There be dragons!

Inflation

YoY consumer prices in the USA hit 4.2%. This is the highest inflation reading for thirteen years, and it was unlucky for all equities.

• pretty much all equities were down, around 2% generally,
• commodity plays, financials and energy companies, were least affected,
• the 10Y Treasury yield was up to 1.69%,
• the Ponzi sector, e.g. $ARKK was hit hard: down 3.8%,
• European stocks were untouched, but the figures came out after Europe closed, so tomorrow might be red,
• commodities were down, even gold miners,
• USD.JPY was up nearly 1%. Covered interest rate parity is truly dead.

Crocodiles have been around since before the dinosaurs

Crocs (the footwear company) has had an amazing run, dropping from 70 to 0.94 back up to 106.

Goldilocks inflation targetting

https://thesoundingline.com/the-wrong-kind-of-inflation-again/

This is good article on why inflation targetting is much worse than trying to maintain a steady growth in the level of nominal GDP. Central banks may have to put on hold their mandates to solve racism, climate change and making life better for the alphabet mafia while they return to the boring problem of keeping the value of money stable.

Bitcoin is rat poison squared

Wall Street on Parade has a wonderful article about bitcoin.

It’s amazing that the mainstream press simply won’t say this stuff, because, hey, hey bitcoin is fintech, and it’s self-evidently the saviour of the UK economy, and we can’t risk not getting advertising from the crypto ecosystem. We will see soon whether bitcoin really is the antidote to inflation.

Harris also takes on the proposition that there is some intrinsic value to Bitcoin. He writes:

“It helps to understand that a bitcoin has no value at all.

“Promoters claim cryptocurrency is valuable as (1) a means of payment, (2) a store of value and/or (3) a thing in itself. None of these claims are true.

“1. Means of Payment. Bitcoins are accepted almost nowhere, and some cryptocurrencies nowhere at all. Even where accepted, a currency whose value can swing 10 percent or more in a single day is useless as a means of payment.

“2. Store of Value. Extreme price volatility also makes bitcoin undesirable as a store of value. And the storehouses — the cryptocurrency trading exchanges — are far less reliable and trustworthy than ordinary banks and brokers.

“3. Thing in Itself. A bitcoin has no intrinsic value. It only has value if people think other people will buy it for a higher price — the Greater Fool theory.”

In July 2019, NYU Professor and economist Nouriel Roubini launched a scathing analysis of Bitcoin. In a Bloomberg interview, Roubini said this:

“Crypto currencies are not even currencies. They’re a joke…The price of Bitcoin has fallen in a week by how much – 30 percent. It goes up 20 percent one day, collapses the next. It is not a means of payment, nobody, not even this blockchain conference, accepts Bitcoin for paying for conference fees cause you can do only five transactions per second with Bitcoin. With the Visa system you can do 25,000 transactions per second…Crypto’s nonsense. It’s a failure. Nobody’s using it for any transactions. It’s trading one shtcoin for another shtcoin. That’s the entire trading or currency in the space where’s there’s price manipulation, spoofing, wash trading, pump and dumping, frontrunning. It’s just a big criminal scam and nothing else.”

Later in the interview, Roubini added this: “There are millions of degenerate gamblers that are retail suckers, and they’re gonna create something where they can leverage not 10 times, not 50 times, but 100 times. It’s worse than those drug pushers who give you crack cocaine for free to get you addicted and then lead you to be broke….”

Lack of diversity is a problem for Fed Board of Governors

Yes, another article about inflation. Many commentators outside the mainstream have been saying this for a year or more.

Still, it may surprise people to learn that not a single dissenting vote was cast by any member of the Fed’s Board of Governors throughout the eight monetary-policy meetings in 2020 and the three meetings held so far this year. The same is true for 2019, 2018, 2017, 2016, 2015 and 2014, covering Mr. Powell’s years as Fed chairman and the entire term of his predecessor, Janet Yellen (2014-18). No Fed governor cast a dissenting vote from the Fed chair at any monetary policy meeting held throughout that time.

At such meetings of the Federal Open Market Committee, which convene approximately every six weeks, monetary policy is determined by a group of Fed board members—seven governors by design, but fewer in recent years due to extended vacancies—and five of the 12 Reserve Bank presidents. The New York Fed president is a permanent FOMC member, while four of the remaining 11 Reserve Bank presidents serve one-year terms on a rotating basis.

It isn’t uncommon for Reserve Bank presidents to disagree formally with the policy actions approved by the FOMC; their dissenting votes, based on compelling arguments, are contained in the minutes of those meetings. FOMC records indicate that dissents reflect fundamental differences between committee members over current policy and how to achieve macroeconomic objectives. That’s normal. What should give observers pause is the blanket agreement among Fed governors regarding the monetary-policy actions that get implemented.

_Judy Shelton, in the WSJ, 5 May 2021. _