Dreaming About Inflation Woes

Posted on August 17, 2013 | Leave a comment

By Walter A. Strong, III

Wakeful night last night. Recurring dream about the Fed pumping lots of dollars into the economy but they were invisible. In my dream I was searching for the missing dollars. Then I woke up.

We’ve been printing money for several years with no sign (up until now) of inflation. Yet, isn’t printing money by definition creating inflation? No, not if you’re printing 0.01% interest money. Those are empty, non-caloric dollars we’re putting into circulation, so they say. Bernanke’s QE program buys bonds and Treasury gets to print money at Fed’s “Almost less than zero” rate.

We’ve had low inflation for several years now. If, on the other hand, we had a base of 2% inflation, then each of those nearly empty dollars would already be 2% full and their accumulated bulk would be noticed quickly, piling their newly minted 2%s on top of the base 2%. That would surely get our attention, right?

So, this is a hidden inflationary bubble. All those trillions of 0.01% dollars are so thin and airy they are just about invisible to the naked eye. But the point is, thick or thin, they’re out there, floating around somewhere. And if something causes a spike in interest rates, those nearly empty dollars will instantly fill themselves up to whatever inflation rate the new market conditions dictate. Skinny, nearly invisible dollars will become big, fat easy-to-spot dollars weighing down people and institutions that thought they were carrying a lighter load.

Next question, sez I.

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Posted in Capitalism Today, General, The Economy, US Politics

Free Press Futurity

Posted on August 16, 2013 | Leave a comment

by Walter A. Strong, III

Reading columns and articles about Jeff Bezos’ purchase of the Washington Post the other day was interesting but they all missed a few fundamental things. It got me to thinking about the newspaper publishing business my father and grandfather knew. The original Walter A. Strong published the Chicago Daily News from 1925 until his death at age 49 in 1931. His son, Walter A. Strong, Jr., published the Beloit (Wisconsin) Daily News from 1949 to 1968.  Their newspapers served two entirely different markets, one a major metro, the other a secondary market, but their businesses shared some similarities back then that newspapers today do not share.

First, in terms of differences between then and now, the “lines of communication” in those days were “short” while today they are “long.” Second, the “news cycle” then was “long” while today it is “short.” What I mean by that is the “reach” of the Chicago Daily News extended less than forty miles around Chicago and that of the Beloit Daily News about half the distance to the nearest town or city with a daily newspaper, about 10 or 15 miles overall. What is significant about this bit of wisdom is that merchants within their lines of communication or “reach” who wanted to communicate their messages to that audience could do so effectively with newspaper advertising.  Today, the Chicago Daily News is gone but you can “read” the Chicago Tribune from half way around the world. The “reach” of both the Chicago Tribune and the Beloit Daily News is now “long” but their influence within that area is minimal because it is so vast and there are so many competitors in that area. My brother lives in Rhode Island and he can read the Beloit Daily News from his computer, should he so desire (it has been in other hands since 1968). The “reach” of the Beloit Daily News is now “long” but the paper cannot generate revenue from that fact because almost nobody in Rhode Island is interested in what is available in Beloit other than my brother and the children and grandchildren of some former Beloit College faculty who live there.

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Posted in Communications/Free Press, General

The Piemonte Market Index

Posted on December 31, 2012 | Leave a comment

By Walter Strong

For the last thirty years one of the least known but most reliable indexes of economic activity in the Midwest has been the Piemonte Index. It predicts both ups and downs in the market with uncanny accuracy. It is best known as a harbinger of tough times and is also a relatively good indicator of when the market is about to recover. It is a simple index to track, requiring only a standard television set (nowadays a cable or satellite connection is necessary but nothing beyond that). You know that things are on the verge of getting much worse when you begin to see the Piemonte indicators starting to appear on local Chicago television. Specifically, when you see Al Piemonte himself on your television screen talking about the automobiles he has on his various lots around Chicago, you know the rollercoaster has not just started down the Big Dipper but is about to pick up frightening speed before things finally turn upward again sometime in the future. When Al takes to the airwaves, as he has of late, tough times lie ahead.

The Al Piemonte Automotive Group is probably the largest dealership group in metropolitan Chicago and Al, himself, is the star salesman for all of the dealerships, beginning with the original Al Piemonte Ford franchise in Melrose Park. Al talks with his hands. Almost everyone who watches his commercials has this urge to grab his wrists and tie his hands to his side to see if he can talk without waving to the cadences of his own voice. Most people smile when they see Al on television. He’s almost like family… which is probably why so many people buy their cars from him. But, back to the Piemonte Market Index.

