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“Make Easy Money AND Forever War!”

Friday, June 21, 2019 1:33

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“Make Easy Money AND Forever War!”

by David Stockman

“The primary aim of modern warfare (in accordance with the principles of DOUBLETHINK, this aim is simultaneously recognized and not recognized by the directing brains of the Inner Party) is to use up the products of the machine without raising the general standard of living.”

– George Orwell, “1984″ (1949)

“Within seconds of its release, Wall Street heavyweights noted the absence of the word “patient” from a key passage in the official Federal Open Market Committee (FOMC) statement for the June 18-19 meeting. And, of course, equity indexes exploded to the upside. Bubblevision had already forecast the move last Friday, with a little help from Palace Keynesians: “The Fed is likely to drop ‘patient’ word this week, clearing way for July cut, economists say.” “After his commentary at the press conference,” noted David Rosenberg, “it’s apparent that Powell is open for an aggressive 50 bp rate cut at the next meeting.”

Here’s the Tweeter-in-Chief with the rest of the story: “S&P opens at Record High!” The process of “Peak Trump” continues… and it’s going to get a lot more perilous from here. Indeed, the Donald followed his market commentary 15 minutes later with some geopolitics: “Iran made a very big mistake!” John Bolton and Mike Pompeo didn’t even need The New York Times to re-hire Judith Miller to get this project off the ground. But, of course, The Onion did see where this was going…

The Donald seemed to resist the mongering for a moment. But, today, all you need to execute the Tonkin Gulf Playbook is some footage for Fox & Friends’ biggest fan. The people who own the tanker that got blown up near the Strait of Hormuz a few days ago have called “bullshit” on Imperial Washington’s story. And, of course, Iran says this unmanned drone violated its airspace. The U.S. Defense Department says, of course, that it was operating in neutral waters near the Strait. It’s all provocation, made-for-short-attention-span theater.

Are you familiar with the Strait of Hormuz? It’s outsized geostrategic importance is a direct consequence of the narrowness of the connection it makes between the Persian Gulf and the Gulf of Oman and then to the Arabian Sea and the rest of the world. It’s an extremely tight space, 21 miles at its narrowest point, through which something like 21 million barrels of oil per day transit by tanker on its way to market. That’s equal to about 21% of global liquid petroleum consumption. And Iran basically sits on top of it.

Wherever that drone was operating, there was a higher probability of incident. Everybody knows that – not least Bolton and Pompeo. They want what the ancients called casus belli, “an act or event that provokes or is used to justify war.” And, because of who the Tweeter-in-Chief is, it’s not going to take much to make one.

Now, let’s pull out to a wider view… The good folk at Global Macro Monitor recently published simple chart exposing the false promise of monetary central planners and the elites they serve. Their handiwork has produced ever-bigger bubbles for Wall Street with ever-direr consequences for Main Street.

During the heyday of middle-class prosperity in America, from the 1960s through the late 1980s, it took 30 hours of average wage income to buy the S&P 500 Index. That little heuristic recently reached an all-time high of 127 hours. That is, today it takes 127 hours of average wage income to buy the S&P 500.

The workings of a truly free market would have kept the labor share of national income relatively constant. Average nominal wage rates would’ve captured a proportionate share of inflation and productivity growth during the interim.

Absent an explosion of aggregate labor hours employed – because of population growth or immigration or longer work-weeks or higher labor-force participation rates – the ratio of hourly pay to stock prices shouldn’t have increased at all, let alone quadruped. Equity-market valuation multiples have soared because of easy money and excess liquidity. It’s mere price inflation. It’s nothing to do with growth of real output and real income.

Global Marco Monitor nailed it: “Profits don’t grow to the sky and are subject to economic constraints. Squeezing labor costs to further increase margins creates not only political conflict but tips the economy into a nasty feedback loop of weak demand, lower capital spending, and more ~~cowbell~~buybacks. The end result is punk economic and top-line growth further forcing firms to increase margins by additional cost-cutting. Wash, rinse, repeat.”

That 4.2-times rise in the “paid hours cost” of the stock market is not a minor change. Nor is it to be dismissed as some statistical squiggle. It’s more shorthand for a world turned upside down by “easy money” and Forever War.”

- http://deepstatedeclassified.com/

Source: http://coyoteprime-runningcauseicantfly.blogspot.com/2019/06/make-easy-money-and-forever-war.html

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