The collapse of the crypto exchange FTX may prove to be a canary in the coal mine of the easy-money fueled crypto bubbles. FTX’s collapse has exposed just how little due diligence is actually taking place among investors who are apparently willing to put large amounts of cash in whatever place looks like the hottest new thing and promises—without convincing evidence—big-time returns.
Indeed, FTX seems to be a textbook example of how many investors are easily hoodwinked by media narratives about the latest investment genius who has magically discovered some new way of delivering unprecedented returns.
The “genius” in this case is Sam Bankman-Fried, a 30-year old MIT grad who ran FTX into the ground and had placed control of his clients’ money in the hands in the

As mortgage rates have risen this year, the demand for home purchases has fallen. That has spelled trouble for the home construction business. Homebuilder confidence dropped for the 10th straight month in October. The decline in builder sentiment reflects what economist Ian Shepherdson describes as “housing … in free fall. So far, most of the hit is in sales volumes, but prices are now falling too, and they have a long way to go.” The University of Michigan’s index of buying conditions for homes has fallen to the lowest level since 1982.
Meanwhile, as of this week, mortgage demand for home purchases is “down 41% from a year ago and close to a seven-year low.” 
Naturally, this has been a sizable drag on the sale of newly constructed homes. According to the Census

“Democracy” is the new “revolutionary.”
In the old Marxist regimes, anything that displeased the ruling communist regime was said to be contrary to “the revolution.” For example, in the Soviet Union, national leaders spoke regularly of how the nation was in the process of “a revolutionary transformation” toward a future idealized communist society. Many years after the actual revolution and coup d’etat in Russia in following the collapse of Tsarist Russia, the word “revolution” had “positive connotations and was considered a source of legitimacy in official ideology.”
Revolutionary became a synonym with “a thing we like,” and it’s no surprise that a 1952 soviet legal manual lists “counterrevolutionary” activities as among the “political crimes … deemed generally

In another sign of weakness for the job market, the total number of employed persons in the United States fell, month over month, in October. That’s the third time in the last seven months this total has fallen, dropping to approximately 158 million.
According to new employment data released by the Bureau of Labor Statistics on Friday, the current population survey shows 328,000 fewer people were employed in October than in September, seasonally adjusted.

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This continues a seven-month trend in which the total number of employed persons has moved sideways. From March 2022 to October, total employed persons has only increased by 150,000 people, rising from about 158.45 million to 158.6 million. With October’s drop, this also puts total employment in October

Home price growth of the sort we’ve seen in recent years simply cannot be sustained without a continued commitment to easy money from the central bank, and it shows.
Home prices continued to slide in August as the economy cooled, and as the Fed hit the Pause button on quantitative easing while allowing interest rates to rise. Home prices in August were 13.0 percent higher nationally compared with August 2021, according to newly released data from the S&P CoreLogic Case-Shiller Home Price Index. That is down from a 15.6 percent annual gain in the previous month. This is a big shift downward, and as CNBC reported Tuesday, “The 2.6% difference in those monthly comparisons is the largest in the history of the index, which was launched in 1987, meaning price gains are

Money supply growth fell again in September, dropping to a 37-month low. August’s drop continues a steep downward trend from the unprecedented highs experienced during much of the past two years. During the thirteen months between April 2020 and April 2021, money supply growth in the United States often climbed above 35 percent year over year, well above even the “high” levels experienced from 2009 to 2013.
During September 2022, year-over-year (YOY) growth in the money supply was at 3.92 percent. That’s down from August’s rate of 4.54 percent, and down from September 2021’s rate of 7.02 percent.
The growth rates during most of 2020, and through April 2021, were much higher than anything we’d seen during previous cycles, with the 1970s being the only period that

In recent decades, every instance in which the economy contracted two quarters in a row has coincided with a recession. Nonetheless, the Biden Administration and the leadership at the Federal Reserve insist there is no recession now, nor is one even in the works.
On the other hand, declining GDP growth, rising credit card debt, disappearing savings, and falling disposable income all point to recession. And now one of the most closely watched recession indicators is now flashing red: the yield curve inversion.
As The Wall Street Journal put it Wednesday:
The spread between yields on the three-month U.S. Treasury bill and the benchmark 10-year note has inverted several times since Tuesday’s trading session. Inversions have preceded both the 2008 financial crisis and

According to the establishment survey of employment, released last week by the Bureau of Labor Statistics, total employment increased, month-over-month by 263,000 jobs. The “job market stays strong” reads one CNBC headline, and the new jobs print was hailed as a great achievement of the Biden Administration by MSNBC pundit Steve Benen.
Yet, the employment data is possibly the only data that looks good right now, and that’s not much comfort since employment is a lagging indicator of the economy’s direction. In fact, if we look beyond the employment survey, what we find is an economy where real earnings are falling, savings are falling, and more people are taking on second jobs to make ends meet.
The first indicator of this is the fact that while total jobs have

