Saturday , November 27 2021
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Michael Maharrey

Articles by Michael Maharrey

Jerome Powell 2.0

4 days ago

President Joe Biden has tapped Jerome Powell to serve a second term as chairman of the Federal Reserve.Biden said Powell’s “steady leadership” helped calm markets as governments shut down the economy due to coronavirus, and he expressed confidence in Powell’s future leadership. “I believe Jay is the right person to see us through,” Biden said.Over the last several days, there was speculation that Lael Brainard might get the nod. She is perceived as even more dovish than Powell, and she’s a Democrat. She will serve as vice-chair.Both Powell and Brainard must be confirmed by the Senate.Democrats were pushing hard for Brainard. Biden defended his decision saying Powell’s “independence” is a plus adding that he felt there was a need for stability at the Fed.At this moment of both enormous

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Booming Retail Sales Don’t Necessarily Signal “Strong Economy”

10 days ago

Retail sales surged at a higher than expected rate in October, rising 1.7%.The mainstream reported this as fantastic news signaling a strong economy. American consumers are out there buying lots of stuff. The stock market rallied and gold fell.But the mainstream narrative isn’t giving you the full picture. There are two important factors to consider as you analyze these surging retail sales numbers.First, retail sales aren’t inflation-adjusted. The data just reflects the amount of money Americans spent on retail goods. It is as much an inflation indicator as it is a sign of strong buying patterns.For example, if consumers buy 100 widgets in a month at $1 per widget, and the next month, they only buy 75 widgets, but the price inflates to $2 per widget, retail sales would rise 50%. But

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Fun on Friday: Silver Theft Buffoonery

15 days ago

A story I ran across a couple of weeks ago provides an opportunity to make fun of all kinds of people, from a silver thief, to a silver buyer, to a really bad writer who somehow managed to land a job writing web stories for a local TV station.Our saga comes to you from the thriving metropolis of Lake Mills, Iowa, and was reported by KIMT 3 out of the thriving metropolis of Mason City.The story is short, so I’m just going to copy-paste it here for your reading enjoyment.LAKE MILLS, Iowa – A Winnebago County man is accused of being a silver thief.Daniel Joseph Martinson, 32 of Lake Mills, has been charged with one count of second-degree theft.Law enforcement says Martinson had sold a bar of silver to another Lake Mills resident but the buyer then asked for the bar’s serial number.

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They Expected Inflation to Come in Hot in October; It Came in Sizzling

16 days ago

The consumer price index was expected to come in hot yet again in October. It came in sizzling.The actual CPI numbers for last month were even hotter than expected as “transitory” inflation remained well above 5% on an annual basis for the sixth straight month.The projection was for the CPI to be up 0.6% month-on-month. That would have been a significant increase. But the actual number was even higher, with CPI up 0.9%. On an annual basis, the inflation rate was 6.2% compared with a 5.9% estimate. It was the highest annual CPI gain since 1990.The total CPI gain for 2021 now stands at 6.3% with two months to go. The annualized gain is 6.84%. That’s more than “moderately” above the Fed’s mythical 2% target.Stripping out volatile food and energy prices (as if consumers don’t have to eat

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Stagflation Warning: Atlanta Fed GDP Estimate at 0.5%

October 20, 2021

As governments shut down the economy in response to COVID-19 and the Federal Reserve put money printing into hyperdrive, we warned that it was a recipe for stagflation. Today, it looks like stagnation is here.Stagflation is an economic environment with rapidly rising prices, a weak labor market, and low GDP growth. It’s looking more and more like we have all three elements.We’ve primarily focused on the inflationary aspect of stagflation. There is no denying that prices are rising rapidly. The CPI came in hotter than expected again in September. We’re looking at a 6% inflation rate even using the government numbers that understate the true extent of rising prices.But what about economic growth?It is clearly slowing down as well.We’ve gotten hints at this in the last two jobs reports.

