Does Government Debt Even Matter?

June 10, 2022

In my state, the cost of gas is so high it would be cheaper to buy cocaine and just run everywhere.
– Louisiana Senator John Kennedy

THOUGHTS FROM DOUG

When I was a youngster in the 1970s, because of inflation shopping was something we tried to avoid. Today, shopping seems more like an addiction.

Lots of people are comparing US inflation in the 1970s to today’s inflation. The difference is that today’s economic environment is global. So maybe we should be considering global inflation and the potential for wage-price spirals in a globalized economy.

Janet Yellen just said there’s no recession in her crystal ball. Hmmm… I wonder if it’s government policy to always say there’s no recession coming. Certainly if anyone at the Fed or a US government economic leader suggested a recession is coming. many of us would immediately stop spending and recession would be inevitable. 

Despite inflation, bad economic numbers in general, and more and more talk of recession, people are still traveling like crazy this summer. Is this pent up vacation demand a result of too much time stuck at home during Covid? Will demand peak this summer then collapse next summer? Has YOLO taken over our collective consciousness?

We probably need to remember that neither bull nor bear markets run in a straight line. If success was achieved by buying on the dip in bull markets, does that mean we should sell on the rise in bear markets? But then what do we do with our money?

Did Elon Musk join the meme world? And is that meme about to fall on its face like so many others have these days?

Janet Yellen opened Pandora’s box of deglobalization. Now people are starting to realize that deglobalization seems to lead to higher inflation and lower growth. So should we keep trading with countries that don’t share our values? How would doing so fit with our human rights, zero carbon and ESG goals? Do we have morals and values, or are cheap products and corporate profits our morals and values?

Let’s ponder the production-consumption conundrum. Humans can’t exist without the production of the stuff we consume, yet all production of stuff creates waste. Consequently, the easiest path to less waste is to consume less stuff. Unfortunately, our current economies are so highly levered (lots of debt) that if we stop producing and consuming ever more stuff, our financial system could implode.

Why do we seem to lament the things we don’t have more than appreciate the things we do have?

THE ECONOMIC VIEW

CPI up to 8.6%
Real average earnings keep falling
US auto sales plunge
Housing affordability collapses
May ISM survey says economy still good
Yet consumer sentiment at 11-year low
As US household debt keeps growing
Mortgage applications at 22-year low
Americans are in a pissy mood

Does government debt even matter?
They’re debating this in Japan.

THE INFLATION BOGEYMAN 

“Shrinkflation” is on the rise.
Just look at this story’s photo lead

Chips, shipping and fertilizer costs
Are starting to come down.
Prices at some retail stores headed down, too
Has inflation peaked?

Fire at US LNG plant not good
Goldman predicts $140 oil
There’s a growing diesel shortage
Which could drive inflation higher

Turkey’s inflation soars by 73%
Let’s not use them as a model.

THE LABOR VIEW

Initial jobless claims keep rising
Are they signaling recession?

Are workers more productive at home?
Hmmm…

Which states have the highest wage growth?
Check out the chart.

What do big US companies pay labor?
At Google, the median wage is $300K.

MEANWHILE IN EUROPE

EU bans ICE car sales after 2035
How are they going to power all the EVs?

Here’s the EU’s current energy mix
They need lots of change—quickly.

ECB to start raising interest rates
Everyone hopes for a soft landing.
But this may be hard to achieve

PLAYING WITH FIRE

Is Xi trying to find ways to help Putin?
EU adopts sixth sanctions package
Russia’s oil & gas output will fall
While Macron wants to go easy on Putin
100 days of war, by the numbers
Putin threatens new targets over Western arms
Russia back to firing rockets into Kyiv
As Britain pledges long range missiles to Ukraine
Germany establishes new €100B military fund
US to let Venezuela sell its oil
France looks to UAE for oil supply alternative
Turkey negotiates with the West and Russia
Ukrainian resistance to Russia on the rise
Japan sanctions more banks
Norway LNG headed to the Baltics
Canada adds new sanctions on Russia

GLOBAL

Prime Minister Abe really changed Japan
This is how.

Global recession may be hard to avoid
Suggests World Bank president.
As the wheat problem gets worse

Saudi Arabia steps toward Israel relationship
Who knew this would ever happen?

The droopy rupee
EM economies are in a tight spot.

THE FINANCE WORLD

Public PE firms raising gobs of capital
Is a PE bubble forming?
Rising rates a new challenge for PE

New stock trading rules may be coming
SEC wants more trading firm competition.

A giant credit bubble pop is coming
So suggests successful Black Swan investor.
While private credit has its challenges

The ESG reckoning
There’s no logical way to value ESG.

THE CRYPTO MEME

Egalitarian, decentralized and anonymous
What Bitcoin was supposed to be—but is not.

NY wants to ban crypto mining
In order to reduce emissions.

When tulipmania meets the real economy
Trying to keep crypto from creating a crash.
What happens in crypto may spread

TECHNOLOGY

Is social media truly harmful
Or have we not adjusted productively?

Big tech pulls out all the stops
To prevent antitrust bill.
What would a bust up really mean?

A Chicago-to-New Orleans EV road trip
Was too painful to do again.

THE NEXT NORMAL   

US fertility rate rises in 2021
Yeah, us!

Renewables dominate new power generation
Are they cost effective and sustainable?

Bees are legally a fish
In California. Come on now.

THE WAR ON CARBON

Push to mine the ocean for EV minerals
Could devastate the environment.

Can bacteria become jet fuel?
Cemvita Factory is working on it.

The biggest marine vessel polluters
Are…cruise ships, of course.

THE CHINA SYNDROME

Here’s when to seize Taiwan and TSMC
Suggests top Chinese economist.

Chinese hackers exploited global telecom
How vulnerable are we?

China digs in for permanent zero-Covid
Why is this such a priority to them?

Beijing reopens
They’re back to locking down parts of Shanghai

THE WASHING-TONE

Biden reduces solar tariffs
At the expense of US producers.

Republicans introduce an energy plan
Does it offer a sufficiently rational balance?

Are price controls coming to battle inflation?
They’ve been used in the past.

MAKING A BETTER YOU

Lighting your rooms well
Can be helpful in many ways.

When’s the best time to exercise?
It’s different for men and women.

How to use food to break your mood
What can I eat to earn more money?

HOW ABOUT A BREAK

Caribbean hurricane activity collapses
That darn climate keeps changing.

These are the good ole days
Let’s hope they last.

Encouraging more imagination
May help us learn better and more.

SONG OF THE WEEK

“Summer Breeze”
Seals and Crofts
Who knew they were both born in Texas?
Jim Seals just passed away
Lyrics

VIDEOS OF THE WEEK

Spring time is bee time.
What does a bumblebee nest look like?

10 minutes of crazy wacky mayhem
Gloucester’s annual cheese rolling contest.

The agony and ecstasy of trying to learn
Expertise is almost always learned.

CASTING AROUND THE PODS

Burnout and how to avoid it
From Dr. Laurie Santos and The Happiness Lab.

FROM THE HEADHUNTER’S KITCHEN

What to eat with steak
That’s not potatoes.
How about a beefalo steak?

Italy cracking down on counterfeit parmesan
Don’t get caught shredding fake stuff.

Want to lower your risk of death?
Drink your coffee every day!

IN CASE YOU MISSED IT

The Leyendecker View: Moore’s Law Is Almost Dead
June 3, 2022

The Leyendecker View: IRR Is a Vanity Metric
May 27, 2022