, ,

For the first few days, it wasn’t clear if Trump’s call to the Republic of China’s president was a rookie blunder, or intentional.  Now, it’s clear.  He’s going after a two-China policy, which is ideologically much more consistent with conservative American politics.  It is so idealistic that Reagan wouldn’t even pursue it.  Pure, but dangerous. 

China since Reagan has become so entwined with the American economy, it really can’t be separated.  It is awfully foolish to be kicking our creditors at the moment.  They have so much American debt to torment us with, they can suck down the M1 (cash) supply during America’s peak purchasing period in December.  “Black Friday” originally meant the day when stores go in the black on the balance sheet. You get it. It’s a Wonderful Life, different ending. 

If it’s too late to pull available cash off the table for spending, it’s not too late for pulling it off the table for lending.  Most of the “purchases” for “Christmas” are done on short-term consumer credit.  Enough disruption can be made to the US lending economy over the first quarter of 2017, when people actually pay off their “Christmas” purchases, that the banks will be left long and lean on collections.  In such a case, they will inevitably turn to Goldman Sachs retiree Steven Mnunchin, now the Secretary-designee of the Treasury, to slide some government cash over in a mini-rescue of the lending institutions.  Again. 

Consumer Inflation
The “real” inflation rate is really not the one published by the US Government Bureau of Labor, etc. The magic formula has been so bejangled and encrusted with exceptions, it does not mirror the original formula from twenty years ago. shadowstats.com has regularly kept graphs of the REPORTED inflation rate, and the ACTUAL inflation rate, which closely mirrors the original formula in its effects, i.e. consumer purchasing. Notice that the inflation rate is about 8% since 2001.  Based on the Rule of 72, a constant earning rate drops to half its real value every nine years or so.  THIS is why middle America in Flyover Land is screaming about money.  It’s trickled through their hands. 

Notice medical expenses, which had been “rising faster than inflation.” I’ll try to find out what the reported rates were.  As I recall, they were just about 8-9% which was “out of control.”  The problem was, they just couldn’t be jiggered like other inflation rates to show a lower rate.  This may well have been on purpose, as the hit has been on American Medicine for 20 years to restructure into a corporate/retail model, and apparently “unsustainable” inflation rates added pressure to the urgent “fix.”

In reality, a quick grab off forecast-chart.com an unknown website, the data looks like this:

US Healthcare inflation rate and cost increase over time
Annual US Medical Care Inflation Rate Inflation Cost Increase
Last Month 3.4%  
Last Year 2.5% 103%
Last 5 Years 2.9% 116%
Last 10 Years 3.4% 141%
Last 20 Years 3.7% 213%

The cost of healthcare has doubled since 1996, according to the data. Is this enough to run the system off the rails, given that the rest of the economy seems to be doubling in dollar cost every nine years?  Even the CPI-U, the buggered public data, is not that far off the horrific “healthcare inflation rate.”  Why sacrifice healthcare, and not, say, donut manufacture?  It’s because the megacorps already have the donut market, and they want to put in McDoctor booths with every Starbucks and Dunkin’ Donuts.  There is nothing to the panic that we need to wrestle down healthcare costs; it’s a scam.  The looting of the consumer through Obamacare policies is not just “keeping up with costs;” it’s looting.  How can they get away with it?  Well, the takeover of American Health has been planned for years, in the late 1980’s – it’s just coming to fruition now.  I see that most doctors’ offices will be in Wal-Marts or McDoctor virtual booths by 2020.  The system will produce lousy care -but it fits best with the traditions of Fordism & Taylorism.

And the “Flyover Land” is angry for missing out on the economic recovery since 2008.  They missed out because it’s spurious.  There has been no recovery. Rather, it’s a phony finagle of a “recovery” of small ultra-rich traders and corporations on Wall Street and nearby.  Donald got richer and richer off of this recovery, because he knew how to get next to the money fountain.  

The rest of the country, not on the NY-D.C. axis is increasingly ignored. The Rust Belt? Where?

The Flyover Folks want to get next to the magic money fountain – but there is no money fountain.  It’s just a show put on by the NY-Washington club to look like a recovery is here.  Suckers. 

Take a look at this graph.  How does it compare to, say, 1929-1934?


Oh, that’s ugly.  It looks like absolutely no recovery has taken place for the last six years, by the U6. How does that match up with the horrible old days?