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A Messed Up Economy: Jobs Edition

October 13, 2021

Government policies – from shutdowns, to stimulus, to vaccine mandates – in response to the coronavirus pandemic have thrown the US economy completely out of whack. Looking at employment reveals just how messed up the economy has become.The number of Americans quitting their jobs surged to a record high in August. According to the Labor Department Job Openings and Labor Turnover Survey (JOLTS) report, job quits increased by 242,000 in August, pushing the total to a record 4.3 million. The quits rate surged to an all-time high of 2.9% in August from 2.7% in July.Meanwhile, job creation has tanked. The Labor Department reported an increase of only 194,000 jobs in September, well below the estimated 500,000. This followed on the heels of another big miss in August.And yet companies are

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Fun on Friday: The $1 Trillion Coin

October 8, 2021

Have you heard the latest news on the fake debt-ceiling fight?The Senate has approved a measure to kick the can down the road a couple of months. So, the “fight” will continue!The $480 billion increase raises the debt limit to $28.9 trillion, but that’s only going to last until Dec. 3. That means we have time for more political theater. Yippee!It’s so silly because there’s a 100% chance that the debt ceiling is going to be raised.Meanwhile, Treasury Secretary Janet Yellen wants to just get rid of the debt ceiling altogether. That would really be more honest. The whole concept is just a dog and pony show. This is what you get when you have a government completely untethered from any constitutional limits. The feds literally think they can do whatever they wantAnd they do.Or course, that

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If the Fed Can’t Hit It’s Inflation Target, Why Not Just Move the Goalposts?

September 26, 2021

The Fed has an inflation problem.The CPI is running well above the mythical 2% target and there isn’t any sign that it will ease soon. To deal with this problem, the central bank should tighten its monetary policy. But that would create a whole new problem, given that it can’t tighten in this economic environment. So, what is a central banker to do?Well, if the Fed can’t hit the target, how about just moving the target?That idea is apparently seriously being considered.In a article, Greg Ip floated the idea.One strategy [Powell]—or his successor—should consider in that eventuality is to simply raise the target.”Ip buys into Keynesian economic voodoo and thinks straitjacketing the Fed with a 2% inflation target will hinder job creation.Why would higher inflation ever be a good thing?

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Fun on Friday: I Wish I Had This Superpower!

September 24, 2021

Wouldn’t it be cool if you could just talk and your words would alter reality?It would elevate you to superhero status — or super-villain depending on your propensity to use your power for good or evil.You know, there’s a real-life person who at least appears to have this superpower.Federal Reserve Chairman Jerome Powell.Think about it. This dude gets up and makes a speech and the entire stock market moves. Bond markets respond. Gold sells off or takes off depending on the Fed chair’s utterances. Powell talks and the entire direction of the economy shifts, or at least gives the impression of shifting. Powell is like EF Hutton – when he speaks, people listen! (If you are too young for that reference, just watch this.)It’s almost amusing. The Fed had a meeting this week. It didn’t

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Does the Fed Really Want a “Bond Market Tantrum”?

September 21, 2021

A article by Stefano Rebaudo argued that the Federal Reserve might welcome a “bond market tantrum” that pushes bond yields higher. But does the Fed really want higher interest rates? And what would that mean for the economy?Despite the post-pandemic economic improvement and wide expectations that the Fed will begin tapering quantitative easing in the near future, bond yields have remained stubbornly low. Ten-year Treasury yields remain stuck just above 1.3%.Analysts cited in the report said the Fed “needs bonds to respond to the end of the pandemic-linked recession.” ING Bank research analyst Padhraic Garvey told higher yields would align markets more with the signals coming from central banks.“To facilitate that, we argue that there needs to be a tantrum. If the Fed has a taper

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Fun on Friday: The Government Can’t Even Get Constitution Day Right

September 17, 2021

Today is Constitution Day.We’re supposed to be celebrating the day the Constitution was signed and presented to the states for ratification. But it’s pretty hard to celebrate because the Constitution is dead.On Sept. 17, 1787, delegates (most of them, but not all) at the Philadelphia Convention signed the proposed Constitution for the United States and sent it off to begin the long and arduous ratification process.James Madison is often called “The Father of the Constitution.” During the ratification debates, he explained the new government created by the Constitution would have very limited powers. Most of the authority in the American system was supposed to remain with the states and the people. Read carefully what Madison wrote in .The powers delegated by the proposed Constitution

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CPI Housing Cost Calculation Hides True Extent of Inflation

September 16, 2021

The government CPI data for August came in slightly under expectations. Nevertheless, a 0.3% month-on-month increase in prices is significant. And a dig into the numbers reveals something wonky. The way the government calculates housing costs drastically understates rising prices and skews overall CPI to the downside.Housing costs make up 1/3 of the CPI. If you’ve been looking to buy a home, or waded into the rental market, you know the price of housing has skyrocketed. Here’s some anecdotal evidence from a recent Facebook post.Is it me or do you think the rental home market has priced medium income and retirees on a fixed income out of the area? I have close family and local friends looking for a single-family rental home with a long-term lease in the North Pinellas (Florida) area for

