high but are dead scared to be a factor of 10 percent too low.

“The number of deaths caused by lockdown is way higher than anything that will be caused by Covid, unless you assume exponential growth, forever. So, therefore this is a price that the world is paying for this asymmetry….

“Sweden is not locked down. You guys are going to have a very hard time when Sweden plateaus at 6,000 deaths, which is 0.6 per 100,000, and you can say well they social distance, they’re Scandinavians, they’re cold, there’s high population density. But, you know, the fact remains that the plateau rate of population reached by England, New York City, Lombardy, France is basically around one month of natural death. (Imperial College of London's Neil) Ferguson said a year of natural death. That is horrible. That is an error that has cost the world many, many trillions of dollars.”

--Michael Levitt, Stanford professor and winner of the 2013 Nobel Prize in Chemistry, in an on-line discussion with South American epidemiologists.

Source: Stephen Moore, Unleash Prosperity

Tom Nugent said...

If the Fed sells securities that it holds and earn interest on from both the public and private sector and extinguish reserves that are in the system in this process, then it will be transferring the flow of interest back into the private sector where such an increase in "income" may provide the wherewithal for greater spending and an increase in inflation? Note that the Fed has sent those interest payments to the Treasury each year in the billions of dollars when they held an increasingly large portfolio of such securities.

Bruno Noble said...

Hi Scott, it's good to be reading you again after so many years. Just one thing on inflation - and I did read your 2013 blog in which you wrote, "inflation by any measure has been averaging between 2 and 2.5% for the past six years" - I must disagree. The narrow inflation baskets measured in the US and the UK (where I live) may show little in terms of price rises but they bear little relation to what I spend my money on. My children's university fees have tripled, housing costs have spiralled, my health care costs have risen by 30% every year over 10 years and other insurance premiums (the things I have to buy) have gone up by nearly as much; the fact that the two pints of milk and two loaves of bread I buy every week have increased by only 2% per annum is neither here nor there. Financial asset prices and real estate (the things I'd like to buy), as you know, have soared. Friends in the US tell me it's much the same there. So, yes, one can argue that CPI has barely moved but it bears so little relation to the world we live in that it has become meaningless. This year, in the UK, the ONS added self-tanning products, gluten-free products and minced turkey to the CPI measure and removed fruit pies, chicken pieces and frozen legs of lamb. Well, whoopy doo. In the UK, where so many state liabilities are CPI- (or RPI-)based, one can understand why we persist in maintaining the fiction - the inflation basket, then, really is a bit of a con. If you can drop me a line - presumably you can see my email address - I'd like to ask you a question or two about our time at Western. Thanks, Bruno

Johnny Bee Dawg said...

Today Texas had the fewest #COVID19 fatalities since March 30th.

The State also had the fewest Texans testing positive for COVID in the past 6 weeks.

And, have had the 2nd most recoveries from COVID in America.

Texas...big economy.

cbt696 said...

Maybe not the flu, but nothing like the end of the world.

It is axiomatic that politicians have never solved a problem that politicians did not first create.

“• One More Time: Coronavirus Not Dangerous to the Young and the Healthy

U.S.S. Theodore Roosevelt, via the Federalist:

"The final data offered by the Navy remains at 1,102 cases, with only one reported death. Doing some simple math, COVID-19 aboard the Theodore Roosevelt had a death rate of 0.09 percent, while the estimated death rate for the seasonal flu is 0.1 percent."

Colorado, via Conservative Review:

"Colorado has published the results of ongoing antibody tests with a massive sample size of 56,000. The study found, as of Thursday, that 7.75% of the entire state has been infected. That means that an estimated 489,500 Coloradoans have already had the virus. If you divide Colorado’s 1,135 deaths by the number of infections, you get a 0.23% IFR.

"If you further divide the Colorado numbers by age group, you get a 0.03% IFR for everyone (sick and healthy together) under the age of 60. Even if you include all those under 70, the IFR comes out to 0.07%."

• Leaked German Report Warned Against Lockdown

Germany’s Interior Ministry is desperately trying to avoid questions about the leak of a report it prepared that challenges its official pronouncements on the coronavirus.

Some of the report’s key conclusions:

· The dangerousness of Covid-19 was overestimated: probably at no point did the danger posed by the new virus go beyond the normal level.

· The people who die from Corona are essentially those who would statistically die this year, because they have reached the end of their lives and their weakened bodies can no longer cope with any random everyday stress (including the approximately 150 viruses currently in circulation).

· The danger is obviously no greater than that of many other viruses. There is no evidence that this was more than a false alarm.

· More people are dying because of state-imposed Corona-measures than they are being killed by the virus.

The 93-page report is being dismissed by government officials as the work of one employee, but in reality it was drafted by a scientific panel appointed by the interior ministry and composed by medical experts from several German universities.”

Source: Stephan Moore, unleashing Prosperity
Where next: Robert L. Bartley, “The Seven Fat Years” (1995)

cbt696 said...

Re: Police Reform

Re:The $8 Trillion Lockdown (Excellent graphic within link below)

The Congressional Budget Office says the US economy could be $7.9 trillion smaller in real terms over the next decade than it otherwise would have been due to the pandemic. That's a cumulative real drop of 3.0 percent over the decade.

“The revised forecast for nominal GDP reflects a significant markdown in CBO’s projection of real (inflation-adjusted) production in the United States as a result of the pandemic. Business closures and social distancing measures are expected to curtail consumer spending, while the recent drop in energy prices is projected to severely reduce U.S. investment in the energy sector."

Let’s be clear. While liberals will spin the CBO report by saying the devastated economy was caused by the coronavirus, in reality the costs are almost all driven by insane lockdowns that have destroyed millions of jobs and businesses. The way to repair the damage is to restore order and restart the engines of our economy.

Source: Stephan Moore, Unleashing Prosperity
Re: Unintended Consequences:
Notice age of protestors. If the lockdown had not needlessly closed schools these teens and twenty somethings would be in school.

cbt696 said...

Sweden’s open response to the corona virus is now appreciated by neighboring Western European nations as being as effective and less economically damaging than the lockdown response.

The scientist behind lockdown in the UK has admitted that Sweden has achieved roughly the same suppression of coronavirus without draconian restrictions.

Neil Ferguson, who became known as “professor lockdown” after convincing Boris Johnson to radically curtail everyday freedoms, acknowledged that, despite relying on “quite similar science”, the Swedish authorities had “got a long way to the same effect” without a full lockdown.

Sweden has adopted a far softer approach to Covid-19 than elsewhere in Europe, introducing voluntary social-distancing measures and keeping restaurants and bars and many schools open.

steve said...

Wonder if Druckenmiller or Tipper have thrown in the towel and bougght stocks? I suspect yes. In my 35 years as a professional money mgr and retired trader I cannot remember a stronger market. Maybe '99 or early 2000 but to the extent you are NOT long risk assets you are missing out on an incredible run. ALL risk assets are participating including bank loans, junk bonds and the like. Having my best year since '09 and what is most amazing is nothing seems to stop it! Riots, terrible job numbers, absolute idiocy of our POTUS with his dumbass tweets-doesn't matter.

steve said...

Sorry for the typos people.

Chris said...

Friedman says Inflation is a monetary problem, but isn't it also a competition problem? When multiple providers are offering the same product or service, competition between them drives prices lower and quality up. With so many small and medium business in danger of going out of business these days, it seems to me there will be less competition, which will allow surviving producers to avoid innovation and keeping prices low.

Unknown said...

Banks are no longer required to hold ANY reserves. Period.