Monthly Archives: October 2021

Stagflation and the Supply of Bad Public Policy

20 Wednesday Oct 2021

Posted by in Inflation

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Price inflation is getting more attention now than it has in many years, but not everyone is convinced it will persist, most conspicuously bond investors. The Biden Administration’s initial narrative was plausible even if there were seeds of doubt: a price spike was to be expected relative to the low-ebb of price changes during the pandemic. However, the inflation data has come in strong since the spring, and events point to continuing price pressures and the potential for expected inflation to drive escalations in contract pricing. Once embedded like that, the phenomenon broadens and gets harder to squeeze out.

Broadening Price Hikes

The evidence at hand is never enough to take much comfort in predictions, and the uncertainties now are similar to those I discussed in June. At the time, the price moves had been pronounced only in the prior month or so, and there was no evidence of any breadth. Now, it’s at least clear that increases in the so-called “core” Consumer Price Index (CPI), which excludes food and energy prices, have escalated. In addition, the growth in the median component of the CPI basket reported by the Federal Reserve Bank of Cleveland has begun to jump. So has the “trimmed CPI”, which excludes the most extreme 8% of prices changes in both directions within the index. The chart below shows one-month changes in these gauges:

So the recent upward price trends have expanded in breadth, and their persistence is making it a little harder to argue that the changes are transitory rebounds from pandemic weakness.

Bond Investors Still Nonchalant

Investors are by no means convinced that the recent price pressures will persist. They have an incentive to bid-up bond yields to compensate for expected inflation, so these yields can be used to infer inflation expectations. The chart below from the Federal Reserve Bank of St. Louis shows the five-year “breakeven” inflation rate, which is derived from inflation-indexed versus unindexed Treasury securities.

The pattern does not suggest that a meaningful change in inflation expectations has taken place. In fact, the implied five-year inflation forecast has edged down a bit. Of course, we’re still worrying about a fairly short period of high month-to-month changes in prices, and five years is a long time in that context.

This “casual” reaction of interest rates to the inflation spike undoubtedly reflects investors’ belief that the Federal Reserve will tighten policy in an effort to contain inflation. Some of us have strong doubts about the Fed’s inflation-fighting resolve, however. There is little the Fed can do to relieve supply-side problems, and many would argue that the Fed should take an accommodative stance in an attempt to minimize output and job losses, but that would reinforce the inflationary effects. There is no easy way out. Risks loom in both directions, and though I might regret it, at recent yields, I’m not buying Treasury bonds.

Sources of Price Pressure

Economists have tended to divide price pressures into those driven by demand and those driven by supply. Sometimes the terms “demand-pull” and “cost-push” inflation are used for shorthand. The former is usually associated with economic growth, where rising prices indicate that demand is outpacing gains in capacity. With cost-push inflation, however, rising prices indicate that production snd supply is somehow impeded. You get higher prices and lower output. This is so-called “stagflation”. Today we seem to have a combination of those inflationary forces in play: demand has rebounded from the pandemic lows of 2020, while breakdowns in the supply chain have choked production, with a consequent need for more severe price rationing. If the latter forces win out, we will have entered a stagflationary episode.

Unfortunately, administration policies are exacerbating supply-side inflationary pressures. Officials first insisted that the jump in inflation measures would be transitory. More recently they’ve said that it really only hurts “the rich”, an assertion that is decidedly false. Biden flaks are doing their level best to put lipstick on a pig. “Peppermint” Psaki says it shows that people just want to buy things! On the other hand, the Washington Post encourages us to “lower our expectations”. Um, yeah… I think we’re there!

Burning Energy Producers and Consumers

Energy policy is an obvious case: while a hurricane moving through the Gulf of Mexico took a big bite out of domestic oil production, Biden took several steps to hamstring the domestic fossil fuel industry at a time when the economy was still recovering from the pandemic. This included revoking permits for the Keystone pipeline, a ban on drilling on federal lands and federally-controlled waters in the Gulf, shutting down production on some private lands on the pretext of enforcing the Endsngered Species Act, and capping methane emissions by oil and gas producers. And all that was apparently just a start.

