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David Stockman On Why The Great Reckoning Has Begun

David Stockman On Why The Great Reckoning Has Begun

Authored by David Stockman via InternationalMan.com,

Well, that should have been a wake-up…

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2 years ago

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David Stockman On Why The Great Reckoning Has Begun

Authored by David Stockman via InternationalMan.com,

Well, that should have been a wake-up call. The 30-year mortgage rate soared by 24 basis points recently to 6.18%. So the latter now stands at well more than double the 2.65% rate which prevailed just 18 months ago in January 2021, and at the highest level since the tail end of the Great Financial Crisis in 2009.

In a word, the Fed’s fake economy based on ridiculously unsustainable ultra-low interest rates is coming to a thundering end. And far more abruptly and violently than the Fed and its Wall Street megaphones ever remotely imagined.

Not surprisingly, the eruption of the mortgage rate depicted above has sent housing “affordability” into the drink. In fact, housing affordability is now at the lowest point on record going back to the late 1980s.

Needless to say, household budgets are about to get hammered and the housing market is fixing to experience another great implosion. It would actually take a 30% drop in average home prices to reverse the affordability plunge just since the pre-Covid levels.

Homebuyer Affordability Index, 1988-2022

Alas, the surge in homeowners’ carry cost especially during the last six months is truly startling. A simple back of the envelope calculation reveals that the jump in mortgage rates from 3.25% to 6.13% during that brief period means that new homebuyers face an average monthly payment on a typical new $350,000 mortgage (at the median price) that has gone up from $1,523 to $2,128. That’s a 40% increase in 6 months!

So whether it was intended or not, the Fed is about to unleash the biggest housing crisis since the bursting of the 2007 bubble. And there should be no doubt: The housing price bubble this time is even more egregious than back in 2005-2007.

House Price Index, 2000-2022

Likewise, junk bond yields have gone from 4% at the end of Dec (i.e. just 6 months ago) to 8.4% today. That’s another lightening fast doubling of rates.

So with junk bond yields at their highest level since 2015, the myth of low defaults is about to be monkey-hammered. That’s because the “refi” game which papered over bad credits is now over: When you rollover your leveraged debt to a 2X higher interest rate, rather than to a lower one compliments of the Fed money printers as per the last decade, the jig is up.

As the excellent bond maven, Stephanie Pomboy, tweeted recently:

Prepare to see an absolute ONSLAUGHT of corp defaults and downgrades. The myth of corp B/S strength is about to be shattered spectacularly.

She got that right. And that’s also the true economic evil of the Fed’s financial repression policies. It causes the financial signalling system to go wildly askew, thereby generating massively falsified financial values.

For instance, the market cap of the FANG stocks went from $3.0 trillion to $5.1 trillion and then back to $3.0 trillion, all in the space of hardly two years. But that’s not honest price discovery in any sense of the word; it’s just the consequence of liquidity fueled bubbles being inflated and then deflated by speculative forces.

Indeed, at the individual company level, the bubble dynamics as between the Covid-19 stock rally from March 23, 2020 to January 3, 2022 and then what is now being labelled the subsequent “bear market” is truly astounding.

Covid-19 Bull Market Versus Plunge Since January 3, 2022 Peak:

  • Nividia: Up 466%, Down 48%;

  • Apple: Up 224%, down 28%;

  • Google: Up 175%, Down 27%;

  • Microsoft: Up 145%, Down 28%;

  • Facebook/Meta: Up 129%, Down 51%.

There is one constant, of course, which was ever cheaper overnight money (red line) supplied by the Fed that provided the carry traders with the wherewithal for massive, sustained momentum driven speculation.

Indeed, as indicated by the chart, the Fed’s mistakes were systemic: As rates peaked lower and lower with each cycle, the financial bubbles got larger and larger.

At the same time that the bejesus was being inflated out of Wall Street, the planking was being laid for a new bout of goods and services inflation on main street. And this gets us to the May PPI index released this AM.

There are various measures of producer prices, but the index that requires special attention at the moment is the All Commodities PPI. It was up a red hot 21.5% versus prior year.

More importantly, the 20%+ Y/Y readings of the last few months exceed almost all prior inflation peaks since 1950. For instance, the July 2008 peak posted at 17.4% versus prior year, and even at the top of the inflation blow-off in November 1974, the Y/Y gain came in only slightly higher at 23.4%. Even the Korean War induced inflation-surge in 1951 peaked at just 18.4% on a Y/Y basis.

