The educational establishment has worshiped at the altar of the “scientific method” (SM) for many decades. That is a decision-making tool for determining truth, by developing a hypothesis and then testing it against actual observations. If the observations don’t support the hypothesis, then the hypothesis must be untrue. With roots as far back as ancient Egypt, belief in SM didn’t become commonplace until the 17th…
Existentialists often joke that words are just hollow emotions. One example is the oft-spoken “thank you for your service” that veterans hear. At first, it was appreciated. Now, it is just a reminder of how many years we never heard it. Another example is “thoughts and prayers” which is uttered by every politician afraid of their base of voters, as well as the all-powerful gun…
The economic recovery from the 1980 recession was slow, so Congress they decided to jump-start it by invigorating the banking system. They authorized bankers to make equity investments. Instead of lending money to build a shopping center, for example, they could buy it. Later, they were allowed to buy companies. Indeed, bankers were strongly encouraged to be more than mere bankers. The accounting was simple…
Since Spring, I have advised people that the outbreak of inflation is not “your father’s inflation.” It’s not as bad today as it was in the early 1980s. One reason is that we have additional tools to fight it. Your father only had increasing interest rates to kill inflation – a proven technique but no longer the only cure. Appealing to patriotism didn’t work. (Remember…
I’ve always wanted to be Superman – you know, “Faster than a speeding bullet! More powerful than a locomotive! Able to leap tall buildings at a single bound!” Unfortunately, I didn’t look good wearing tights and accepted that harsh reality. The new UK Prime Minister is Liz Truss, and we wish her well, but I suspect she wants to be the legendary Margaret Thatcher, her…
Let’s see . . . the stock is way down, the economy is suffering, both inflation and interest rates are soaring, the world is sinking into debt, a deranged world leader is threatening to use nukes, and the news media relentlessly reports wars and other pleasantries. Who can sleep with all that happening? You should! One reason I don’t lose sleep that, earlier this year,…
When I was still young enough to know everything, I loved the concept of democracy. Sure, lots of people have argued that we are a republic, not a democracy, but that is a difference without significance in America. Authoritarian forms of government are too repugnant to even consider. Likewise, the constitutional monarchies like the United Kingdom, Japan, Thailand, Norway, etc. were also offensive forms of…
Unfortunately, today’s release of the Producer Price Index confirmed yesterday’s Consumer Price Index. Prices are still going up, although not as rapidly as before. On a year-over-year basis, consumer prices went up 8.3%, while producer prices went up 8.7% – both more than expected! We are already experiencing a mild recession, which suggests a “soft-landing”. That means it won’t be necessary to trigger a “real”…
Oh, what a difference one-fifth on one percent makes . . . . immediately knocking 600 points off the Dow and making three-quarters of one percent increase in interest costs later this month a virtual certainty. This morning, the CPI report for August was issued, showing it increased 0.1% instead of decreasing 0.1%, for a disappointment of two tenths or one fifth of one percent. …
Do you think poor people are poor because they are lazy? If so, what percentage? What percentage are just plain stupid? What percentage are emotional refugees? As a former Texan, I enjoy reading former Senator Phil Gramm (R – TX) whenever I can, and he had a recent opinion piece in The Wall Street Journal, along with John Early of the American Enterprise Institute. It…
Going from G.O.A.T (greatest of all time) to Goat (stupid mammal) in just two years requires more than bad luck. Two years ago, the head of the Fed Reserve, Jay Powell, was celebrated for his actions getting us past the pandemic. He dropped rates and greatly expanded the money supply. Facing soaring job losses from Covid-19 and in concert with Congress, he injected trillions into…
Your choice . . . do you slowly peel-off a band-aid or do you prefer to simply rip it off? Economists have long believed the only certain tool to end inflation is a recession. Paul Volcker proved it! He was Chairman of the Federal Reserve from 1979 to 1987 and ushered in two recessions, by raising interest rates from 11.2% to 20% during 1980 and…
For those who like to see a conspiracy behind every tree, here is a fresh one . . . So, assume President Biden wants increased spending, but that causes more inflation. Further, assume Fed Head Jerome Powell wants less inflation and drives up interest costs to slow inflation. Is it possible they floated down the Snake River in Jackson Hole this week and conspired that…
I have a young cousin who is dumb as a stump . . . maybe dumber? Fortunately, he lives six hours away, and I have rarely seen him over the years. Unfortunately, his downward slide began when he was expelled from school about fifteen years ago for smoking pot and started hanging out with a bunch of losers. Shortly afterwards, there was a large family…
Anybody who have ever been to Jackson, Wyoming, has fallen in love with it — truly a remarkable place for lovers of nature. It’s also a remarkable place for nerds. In fact, the Federal Reserve System holds their annual Economic Symposium there in late August of every year, and it is jokingly referred to as The Nerdfest. I suspect all the attendees still have their…
I’ve spent almost two decades guessing whether the National Association of Business Economics (NABE) is conservative or progressive. The membership of the competing American Economics Association consists of academics and is clearly progressive. However, the NABE membership consists of working economists, and I think there is a mere 51% probability that NABE is also progressive. Here are some examples from their most recent survey of…
