Welcome to This Week’s Leyendecker View
A BIG THINK
The End of Inflation?
Between November 2020 and November 2021, the consumer price index (CPI) in the US rose 6.8%, thanks to rises in the price of gasoline, food and housing. Higher energy costs caused inflation to rise further in 2022, reaching 8.9%—a high not seen since 1981.
Just a few days ago, CPI rose 3.2% for the 12 months that ended in October 2023.This was down from 3.7% in September 2023. October’s CPI was the lowest since March 2021.
Yay, us! Yay, Fed! It looks like we’re beating down inflation!
Inflation is falling while China’s economy struggles, Europe’s may be in recession, Japan is in recession, US consumers are backtracking from Covid-revenge spending and the WTO downgraded global trade growth. What happens when/if any of these indicators turn around?
More so, what happens if the enormous flood of fiscal and monetary stimulus over the last decade has pushed the world into an oversupply situation?
This WSJ article suggests that, over the last decade, numerous countries have borrowed and spent like drunken sailors. That borrowed money went into a lot of factories and infrastructure to support growing global trade. Now these countries have to pay the piper in debt interest.
Will China’s massive manufacturing capacity, combined with a global economic slowdown, result in deflation replacing inflation as a concern? Some countries are worried. While others, in response to China’s retreat from the market economy model and its impact on global trade, are adding to global capacity. Won’t this just push even more over-supply into the global market?
China’s biggest chipmaker thinks geopolitics have us headed for a chip glut. Is the trend to reshore, nearshore and friendshore only going to add to more production capacity at a time when we may already have too much?
And is the global economy going to return to the explosive growth we had before the pandemic? Or will too much global debt, combined with the slow unwinding of globalization, push the global economy into a period of stagnation similar to what happened in Japan after its 1970s and 1980s economic blowout?
A year from now, will we be worrying about deflation?
And we haven’t even scratched the surface on AI’s potential influence on inflation/deflation. Will it lead us to another long period of deflation?
THE ECONOMIC VIEW
Third-quarter productivity increased 4.7%
Good for corporate profits and GDP growth.
Small businesses slam on the brakes
Borrowing costs are too high.
For fourth straight month, consumer sentiment falls
Retail sales are falling
Walmart grows cautious
This holiday season could be ho, ho, horrible
Holiday hiring demand drops
Has the interest-rate-rise lag finally hit?
THE INFLATION BOGEYMAN
The components of inflation
Housing is 44.6% of the calculation.
Airfares are dropping
Yay, say travelers.
THE LABOR VIEW
The Great Resignation
Has turned 180-degrees around
MEANWHILE IN EUROPE
ECB not lowering rates soon
Following the Fed’s lead.
THE GLOBAL GAME
Global debt service costs explode
Less money for military and climate change.
WTO downgrades global trade growth to 0.8%
Hey…at least it’s growth!
Globalization is changing.
These five countries are the beneficiaries
THE GAZA FIRE
Israel looks for evidence of Hamas presence at hospital
You think captured combatants misled them?
Germany raids anti-Israel Muslim groups
Will this stir the hornet’s nest in Germany?
Fighting may soon start in southern Gaza
Israel is already warning residents.
THE UKRAINE FIRE
The EU seeks more Russian sanctions
Russia seems to find ways around them.
China building navy base in Cambodia
It’s for Cambodian commercial use, right?
Japan and Britain cozy up
Forming stronger alliances.
South Korea is fastest-growing global arms exporter
Ukraine is a customer.
Private equity faces a reckoning
Is the easy-money era behind us?
Will American realtor commissions really fall?
Almost no one else in the world pays 6%
Do you really need to own a home?
Most people in Switzerland don’t
Hyundai to sell cars on Amazon
Will Amazon drivers deliver them?
Microsoft announces its AI chip
The gigantic seek to be more gigantic.
New breed of supercomputers coming soon
They do two billion operations a second.
THE CHAT ON AI
ChatGPT-4 Technical Report
It blows away GPT-3.
AI will cut film animation costs by 90%
Accenture boss says AI could free up 40% of work hours
Will this spike demand for jobs at Starbucks?
