The Economy

Endless ability to borrow (money that is cheaper than free) + massive government subsidies = epic malinvestment.

A few factoids.
This company is worth 35 percent more than GM and almost 50 percent more than Ford.

The combined valuation of Tesla, Rivian, Lucid, Nikola, Fisker, Lordstown Motors and Workhorse is $1.3 trillion. The combined valuation of GM, Ford, Stellantis, Toyota, Nissan, Honda, Volkswagen, BMW and Daimler-Benz is $845 billion. The second group sells more than 100 cars for every 1 the first group sells.

Thank Ben Bernanke, Janet Yellen, Jay Powell for this stupidity. I don't blame the politicians who have mucked up our markets with subsidies and corrupt regulation, because without the central bankers monetizing trillions upon trillions of debt in an escalating fashion, they would be impotent to do it.

This is as much of a reality today as it was in 2008 when the Federal Reserve dipped its toe into quantitative easing -- and then went batshit crazy with hubris since. When you essentially create money out of thin air and buy more and more debt with it, you not only pull growth from the future into the present, you ensure that that money won't be allocated efficiently. It's moral hazard at its worst, because the deeper they get in, the more debt monetization they have to do to keep from paying the price, which ensures a greater and greater price lurking in the future. Markets now have been conditioned to see money as free, and the amount of risk people are taking is beyond anything we have ever seen -- beyond what was going on in the 1920s and 1990s. There is a perception that there is absolutely no incentive to guard against risk when we have gone so long in which reckless behavior has been shielded from any consequences.

We should have never gotten to this point. Right now, the Fed is gingerly trying to extricate itself from the insane amount of debt buying it embarked on when the pandemic hit. But it's a bit like fiddling while Rome burns. Even with their tapering schedule (if they don't reverse course like they have every time the minute the bubble started to pop when they tried to back out), they will add another half a trillion dollars to their balance sheet by the middle of next year.

Even more importantly, they still have real interest rates very far into negative territory, stoking more and more malinvestment. If they stop their manipulation we are going to see something that makes the great depression look quaint -- and the defaults on all of the malinvestment are going to destroy people. But the longer they continue this insanity, the worse the price we are going to have to pay gets. And they are now backed into a much bigger corner than they were say 10 years ago when they kicked the can down the road because they lacked the courage to do the right thing. Jay Powell doesn't have the courage. So at this point this isn't going to end until they lose control and the mother of all credit crises overwhelms them. The cracks are there. All of that money they have created is causing runaway inflation now, when we should be in a period of glorious lower prices due to all the technological gains we have seen. We all are losers because of central bank arrogance, and unfortunately they have created a huge mess with impunity because 95 percent of people have no clue who they are or what they do.

 

From the "damn," I take it you took the over.

 

For a few, um, considerations, I can make he house win 58 percent of the time. Just saying.

 

My only kink is a good 10 paragraph post. Did you have me pegged as a dominatrix and donkeys type?

 

We saw one of those the other day and were trying to figure it out. The logo on that thing was incongruous.