  Lebergott Darby Avg
1929 3% 3% 3%
1930 9% 9% 9%
1931 16% 15% 16%
1932 24% 23% 23%
1933 25% 21% 23%
1934 22% 16% 19%
1935 20% 14% 17%
1936 17% 10% 13%
1937 14% 9% 12%
1938 19% 13% 16%
1939 17% 11% 14%
1940 15% 10% 12%

Ugh! It looks like that “bad old days” of the Great Depression aren’t as bad as the depression in employment in Flyover Land today. Instead, according to the Federal Calculations, all is ducky. Recessions never hit in the Washington area, remember.  But Flyover’s stuck. 

Okay, so we’ve been puttering along at about 23% unemployment in Flyover City since 2010  That’s WORSE than the average from 1931-1937, the heart of the Great Depression.  No wonder “they’re” pissed.

[data for 1930’s from https://fraser.stlouisfed.org/files/docs/meltzer/maremp93.pdf]  It’s from the Federal Reserve.]

“They” pulled for The Donald in hopes that he could lend his magic to the Government, and pull cash out of the money fountain for “the forgot ones. ” The problem is – the “money fountain” was rigged, hooked up to the Fed for a show-recovery for Wall Street insiders and the mega-rich (say Hi, Donald.)  The point of the charade of the Goldman Sachs miracle was to pull the wool over the Flyover Boys eyes how bad this economy has been.  Why are you damn folks so whiny?

To do this trick, the M1 money supply – actual, available cash-on-hand in the American market – has had to grow by about 9% per year. (M2 is 6%, M3 is 5%)  Where does this cash come from?  Glad you asked.  Interestingly, the US Government cannot pay for 9% of its budget every year, so it goes to the bond market to sell US Treasury bonds.  They are bought by people that have cash – for example, the Chinese.  Any unpurchased bonds are bought up by the Federal Reserve, using reserve cash. 

Federal Reserve cash is a fiction.  They electronically create money.  But since the Fed doesn’t have to show its books, nobody can tell how much is phoney money.  We all know it’s 100% phoney money; that’s the biggest non-secret in Washington.  If it had to be audited and show up as a debt, inflation would explode. 

Now, the Chinese got a stick in their eye from the Don.  What if they sulk, and don’buy US Treasuries for a while?  What if they quit playing the game, and put a call on for actual value of Treasury Bonds, by dumping them on the open market, just to be spiteful?  After all, they own them. 

To survive that, the Fed has to buy more Treasury Bonds with reserve cash.  It will also vacuum up some of the M1 money to go back to China.  Alternatively, if we can’t buy up all the Treasuries, the inflation rate in the US will spike.  

Actually, it won’t truly spike.  It will just go back to its real level, which is about 6-8% which will put a huge brake on the US economy, and throw us into recession.

Wait, aren’t we already in recession?  On paper in Washington, they say no.  In Flyoverland, they say yes, and well over 10% unemployment.  How does worsening recession affect employment?  Not good.  What if more Flyover Folks lose their jobs from inflation?  Not good.

The Donald is making a brave political statement in poking the mainland Chinese in the eye.  But he doesn’t have the resources to back it up.  The ChiComs (love that word) can melt down our economy, if they want to.  Our stability hinges on their kindness.  It’s pathetic, but it’s where we are.   It’s the economy, stupid!!

It’s gonna be a bumpy ride.  We’ve been letting Big China get power over us for twenty years.  Back in 2005, foreign sovereign investments in the US Treasury were minimal.  Now, they are massive, and the #1 lender is China.  How much power do they have?

You’re Fired!

Yep.  They can wring the testicles of the Wall Street, Washington and DemoRep parties enough to impeach the Donald on nonsense grounds.  The fact that the Donald has given arguable reasons for impeachment already doesn’t make it any easier.  They are puppets in the game now.  If China threatens to throw the United States into Iraqi-quality civil war – and they can by shutting off the money spigot – we’ll need all those weaponized police that we can get.

Or fire the Donald.  That will happen.  The Pence will be told what he will do, or he’ll be fired too.  Speaker-President Ryan will be a good li’l boy, and do what he is told.

Does it suck being dependent on the whim of Beijing?  Yep.  Should you check that the cage is locked, before you poke the tiger?  Yep.