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Posted in General, The Economy

When Does a Cow Sound Like a Kitten?

Posted on November 28, 2011 | Leave a comment

The other night I decided I wanted some kind of distraction while I was browning the meat for beef bourguignon, one of the few dishes I can make that other people will actually eat…probably because I use plenty of wine. Browning is the key to a good bourguignon. You have to get just the right amount all over the pieces and the secret is to watch the vapors coming off the meat. You want to get past the steam and not too far into the smoke so you have to stand there and watch for the subtle changes that signal the right degree of browning. It was going to be a large batch of beef bourguignon so it was going to be a lot of standing and watching and that called for a nice distraction, something that would play in the background without requiring too many brain cells. That sounded like a good description of the Fox News Channel.

So, there I was, watching clouds of steam, ready to wield my tongs at the crucial moment when the smoke had established itself, listening to the television on the counter behind me when I heard those immortal words, “The cow said ‘mew’!”

When you’re watching clouds of steam rising out of a large skillet filled with strips of beef your eyes sort of un-focus and you just gaze into the rising vapors waiting for the shift to a more opaque white so when my brain finally registered that the cow had said “mew” I had to re-focus and pull back into the real world. “Surely you jest,” I said to no one in particular and turned around to see who this person was on Fox. She was young and very attractive, decked out in an expensive form-fitting skirt and sweater set ornamented with a scarf and pin to give an appearance of class. I tried to remember what she had been talking about before the cow said “mew” but the only conscious thoughts I could bring back were of when I glanced up at the recipe held to the vent hood with a magnet to make sure I needed to slice the onions horizontally to get long pieces to be added after the meat had browned sufficiently.

I looked at the girl and listened to what she was saying. She was a newsreader or perhaps a program host and had moved on to whatever the next topic was and I had no clue why she said “The cow said ‘mew’.” I stood looking at her, trying to figure out if I was hearing things correctly. Maybe I had too much ear wax. Maybe I was getting senile. Then I noticed that the meat was smoking and forgot about what the cow said while I tried to rescue the remains of the beef bourguignon. It took a week or so but I finally figured out why the cow said “mew.”

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Posted in Capitalism Today, General, Perspectives

Goldman on the Move Again

Posted on October 20, 2011 | Leave a comment

By Walter Strong

Goldman Sachs is on the move again. They have been in the news for having sustained a loss in the previous quarter, only their second loss since going public. In the past, whenever market and political forces stymied Goldman the company re-aligned its strategy and shifted activities away from problematic or regulated areas of the financial market. They did this most recently by shifting away from regulated securities to unregulated and began producing swaps, CDOs and other highly profitable financial instruments of chance and extremely high risk/reward for winning. Look for Goldman to pop up, “whack a mole” fashion, in some other non-regulated area of financial activities where it can pursue high-profit activities undisturbed by government regulations.

As I wrote the other day, “Those willing to lie, cheat and take terrible risks that endanger everyone else will just as easily step outside the arena and set up a playing field beyond laws, regulations, common sense and decency in order to enrich themselves.”  It looks a lot like that is what is about to happen once more now that Goldman Sachs is under pressure again. It will be interesting to see how they manage to pop up in yet another unregulated but highly profitable territory and whether or not anyone in government can whack them a good one up along side the head.

Goldman Sachs wasn’t the only super-large financial organization reporting either losses or lower profits, but Goldman is a different breed of cat. It has a history of shape-shifting, of sliding into new markets, of nurturing activities and processes that eventually climb on the rails and carry a lot of freight for the company. It is likely that the other super-large financial organizations should be broken up because they cannot be managed. The other super financials got much larger during and after the latest recession, some at the behest of the Treasury secretary, some under duress. Their current problems are a combination of bad management and bad investments in acquired companies.  It would be hard to make that argument over Goldman which has, over the years, abandoned activities and markets that no longer suited its purposes. Even with its current problems it is not likely to be under pressure to break itself apart. It will most likely restructure itself to enable it to operate in some other unregulated niche where there is a minimum of transparency and a maximum of opportunity, not to mention risk.