When asked about price inflation in his Sunday interview with 60 Minutes, President Biden claimed that inflation “was up just an inch…hardly at all.” Biden continued the dishonest tactic of focuses on month-to-month price inflation growth as a means of obscuring the 40-year highs in year-over-year inflation. This strategy may yet work to placate the most ignorant voters, but people who are paying attention know that price inflation continues to soar.
Thus, while Biden may be pretending that it’s all no big deal, the Federal Reserve knows it better do something about price inflation which even the Fed now admits shows no signs of even moderating.

Another 75 Basis Points
On Wednesday, the Fed’s Federal Open Market Committee announced that it will again raise the

On February 8, the Japanese yen fell to a 24-year low against the dollar, dropping to 143 yen per dollar. Not much has changed since then with the yen hovering between 142 and 144 per dollar. In September of 2021, one only needed 109 yen to buy a dollar.
Overall, the yen has dropped 21 percent against the dollar over the past year, yet Japan’s central bank apparently has no plans to change course. Nor should we expect it to do so.  Japan’s debt load has become so immense that any attempt to raise interest rates or otherwise tighten monetary conditions would prove extraordinarily painful.  So, it’s no surprise the BOJ is now positioned to become the world’s last central bank clinging to negative interest rates.
It’s Not Just Japan
The yen is sliding the most among

In recent years, Congress has attempted to add various new mandates to the Federal Reserve’s mission. In 2020, Democrats introduced the “Federal Reserve Racial and Economic Equity Act.”  Then, in 2021, pundits and politicians were telling us that it’s the Fed’s job to “combat climate change.” These are just the latest efforts to use the enormously powerful central bank to achieve political ends to the liking of elected officials.
This is a helpful reminder, of course, that the Fed is not independent from politics. The Federal Reserve has never been politically independent, and it certainly isn’t so now. Fed independence is a fairy tale academic economists like to tell their students. The debate over new mandates has also highlighted the fact the Fed already has no

With the impending burial of the United Kingdom’s Queen Elizabeth II, republicans from London to Sydney have ramped up their efforts to end the British monarchy. The resulting war of words between monarchists and their opponents has highlighted the sheer diversity of opinions over the desirability of monarchy. Indeed, it would be impossible to enumerate all the different criteria on which different groups and individuals judge monarchy as an institution. However, for those of us who favor the ideology known as laissez-faire liberalism—also known as “classical” liberalism or libertarianism—a fundamental question we must ask ourselves in judging monarchies is whether or not they are useful in limiting state power.
This is not a new question, and fortunately the

The federal government’s Bureau of Labor Statistics released new price inflation data today, and the news wasn’t good. According to the BLS, Consumer Price Index (CPI) inflation rose 8.3 percent year over year during August, before seasonal adjustment. That’s the seventeenth month in a row of inflation above the Fed’s arbitrary 2 percent inflation target, and it’s six months in a row of price inflation above 8 percent.
Month-over-month inflation rose as well, with the seasonally adjusted CPI rising 0.1 percent from July to August. With the exception of July’s month-over-month figure, which was zero, monthly CPI inflation has risen twenty-seven months in a row.
August’s increase keeps price inflation near forty-year highs. June’s year-over-year increase of 9.1

The U.S. economy contracted for the second straight quarter during the second quarter this year, the Bureau of Economic Analysis reported Thursday. With that, economic growth has hit a widely accepted benchmark for defining an economy as being in recession: two consecutive quarters of negative economic growth.
According to the BEA, the US economy contracted 0.9 percent during the second quarter in the first estimate of real GDP as a compounded annual rate. This follows the first quarter’s decline of 1.6 percent. MSNBC reports:
The decline came from a broad swath of factors, including decreases in inventories, residential and nonresidential investment, and government spending at the federal, state and local levels.
Gross private domestic investment tumbled 13.5%

Perhaps one of the more astute observers of Russian foreign policy in recent decades has been John Mearsheimer at the University of Chicago. He has spent years warning against US-led NATO enlargement as a tactic that would provoke conflict with the Russian regime. Moreover, Mearsheimer has sought to explain why this conflict exists at all. Why, for example, doesn’t the Russian regime just accept US-led expansionism in the region? Or perhaps, more precisely, why have so many Russians continued to support Vladimir Putin in his efforts to counter US influence in the region? After all, many countries—Poland and Estonia, for instance—have benefited materially from embracing “the West.” For Mearsheimer the answer to this question is related to the question of why the

