Today is Wednesday, so only a few clips will be played before some great music from the early 1960s. In the past few weeks, the financial and economic media have commented that the “market” has digested higher inflation, and the central bank will have to give in to market privileges. Even media people I personally like have been talking about this line, and last week’s headlines included statements like the RBA has raised the white flag. All of this is the result of self-realization, and if everyone acts as if it is necessary to make the “market” work, then it will happen. We should all be clear about what this means. Corporate welfare abounds. This is not the only example from last week.
Corporate Welfare #1
How does the Biden administration work hard to fulfill almost all its promises before last year’s presidential election, but it can issue billions of dollars in shares to private companies whose stock values will soar?
Last week, we read that Hertz Rent-A-Car has purchased 100,000 Tesla Model 3 cars from Elon Musk’s company.
According to reports, the contract has brought about $4.2 billion in revenue for Tesla, and its equity value exceeds $1 trillion.
As a result, the wealth of company owners has increased substantially.
The purchase order is equivalent to about 10% of the company’s annual output.
We also learned that with the support of the House of Representatives Settlement Expenditure Act, especially regarding the decarbonization of US motor vehicle inventories, although the consumer subsidies (tax credits) provided will exclude Tesla because it is an anti-union Workplaces, but regulations related to commercial vehicles will be given tax credits of up to 30%.
This means that the subsidy will save Hertz about $1.26 billion, which means that Tesla’s rival has become a fairly standard Toyota.
They will also receive subsidies for the electric vehicle charging infrastructure to be built.
When I read about this, there are a few things that impressed me.
1. I appreciate the shift to electric vehicles.
2. Tesla has a long-term supply delay in delivering cars to consumers, which means that demand has been surplus.
3. Hertz sees this decision as a “strategic decision” to reduce unit costs and increase profits.
4. If (2) and (3), then why does the US government provide huge public subsidies to profit-seeking companies, while at the same time, politicians violate their promises to do other valuable things because they “no” enough money’?
Answer: The company’s welfare is normal.
Corporate Welfare #2
Back to the central bank.
When we hear that the “market” has “digested” higher interest rates, it means that many gamblers in the financial market have bet on rising interest rates, and if the result occurs, they will make huge profits.
These gamblers manipulated the media to exert pressure on the authorities to imply that interest rate hikes are inevitable in response to an apparent inflationary outbreak that may escalate into hyperinflation.
Every day, at this stage of manipulation, some financial market “economists” will hype in the media, saying that the central bank must take action to protect us from higher inflation.
This is a code that indicates that they want the central bank to verify their bets and provide their companies with huge returns, including their own bonuses.
The unsuspecting public believes that these investment bank commentators who appear on television every day are “experts” who provide wise comments to help us all understand what is happening in the economy, and in turn, we think it helps We make better decisions. Lending and spending decisions.
Media companies, including public broadcasters (such as ABC, BBC, etc.) have never indicated that their “experts” actually have a huge conflict of interest, because if they provide advice or comments (eg, interest rates will have to rise, etc.) become reality.
Stupid we are too easy to be deceived.
The statement that “the market has set its price” also reinforces the idea that these amorphous “markets” are actually more powerful than the sum of the Ministry of Finance and the Central Bank (the government).
This leads to all the narratives we face about “inevitability”, “TINA”, “the government can’t do anything about it”, “the market rules and provides the efficiency of government intervention and destruction”, and all other issues.
This will lead to all other collateral consequences, that is, fiscal deficits are bad, and financial markets will stifle the currencies of the countries that run them. And all this.
Then they infected social democratic parties, such as the British Labor Party in 1976. They lied to people that they had run out of money and could only resort to the IMF’s loan facility as a choice.
And all this.
The billionaires in the market have always laughed at our stupidity. They ordered the next luxury yacht or took a private jet to the climate change conference in Glasgow and provided a platform to teach us about climate change issues.