In other words, producer inflation is roaring down the pipeline at rates seen less than 0.01% of the time during the past three-quarters of a century. The Fed belated attempt to cope with it, therefore, will not end well or soon.

Y/Y Change In All Commodities PPI, 1950-2022

Even if we look at May’s readings for PPI finished goods as opposed to commodities, there is no evident relief in sight. The Y/Y gain was 16.4%, the largest advance since December 1974 when the finished goods PPI posted at 18.5%.

That was 48 years ago, of course, but the mechanics of inflation transmission do not change. That is, producer prices fuel the costs of production of goods and services in the business sector, which, in turn, work their way into the retail price level with a lag.

Accordingly, we are not yet even close to “peak inflation”. The only scenario in which these soaring producer level price increases do not show-up in the CPI is in the event of a thundering recessionary collapse in which producer profit margins are crushed on the way down.

The latter is always a possibility, but the issue is timing and sequence: What buckles first—output and employment or producer profits margins?

Currently, we are in such uncharted waters that it is difficult to know. But no matter: Both outcomes are on the way, and in the not too distant future, too.

Y/Y Change In Producer Price Index For Finished Goods, 1974-2022

In the case of the final demand for consumer foods, the index was up nearly 14%, and that was the seventh straight month of double-digit gains. We have a hard time seeing how household budgets will survive the grocery bill assault coming down the inflation pipeline or how the idea that inflation has peaked has any basis in the facts conveyed by the May PPI release.

Indeed, the chart below conveys quite pointedly that we are in a wholly new inflation ball game. After the Fed adopted inflation targeting in January 2012 it took to lamenting that it was missing its 2.00% target from below, thereby justifying its madcap money-printing.

One of the reasons, however, was that the global foods market was in temporary surplus, causing food inflation to oscillate between +2.5% and -2.5%. That had nothing to do with the monetary policies being cranked out in the Eccles Building, save for the license it provided other central banks to flood their economies with cheap capital and thereby generating a temporary abundance of agricultural investment.

But that era was never sustainable, and was always at risk for exogenous disruptions like the Ukraine based global Sanctions War now roiling the global commodities and food markets.  Accordingly, the idea that the Fed had license to print money with reckless abandon because headline inflation was being temporarily pulled lower by deflation in foods, energy and manufactured goods will surely rank as one of the great follies of all time.

Y/Y Change In PPI For Finished Consumer Foods, 2012-2022

Another sign that inflation has a growing head of steam was the 21.0% Y/Y rise in the PPI for transportation and warehousing. As shown below, that’s off-the-charts of recent history, and more than double the surge that occurred during the inflationary blow-off top in mid-2008.

Needless to say, these are services industries that are being hit by the double whammy of rising energy and wage costs, neither of which is likely to be abating any time soon. Nor would resolution of current global supply chain dislocations make much difference—the problem in this instance is shortages of capacity across a broad spectrum of modalities, from railroads to trucking and the ocean ports.

Y/Y Change In PPI For Transportation And Warehousing Industries, 2008-2022

For want of doubt, here are the PPI indices for energy and for transportation and warehouse wages. In the latter case the wage gain (purple line) was 7.8% on a Y/Y basis, a figure more than triple the 2.5% per annum trend that prevailed prior to February 2020.

Similarly, the gain in the PPI for energy during May was 45%, a Y/Y level which has prevailed since the spring of 2021.  That is, there is nothing in the black line below that says the worst is over.

Y/Y Change, Transportation And Warehousing Costs And Energy, 2016-2022

In short, the central banks have unleashed an inflationary whirlwind that has left the false pricing of the stock and bond markets high and dry. That’s why the very benchmark security of the global financial system has nearly gone parabolic in recent weeks.

At today’s 3.48% closing yield, the 10-year US Treasury yield was up 50 basis points from 5 days ago, 130 basis points from mid-March, and is in a totally different universe than prevailed when the Fed went berserk buying government bonds after March 2020.

But here’s the thing. Out of anti-inflation desperation, the Fed has pivoted to QT, but the impact of Fed held-bonds flooding into the trading pits has barely begun. And that’s to say nothing of the $95 billion per month bond shrinkage rate which will commence in September.

10-Year Treasury Yield, February 2020-June 2022

So the Great Reckoning has now commenced. The soaring red line below tells you all you need to know. It means that the artificially low cap rates of the last decade or more have reached their sell-by date and that the great money bubble the fostered is now heading for the wall.