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Posted in The Economy

Remembering the U.S. Post Office

Posted on October 19, 2011 | Leave a comment

By Walter Strong

Ever wonder where Grover G . Norquist (he of Americans for Tax Reform and the pledge for politicians to vote against tax increases) got his idea for reducing government by “starving the beast”? Could have been the U.S. Post Office, now known as the U.S.Postal Service. Few people today remember that a large portion of the old U.S. Post Office’s business was package delivery. In high school in the early 1950’s I was an aspiring photographer and made many trips to the main post office in our town to mail packages of pictures to customers or publications in hopes of getting some publicity. Even in our small town there were five large grated windows arrayed down a long high-ceilinged hallway. Letters had two small windows at the far end. We climbed up eight or ten steps to get into the building (I got to pose on those steps when the local newspaper took a picture of a recent crop of draftees about to get on the bus to Fort Leonard Wood in 1961). The old Post Office was hot in the summertime and cold and drafty in the winter. We stood in line at one of the windows, waiting patiently with our packages and our coin purses, reading the FBI Wanted posters. Then, along came Fred Smith.

Fred Smith started FedEx service in 1973 and refined the logistics of package distribution. It wasn’t long before FedEx and UPS had siphoned off the most lucrative part of the Post Office’s business, leaving it with the most difficult and costly parts, letters and junk mail. The politicians, many eager to see private enterprise taking over government functions such as mail delivery, sanctioned the raid. They set up the Post Office as the Postal Service, a quasi-government operation, and mandated that it could not increase rates on letters or junk mail more than the increase in inflation. This meant that the USPS could not keep up with expenses or make investments in labor-saving equipment. With the loss of the lucrative package business and as costs rose faster than the rate of inflation, the USPS effectively starved to death.

Someone, somewhere, should ask if this is what we need as a nation, an emasculated document delivery system that, like it or not, is the only means of carrying information that is not either in private hands or subject to the hacking abilities of foreign powers who can bring down the Internet whenever they are ready. As a nation, do we need the ability to convey real, physical documents in real time in a manner not subject to the whims of the management of a not always dependable profit-making corporation or those of a tyrant sitting in Asia or the Middle East? Have we, once again, emasculated ourselves in the name of free markets?

 

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Posted in Anthropology of Religion, Anthropology of Trade, Capitalism Today, Foreign Affairs, General, Healthcare, Higher Education, Perspectives, Public Education, The Basics, The Courts, The Economy, US Politics

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The Schalit Initiative

Posted on October 19, 2011 | Leave a comment

By Walter Strong

In a brilliant strategic move that both political and military historians see echoing the renowned “strategy of the indirect approach” made famous by B.H. Liddell Hart, Israeli Prime Minister Benjamin Netanyahu has set in motion a chain of events that will unbalance the equilibrium of the Palestinian and Arab forces seeking to force Israel into a negotiated peace. By the simple expedient of exchanging Gilat Shalit for 1,027 Palestinian prisoners, Netanyahu is guaranteed the continued terrorist activities of at least 60% of the returnees, based on previous rates of recidivism. That means over 600 attacks, bombings and assassinations on Israel and its citizens guaranteed as a direct result of this exchange. The turmoil that will be generated by these attacks will allow Israel to back away from any negotiated settlements on the obvious grounds that those on the other side of the table are not to be trusted: whenever Israel tries to be cooperative by exchanging many prisoners for a few Israeli citizens and/or soldiers, these same criminals and terrorists released by Israel turn right around and attack their benefactors.

Liddell Hart developed his theory after experiencing the trench warfare of World War I. He formulated his strategy of the indirect approach which he described as “the longest way ’round is the safest way home.” He realized that a direct approach weakened the forces of the attacker and hardened the resistance of the defenders. In Israel’s case, the indirect approach to attacking the Palestinians is to let loose a large number of proven combatants who will, upon release, again take up arms against Israel. Israel can then make a ruckus about being unjustly attacked, world opinion will side with Israel and the opposition will be shunned and marginalized, defeated because they cannot control themselves.

It seems to work every time: one need only look at history to see how this Liddell Hart strategy has worked for Israel. In 1985 Israel released 1,150 Palestinian prisoners in exchange for three soldiers captured in Lebanon. In 1998, Israel and  the South Lebanese Army exchanged 65 prisoners and the remains of 40 Hezbollah guerrillas for the remains of an Israeli sergeant. Over the last 30 years, Israel has released approximately 7,000 Palestinian prisoners to secure freedom for 20 Israelis and the remains of others. In every single case the returnees given up by Israel returned to continue attacks on Israel. This allowed Israel to remain steadfast in its position regarding the State of Israel and a negotiated peace.

The Israelis understand that the fragmented and stateless people who oppose their occupation of disputed territories will wage asymmetric warfare as their only means of action and that this will lead nations to side with Israel or, at least, to keep quiet for fear of stirring up the wrath of the people.

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Posted in Foreign Affairs