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The Fed Is Helping Facilitate Trailer Park Evictions

September 7, 2021

The Federal Reserve is helping corporate real estate investors evict poor people from mobile home parks.NPR highlighted the growing number of mobile home part evictions. According to the report, real estate investors continue to buy up mobile home parks across the US. They then raise lot rents and fees, and evict residents who can’t pay.As the report explains, the government makes this scheme possible with easy financing through agencies such as Fannie Mae and Freddie Mac. Here’s how it works in a nutshell.A company raises rates and fees in a park. That makes the park more valuable. So they can now borrow more money against it, kind of like when you refi your house and get cash out of the deal. They pull out, say, $3 million, and they use that to go buy another mobile home park. And

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Fun on Friday: Politicians Lie

August 20, 2021

I have some sobering news for you.Politicians lie.No, no, not just the politicians you don’t like. I mean pretty much all of them – with a few rare exceptions. It’s like part of the political DNA.If you follow SchiffGold News, you know Sunday was the 50th anniversary of President Nixon closing the “gold window” and cutting the final tether between gold and the dollar.Nixon delivered a national TV address to announce the move. In the first 1:18, he told two big whoppers.First, Nixon promised the action would be temporary in order to “defend the dollar against the speculators.” Fifty years later, this “temporary” action remains in place. It just goes to prove that nothing is as permanent as a “temporary” government program, as Milton Friedman once said.Second, Nixon said, “Let me lay to

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Fun on Friday: The Rise of the Crypto Gangster

August 13, 2021

I learned a new term this week – crypto gangster.I have to confess — it sounds kind of cool.“What do you do, Maharrey?”“I’m a crypto gangster. So, don’t mess with me.”The world gangster conjures up images of a scar-faced tough guy carrying a Tommy-gun, right? Well, I get the feeling that’s not really what a crypto gangster is. He’s probably more like a computer nerd in his momma’s basement. Except he has a Rolls Royce in the driveway.OK, a Rolls? I’m still down! I don’t really carry the tough-guy persona all that well myself.But then there’s the lesson – crime doesn’t pay.  At least not in the long run.Roger Nils-Jonas Karlsson is a crypto gangster originally from Sweden. According to Yahoo Finance, he created a company called Eastern Metal Securities (EMS) and offered investors plans

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“Transitory” Price Increases Are Forever

August 10, 2021

Prices are rising throughout the US economy. Federal Reserve Chairman Jerome Powell keeps telling us this inflationary surge is “transitory.” But transitory doesn’t mean what you think it means. The truth is higher prices are forever.Here’s just a sampling of the price increases we’ve seen over the past few months.Chipotle raised menu prices in June. Polaris, the company that makes Indian Chief motorcycles, snowmobiles and offroad vehicles, raised prices in May and is contemplating additional price hikes. Procter & Gamble, Coca-Cola, Kimberly-Clark, General Mills, Unilever, and other big companies have all raised prices.Auto manufacturers are coping with skyrocketing costs another way. They are cutting back incentives, meaning the consumer ultimately pays more.And then we have

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Fun on Friday: Is There Mobster Gold in Them Thar Hills?

August 6, 2021

How about a treasure hunt?I’ve got one for you.Word has it, there is mobster gold buried somewhere in the Catskills.How did the gold get there?Legend has it, a now-deceased mobster buried it there as an insurance policy.Dutch Schultz had a reputation as a top bootlegger during Prohibition, a savvy racketeer, and he may have been the first mobster to extort New York’s labor unions – this according to Sullivan County historian John Conway who wrote a 2,000-page book titled  “Dutch Schultz and his Lost Catskills’ Treasure.”So, about that treasure.In 1931, various criminal syndicates formed “the Commission” to coalesce various Mafia gangs under one governing body. According to Conway, “It was a time of no more independent operators doing things the way they wanted.”Apparently, Dutch was

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Rising Production Costs Undercut “Transitory” Inflation Narrative

August 4, 2021

In yet another sign inflation might not be transitory, over 85% of manufacturers reported increasing prices in July in the most recent manufacturing ISM report. At some point, producers will have to take steps to mitigate the impact of rising prices. That means passing costs on to consumers, cutting costs, or some combination of the two. If more companies begin to pass rising production prices on to consumers, we’ll see CPI continue to spike.CPI has already come in hotter than expected every month this year. Peter Schiff has said he thinks the pace of price increases could accelerate even more through the back half of the year.I think a lot of companies have been reluctant to pass on their higher costs to the end consumer. … So, I think by the end of the year, or as we get closer to