As Mark Theisen notes, when you promise to destroy a particular industry, as Joe Biden has, by taxing and regulating it to death, who wants to invest in or even maintain production facilities? Some leftists with apparent influence on the administration are threatening penalties against the industry up to and including prosecution for “crimes against humanity”! This is moronic, of course, but perhaps these extremists are just trying to move the Overton Window. Fossil fuels have been and still are a miracle in terms of human well-being, and renewable (but intermittent) energy sources are simply not capable of replacing the lost power, as Germans, Californians, and Texans are learning. Furthermore, the effort to kill fossil fuels amounts to a war on the poor. Americans are facing steep increases in their utility bills and blackouts during the times when power is needed most. Now, Biden is actively trying to wheedle more oil production out of OPEC, as if it’s okay for those nations to extract it, but not for us to do so!

Labor Shortage

Have you heard it’s hard to get help these days? You’ll notice it pretty fast if you have regular occasion to deal with service establishments. Goods are getting scarce on the shelves as well. Food and paper goods are getting pricier. The semiconductor shortage has been prominent, impacting production and pricing of electronics, computers, and new cars, with a big cross-effect on the used car and rental car markets. Everywhere you look, sellers seem short of inventory. This year it might be tough to fill the space under the Christmas tree for lack of availability.

This isn’t just about cargo ships unable to unload at the ports, although that’s significant. Patrick Tyrell and Anthony B. Kim note the difficulty of overcoming the supply chain breakdowns even with 24/7 operations at the ports. Tyrell snd Kim offer this quite from the Financial Times:

“The US is facing a shortage of warehouse space and truck drivers, and shifting to 24/7 operation will require enormous co-ordination between the publicly operated ports and private sector groups, including large retailers and freight companies.”

There are several reasons for the labor shortage: a few workers and businesses might still be living in fear of COVID, especially in “blue” states and urban areas where the fear factor seems to have been more palpable. That’s where the high unemployment is. There has also been an apparent wave of retirements among late baby-boomers who were already on the cusp of hanging up their skates. However, the Biden Administration has instigated a set of ill-advised policies that blunt work incentives, leading to reduced labor force participation: the repeated extensions of pandemic-related unemployment benefits; increased child and dependent care tax benefits; the moratorium on evictions from rental property; the elimination of work requirements for expanded Medicaid coverage; and increased EBT and SNAP benefits. This is not hard to understand: if you pay people to stay home, they will stay home, even as you suffer through an interminable wait for your fast food. But there might not be a wait at Dunkin’ Donuts, because they’ve been running short on donuts due to “supply chain issues”!

Destructive Public Policy

COVID policy contributed to the early plunge in demand in 2020. Economic output declined, and ramping-up production is not always a simple thing. In this case, it was hindered by repeated non-pharmaceutical interventions and confused messaging from public health authorities. These are issues I’ve felt compelled to address too many times on my blog over the past 18 months. The negative economic effects of these policies continue to linger, and it should surprise no one.

The Democrats’ so-called “social infrastructure” bill, which looks mercifully unlikely to pass without major curtailments in scale and scope, would exacerbate many of the problems cited above. As I’ve noted recently, it’s more of an “infra-shackle” bill for the private economy than an infrastructure bill. For $3.5 trillion (an understatement based on budget gimmickry), we get heavy regulation and taxes, particularly on fossil fuels, subsidies for uneconomic technologies, assorted entitlements with no means testing, wage- and job-killing (and inflationary) hikes in corporate taxes, and other tax disincentives to private investment. The bill would represent a huge reallocation from the private to the public sector via coercion and public competition for scarce resources.

