Friday , September 17 2021
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Michael Maharrey

Articles by Michael Maharrey

The Fed Is Helping Facilitate Trailer Park Evictions

10 days ago

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

28 days ago

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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Thomas Jefferson vs. the Federal Reserve

June 13, 2021

The Federal Reserve is the engine that drives one of the biggest, most powerful governments in the history of the world.Without the Fed, it would be difficult, if not impossible, for the government to fund its foreign wars, its massive, unsustainable social programs, the ever-growing police state, and the tangled web of corporate welfare programs. It’s almost certain none of this would exist as we know it today – not even close. The federal government would truly be limited.Although the Federal Reserve is relatively new within the scope of American history, its roots go back to the early days of the republic and the First Bank of the United States, chartered by Congress on Feb. 25, 1791. A national bank was the brainchild of Alexander Hamilton. His rationale wasn’t much different from

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Fun on Friday: That’s One Heck of a Premium!

June 11, 2021

A US coin with a face value of $20 just sold for $18.9 million.That’s quite a nice little bit of appreciation right there. Or one heck of a premium, depending on how you look at it.It shouldn’t shock you to know it was a gold coin. In fact, it was an extremely rare 1933 “Double Eagle.” This was the last gold coin ever minted in the US for circulation. But it never got circulated. President Franking D. Roosevelt saw to that.On April 5, 1933, Roosevelt signed Executive Order 6102. It was touted as a measure to stop gold hoarding. In reality, it was a scheme to confiscate gold from the public. The order required private citizens, partnerships, associations and corporations to turn in all but small amounts of gold to the Federal Reserve in exchange for $20.67 per ounce.With the dollar tied

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Chipotle Menu Price Hike Spotlights Inflation Problem

June 10, 2021

Government programs, political campaigns and wishful thinking can’t trump economics. In the end, economics always wins.Chipotle’s recently announced menu price hikes bear this out.Chipotle was the darling of the “Fight for $15” crowd last month when it announced wage hikes for all its workers that will bring average pay to $15 an hour. “See! Companies can pay a living wage,” proponents of boosting the minimum wage exclaimed.It took less than a month for economic reality to catch up.This week, the restaurant company announced menu price hikes of about 4% to cover the higher wages. Now people are angry that they’re going to have to pay more for a burrito.Nobody who understands the first thing about running a business is shocked by Chipotle’s price hike. When you increase the cost of

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The Demise of the Dollar?

June 8, 2021

Last week, Russia announced plans to completely eliminate dollars and dollar-denominated assets from its sovereign wealth fund. Is this another sign of erosion of dollar dominance?The news from Russia dovetails with a warning by billionaire fund manager Stanley Druckenmiller that the dollar could cease to be the world’s reserve currency within the next 15 years.Finance Minister Anton Siluanov announced Russia’s $186 billion National Wealth Fund will dump all of its dollar assets during the St. Petersburg International Economic Forum. “Like the central bank, we have decided to reduce investments of the NWF in dollar assets,” he told reporters.The wealth fund currently holds 35% of its liquid assets in dollars, worth about $41.5 billion. It has roughly the same amount in euros and the

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Fun on Friday: Getting Prepared

June 4, 2021

Hurricane season started this week. That means those of us who live in Florida are in preparedness mode – or at least we should be.For you landlocked readers, the notion of a hurricane kit is probably foreign to you. But for those of us who live in hurricane-prone coastal areas, updating the hurricane kit is a right of passage from spring into summer. If you’re wondering what I’m talking about, a hurricane kit consists of basic items you might need in an emergency situation. In fact, it’s probably not a bad idea to have have some supplies on hand in the event of a disaster no matter where you live. During hurricane season, we keep several weeks of non-perishable food on hand, along with batteries, tools and lots of bottled water – all in a single easily accessible place. We’ve even

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The War on Cash: US Exploring a “Digital Dollar”

June 3, 2021

Last year, China launched a digital yuan pilot program. The Chinese government-backed digital currency got a boost when the country’s biggest online retailer announced the first virtual platform to accept the Chinese digital currency. China isn’t the only government exploring the possibility of digital money. Sweden has developed a digital currency of its own. The European Central Bank is pushing for a digital euro. And Russian central bank governor Elvira Nabiullina recently told CNBC that digital currency is “the future of our financial system.”So, how long before a digital dollar comes to the United States? Well, it’s already in the pipeline.Federal Reserve Governor Lael Brainard recently said the US central bank is “stepping up its research and public engagement on a digital