Moreover, in some cases, after blasting oneself into space, who knows the damage to the environment is just to confirm that the atmosphere is “thin”.
Stupid us, because of so gullible and tolerant of all this.
Last week, the Reserve Bank of Australia abandoned the 3-year Australian government bond yield as part of the pandemic and has maintained its target of close to 0.1% since March 2020, succumbing to the tricky response that “interest rates will have to rise”.
Since March 2020, they have demonstrated their influence on the market through bond purchasing power.
In the past few weeks, the “market” – gamblers – has been selling bonds maturing in April 2024, which has pushed up yields in the fixed income market.
Then the inflow is the interest rate of other assets. If this happens, then speculative trading (short selling, etc.) will be profitable.
The central bank has two options: (a) curb speculation by maintaining strong demand for these bonds in the secondary market; or (b) stop controlling returns and allow profits
Last week, the Reserve Bank of Australia chose option (b) and provided gamblers with huge corporate benefits.
Last Friday, the Bank of Australia could have suppressed speculation by buying a batch of bonds maturing in April 2024.
The Reserve Bank of Australia did not bid, which means the gambler won.
In the statement yesterday (November 2, 2021) – Today’s monetary policy decision – The Governor of the Bank of Australia confirmed that the policy rate will remain unchanged at 0.10%.
He also stated that the Bank of Australia will “continue to buy government bonds at a rate of US$4 billion per week until mid-February 2022, when further review will be conducted”, but will “suspend the April 2024 yield target”. key”.
The Reserve Bank of Australia claims that the introduction of a yield target is to keep interest rates low during the worst period of the pandemic.
The statement went on to say:
However, its effectiveness as a monetary policy tool has declined because the operation of data and the forecast progress of our goals have led to changes in expectations for future interest rates.
This makes it seem as if the gambler has power.
But, of course, no matter what the gambler claims is the inevitable future, RBA can keep the rate of return at any level it chooses.
The Reserve Bank of Australia has effectively abandoned their “commitment” to keep short-term interest rates unchanged until 2024, which is why the three-year yield is the target.
Now they admit that they may raise interest rates before then because inflation may be higher than previously thought.
However, they sent mixed signals because the statement also claimed:
I want to make it clear that this decision does not reflect the view that the cash rate will increase before 2024.
Go to figure it out.
Another issue involves the argument that interest rates must be raised to address the “so-called” inflation problem.
Of course, the prices of certain products have risen, and the transportation costs have risen due to misallocation of ships and containers.
But wages have not changed.
During the pandemic, due to lockdowns and travel restrictions, consumer spending patterns have changed, factories and wholesalers have experienced massive disruptions, and there will always be some inflationary pressures.
But how will higher interest rates alleviate these temporary supply chain blockages?
They will not-so we are once again caught in the destructive neo-Keynesian mantra of the necessity of achieving fiscal surpluses as quickly as possible regarding the primacy of monetary policy and its inevitable results.
If we return to that kind of nonsense, the damage will be huge.
Music – Scraper Blackwell
This is what I have been listening to at work this morning.
I have never heard of this album-Mr. Scrapper’s Blues (released on the Prestige Bluesville label in 1962)-this is one of three studio albums- Francis Hillman’Scrapper’ Blackwell.
Repertoire by- Art Rosenbaum -As part of his archival work preserving American folk music traditions.
You can get that album on CD now, it’s great.
This is a famous song played by Scrapper Blackwell—— No one knows you when you are down – Written by – Jimmy Cox – 1923.
It shows– Piedmont style – Guitar performance developed from Ragtime’s playing style.
Scrapper Blackwell didn’t have much singing in his early days-especially in his collaboration with pianist Leroy Carr, but when the relationship ended, after a long interruption of Blackwell’s inactivity on the scene, he did start singing. , We are very grateful to him for doing it.
Excellent performance and beautiful singing voice.
That’s enough for today!
(c) Copyright 2021 William Mitchell. all rights reserved.
