There’s more to the inflation story than numbers

[Bill Bonner’s Diary]( There’s More to the Inflation Story Than Numbers By Bill Bonner Friday, March 5, 2021 [Bill Bonner] YOUGHAL, IRELAND – Yesterday, Jerome Powell, jefe of the Federal Reserve, speaking at a Wall Street Journal virtual conference, let the cat out of the bag. CNN reports: US stocks tumbled Thursday after Federal Reserve Chairman Jerome Powell predicted an increase in consumer prices this summer – something investors fear will force interest rates up sooner than expected. …the market reacted strongly to his interview. The 10-year US government bond yield jumped and was up 0.07% at 1.54% around the time of the closing bell. Meanwhile, stocks sold off. The Dow finished down 1.1%, or 346 points, and the S&P 500 closed 1.3% lower. The Nasdaq Composite fell even more sharply, tumbling 2.1%. The index managed to just avoid dipping into correction territory – defined as a 10% drop from its most recent high – as it was down 9.7% from its February 12 record high. The Nasdaq has erased its gains for the year. “We do expect that as the economy reopens and hopefully picks up, we’ll see inflation move up," Powell said… More to the Story We’ve spent the entire week poking around in the marshes… the tidal flats where inflation flourishes… between the water world and solid ground. “Inflation is always and everywhere a monetary phenomenon,” said Nobel Prize-winning economist Milton Friedman. Alas, about that he was wrong. He was too literal. Too numerical. Too confident of his own power of intellectual reductionism. Funny that Friedman would illustrate such a mistake. Like choosing Mao Tse-tung to make a point about dental hygiene, Friedman was supposedly a conservative. That is to say, he recognized that we should be chary of making impulsive changes. For however much we think we have something figured out, there’s always more to the story. Recommended Link [Man Who Recommended Tesla in 2018 Says “Now Is the Time”]( [image]( As stocks keep shooting higher, the investment analyst who picked some of the biggest tech winners in recent years – including Bitcoin in 2015 and Tesla in 2018 – and who also foresaw the 2020 crash 45 days early… has now made [another major prediction](. If you have any money in the market, this is a can’t miss interview. Already, over 9.8 million people have seen this stunning video. [See What He Says Here]( -- Shortcomings We are grateful to our colleague, George Gilder, for triggering this thought. In his recent writings, he has focused on the shortcomings of scientific models. The world, of course, is an infinitely complex place. But we can’t produce infinitely complex models. So our models are always simplified… like a school book for sex education leaving out the racy parts. That’s why the modelers are almost always wrong. The climate modelers tell us that because of our cows and cars, the world is heating up. And maybe it is… or isn’t. The epidemiologists tell us that COVID-19 will kill millions… unless we wear our masks. And maybe they’re right, too… or not. [Featured: Urgent briefing about China’s next move]( Amusing Story On this subject, an amusing story developed yesterday, when Joe Biden referred to Republican governors’ reluctance to continue with the lockdowns and cover-ups as “neanderthal.” How he knew what Neanderthals would think of his opinions on infectious diseases, we can’t imagine. And why the “unity president” would feel free to stereotype and calumny a whole race of humans – talk about victims of the patriarchy! – we don’t know that, either. But at least one member of Congress stood up for the neanderthal-ish governors. Senator Marsha Blackburn (R-TN) one-upped the president, constructing an amazing, almost first-hand, life-like model of the vanished people: “Neanderthals […] are resilient, they’re resourceful, they tend to their own,” Blackburn said. Well, they must not have been that resilient; they disappeared 30,000 years ago. Recommended Link [Buy This Ticker Now: Projected To Jump 1,530%]( [ad_img]( With experts projecting gains as high as 1,530% by the end of this year… If you don’t buy this ticker, you’ll regret it later. Forbes has already confirmed that when all is said and done, “a new class of millionaires may emerge.” [Click here and get the ticker now… no strings attached.]