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A Whole Lot of Talk, No Action at the Latest Fed Meeting

July 29, 2021

The Federal Reserve wrapped up its July meeting on Wednesday. Once again, there was a whole lot of talk and no action.The Fed kept interest rates at zero. The Fed kept its quantitative easing program rolling. The Fed didn’t do anything. But the Fed had plenty to say.Peter Schiff summed it up this way in a tweet.The most important aspect of today’s FOMC announcement on interest rates is the press conference that follows. That’s because Fed policy is now defined by words, not action. As the US economy is now too leveraged for the Fed to actually tighten, all it can do is talk about it.”As far as the economy, the Fed said it continues to strengthen. But despite this somewhat optimistic outlook, Powell said the central bank is nowhere near hiking interest rates because it hasn’t seen

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Another Fed Balance Sheet Record; Where’s the Exit Door?

July 28, 2021

For months, the markets have anticipated the Fed tightening monetary policy in order to take on rising inflation. At the June FOMC meeting, the central bank even hinted that it might start raising interest rates in 2023 instead of 2024, and the central bankers apparently talked about talking about tapering their quantitative easing bond-buying program. But with all of this talk, the loose monetary policy driving inflation continues unabated. Interest rates remain pegged at zero. The Fed balance sheet sets new records week after week. Where exactly is the exit door?Today, markets eagerly await whatever pronouncements that come out of the Federal Reserve’s July meeting. Analysts and pundits in the financial media will scrutinize every punctuation mark in the FOMC statement and dissect

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Brace Yourself for Another “Debt Ceiling” Fight

July 22, 2021

Here we go again.The clock is ticking down to another US debt ceiling battle.The Congressional Budget Office projects Uncle Sam will run out of money this fall, likely in October or November. “If that occurred, the government would be unable to pay its obligations fully, and it would delay making payments for its activities, default on its debt obligations, or both,” the CBO said in a statement.In 2019, Congress suspended the debt limit for two years. That suspension ends on July 31.Congress imposed the first debt ceiling in 1917. The Second Liberty Bond Act capped debt at $11.5 billion. This was supposed to put some kind of restraint on government borrowing. Of course, it didn’t. Every time the debt approaches the ceiling, Congress simply raises it. Between 1962 and 2011, lawmakers

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Paying More and Getting Less

July 21, 2021

In the Federal Reserve’s new world of “transitory” inflation, Americans are paying more to get less.Retail sales were up 0.6% from May to June. According to the Commerce Department, American consumers spent $621 billion on retail goods and services last month. With the big 1.7% drop in May, retail sales remained below levels in March and April. Meanwhile, price increases in June far outran the increase in retail sales. In fact, they outran retail sales for the entirety of the second quarter. Consumers paid significantly more in every retail category.Food bought at stores – up 0.8%Prices at restaurants, delis, cafeterias, etc.  – up 0.7%The price of gasoline – up 2.5%Durable good prices including appliances, electronics, autos. furniture, etc. up 3.5%These were price increases in just

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That’s His Story and He’s Sticking to It!

July 15, 2021

Despite mounting evidence to the contrary, Federal Reserve Chairman Jerome Powell stuck to his “transitory” inflation narrative during testimony before the House Financial Services Committee. That’s his story and he’s sticking to it!Just the day before, the consumer price index (CPI) came in hotter than expected – again.  The data has come in higher than expected every month this year. Month on month, the CPI was up 0.9%. The 5.5% year-on-year increase was the biggest monthly jump since 2008. But during his Wednesday trip to Capitol Hill, Powell continued to insist rising prices are transitory.Powell said inflation “has increased notably and will likely remain elevated in coming months before moderating.” He continued to insist we’re really only seeing significant price pressures from

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“Transitory” Inflation Comes in Hotter Than Expect. Again.

July 14, 2021

For the sixth month in a row, Consumer Price Index (CPI) data came in much higher than expected. But the question remains: how long will the Fed keep up the “transitory” inflation narrative? And when they do abandon this storyline and acknowledge inflation, what can the central bankers really do about it?The CPI surged 0.9% month-on-month in June. It was the biggest monthly price increase of the year, blowing away expectations of a 0.5% increase. Stop and think about that number. Prices rose nearly 1% in a single month.The headline CPI number bandied about in the mainstream media was the 5.5% year-over-year increase. The consensus was for a 5% gain. It was the biggest yearly jump in the CPI since August 2008.Core CPI, stripping out more volatile food and energy prices, rose 4.5%

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Fun on Friday: Happy Secession Day!

