by Karl Denninger, Market Ticker:
The Coinage Act mandated the death penalty for debasement of currency. Yes, in America. It was “removed” more-or-less, but we can and should bring it back — and then immediately start trying, convicting and hanging people, beginning with The Fed and President Trump.
We would need 41,000+ gallows, of course if the “likes” count — and they damn well should.
Trump says there’s “little” inflation. Uh huh. What do the facts say? That you can’t spin pizzas and pay college tuition, fees, room and board — but you used to be able to. You can’t have a one-bedroom apartment for $400/month – but you used to be able to. Your power bill was a fraction of what it is now, as was your car insurance. Health care was a cash-n-carry business; you paid the cash and carried your ass into and out of the doctor’s office; if you chose to you could buy insurance but that was between you and the insurance company; the doctor’s office and hospital neither knew or cared. Prices were roughly one tenth of what they are now in inflation-adjusted cost; taking a 1960s birth, for example, and inflating it by the CPI the total bill including a couple of nights in the hospital was under $1,000 and there was no insurance involved. Try having a kid in the hospital today where the total is less than five times that amount; you can’t.
Trump made all of his money from leveraging commercial real estate, borrowing nearly all of the money to build and/or buy it, then skimming off the free cash flow. You can’t do that with your house. You might think you can but you’re wrong. You need somewhere to live, so alleged “price appreciation” in your house is stupid to cheer for because when you are done with your house and want to sell it you must either rent or buy another one. The exception, of course (the only exception), is when you die.
If you take out a 30 year mortgage on a house you will pay for it three times instead of once due to the interest charges. Worse, you have exactly zero you can do to stop the place where you live from jacking up the property taxes which continue forever and must be paid every year. This “low inflation” Trump talks about has doubled said taxes over the last 20 years in a huge percentage of where people actually live and the discounted value impact that has on house prices has meant that over the last 20 years in like-for-like terms you’ve lost approximately 30% of real value! No, spending $100,000 on various things over that period of time (e.g. granite counters, that nice Viking range, the Subzero refer, the $20,000 stone-tile flooring and similar) is all quality improvement and you never get it all back dollar-for-dollar when you sell. You should get back more than a dollar because of inflation; a 2% compounded inflation rate doubles price in nominal dollars about every 35 years! While there was price appreciation back in the 1960s – 1990s that has now, in like-for-like circumstances, ceased and is in fact going the other way.
What’s not going the other way is debt and real interest rates. Credit card debt interest rates are up 27% in the last four years and change (that’s not “inflation”?) — they now top 15%, including those accounts not actually assessed interest. Among those that do get charged interest the average is 16.91% or some 6.75 times the alleged “fed funds” rate. New car loans on average are more than double “Fed Funds” while the average loan amount (including used cars!) now tops $30,000!
There is now over a trillion dollars being charged that 17% interest every single year right here and now. That’s not inflation? Like Hell it isn’t and it sure is trashing individual and family cash flows!
The stock market loves this crap but it cannot continue as it is destroying the economy and incentives to produce. Real assets of real people, the vast majority who do not have excess income to put into stocks in any material amount, that is the assets “behind” or “backing” these loans is falling in real terms and has been for the last 20 years. It is precisely the policies of The Fed and Federal Government that have caused this to occur including the rampant lawless actions of said Fed, which has an actual legal mandate of zero price change.
The financial******served up by this crap, in a just society, would have long ago resulted in indictments, convictions and hangings.
If you think Trump is simply an idiot I introduce this as evidence that his statement now has scienter; that is, actual knowledge of wrongdoing.
What changed in the intervening years? Gee, I wonder if anyone can figure that out….