( Just Numbers Models are always fanciful. The Fed’s 2,000 economists prepare models to predict GDP growth, for example. Inevitably, the models need to be constantly revised… so that the final line on the chart bends to meet reality. And when Milton Friedman modeled inflation, in order to reduce it to a “monetary phenomenon,” he had to ignore the mystery and poetry… the moral side of things… the surprises… the politics, panics, and madness… and all the other things that go into making a genuine inflationary episode. That is, he had to drain the marshes of all that didn’t fit his model – the tides of greed and fear… the wild animals… the slosh and suck of untamed mud. And what was he left with? Numbers. Numbers that did his bidding. Numbers that didn’t whine or complain when he crunched them together. Numbers that didn’t ask questions. [Featured: ATTN. Gold Owners — Major Announcement]( More than Numbers In the stripped-down, simplified version, Germany’s hyperinflation was caused by numbers. In 1918, Germany had about 32 billion marks in circulation. By 1923, when the architect of Germany’s monetary policy, Rudolf von Havenstein, died of a heart attack, it had 500 quintillion of them. But Germany had also just lost a devastating war. It had lost its industrial heartland – the Ruhr Valley. Its unemployed war veterans were battling it out in the streets – the brown-shirts against the black shirts… the communists against the national socialists. And it had been forced to deliver almost all its real money – gold – in reparations to Britain and France. Those things were not numbers. And not strictly monetary. But they mattered, too. And in America, had they been less pliant, the numbers might have stood up in 1971, when Richard Nixon decoupled the U.S. dollar from gold, and asked: “Now that the feds can print money at will, won’t they inevitably print too much? Isn’t that the lesson of 2,000 years of monetary history?” Eight years later, they would have had more questions: “What is the effect of China joining the world economy? They have about 500 million people ready to be put to work. What will that do to inflation?” Recommended Link [Are These Global Elites More Powerful Than Joe Biden?]( Global Elites like George Soros, the IMF, the World Economic Forum, and leftist think tanks in Washington call to end capitalism... And replace it with a socialist economy and their one-world currency. [image]( It’s not Bitcoin, the yuan, or any fiat currency you’ve heard of… But if approved, it could cut your savings, your retirement accounts, and even devalue your property by a third. It’s the “Great Reset” of the American way of life. That’s why you must see [this briefing]( while you still can. It’s your best chance to fight back and protect your livelihood. [Click Here Now To Learn How To “Escape the Reset”]( -- China Price In a recent book, The Great Demographic Reversal, Charles Goodhart and Manoj Pradhan argue that it did a lot. Much of the credit for keeping consumer prices relatively low over the past 30 years, they say, must go, not to the clever folks at the Fed, but to the Chinese. It was the “China price” that kept consumer goods from rising more sharply. Since taking the “capitalist road” in 1979, China added hundreds of millions of very low-wage workers to the world’s labor pool. These – along with efficient infrastructure, skilled technical expertise, and a business climate that permitted faster and more free-wheeling enterprise than in the U.S. – brought fierce price competition to global markets. Turning Point But the tides don’t stop, and Goodhart and Pradhan tell us that that “sweet spot” for consumer prices is now turning sour. China has already drained the countryside of its cheap labor. Wages are rising. And the Chinese are getting older, inevitably switching from producing goods to consuming them. This “reversal,” say the authors, will raise prices in the West… forcing up real interest rates… and bringing a crisis that Jerome Powell and Janet Yellen can’t manage or control. Head for higher ground, in other words; the marshes are getting soggy. Regards, [signature] Bill --------------------------------------------------------------- Like what you’re reading? Send your thoughts to [feedback@rogueeconomics.com](mailto:feedback@rogueeconomics.com?subject=There’s more to the inflation story than numbers). --------------------------------------------------------------- FEATURED READS [U.S. Labor Bureau Releases First Full of Employment Numbers in Biden Presidency]( U.S. jobs numbers are out, the first full month of data under Joe Biden. Unemployment is listed as 6.2%, but that doesn’t accurately reflect the state of the job market, say economists… [Climbing