As if that wasn’t bad enough, now Biden has issued his legally dubious vaccine mandate, which has been met with outrage among many workers, from Chicago cops and other public servants, health care workers, truckers and workers at such corporate giants as Boeing, Southwest Airlines, and many others. Unions are furious. People are walking out. This represents a negative “supply shock”, an unexpected event that hinders production and boosts prices. Joe Biden looks to be well on his way to earning the title of “The Stagflation President”.

I’ll leave you with this gem from Brian Dunn:

Parents and Taxpayers Confront Rogue Educrats

14 Thursday Oct 2021

Posted by in Critical Race Theory, Education, Propaganda, Uncategorized

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This Norman Rockwell painting is called “Freedom of Speech”. It depicts a Vermont dairy farmer speaking his mind at a school board meeting, and no, he is not a “domestic terrorist”! (A recent piece by Selina Zito reminded me of this painting.) Today, parents of schoolchildren have a very special reason to be upset: the teaching of critical race theory (CRT) as part of the regular curriculum. A better name for this vapid “theory” might be “critical race theology”, because it is no “theory” at all: it is a set of “woke” accusations leveled against “out groups” designated by leftists: whites, straights, men, and sometimes groups like Jews and Asians. Many people of color are just as dismayed as those among CRT’s targets because its wrongheaded and corrosive nature is so plain. CRT is itself straightforwardly racist.

Taxpayers have a place in this debate as well, at both the K-12 and public university levels. However, their role in funding the indoctrination taking place in public schools has been neglected in the story of the revolt against CRT.

The Parent Trap

Many parents have taken strong action in response to the CRT onslaught. Some have quietly removed their children from public schools, while others have chosen to register their objections with school officials, often at school board meetings. Also, there has been some success at the ballot box by dissident school board candidates. This is grass roots participatory democracy in action, local and vocal. Certainly parents have a greater stake in their childrens’ education than anyone (except the kids themselves). They have a right to know what’s being taught and to provide critical feedback to schools.

School officials, teachers unions, and CRT teacher-enthusiasts are not likely to be straightforward about whether CRT is actually taught, however. This link might help you see through the gaslighting to which we’ve all been subjected. This article discusses various political avenues for fighting CRT in the schools. And here’s a “tool kit” that might be helpful.

Garland’s Effrontery

To top it all off, recently we’ve witnessed an act of fascist authoritarianism by the U.S. Attorney General that, by all appearances, involves a conspiracy between the Biden Administration, top officials at the Department of Justice, and the National School Boards Association (NSBA). AG Merrick Garland’s memorandum of October 4 announced a “partnership among federal, state, local, tribal, and territorial law enforcement to address threats against school administrators, board members, teachers, and staff.“ He did not provide actual evidence of threats against school boards or personnel, however. Yet Garland is willing to treat interested parents as if they are domestic terrorists! His memorandum is a thinly veiled warning to anyone having the temerity to confront school authorities on issues like CRT, as well as school mask mandates (which are ineffective, unnecessary, and detrimental to learning, socialization, and the psychological well being of children). Furthermore, we now know of an obvious conflict of interest: Garland’s daughter is married to the cofounder of Panorama Education, which sells training materials for teachers of CRT.

While Garland’s attempt to undercut free speech might chill the willingness of some parents to speak out against CRT in the schools, many refuse to back down. The following is an excerpt from a letter to the NSBA written on behalf of 427,000 parent-members of 21 organizations:

“Our organizations unequivocally oppose violence and find it deeply troubling that you imply otherwise about concerned citizens who care deeply about their community’s children – and who are concerned by the direction that America’s schools have taken.

  • Citizens are angry that school boards and school officials around the country are restricting access to public meetings, limiting public comment, and in some cases conducting business via text messages in violation of state open meetings laws.
  • They are angry that schools are charging them thousands of dollars in public records requests to view curriculum and training materials that impact their children and that should be open to the public by default.
  • They are angry that pandemic-related learning losses have compounded the already-low reading, writing, and math proficiency rates in America’s schools.
  • They are angry that rather than focusing on declining student achievement, large numbers of districts have chosen to fund, often with hundreds of thousands of dollars in taxpayer money, “social justice” and “diversity, equity, and inclusion” programs with finite resources.”