The US Bureau of Labor statistics released new Consumer Price Index inflation estimates this morning, and the official numbers for June 2022 show that price inflation has risen to 9.1 percent year over year. That’s the biggest number since November 1981, when the price growth measure hit 9.6 percent year over year. The month-over-month measure surged as well, with the CPI measure hitting 1.4 percent. That’s the highest month-over-month growth since March 1980, when the measure hit 1.5 percent.
June marks the fifteenth month in a row during which CPI inflation has been more than double the Fed’s 2 percent target inflation rate. CPI inflation has been more than triple the 2 percent target for the past nine months, and year-over-year growth in CPI inflation has

Most commentary on the Supreme Court’s decision in Dobbs v. Jackson Women’s Health Organization—which overturns Roe v. Wade—has focused on the decision’s effect on the legality of abortion in various states. That’s an important issue. It may be, however, that the Dobbs decision’s effect on political decentralization in the United States is a far bigger deal.
After all, the ruling isn’t so much about abortion as it is about the federal government’s role in abortion. State governments are free to make abortion 100 percent legal within their own borders. Some states have already done so. The court’s ruling limits only the federal government’s prerogatives over abortion law, and this has the potential to lead to many other limitations on federal power as well. In this

Last year, just as it was becoming increasingly clear that price inflation was mounting, Jerome Powell repeatedly denied there was any reason for concern. He called inflation “transitory.” A few months later, he admitted it was not transitory, but denied it was “entrenched.” Then, by late 2021, he admitted price inflation was getting out of control but still took no action of any consequence. Through it all, the Powell plan was repeated delay and opposition to any lessening of the Fed’s established policy of ramming down interest rates again and again.

By spring 2022, however, it became impossible to pretend the previous six months of rising inflation rates never happened. In order to avoid looking utterly clueless, Powell was forced to endorse a 25 basis point

Real wages are falling, inflation is at a 40-year high, and the Atlanta Fed predicts we’ll find GDP growth at zero for the second quarter. Meanwhile, both the yield curve and money-supply growth point to recession. 
But when it comes to the latest data on home prices, there’s still no sign of any deflation or even moderation. For example, the latest Case-Shiller home price data shows home prices surged above 20 percent year-over-year in April, marking yet another month of historic highs in home price growth. It’s now abundantly clear that a decade of easy money, followed by two-years of covid-induced helicopter money, has pushed home price growth to levels that dwarf even the pre-2008 housing bubble. This continues to make housing less affordable for potential

Year-over-year PPI growth came in at over 10 percent for the sixth month in a row. This will put more pressure on the Fed to “do something.”

Original Article: “Wholesale Prices Rise More than 10 Percent, Pointing to Continued Price Hikes”

The US Bureau of Labor Statistics released new Producer Price Index (PPI) data today, and it’s not good news for consumers.
The PPI is a measure of prices at the production phase of goods and services, and is often an indicator of where consumer prices are headed. Prior to 1978, the index was known as the Wholesale Price Index.
This May, year-over-year PPI growth came in at over 10 percent for the sixth month in a row, reaching 10.8 percent. This was a small drop from April’s year-over-year rate of 10.9 percent, but

Both consumer prices and producer rose near to multi-decade highs last month. Price inflation rose to 8.6 percent while wholesale producer prices rose by more than 10 percent.
In both cases, a significant factor behind rising prices—but certainly not the only factor—was high energy prices. This has been reflected in prices related to transportation and shipping. Prices for air travel, for example, have seen some of the biggest price increases in recent months while gasoline (naturally) has fueled sticker stock for households across the nation.
Perhaps most notable to the average consumer has been the increase in gas prices. In June, gasoline prices have risen on average to a new nominal high of over 5 dollars per gallon.
Short of recession (or depression), relief

Money supply growth fell slightly in April, falling below March’s eight month high. Even with March’s bump in growth, though, money supply growth remains far below the unprecedented highs experienced during much of the past two years. During thirteen months between April 2020 and April 2021, money supply growth in the United States often climbed above 35 percent, well above even the “high” levels experienced from 2009 to 2013. As money supply growth returns to “normal,” however, this may point to recessionary pressures in the near future.
During April 2022, year-over-year (YOY) growth in the money supply was at 7.23 percent. That’s down from March’s rate of 7.41 percent, and down from the April 2021’s rate of 36.8 percent.
The growth rate peaked in February 2021