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The Biden Budget: Borrow and Spend to Infinity and Beyond

June 2, 2021

President Joe Biden released his 2022 budget this week. The $6 trillion spending plan offers a glimpse into Biden’s long-term fiscal strategy – borrow and spend to infinity and beyond.The Biden budget would take the US to its highest sustained spending levels since World War II.And here you thought the pandemic emergency was winding down and spending would go back to normal. Well apparently, this is the new normal. According to the number-crunchers, the Biden budget would push the debt to GDP ratio beyond levels reached during the Second World War, this despite some $3 trillion in tax increases. Projecting into the future, the proposed budget would increase federal spending to $8.2 trillion per year by 2031, meaning annual deficits of over $1.3 trillion. Over the next decade, the Biden

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Fun on Friday: It’s Just the Price We Pay…

May 21, 2021

So, last Monday was tax day.Ouch!I don’t know about you, but I had to write a big check. But I took solace in the fact that I’m helping create a more civilized society!That’s the mantra, right? Taxes are the price we pay for a civilized society. That sounds like something a tax collector would come up with.And you know what? I question it.Anyway, the government pushed the date back from April 15 this year due to the reasons. So, we got a little reprieve last month. But as they say, nothing is certain but death and taxes. The grim reaper and the taxman always cometh eventually.If you got a refund, you probably went ahead and filed earlier this year so you could get that nice check from Uncle Sam. I did not get a refund. Therefore, I put off filing until the last minute. That means I had

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Job Openings Hit Record High as Unemployment Persists

May 12, 2021

America’s labor market is a mess and riddled with incongruency.On the one hand, businesses can’t find workers. Help wanted signs hang in windows across the country. A McDonald’s franchisee in Tampa is offering bonuses just for showing up for an interview.Meanwhile, unemployment just ticked up to 6.1%.In what kind of world does this make sense?Only in a world where the government pays big money for people to stay at home.WolfStreet summed it up perfectly. We have a “screwed up” labor market.In the midst of widespread unemployment, there are a record number of job openings. According to the most recent Bureau of Labor Statistics report, job openings jumped to 8.12 million in March (seasonally adjusted). That’s the highest number of available jobs since the BLS began tracking job openings

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Janet Yellen’s Flip-Flop and What She’s Really Telling Us

May 5, 2021

Treasury Secretary Janet Yellen sent markets into a tizzy on Tuesday when she said interest rates may have to rise to keep the economy from overheating with all the government stimulus. But later in the day, she walked those comments back, claiming inflation isn’t going to be a problem and insisting that she wasn’t suggesting or predicting rate hikes.Yellen’s flipflop is telling. Even if inflation is an issue (and it is), there isn’t a darn thing the Federal Reserve can do about it.Yellen made her first comments during an event hosted by magazine. She warned that all of the government spending coming down the pike could cause the economy to “overheat.” That’s code for “it could cause price inflation to surge.”It may be that interest rates will have to rise somewhat to make sure that

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Jerome Powell: Same Old Song and Dance

April 29, 2021

The Federal Reserve wrapped up its April meeting yesterday. Again, there were no changes in actual policy, leaving everybody to try to parse out meaning from the FOMC’s statement and Jerome Powell’s post-meeting press conference.When you boil it all down, it was pretty much the same song and dance from  Federal Reserve Chairman Jerome Powell.In a tweet, Peter Schiff said these FOMC statements have been stripped of any real news value.Everyone knows what the Fed is going to say, as it’s clear the Fed isn’t willing to risk a negative surprise. So like the Oscars and the NBA Finals, the ratings have plummeted.”With nothing substantive in the official FOMC statement, everybody is left trying to read meaning between the lines of Powell’s post-meeting presser. As Peter put it in a recent

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US Government Debt Problem Even Worse Than Advertised

April 19, 2021

Through the first six months of fiscal 2021, the US government ran a record $1.7 trillion budget deficit. And there is no end in sight to the borrowing and spending. Just last month, the national debt eclipsed $28 trillion for the first time. But it’s even worse than that.A lot worse.When you include unfunded liabilities such as Social Security and Medicare, that actual US debt stands at $123.11 trillion, according to the Financial State of the Union 2021 published by Truth in Accounting.In order to pay off all of Uncle Sam’s liabilities, every taxpayer in the US would have to write a check for $796,000.I don’t know about you, but I don’t have it.The federal government has $5.95 trillion in assets and $129.06 trillion in liabilities. If it were a private company, the US government

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