My nomination for the best television commercial of the year goes to the search engine “DuckDuckGo,” which competes with Google’s search engine and others. The commercial shows a young man wearing a T-shirt that says Google. It shows him looking over the shoulder of Americans using search engines to find things online. The 1983 musical classic by the Police, “Every Breath You Take” is perfect,…
In the fourth century BC in Greece, there was a legend that a rope-knot was so entwined and complicated that it was impossible to unwind. That legend promised control of Asia to anybody who could undo the knot, which became known as Gordian’s Knot. Along came Alexander the Great, who didn’t waste time trying to untie the knot. He simply took out his sword and…
The poorly-named “Inflation Reduction Act” was just passed by Congress. Democrats rave that it will reduce inflation. Republicans crow it will not! They’re both right . . . a little! Think of it this way: If you own a $1,000 CD, you get paid interest. The money spent buying the CD is called principal. The interest paid by the bank is called income. Now, remember…
Yesterday’s monthly “jobs report” was a good example of when good news is not so good. Expecting a healthy 258 thousand jobs were created last month, Wall Street was stunned to see twice as many jobs were created. It was a blow-out number, suggesting the economy was still strong, but why did Dow futures suddenly drop 220 points. Shouldn’t investors be happy that America was…
My ex-wife was fond of saying that one of the biggest problems with men is that they just can’t stop competing with other men . . . even dead men. Paul Volcker (1927-2009) was the Chairman of the Fed from 1979 to 1987, when he was succeeded by Alan Greenspan. A product of Princeton and Harvard, he is still widely regarded as the greatest “Fed-Head”…
When I was a young boy, my father told me to NEVER discuss religion or politics with other people. What he meant to say was NEVER discuss subjects that make other people react emotionally. If such subjects must be discussed, just don’t be inflammatory. Good Advice! A recent blog entry was about a quote from Ross Perot about abortion, when he answered a reporter’s question…
The short answer on how to handle inflation is simple . . . create a recession and hope you don’t get stagflation. The longer answer is that you have three tools to handle it. First, one cause of inflation is a sustained period when demand exceeds supply. If you cannot increase supply with targeted tax cuts or targeted regulatory relief, you can decrease demand by…
One of the best and most venerable market strategists is Dr. Jeremy Siegel of Wharton. His thoughts are always well-informed and well-crystalized. Today, he thinks we may have seen the worst in inflation. CPI and PPI numbers are backward looking – what has been, not what will be. The Fed has both shut down the growth in money supply and aggressively raised interest rates. Historically,…
If kids ask tough questions, then grown-up kids ask even tougher questions. During a recent visit, my grown-up daughter asked me if I thought the 2024 presidential election would be the last one? Laughing at first, I realized she was actually quite concerned. First, I explained that even dictators stage elections, so if a dictator “wins” in 2024, he would continue the farce. Second, the…
My latest quarterly column for Inside Business can be found here: https://www.pilotonline.com/inside-business/vp-ib-expert-flinchum-0718-20220718-5v6iajiel5eatpjdqzcdpba4hm-story.html
Raise your hand if you were surprised by yesterday’s report that inflation during June was running at a steep 9.1% annualized rate! We all know it has become a problem. We also know how to stop it – bring on a recession! The hesitancy of the Fed to intentionally cause a recession is understandable, as they hope for a “soft landing.” Of course, the slower…
One of my favorite Republican writers has long been Peggy Noonan, who was the primary speechwriter for President Reagan. Last week, she wrote an article in The Wall Street Journal that deserves some thought. She argues that crime is more scary now, not because there is more crime, but because we no longer know the rules to keep ourselves safe. Quoting her: “Previous crime waves…
Blessed to live in a safe, peaceful country without the curse of the Second Amendment, Shinzo Abe was nonetheless gunned down, as he was speaking in a public square. He was a conservative leading a party named the Liberal Democratic Party. His family had a long history of being active in Japanese politics, similar to the Kennedy’s or Bush’s in this country. Abe was blessed…
When I enlisted in the Army long ago, I just wanted to kill those “godless Communists” in Southeast Asia. It was certainly not a business proposition. An article in ABC News last week discussed the recruitment problems of our military forces. To compete with private companies, the Pentagon is debating various options to increase enlistments. It’s the same problem facing the airlines or fast food…
Thank God the first half (H1) of this year is over! Forgetting the horror of Putin’s War on Ukraine and the never-ending clown show in Washington, inflation broke out with a vengeance, interest rates started increasing rapidly . . . and stocks stumbled into a bear market. The Dow Jones dropped 14%, while the S&P lost 20% and the volatile NASDAQ lost almost 30%. Unless…
Wall Street economists pay close attention to the growth rate of our Gross Domestic Product. For the first quarter (Q1) of this year, GDP growth was estimated at a negative 1.2%, which was the first quarter to shrink since the pandemic collapse two years ago. On the second reading, we found GDP shrank 1.5% instead. Yesterday’s final reading was a negative 1.6%. The commonplace definition…
One of the most important books I’ve ever read was the iconic “On Death and Dying” by Elisabeth Kubler-Ross in 1997. She demonstrated that there are normal emotional stages after hearing a terminal diagnosis. It is a useful exercise. Naturally, Dr. Kubler-Ross’s perspective on predictable emotions related to death is useful for other life events. Mark Hulbert of MarketWatch has written the very useful “Five…
