With the lockdowns fading and attempts to return to normalcy, my mind thinks about the future. We had a meeting at Evolution. The biggest obstacle that we face was ourselves. This divide is evident with the civil rights protests currently happening. It was also at our meeting. We are similar. You see, we are pals. We think a like. This has a weak link because the future outcomes are as variable as the dust floating in the sky. The great Greek philosopher, Herodotus had a saying, "Where wisdom is called for, then force is of little use. Our streets are full of bad choices and mostly, with force.
Our government chose force in more ways than one. Excess force by police. The force lockdowns. The use of (force) debt to overcome all economic problems. The lack of admittance to mistakes. They remind us all of Winston Churchill's observation about Americans, "You can always count on America doing the right thing - after they tried everything else."
Two Biggest Harms
The two lingering effects of the response to the virus will be the harm it did to individual firms and all workers associated with those enterprises. The civil rights issue will always be with us as long as workers are exploited.
The other and more dangerous response will be the government's use of debt. The stimulus checks to people and the bonus help with money for the unemployment insurance was acceptable. However, any financial assistance to the larger corporations like airlines is unacceptable. One aspect of capitalism is its destruction nature. It acts like Darwin's survival of the fittest. Many corporations were led by greedy CEOs. These small minded honchos chose buybacks to sweeten their option in retirement. This satisfied investors who do not see the big picture. The same CEOs didn't cover their workers pension. The government did not intervene. The CEOs didn't do R&D to give their firms a future. They didn't save for a rainy day. They need to be chased out of the system along with their thinking. Their firms will be replaced by more efficient entities. This is how the free market operates or is suppose too. The police need more go-between. Try the easy way before using the heavy hand of the law.
Forrest Gump's Nature
Maybe the Gump had a major disability, but he was always positive in nature. He didn't see Lt. Dan with no legs. Lt. Dan is our economy. We want to die, but if we find something at the bottom of our soul, we will survive. A little rain falls on every head. We will continue with life, but the life that we will partake in might change. We should prepare. Preparation is the key to success. The police have to learn to put things in their proper perspective. A traffic ticket is not a life and death situation. That's it for the cliché's and preaching.
Inflation or Deflation?
The biggest market is the bond market. It is the place for smart money. The bonds are saying that there will be deflation ahead. The Fed has kept low rates. This makes money cheap which helps many assets. This is central to the aspect that the stock market has been rallying even with 40 million Americans unemployed. Cheap money helps assets and thus, the companies within the stock exchanges. The Fed chair, Powell says even though the Fed has kept rates low, the Fed will not entertain negative rates. Dear Reader, he is lying. We already have negative rates and in fact, we had them for years. The benchmark for notes is the US 10-year bond. Currently, it is at .63%. This note is suppose to cover inflation for ten years. In early April, gasoline decline to under $2 dollars per gallon. The most important commodity was acting deflationary. The government said deflation is dangerous and it is present in our economy. Since that time, gasoline has increased in price to over $2.50 a gallon. This one necessary item that is needed by everyone has already broken the outlook for the 10-year note. Thus, this proves we have negative rates!
Put it this way. The government is like the guy who works at a gasoline retail location. When prices rise, he finds his ladder. He climbs to raise prices before the sun comes out. When prices fall, he can't find his ladder. It takes the guy over a week to lower prices. Of course, he is an amateur. The government takes years.
Bottom line: these aspects are central to the case for deflation. Civil unrest doesn't help either.
Experts
Give them the Bronx cheer! Anyway, the experts are the ones leading the scenario for deflation in our future. They do not see or know real people. The pandemic has shown many things. We have exported too many necessary aspects that are needed by society. We cannot manufacture medicine or any of the components of PPE that is needed by people in responsive positions like first responders and health care workers. The connections are endless - the truck drivers, stock shelf people, on and on. I once said that I admire Russian thinking in education. They remind young minds that garbage workers do a dirty job for low pay, but their work is essential. It stops the spread of dangerous bacteria! They should be thanked.
How many thanks did you realize during this painful period? What we see here at Evolution is ordinary people waking up to reality. This happened once before in the early1970s. Garbage workers went on strike for better wages and benefits. It took a while, but they succeeded. However, other workers and mostly in unions, also said and thought about what the sanitation people realized. They went on strike. Our nation had a endless series of strikes. We will get this again!
Landlords will seek higher rents to make up for lost income. Banks will add fees to make up for forbearance with mortgages. Grocery stores will try to maintain the higher food prices that they received from hoarding. Everyday workers will realize the dangers that could arise from their job. They will want a higher wage. The meme is in the air. The virus of higher prices will spread.
The result will be inflation. The irony of this future shock will be at the Fed. For years the Fed said it was seeking 2% inflation. It was rarely received. By the way, seeking inflation is against the Fed mandate. Nevertheless, I see workers seeking higher wages. Corporations will be seeking AI to replace workers. The battle lines will cause inflation until one side wins the battle. The other and more strongly effect of this virus will be felt by our currency. All the Fed printing will devalue our dollar which will cause inflation. When ordinary citizens wake up to this crime, there will be more civil unrest. There will be more protests. This is why I desire to form a new third political party that places citizens as its primary purpose.
Bottom line: This is the case for inflation. Protests foster the idea of hoarding. This is inflationary.
Or What Case?
The thing that I worry about most is the disruptive aspects of new technology. As corporations look to be first with driverless vehicles, and with robots doing warehouse work and self-checkouts and internet shopping over personal visits to retail, the loss of jobs will severely hurt our economy. When people lose their ability to live and only exist, civil unrest is not far behind. In addition, wages will shrink due to the availability of laborers. This points to deflation. However, the loss of income points to a stagnating economy. If prices rise and they will due to the dollar losing value with excessive printing or worse losing its status as the world's reserve currency, the US will have inflation. Then, we could encounter the worse of all economies - stagflation. This is rising prices in a shrinking economy. First remedy is not a vaccine but to End the Fed!
We need fiscal leadership. We need a balance budget. We need to end foreign wars and cut the military budget in half! Then, our society will begin to heal. Peace.
