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The content on this site is provided without any warranty, express or implied. All opinions expressed on this site are those of the author and may contain errors or omissions.


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2018-10-18 07:49 by Karl Denninger
in Editorial , 255 references
[Comments enabled]  

Well well look what we have here...


They are not "undocumented workers" or "refugees."

A person who wishes to work or immigrate asks permission before coming and complies with the law.  If told "no" for whatever reason the abide that decision as they recognize reality -- they have no right of entry, they are guests and they are requesting a privilege.

If you do not do that -- if you instead choose to break the law, to demand something you're not entitled to and when refused you take it anyway you're an invader and those invading another nation are subject to being -- and should be -- shot.

And by the way -- the Constitution requires the President to do this (Article 4 Section 4.)  It's not optional and if the President will not do so he must be removed and replaced by whatever means are necessary or we no longer have a Constitutional Republic.

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2018-10-18 07:00 by Karl Denninger
in Monetary , 91 references
[Comments enabled]  

The minutes are out and this caught my eye:

In their consideration of monetary policy at this meeting, participants generally judged that the economy was evolving about as anticipated, with real economic activity rising at a strong rate, labor market conditions continuing to strengthen, and inflation near the Committee's objective. Based on their current assessments, all participants expressed the view that it would be appropriate for the Committee to continue its gradual approach to policy firming by raising the target range for the federal funds rate 25 basis points at this meeting. Almost all considered that it was also appropriate to revise the Committee's postmeeting statement in order to remove the language stating that "the stance of monetary policy remains accommodative." Participants discussed a number of reasons for removing the language at this time, noting that the Committee would not be signaling a change in the expected path for policy, particularly as the target range for the federal funds rate announced after the Committee's meeting would still be below all of the estimates of its longer-run level submitted in the September SEP. In addition, waiting until the target range for the federal funds rate had been increased further to remove the characterization of the policy stance as "accommodative" could convey a false sense of precision in light of the considerable uncertainty surrounding all estimates of the neutral federal funds rate.

Oh really?

Neutral today is at least 6.23%.

Why?  Because that's the federal deficit as a percentage of the economy in real dollars of debt.  Not the phony-baloney "deficit" published that excludes unfunded entitlement spending, the real amount of Federal Debt advancement over one fiscal year compared against the size of the economy in that same fiscal year.

That means the rate of monetary inflation is at least 6.23% and therefore the neutral Fed Funds rate is at least that rate.

Now it may be higher because other unbacked credit emission takes place in the economy as well, but there is plenty of argument over the other issuers.  States, at least in theory, cannot do so -- that is, they're allegedly supposed to retire all their debt.  In practice they don't but Constitutionally they are not permitted to run fiscal deficits.  In addition unbacked credit issuance to private entities also counts, but whether something like a credit card debt is truly unbacked is a function of some debate.

There is no such argument, however, when it comes to the Federal Treasury debt.  Every dollar of that is unbacked and every dollar of it is reported every single day in either direction so ascertaining the minimum "neutral" rate is trivial.

The Fed's claim otherwise is a lie -- but you may wish to contemplate what you think the economy and market would do if the Fed Funds rate was to be immediately reset to 6.25% -- because that would be "neutral."

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Come and get it!  This nice accent piece, in mixed-media, would look fabulous on your wall.  Email now to make it so!

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2018-10-17 11:51 by Karl Denninger
in International , 128 references
[Comments enabled]  

It's about damn time.

Trump has tendered notice that the US is withdrawing from the "UPU_UN", a postal interchange treaty that China has abused for the last two decades to force non-customers to subsidize their small commercial shipments.

This is also how small, high-value and very illegal things (e.g. fentanyl and carfentanyl) are being shipped into the United States, never mind the insane damage done to US goods manufacturers who have their own shipping prices undercut by shippers from China despite the Chinese goods traveling 10 times as far!

It's about damn time this garbage was stopped -- and since Congress never approved the "update" that allowed China to engage in these abuses Trump needs no Congressional approval to make this change.

There is a formal process and time involved in this change -- about a year in duration end-to-end.  During that time perhaps a reasonable change (like paying their way!) can be negotiated.  But I very much doubt that, never mind the Chinese obsession with shipping in fentanyl.

Better late than never.

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2018-10-17 09:54 by Karl Denninger
in Market Musings , 116 references
[Comments enabled]  

The opposition of the alcohol industry to weed legalization is obvious.....

“I realized that I get zero enjoyment out of drinking and it costs me more money than weed does,” said Jena, who asked to omit her last name because marijuana is not legal where she lives.


Well now.... that, by the way, puts a whole lot of color on the weed industry too though.

You see, booze, while a significant (and profitable) business isn't that large.  The total booze (all types) in the US was about $25 billion last year, half of which (roughly) is wine.

Now consider that if there's a substitution effect and the cost goes down to the consumer for the cannabis products then the gross sales are going to be materially smaller than they are for the booze industry.

There are still people preening around saying that the total addressable market is in the couple-hundred billion area -- Tilray's CEO being one of them.  IMO he's using too much of his own product.

I know, I know, the stuff's legal in Canada basically now.  Fine.  The US will follow, and soon -- it's utterly silly to cater to Jeff "I'm a dickhead" Sessions at this point, but it's part and parcel of his bull**** and that Trump doesn't really care about the issue - especially not the very real and known medicinal characteristics for kids suffering from epilepsy.

Nonetheless the worm will turn -- just don't get caught under the weed stocks when the floor falls out of their valuations -- because it will.

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