The Fed Crows and the Sun Also Rises
Politicians of the world have collectively embarked on various chimerical goals, such as CO2 and energy suppression ($3 trillion), tariff and tech wars (another $3 trillion and counting), fantasies of despotic self-sufficiency, nationalization of money and banking, and catastrophic COVID and messenger ribonucleic acid (mRNA) power plays (another $3 trillion).
Those actions defy and falsify economic and even biological reality. All these pursuits destroy economic value. In my book “Life After Capitalism,” I call it emergency socialism. It botches every number emitted by governments.
Astonishing is the willingness of media and academic economists, left and right, to continue their empty ruminations about “growth” and productivity, gross domestic product (GDP) and Consumer Price Index (CPI), “inflation” and employment, as if they continued to have meaning. All their numbers are belied by their acceptance of the idea that some value springs from politicians stealing from the future to fund their figments today.
The Fed Crows and the Sun Also Rises: GDP Numbers
GDP numbers assign full value to government spending—as if some glint of worth could be ascribed to multi-trillion-dollar potlatches to control the “climate” or to ravage lives in the name of public health. Meanwhile, as our favorite recent economic text, “Superabundance” (2022) by Marian Tupy and Gale Pooley, demonstrates, GDP (gross domestic product) numbers fail to measure most private sector technological progress.
Economists even indulge the Federal Reserve’s claims—on no evidence—to be able to control the strange beast “inflation,” or even more fantastical to arrange a “soft landing” from an inflationary flight in a bubblegum balloon.
Going back at least four decades, the Fed has had about as much control over the value of money as the rooster over the rising of the sun. Go back those 40 years, and just possibly, the Fed under Paul Volcker did help slow the great Nixon-Carter inflation of the late 1970s and early 1980s, after Nixon, with Milton Friedman’s support, ended the gold standard. If so, Volcker achieved his success by raising short-term interest rates so high as to trigger an exceptionally severe “recession” for a few months before Ronald Reagan’s supply side programs took effect.
The Fed Crows and the Sun Also Rises: Price Predicament
Prices may fall if commerce collapses. They also will fall according to private sector learning curves that reduce costs by 20-30% with each doubling of sales. Only the private sector learning curves actually contribute to restoring the value of the dollar.
Since that Volcker era, there has been little to no correlation between the various cost of living indices and either nominal interest rates, unemployment, or the money supply the Fed’s weapons of legend.
The Fed Crows and the Sun Also Rises: Government Share of GDP
Meanwhile, the claimed government share of putative GDP—designated the “swamp”—has risen from roughly 10% to some 50%.
The venerable Bill Bonner wants to know where is the “dry land”?
The “dry land,” mostly unmeasured in GDP, and imperceptible at the UN and its statistical swamps, is visible in free zones of private sector enterprise. Through the fogs of stock market booms and “startup nation” heroics, American leadership, rule of law, and openness to progress is perceptible in the fact that U.S. companies retain 70% of global market cap with just 10% of measured “GDP” and 4% of world population.
The Fed Crows and the Sun Also Rises: China and Israel Effects
That 70% of global market cap is a real figure. It implies that real private output is hugely greater than GDP figures suggest. But it conceals a global reality. Nearly every one of the leading U.S. companies is inexorably dependent on critical contributions from around the globe, particularly China and Israel.
The key fact of the world economy today is the U.S. attempt to destroy the crucial Chinese contribution by sanctions and tariffs, and the possible jeopardy of the Israeli contribution amid war. Since the U.S. government, right and left, remains blithely ignorant of the Israeli and Chinese roles in U.S. prosperity, establishment economics has become a phantasmagorical science.
Our business here is to define and elucidate the realities behind this statistical miasma.
P.S. Be sure to check your inbox tomorrow at 11 a.m. EST for an exciting announcement about a groundbreaking new technology that could revolutionize medicine more than antibiotics, x-rays and anesthesia… COMBINED.