Insularity At the Board

I’ll be surprised if Garland’s memorandum doesn’t inspire many parents to push harder against CRT in their local schools. However, getting in front of school boards is not always easy, thanks to restricted access for public comment. Here’s an example of the draconian reaction by school authorities in their effort to silence parents, from Orange County, CA. In my own local school district in Missouri, making a short comment at a board meeting first requires submission of a request detailing the subject or question you wish to address to the board. Not only can they simply ignore your request, but it also gives them an opportunity to “circle the wagons” in advance, as it were, even calling upon various “friends of the board” to attend en masse.

The leftists who support CRT fight dirty, as this article notes:

“Nicole Solas, a mother who has complained about her school board, has been harassed and even sued by the authorities. Go ahead, ‘arrest me,’ she said on Twitter. ‘They wanted to publicly humiliate me,’ she said. ‘They paid a PR firm to call me a racist in the national media. So they really wanted to ostracize me from my community.’”

The anger of parents toward this bankrupt philosophy in our schools, and its belligerent proponents, is well justified. Parents obviously have the biggest stake in this controversy. My kids are grown, but I’m angry too, in part because the once-fine education offered by our school district has digressed to brutish proselytization about victimhood, its supposed perpetrators, and the emphasis on the Left’s version of “social justice”. I’m also angry as a taxpayer. While the student population might shrink as decent families abandon the brainwashing camps in favor of private schools or home schooling, does anyone expect the tax bill to decline commensurately? At all? School taxes should be a ripe area for activism, because lots of people don’t want to pay for this shit!

Our Taxes, Our Schools?

Opponents of CRT won a victory of sorts this summer when the U.S. Department of Education amended a proposal that would have prioritized CRT initiatives in awarding grant money.

“The Department of Education withdrew ‘the requirement that grantees incorporate curriculum and instruction based on or similar to the 1619 Project or the works of Ibram X. Kendi.’”

Hooray for that. And in August, the U.S. Senate passed a “STOP CRT” amendment to the otherwise misbegotten $3.5 trillion “social infrastructure” bill. The amendment would ban the use of federal funds for teaching CRT in schools. Of course, that the federal government has any role in funding local schools, and in shaping their curricula, is itself regrettable.

At the state level, many Republican office-holders seem unaware of the use of state resources for CRT in schools, as this piece about Indiana demonstrates. Perhaps they’ve been cowed, and are reluctant to comment for fear of being called racists by CRT proponents. Registering strong displeasure with state legislators regarding the onslaught of CRT is something all within our opposition should be doing.

Local taxes still account for most school funding. There’s obviously no way to get around school district bond servicing. Most ballot initiatives on school taxes appear at the behest of the school districts themselves, and generally those go in only one direction: up! General funding may be subject to reduction via ballot initiative, but petitions are usually necessary, and apparently those have been few and far between. A more promising avenue for wresting control over school funding are school voucher programs, whereby school funds (either state or local dollars) follow the student rather than remaining under the control of monopoly school districts. School choice is expanding across a number of states, having been given a boost by the pandemic. CRT might prove to be an additional impetus in some states. But parents should be careful: some private schools are just as brazen as public schools when it comes to peddling CRT. And there is the danger that vouchers, one day, will bring unwelcome government curriculum mandates.

Joining Arms

The widespread adoption of critical theology in public schools (and universities) is not only a corruption of education: it is institutional roguery and a misappropriation of taxpayer funds for political indoctrination. This is aggravated by the unresponsiveness of many school boards, administrators, and teachers. Parents have good cause to be infuriated, and so do taxpayers. They are natural allies in this struggle to win back our educational institutions.