U.S. Debt Is Fast Approaching Crisis Level]( This week, the Congressional Budget Office sounded the alarm to rising U.S. national debt. One prediction: America’s debt will double in the next 30 years, straining any hopes of long-term economy prosperity… MAILBAG Strong opinions from dear readers today about [Tesla stock]( There is an alternative explanation for the price of Tesla stock. Let’s assume they could sell 1 million vehicles (three times the sales volume in 2020). They would merely have to raise the price of each vehicle by 25 times to justify the stock price. In an inflationary and dyslexic world, I submit that this solution is the most likely scenario. – Robin F. You once said there must be a special room reserved in Hell for people who bought into Tesla. Alas, I’ve never been able to short it. Jeff Brown says that people have lost fortunes trying to short Tesla; and that we should think of it as a tech company that happens to build cars. Simon Black has been covering the unfolding story as well. I’m sure the current price is many multiples above a fair market value, but I don’t see any way to profit from this set of circumstances. It’s been well said that the market can remain irrational much longer than investors can remain solvent. – Ken H. And another dear reader comes to Trump’s defense after Bill unpacked the [former president’s economic legacy]( Of the many e-mail messages I receive, I almost always take time to read yours. You are a very good thinker and writer. Thanks. On the other hand, I hope you realize that you have a bias against Trump, a bias that detracts from the quality of your writing. While I acknowledge that Trump is far from perfect, there is a reason – actually quite a few reasons – that so many people appreciate him. You do us a disservice by glossing over those reasons (assuming you are aware of them). I am prodded to write, specifically, because of your statement, “In Trump’s term, the growth rate was only 1.25% – the lowest since the Great Depression.” Yes, of course. But it would not be true without the economic collapse related to COVID-19, and the media-stimulated panic, not to mention unilateral closing of so many businesses, especially smaller businesses. (I recognize that Trump was caught totally flat-footed by the virus and the general hysteria in response to it.) Please, in other words, compare Trump’s four years with other presidents whose terms included similar pandemic panic, and similarly stupid responses to it. Or, at least, please acknowledge that 2020 is without precedent. – Tim L. Was there a better way for Bill to analyze Trump’s economic legacy, as Tim argues? Or do the numbers simply speak for themselves? Write us at [feedback@rogueeconomics.com](mailto:feedback@rogueeconomics.com?subject=There’s more to the inflation story than numbers). IN CASE YOU MISSED IT… [Emergency Briefing: “The Great Reset”]( By May 28th, Americans could be faced with a difficult choice: Accept a “Great Reset” and risk losing the American way of life… or stand up and fight back to save what’s left of the American dream. Jeff Brown, member of a D.C.-based advocacy group, explains what every American must do before May 28th to preserve his assets and thrive. [Click here and get all the details before it’s too late.]( [image]( --------------------------------------------------------------- Get Instant Access Click to read these free reports and automatically sign up for daily research. [image]( [How to Earn Free Bitcoin]( [image]( [The Trader’s Guide to Technical Analysis]( [image]( [An Insider’s Guide to Making a Fortune from Small Tech Stocks]( [Rogue Economincs]( Rogue Economics 55 NE 5th Avenue, Delray Beach, FL 33483 [www.rogueeconomics.com]( [Share]( [FACEBOOK]( [Tweet]( [TWITTER]( To ensure our emails continue reaching your inbox, please [add our email address]( to your address book. This editorial email containing advertisements was sent to {EMAIL} because you subscribed to this service. To stop receiving these emails, click [here](. Rogue Economics welcomes your feedback and questions. But please note: The law prohibits us from giving personalized advice. To contact Customer Service, call toll free Domestic/International: 1-800-681-1765, Mon–Fri, 9am–7pm ET, or email us [here](mailto:memberservices@rogueeconomics.com). © 2021 Rogue Economics. All rights reserved. Any reproduction, copying, or redistribution of our content, in whole or in part, is prohibited without written permission from Rogue Economics. [Privacy Policy]( | [Terms of Use](