Breaking Wind - Fat Tail Daily

Lower short-term borrowing rates don’t really make companies stronger or more profitable. They can have the opposite effect, luring corporate executives to take on too much debt.

In the hills around Gualfin, unwed mothers are the rule, not the exception. The father, say the locals, was ‘the wind.’

And so a strong breeze must have blown across the Potomac when the inflation of 2021-22 was sired. Democrats and Republicans point their fingers at each other. Democrats look at the inflation numbers and see a strong likeness to Donald J. Trump. The stooped shoulders? The fleshy face? The heft and solidity? In any case, it was he who was in the White House at the moment of conception, they say. And everyone knows how he fooled around.

Republicans, on the other hand, were sure that their man had nothing to do with it. It happened on Biden’s watch…when Trump was as chaste a choirboy, they say.

Meanwhile, the wind blows…from every direction.

Scott Bessent, Treasury Secretary, reassured investors this week:

“The United States government will never default,” said Bessent at a Congressional hearing on Tuesday. “We will raise the debt ceiling, and Treasury will not use any gimmicks.”

Let’s see, how does that work? No gimmicks? Raising the debt ceiling does not put a single extra penny in US coffers. But raising the debt ceiling allows the feds to print more money.

How’s that for a gimmick?

And what do you call it when you lower your own debt by inflating the currency in which it is denominated? A gimmick? Or blame the wind.

Many are those who complain about the Trump Team’s ‘disruptions.’ But what we see — at least in the things that really matter — is continuity. All the usual gimcrackery and balderdash, that is. Even the gimmicks remain the same.

“Be patient,” asks POTUS.

Last week, Trump explained that the slowdown in the US economy wasn’t his fault:

This is Biden’s Stock Market, not Trump’s

The very next day, word came that new jobs were more than expected. Donald Trump then decided that maybe the economy was his after all. The Irish Star:

Trump backtracks following decent job report, no longer ‘Biden’s economy’

The political factions take credit when they can… and when policies inevitably lead to trouble, they deny paternity.

Donald Trump was hoping that the Fed would pull his favorite gimmick out of the hat today. He urged Jerome Powell to lower interest rates.

Lower short-term borrowing rates don’t really make companies stronger or more profitable. They can have the opposite effect, luring corporate executives to take on too much debt…or misleading them with sales figures based on runaway credit. But the gimmick works in the stock market: prices usually go up.

But Powell, driven into a corner by Trump’s bullying, is unlikely to lower rates now. MarketWatch explains:

Trump’s repeated attacks on Fed Chair Jerome Powell, including the usual schoolyard taunts and names, have made it almost impossible for Powell and his colleagues to cut short-term rates at their meeting tomorrow, even if they wanted to. Any such move would run an enormous risk of being viewed as capitulation to pressure from the White House.

As for the job numbers, they come with their own gimmicks and miscues. Suppose POTUS decreed that everyone had to be employed… and that those without jobs would be given shovels and told to dig.

The unemployment rate: zero. Would that be a good thing? Of course not. It depends on what people are doing… and what they are getting in compensation.

Employment suggests you are contributing to the support of yourself and your community. But many of those counted as ‘employed’ are part time or gig workers in low-pay industries. ‘Living Wage for US’ reports that:

Across the U.S. today over half of American workers don’t earn enough to support themselves and their families at a basic level of decency…

And what about a clerk at the Pentagon…or a staff member in Congress? He will be counted as ‘employed.’ And well paid. Hire more people like him and unemployment will go down. But these people are a cost center…not a source of added wealth.

And talk about gimmicks!

Now the federal budget — the ‘big, beautiful bill’ — is working its way through Congress. The Republicans talk about ‘spending cuts,’ but if there are any, they are offset by spending increases. In short, it is a budget much like the other budgets that have come along this century. Too much spending. Too little income.

The country will go broke. The baby daddies in Washington will blame ‘the wind.’ And we’ll all be screwed.

Regards,