The Digital Erosion of Collecting and Ownership

07 Thursday Oct 2021

Posted by in Digital Revolution, Technology

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Our material possessions aren’t the most important things in the world, but they are often part of our identities as people. Almost anything qualifies, from the big, expensive stuff like a home or a car, to whatever we find worth keeping. Declutter if you must, but the things that remain have a lot to do with our well being, even if they exist simply as part of our surroundings. They reflect our past, present, and hopes for the future, and they embody important aspects of our interests and passions.

I don’t doubt that individuals of high spiritual or metaphysical consciousness are able to transcend the desire for material goods. Very well, though for most of us, certain physical possessions matter. People collect things like matchbook covers or fine art because they are important in one way or another. Great works and quirky novelties all have their place… with someone.

We’ve witnessed an accelerating erosion in the personal art of “collecting” certain kinds of things, however, and that is the main subject of this post. It draws heavily on Kyle Chayka’s excellent piece, “The Digital Death of Collecting”. There are at least two aspects of this decline. One has to do with digital storage, which eliminates physical media and presents a new set of administrative issues. The other strand has to do with a loss of ownership. That’s a distinct phenomenon, but it has probably been driven by digital technology, at least to this point.

Losing Physical Control

Much of the entertainment we experience today is delivered electronically. Historically, we used physical storage media of various kinds: books, vinyl records, CDs, DVDs, books on tape, etc… so it was (and still is) possible to accumulate and possess a physical collection of music, for example. It can be fun to document those collections, like my old bootleg Grateful Dead concert tapes. Now, actually owning a collection of physical music media is an anachronism to many (mostly younger) people. Instead, their favorite music is stored on a device, a server, or “in the Cloud”. Often, without a shred of awareness, this has led to a kind of interference with the individual’s ability to possess and control a whole class of property closely associated with the cultural and intellectual self.

For example, with respect to physical media and storage, we used to shoot photos and, once developed, we’d curate them and put our favorites into photo albums. However, for the better part of the past two decades, phones have allowed us to snap photos and take videos more or less indiscriminately. I periodically transfer my photos to an electronic hard drive, with minimal curation, where they are automatically assigned names with inscrutable combinations of letters and numbers. I’ve been doing it for years now, and it’s a mess. How long will it take me to find a particular photo? Even one photo from a particular event? What if the drive fails?

I need to back them up, of course, but that was the original purpose of the external hard drive! As I updated and transitioned to new computers over the years, I failed to maintain a complete set on the new laptop hard drives. Now, they reside only on the external hard drive. Sadly, in the end, many of us are simply unable or unwilling to implement better record management practices. My “collection” of photos has been neglected. I could try to rename these images descriptively and sort them into folders, but digging into it now seems almost an insurmountable task.

To some extent, the advent of digital players had the same impact on music collections. Some listeners never made the transition and consigned themselves to the use of older media and technologies, despite the increasing difficulty and expense of finding recordings. But they kept their physical collections active, which is a gratifying thing. Those who made the transition grappled with new issues in managing their “collections”, often without the satisfaction of arranging and beholding the physical media. Granted, this isn’t always an either/or proposition, but doing both requires extra effort.

Similar transitions took place with digitized movies and reading material. I have a small movie collection, mostly movie musicals, animated children’s films, and a few cult films and classics. Not all are on DVD, and I haven’t added anything to this little trove in years. I still rent discs from Netflix, but like most people, streaming accounts for a growing share of my viewing. As for books, it’s less common today to see handsome collections of books arranged on shelves, but some doggedly attempt to maintain personal libraries, even if they aren’t all bound hardcovers.

Loss of Ownership

The other strand of our evolving relationship with digitized entertainment has to do with ownership itself. Today, we often purchase what amount to listening, viewing, or other “use rights”. This has sealed Chayka’s “Digital Death of Collecting”. Here’s how he sums it up:

“My lostness comes from the sense that our cultural collections are not wholly our own anymore. In the era of algorithmic feeds, it’s as if the bookshelves have started changing shape on their own in real time, shuffling some material to the front and downplaying the rest like a sleight-of-hand magician trying to make you pick a specific card — even as they let you believe it’s your own choice. And this lack of agency is undermining our connections to the culture that we love.”

