Trying to make sense out this asylum we all have to live in is a fool’s errand. It really is a cuckoo’s nest. Unfortunately, that hasn’t stopped government leaders, central bankers, economists, and others from believing that they do understand and thinking, therefore, that they can control social and economic outcomes by manipulating fiscal and monetary policies. Let us look a just a few examples.
Not long ago, Nancy Pelosi and other brain-dead Democrats demonstrated that they have dreams of flying pigs when they attempted to convince us of the economic multiplier effect of putting more people on food stamps. Now, Pelosi and friends, are also pushing to raise the minimum wage. The logic, according to what the flying pigs are telling them is that when the price of something goes up, people rush out to buy more of it and, by extension, when the cost of labor goes up, employers will be anxious to hire more. Meanwhile, back in the real world, McDonald’s in Europe announced it is hiring 7000 touch screen cashiers and Amazon announced they will have 10,000 robots working in their warehouses by the end of the year. Also, I remember watching a video a while back of a Chinese company marketing robots to replace waiters/waitresses in restaurants.
Young people, especially in the inner cities already terribly high unemployment. Raising the minimum wage will only make matters worse for them.
We Americans have become accustomed to our government liars creating statistical numbers to support their lies. They manipulate such important indicators as unemployment, jobs created/ saved, and most recently they changed the way Gross Domestic Product (GDP) is calculated by deciding to add a corporations “goodwill” costs and their “research & development” cost to the mix. Now, suddenly, GDP is majically much higher than it would otherwise be and it is harder to fall into recession. This looked like such a grat idea that countries like Spain, Greece, the UK, and Nigeria decided they could also make their GDP look better. But, the Italians get the prize according to Zero Hedge:
“Italy will include prostitution and illegal drug sales in the gross domestic product calculation this year.” Yup: blow and hookers. And that, ladies and gents, how it’s done.
No doubt there is a flying pig whispering Pelosi’s ear on how to tax whores and crackheads.
Negative Interest Rates
Central bankers are not immune to flying pigs either. If the zero interest rate policies (ZIRP) have not done enough to punish savers and reward Wall Street hedge fund managers, some central bankers are seriously considering applying negative interest rates on their member banks. The linked article explains very well why tis is a bad idea which will most likely not achieve the desired result of getting the banks to lend more. Although this article does not go off into the weeds, it does have some very tall grass. The bottom line is that the member banks will either move their excess reserves (trillions of dollars) somewhere safer if the central banks charges them for holding the excess reserves or , if the central banks put negative interest on overnight loans, the member banks will pass that cost on their customers or worse yet, it would restrict lending even more:
Like negative rates on reserves, negative policy rates could actually have a toxic effect on the real economy. Across Europe, including the UK, many loan rates – especially mortgages and business loans – are tied to the policy rate. So if the policy rate were cut to below zero, lenders would find their margins squeezed on existing lending: they could even find themselves receiving negative returns on these loans. Realistically they cannot cut their deposit rates to savers to below zero (savers would stuff mattresses instead), so their only option is to RAISE lending rates to new borrowers, widening credit spreads. Exactly the same effect as negative interest rates on reserves, in fact – and the same effect as QE.
The problem with flying pigs is this. The stuff spewing from their behinds is not fairy dust.
Well, that’s what I’m thinking. What are your thoughts?