Gold Is Doing Its Job

On Monday, the U.S. Commerce Department announced it was awarding Taiwan Semiconductor Manufacturing Company (TSMC) a $6.6 billion CHIPS Act subsidy for the fabrication of computer microchips in Phoenix, Arizona.  TSMC will also receive up to $5 billion in low-cost government loans.

In return, TSMC will expand its planned investment from $40 billion to $65 billion and add a third Arizona fabrication site by 2030.  The company will be producing the world’s most advanced 2 nanometer technology at its second site starting in 2028.

The Commerce Department anticipates the development will create 6,000 long term manufacturing jobs and 20,000 shorter term construction jobs.  With the AI arms race rapidly escalating, having semiconductor fabrication on American soil may be a strategic necessity.  Nonetheless, subsidizing industry – in this case a foreign company – using American taxpayer dollars comes with lasting costs.

This is but one of countless examples of how the U.S. economy no longer functions through the free and mutual exchange of individual citizens in the marketplace.  It is subject to extreme intervention from planners in the government. Continue reading

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Janet Goes to Guangzhou

The S&P 500 closed out Q1 2024, up over 10 percent.  But while the S&P 500 was rising day after day one former highflyer was crashing and burning.

The Boeing Company closed out the quarter down over 25 percent.  Still, it wasn’t the worst performing stock in the S&P 500.  That honor goes to Tesla Inc., which declined over 29 percent.

This amounted to $230 billion in lost market capitalization.  Moreover, according to Forbes’ estimates, it contributed to a $55.1 billion decrease to Tesla CEO Elon Musk’s net worth.  And it dropped Musk from the world’s richest person to third, behind French luxury mogul Bernard Arnault and Amazon geek Jeff Bezos.

Short sellers, on the other hand, reaped $5.77 billion as Tesla’s share price cratered.  Still, Brad Gerstner at Altimeter Capital is buying the dip.  He believes Tesla is making “massive progress at an accelerating rate” on its self-driving technology.

In 2015 Musk told shareholders that by 2018 Tesla cars would achieve “full autonomy.”  Will 2024 be the year it happens? Continue reading

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Does Corporate Greed Cause Inflation?

It cannot be said enough.  Inflation starts with the inflation of the money supply.  From there, the excess money and credit chases consumer prices higher.  So, too, it pumps up both stock and real estate market bubbles.

Rising prices then come with a wide range of effects.  Asset owners are enriched as the nominal prices of the things they own inflate.  This also reduces the relative debt burden of the borrowing used to purchase the assets.

Workers, having little but their labors to sell, are impoverished.  Price increases for consumer goods vastly outpace wages.  Retirees on fixed incomes also get shredded, as their monthly allotments do not go the distance.

Consumer debts become more and more difficult to service.  As a greater portion of a person’s paycheck is used for food and shelter, there’s less money available to pay down debts.  For some, debt piles up from month to month, as additional debt is used to make up the difference between wage earnings and rising prices. Continue reading

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Why the FOMC Wants to Cut Rates

Capital follows a wide-ranging lifecycle.  First it is imagined.  Then it is produced.  Later it is consumed.  Ultimately, it is destroyed.  How exactly this all takes place involves varying and infinite undulations over decades and centuries.

One generation may produce wealth.  While the next generation consumes it.  So, too, a doomed generation may inherit an insurmountable debt burden – in the form of mega amounts of government debt – that will dog it to its dying breath.  Ingenuity and resolve will be significantly stifled.

As we understand it, the value in money is in what it represents.  Every dollar of actual money should be derived from a dollar’s worth of wealth that has been produced.  And every dollar of credit multiplied upon that money should imply a dollar’s worth of wealth plus interest that’s in the process of being created.

This is how wealth creation should work in a world where money is sound, budgets are balanced, and bankers stand behind their loans.  The present world, however, rarely works as expected.  Through policies of state sponsored wealth destruction, wealth is extracted from those who created it and then set on fire with systematic efficiency. Continue reading

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