Founder Merk Investments. USD ~2.5bn in precious metals. Weekend rancher. tweets ≠ advice
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Joined June 2012
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Adam’s post yesterday recalls Thomas Sowell’s A Conflict of Visions: in politics, some prioritize outcomes, others principles. The former may micromanage, risking unintended consequences; the latter tolerate 'loopholes' for more freedom and fewer rules.
amazon.com/Conflict-Visions-…
Controversial take:
As those who follow me know, I'm no socialist
But I'm not a fan of accelerating wealth concentration either (see below stats)
I'm of the mindset that if you invent the next Google/SpaceX/etc you should reap the full rewards in your lifetime
Work your way to billionaire status? Go ahead, live like a king.
But should you be able to set up your family for dynastic dominance for generations to come? There's something about that that doesn't sit well with me
Absolutely you should be able to leave your heirs "plenty" ($20 million per heir?) so that they'll be well off. But not so much that they can influence society's orbit with their inherited mega-riches (e.g., Alex Soros)
How best to achieve this? And if your heirs don't get your excess wealth (beyond my "plenty" allotment), who does?
I don't have a great solution to propose (yet)
On theory my preference would be for the wealth to literally vaporize. No one gets it. Your excess assets would be liquidated and the proceeds would go to money heaven. That way, the purchasing power of every other dollar in circulation would slightly increase -- benefitting all. And the govt wouldn't amass a massive estate tax surplus that would surely get abused and wasted.
But the practicalities of implicating such an idea are probably so complex as to not be realistic (what to do with illiquid assets?, for one)
Maybe your excess wealth goes towards paying down the national debt? Or funds critical infrastructure? The problem is, this would actually incentivize Congress to be even more fiscally profligate as they would come to count on your estate proceeds to subsidize their spending.
Like I said, I don't have a neat solution to propose (yet). But I do noodle on this frequently and would appreciate any constructive ideas any of you may have to share.
Or, we just accept that the aristocrat class will continue to invest its compounding wealth over the generations towards furthering its own advantage. That's largely how the world has worked so far. The danger, of course, is that when the concentration of wealth becomes too lopsided, class warfare erupts and the guillotines come out. I've toured the catacombs under Paris -- they are gruesome.
"European countries have seen a sharp uptick in so-called gray-zone assaults" "if the... attack had resulted in large numbers of casualties, they would have considered invoking [NATO's] Article 5"
WSJ dives into Putin's sabotage campaign in Europe. 👇
wsj.com/world/europe/airfiel…
This morning, @jc_econ suggested to @BloombergRadio that Warsh signed on to a hiking cycle due to peer pressure on the FOMC. With due respect, that's a misunderstanding of Warsh's framework.
Not only is Warsh a hawk at heart, he has clearly articulated both his plan to tackle inflation and his reform ideas to improve the context of how monetary policy is conducted.
You point out good old forward guidance is responsible for the lack of a rate hike being priced in next week. Almost. It is correct that bad habits die hard (FWIW, the Minutes also suggest that a forward guidance mind is still present in several FOMC members), but eliminating forward guidance doesn't mean there should not be a reaction function. And while Warsh cannot publish a reaction function without the rest of the FOMC on board, he was very clear in his September post rate decision presser when he said he "removed a dose of accommodation" - it implies a tightening bias, it implies a hiking cycle, but it also implies that there is no urgency - the rational market reaction should have been what we now see: low odds of a October hike, high odds of a December hike. All of this of course in a context of data dependency.
Differently said: yes, there's still too much forward guidance, but don't let that distract from Warsh's efforts to reform the Fed a step at a time. Implying that Warsh is hostage of an FOMC that pressured him to hike rates mistakes the horse and the cart.
A Bloomberg guest suggests it’s a mistake to raise rates as we are facing a supply shock.
"Raising rates" is too simplistic:
The Fed is “removing a dose of accommodation”, i.e. moving to a tightening bias rather than easing bias - this is not a sledgehammer hiking cycle.
Bloomberg analyst (ie someone several layers removed from managing money) suggests “unlimited” access to capital for top rated hyper scalers.
I would like to add I’ll believe it when pigs can fly; except after last night’s demo, that might actually happen some day 😳
On the backdrop of a hot PPI (and yesterday's hot CPI), Stephanie Roth points out that financial conditions have tightened, signs businesses and consumers are affected.
-> no urgency to hike as tightening works through the system
@BloombergRadio
A few things to remember from the buildout of the railway system: the infrastructure remained in place even as some companies went bust; and eventually, the world move on to further technologies, but railways were a major stepping stone.
Systemic risks might lead to bailouts. Failure of a large cloud services could cripple thousands of companies. Except that's wrong: the bankruptcy code allows for ongoing operations, restructuring.
All this said, my own crystal ball calls for a bust at some point, but not one where interest rates need to go to zero, not one where there need to be bailouts.
Emphasis on "at some point" -- busts are notoriously difficult to time.
Then the question becomes whether a systemically important institution holds "too much" debt of companies that might go bust.
One of the better ways of addressing this risk is to talk about it, so the respective risk managers and boards pay attention.
I frequently get asked about what happens should/when the AI bust comes...
Given the boom was in part driven by tons of debt, odds are that rates would come down more than after the dot-com bust where the boom was equity fueled.
However, the next Q is: will there be bailouts? 1/
Europe's populist right used to be shunned by the mainstream media. Now, France's Marine Le Pen gets a featured front-page interview in the @FT.
The so-called "firewall" has burned down.
ft.com/content/73cfaf41-d3ea…
October rate hike expectations jumped back above 50% after the hot CPI release, currently just below again.
* Warsh in Sept "removed a dose of accommodation" -- expressing no urgency for further hikes.
* Warsh wants to let the data speak - and we got a hot CPI - yet, like any central banker, suggests no single data point drives decisions.
--> the market righfully increases odds of hike, but far from certain.
Separately, Tom Keene mentioned Warsh would ask FOMC not to hike because of election. I very much doubt anyone on the FOMC will raise that point - they are aware the transcript will be published at some point - while the midterms will be in the back of any FOMC member's head - they are human after all - none of them will want to be on the record bringing up politics.
FWIW, my opinion on this is shaped by communication with former FOMC members.
Unlike the upside surprise in August, where you could identify larger idiosyncratic increases, the miss on core CPI in September was more broadly based.
Core goods printed at +0.25%, the largest monthly gain in a year, and shelter was +0.39%.
Core services excluding housing was +0.42%. After falling to 1% on a three-month annualized basis in July, it jumped to 4.6% in Sept.