JPMorgan discusses AI with regulators
Might this bank get AI right?
THE NEXT NORMAL
Brain fog an increasing issue across all ages
Too much information for our ancient brains?
Oregon decriminalized hard drugs
Now they have bigger problems.
THE WAR ON CARBON
Want to cool things down in cities?
Use more reflective paint!!!
THE NEW ENERGY TRANSITION
But we don’t have to recycle dams.
Costs got too high for this NuScale effort in Idaho.
Plug Power needs a government bailout.
THE EV DREAM
Half of EV owners will go back to ICE vehicles
Except for Tesla owners.
Exxon getting into the lithium business
Are they late to the party?
India wants a Tesla factory
So it may slash EV tariffs.
THE CHINA SYNDROME
China lends billions to countries
That can’t pay their previous China debts.
80% of Americans consider China an enemy
What wool will Xi pull over Biden’s eyes?
No matter what Xi said to Biden
He’s been bashing the US for years
Democrats may have lost the working class
Thanks to their immigration position.
MAKING A BETTER YOU
The best and worst habits for eyesight
The eyes need good exercise, too.
Secrets to a healthy breakfast
Get off to a strong start.
Want to lead a longer, healthier life?
Get a dog
HOW ABOUT A BREAK
Recent images from James Webb telescope
A new and amazing view of the universe.
How to discover new music
New music is probably good for the brain.
We knew you’d want to know.
Cats can make 276 different facial expressions
SONG OF THE WEEK
CASTING AROUND THE PODS
VIDEOS OF THE WEEK
Making sculpture from a single grain of rice
Who does this kind of stuff?
Masters of the Air trailer.
The Band of Brothers band is back.
FROM THE HEADHUNTER’S KITCHEN
Some Thanksgiving sides recipes…
Garlic mashed potatoes
Roasted Brussels sprouts with bacon
Five ingredient corn casserole
Buttery herb stuffing
Spicy southern cornbread dressing
Honey glazed carrots
Jalapeño cranberry sauce
Sweet potato pudding cake
Bored with the traditional turkey?
Here are some yammy alternatives
You don’t really need to make pie crust.
Which store-bought pie crust is best?
Who do you think pulled the wool over whose eyes in this week’s Xi-Biden meeting? During his visit in San Francisco, Xi said China wants to be America’s friend. Right! Xi seems to think giving us pandas is a key negotiating strategy.
I did not say this: “The downside risks to the U.S.’ fiscal strength have increased and may no longer be fully offset by the sovereign’s unique credit strengths. In the context of higher interest rates, without effective fiscal policy measures to reduce government spending or increase revenues, Moody’s expects that the U.S.’ fiscal deficits will remain very large, significantly weakening debt affordability.” The credit rating agency Moody’s did.
A friend sent me this video of a kindergarten graduation in Gaza. It shows Palestinian children in military garb, clutching toy guns and acting out a pretend raid in Israel. Some people may think the brainwashing in Palestine is so extreme and frequent that there is no hope for a peaceful future between Israel and Palestine. But remember, Nazi Germany had the Hitler Youth movement. The brainwashing of young Germans did not prevent Germany from evolving a less hateful and more peaceful collective consciousness—after it was decisively defeated in war.
Let’s hope that, at the end of the day, goodness and economic prosperity are more attractive than hate, despair and destruction to the great majority of people. It will be Israel’s, and maybe the world’s, responsibility to establish the economic capacity for prosperity in Gaza after the war ends—just as the US did for Germany after WWII.
I wonder if the Inflation Reduction Act is actually going to increase inflation. So far, everything we are learning about the path to a green-energy future is that it means higher prices for energy. And higher energy prices waterfall into all goods and services.
Maybe another way to look at this is that all government regulation is usually inflationary because regulation adds costs to the industry in question. Companies in that industry then pass these costs onto consumers.
How soon until President Biden has some cognitive or health issue that forces him to pull out of the presidential race? Oh boy, on that thought!
Have a great Thanksgiving week!
IN CASE YOU MISSED IT
Work Will Be Voluntary
November 10, 2023
Janet Yellen Really Messed Up
November 3, 2023
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