Perpetual Motion Machine Finance

Simple answers are not always correct answers.  However, simple answers are often accepted as correct when people are too lazy or distracted to bother to know any better.

Mundis vult decipi, ergo decipiatur.  The world wants to be deceived, so let it be deceived.

President Biden – a conniving politician – is fond of blaming corporate greed for rising prices.  This has proved to be a simple and effective answer for why consumer prices are so high.

In one simple statement he shifts the focus away from the government’s failed policies.  In doing so, he also points to a boogeyman which the broad populace can direct its anger toward.

Biden’s logic is simple.  Prices are increasing; therefore, corporations are greedy.  But if corporations are greedy because prices are rising, isn’t the government also greedy because prices are rising?

Specifically, if corporations are increasing prices because they are greedy, does that mean the U.S. Postal Service (USPS) is also greedy? Continue reading

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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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