There is scattered evidence that home prices are finally starting to slow down. But, if the phenomenon is system-wide, we’re still waiting to see the evidence in numbers. Last week, the most recent Case-Shiller national data, for example, showed that home prices in March rose an eye-popping 20 percent, year over year. That’s well in excess of what we saw during the height of the housing bubble leading up to the 2008 financial crisis.
That makes nine months in a row that year-over-year growth has been above eighteen percent. Asset price inflation in residential real estate has been compounding at more than 5 percent per year for most years of the past decade, and price growth accelerated to historic highs over the past two years. Yet, remarkably, there’s still no

If you’ve purchased any airline tickets lately, you’ve probably noticed that prices are up. It’s quite a reversal from the days of covid lockdowns, when airline tickets could be had for half the price of 2019 fares. Or even lower, in many cases.
But those days are apparently over, and as Yahoo Finance notes this week:
Airline fares soared 18.6% in April, according to the latest Consumer Price Index (CPI) report from the Bureau of Labor Statistics (BLS)…. The jump, which built on March’s 10.7% monthly rise in airfares, marked the largest increase since the inception of the series as a component of the public transportation index in December 1963.
On an annual basis, airline fares logged a 33.3% increase from the same time last year, the largest 12-month rise since

The Bank of Canada on Wednesday increased its policy interest rate (known as the overnight target rate) from 1.0 percent to 1.5 percent. This was the second fifty–basis point increase since April and is the third target rate increase since March of this year. Canada’s target rate had been flat at 0.25 percent for twenty-three months following the bank’s slashing of the target rate beginning in March 2020.
As in the United States and in Europe, price inflation rates in Canada are at multidecade highs, and political pressure on the central bank to be seen as “doing something about inflation” is mounting.
The bank is following much the same playbook as the Federal Reserve when it comes to allowing the target rate to inch upward in response to price inflation. The

First it was Columbine. Then it was Parkland. Now, we learn that at Robb Elementary School, police officers again stood around outside a school while the killer was inside with children.
NPR reports today:
Frustrated onlookers urged police officers to charge into the Texas elementary school where a gunman’s rampage killed 19 children and two teachers, witnesses said Wednesday, as investigators worked to track the massacre that lasted upwards of 40 minutes and ended when the 18-year-old shooter was killed by a Border Patrol team.
“Go in there! Go in there!” nearby women shouted at the officers soon after the attack began, said Juan Carranza, 24, who saw the scene from outside his house, across the street from Robb Elementary School in the close-knit town of Uvalde.

Inflation is so high in America that we’re now supposed to believe that inflation is “moderating” if it doesn’t go above 8.5 percent. That, at least, was the message in much of the speculation yesterday around what April’s CPI inflation numbers would show. Much of the “consensus” was that inflation would come in around 8 percent, and that inflation overall had peaked and is therefore moderating. It’s too early to know if inflation has peaked, but one thing if for sure: there’s no reason to celebrate yet another month of wealth-killing inflation at levels not seen in decades. After all, once purchasing power is lost to inflation in our modern economy, it’s gone forever.
The central bank will never allow inflation to persist for any sizable period, so that

Washington regards the entire world as its “sphere of influence.” But now Beijing is looking to follow the US playbook on hegemony and expand Beijing’s network of military bases abroad.

Original Article: “Expect Washington to Throw a Fit over China’s New Deal with the Solomon Islands”

Over the past twenty years, the United States has increasingly tried to claim that Washington does not believe in spheres of influence and that only supposedly imperialist states like Russia are interested in spheres of influence. This has always been nonsense, of course, especially since Washington’s Monroe Doctrine explicitly claims a sphere of influence for the United States. But the US doesn’t even stop there, and further claims a global sphere of influence through its

Since 2008, a key component of Fed policy has been to buy up mortgage-based securities and government debt so as to both prop up asset prices and increase the money supply. Over this time, the Fed has bought nearly $9 trillion in assets, thus augmenting demand and increasing prices for both government bonds and housing assets. Moreover, these purchases were made with newly created money, contributing greatly to liquidity and the easy-money policies that have prevailed since 2009.
For all this period, the Fed repeatedly stated that it would at some point “normalize” the balance sheet, presumably by returning the Fed’s total assets to a level at least somewhat close to its pre-2008 levels below $1 trillion.
Many skeptics of Fed policy frequently wondered aloud when

It was last August when Jerome Powell began to admit that inflation just might be a problem. But even then, he was only willing to say that inflation would likely be “moderately” above the arbitrary 2 percent inflation standard. Back in August, low inflation—not high inflation—was still perceived to be the “problem.” But things had certainly changed by late November when Powell was forced by reality to retire “transitory” as the preferred adjective to describe price inflation. At that point, the Fed began strongly hinting that it would finally do something to rein in price inflation. But exactly when that might happen remained anyone’s guess.

Fed Talks Big, Does Little
Throughout the end of 2021 and into early 2022, the Fed settled into a comfortable pattern of