July 2, 2021

I haven’t heard; are we allowed to celebrate the Fourth of July or nah?You may recall that after Joe Biden was elected, he said if we were good little citizens and wore our masks, we might be able to celebrate with our friends and families on the Fourth of July. But I never have heard if the president gave us our permission slip or not.By the way — this doesn’t seem to keep with the spirit of the holiday as I remember it.As I recall, the American consists weren’t keen on asking King Geroge for permission. And when they got fed up with his taxes, they just waved buh-bye. They declared that people have the right to “alter or abolish” their form of government  and establish a new one “whenever any Form of Government becomes destructive of these ends.”I’m pretty sure the likes of Samuel

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The Fed Is Doing a Lot of Talking But What Is It Actually Doing?

June 29, 2021

The markets have obsessed over what the Fed is saying while almost completely ignoring what it’s actually doing.After the June FOMC meeting, markets reacted to the hint that the Fed might start raising interest rates in 2023 instead of 2024. But of course, it didn’t move rates up from zero. And while the Fed apparently talked about talking about tapering its quantitative easing bond-buying program, it continues to expand its balance sheet at a torrid pace.Earlier this month, the Fed balance sheet pushed above $8 trillion for the first time ever. In one week between June 16 and June 23, the Fed increased its balance sheet by $37.69 billion. As of June 23, the balance sheet stood at $8.102 trillion.The Fed may be thinking about thinking about talking about tapering its asset purchases,

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Fun on Friday: Lost or Stolen?

June 25, 2021

“Officer, I need to report my wife. She lost her gold necklaces.”That’s basically what happened in Strongsville, Ohio, recently.According to the police blotter, a man showed up at the police station to report the theft of two Cartier necklaces valued at $5,000.The problem is, there was apparently no evidence that the necklaces were actually stolen. According to the report, “The man hinted that he wasn’t sure if his wife had lost them or they were stolen.”So, yeah. She lost them.Or maybe she pawned them to buy something nice for her boyfriend.  Who knows?Regardless, it doesn’t appear a theft was involved. The man told police there was no evidence of forced entry. Nothing else was missing. I’m going to guess that if the woman has two necklaces worth $5 large, she’s probably got other

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More Government Debt Means Less Economic Growth

June 22, 2021

The US government continues to borrow money at a frenetic pace in order to cover its massive spending spree. It runs huge deficits month after month and there is more spending coming down the pike. The national debt is over $28 trillion and it is about to begin surging upward again. But with the exception of a few contrarians, most people don’t worry about the national debt. The conventional wisdom seems to be that since none of the doomsday predictions about skyrocketing debt haven’t come to pass, there’s nothing to worry about.Of course, nothing is a problem until it is. And even if the borrowing and spending don’t ultimately precipitate a crisis, it is undermining the economy. The bottom line is more debt means less growth.Based on relatively conservative CBO projections, the

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Fun on Friday: It’s All Relative

June 18, 2021

A guy made a comment about my article highlighting Chipotle’s recent decision to raise menu prices in order to cover some of the cost of higher wages, pointing out that the CEO made some $38 million last year, noting “I doubt he needs it.”The first thought that popped into my head was, ‘how exactly do you know what Brian Niccol needs?’ My second thought was, ‘what does that have to do with anything?’ And my third thought was ‘dude, you don’t have a clue how business works.’Let’s start with my third thought.Sure, $38 million is a lot of money. People see a number like that and think, jeeze, if he’d just take a pay cut, the company could pay its employees a lot more. But that’s not how any of this works.As of December 2019, Chipotle had about 83,000 employees. Let’s say the average

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Why Are US Treasury Bond Sales Are About to Spike?

June 16, 2021

The federal government has already run a $2.06 trillion budget deficit in fiscal 2021 with four months left to go. But somewhat surprisingly, over the last few months, the national debt hasn’t increased at nearly the pace you would expect considering the budget shortfalls. Given the level of spending, borrowing should be much higher. How has the federal government maintained its spending pace without borrowing at a much higher rate?The US Treasury has been drawing down the balance in its Treasury General Account (TGA) at the Federal Reserve. But that maneuver is about to come to an end, so you can expect Treasury bond sales to spike in the coming months.There has been talk of the Fed tapering its bond-purchase program to deal with hotter than expected CPI. But one has to wonder how the

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