Again, books are a case in point. Chayka notes that building a personal library is an expression of one’s intellectual history and interests. Yet today, with electronically delivered reading material sans physical media, you don’t really “own” the books you purchase. This blogger states the case well:

“As I’ve tried to point out before, both publishers and distributors like Amazon have spent the past decade or so removing rights that we used to have when books were physical property, and were something that you actually bought — along with the right to resell and/or lend them to whomever you wished, whenever you wished. Those rights no longer exist, which is why it’s better to think of an ebook purchase as an agreement to rent access under specific terms rather than an actual acquisition of something tangible.”

Free To Rent … and Pay As You Go

Subscriptions are replacing ownership in all sorts of contexts, and the use rights they confer are obviously of limited duration. For example, I was surprised when I realized that I could no longer “purchase” Microsoft Office and then download and install it to my computer. Instead, I have to buy annual subscriptions to continue to use it. Now, I don’t really “collect” software, unless the plethora of apps I’ve downloaded to my phone qualifies. Also, I understand that software becomes obsolete, so my “ownership” of Office was really equivalent to an indefinite but limited rental period. Maybe one-year subscriptions will be a better deal, though I have my doubts.

Renting certainly isn’t new in the “film space”. Blockbuster was a huge success for a time. And again, I get two discs at a time from Netflix to this day. People can still “collect” videos, but I suspect it’s not quite as common today in terms of collecting physical media.

I’ll always argue that renting is an economically rational alternative to homeownership. Same with leasing vs. owning a car, or anything else. And people often take a measure of pride even in things they rent. These own vs. rent choices and their relative values depend on one’s circumstances in life as well as one’s preference for control over the items in question.

Our Carts Runneth Over

A huge upside of all these changes is that we’re enjoying an astonishing array of choices as well as unprecedented convenience. (We can argue about the quality of the art, but that’s for another day.) In fact, the scarcity of new “collectibles” in the categories I’ve mentioned here might not be such bad news to collectors who’ve been at it for a while. After all, their existing collections might gain value. However, some forms of storage media might require technical or mechanical skill on the part of the collector. That’s because they have rigid hardware requirements. Eight-track players? Cassette tapes? VCRs? Who supports them? Yes, you can still buy a phonograph, but finding compatible “content” can be challenging. For the rest of us, streaming digital content frees us from those requirements and their inevitable obsolescence.

Unfortunately, our relationship to so much of our personal entertainment bounty seems more ephemeral than in the past. Streaming music and films is fine, but I’m much less likely to “burn them”, and ownership is an all but forgotten possibility. Like Chayka, I find the loss of owned, physical collections that has accompanied the digital revolution lamentable, not to mention the loss of control. I truly believe that if publishers ever quit printing physical books we’ll be poorer for it. But I’m not a complete technophobe, and I think there’s promise in recent developments in blockchain technology that might restore our ability as consumers to own more encompassing rights to digital assets.

Non-fungible tokens (NFTs) are essentially digital assets of almost any kind, with ownership documented in the blockchain. Some of the most publicized NFTs we’ve seen thus far are notoriously lacking in the actual rights they confer to the buyer. However, advances in standards are enabling the creation of more robust NFTs. There is no reason, in principle, why a consumer could not possess an NFT documenting ownership for a digital copy of a particular film, piece of music, e-book, or any other form one might collect. That might solve the ownership issue if and when crypto assets gain more acceptance. Individuals who are especially proud of their collections of NFTs could produce physical tokens to represent each NFT for display, if only for themselves to gaze upon lovingly. These could be plaques, for example, or the physical tokens could look like DVDs or books! Granted, it’s not the same as a real collection of physical media, but it might serve an emotional purpose.