*  *  *

The Fed has already pumped enormous distortions into the economy and inflated an “everything bubble.” The next round of money printing is likely to bring the situation to a breaking point. If you want to navigate the complicated economic and political situation that is unfolding, then you need to see this newly released video from Doug Casey and his team. In it, Doug reveals what you need to know, and how these dangerous times could impact your wealth. Click here to watch it now.

Tyler Durden Thu, 07/07/2022 - 08:45

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Health Officials: Man Dies From Bubonic Plague In New Mexico

Health Officials: Man Dies From Bubonic Plague In New Mexico

Authored by Jack Phillips via The Epoch Times (emphasis ours),

Officials in…

Published

4 hours ago

on

March 13, 2024

By

Health Officials: Man Dies From Bubonic Plague In New Mexico

Authored by Jack Phillips via The Epoch Times (emphasis ours),

Officials in New Mexico confirmed that a resident died from the plague in the United States’ first fatal case in several years.

A bubonic plague smear, prepared from a lymph removed from an adenopathic lymph node, or bubo, of a plague patient, demonstrates the presence of the Yersinia pestis bacteria that causes the plague in this undated photo. (Centers for Disease Control and Prevention/Getty Images)

The New Mexico Department of Health, in a statement, said that a man in Lincoln County “succumbed to the plague.” The man, who was not identified, was hospitalized before his death, officials said.

They further noted that it is the first human case of plague in New Mexico since 2021 and also the first death since 2020, according to the statement. No other details were provided, including how the disease spread to the man.

The agency is now doing outreach in Lincoln County, while “an environmental assessment will also be conducted in the community to look for ongoing risk,” the statement continued.

“This tragic incident serves as a clear reminder of the threat posed by this ancient disease and emphasizes the need for heightened community awareness and proactive measures to prevent its spread,” the agency said.

A bacterial disease that spreads via rodents, it is generally spread to people through the bites of infected fleas. The plague, known as the black death or the bubonic plague, can spread by contact with infected animals such as rodents, pets, or wildlife.

The New Mexico Health Department statement said that pets such as dogs and cats that roam and hunt can bring infected fleas back into homes and put residents at risk.

Officials warned people in the area to “avoid sick or dead rodents and rabbits, and their nests and burrows” and to “prevent pets from roaming and hunting.”

“Talk to your veterinarian about using an appropriate flea control product on your pets as not all products are safe for cats, dogs or your children” and “have sick pets examined promptly by a veterinarian,” it added.

“See your doctor about any unexplained illness involving a sudden and severe fever, the statement continued, adding that locals should clean areas around their home that could house rodents like wood piles, junk piles, old vehicles, and brush piles.

The plague, which is spread by the bacteria Yersinia pestis, famously caused the deaths of an estimated hundreds of millions of Europeans in the 14th and 15th centuries following the Mongol invasions. In that pandemic, the bacteria spread via fleas on black rats, which historians say was not known by the people at the time.

Other outbreaks of the plague, such as the Plague of Justinian in the 6th century, are also believed to have killed about one-fifth of the population of the Byzantine Empire, according to historical records and accounts. In 2013, researchers said the Justinian plague was also caused by the Yersinia pestis bacteria.

But in the United States, it is considered a rare disease and usually occurs only in several countries worldwide. Generally, according to the Mayo Clinic, the bacteria affects only a few people in U.S. rural areas in Western states.

Recent cases have occurred mainly in Africa, Asia, and Latin America. Countries with frequent plague cases include Madagascar, the Democratic Republic of Congo, and Peru, the clinic says. There were multiple cases of plague reported in Inner Mongolia, China, in recent years, too.

Symptoms

Symptoms of a bubonic plague infection include headache, chills, fever, and weakness. Health officials say it can usually cause a painful swelling of lymph nodes in the groin, armpit, or neck areas. The swelling usually occurs within about two to eight days.

The disease can generally be treated with antibiotics, but it is usually deadly when not treated, the Mayo Clinic website says.

“Plague is considered a potential bioweapon. The U.S. government has plans and treatments in place if the disease is used as a weapon,” the website also says.

According to data from the U.S. Centers for Disease Control and Prevention, the last time that plague deaths were reported in the United States was in 2020 when two people died.

Tyler Durden Wed, 03/13/2024 - 21:40

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I created a ‘cosy game’ – and learned how they can change players’ lives

Cosy, personal games, as I discovered, can change the lives of the people who make them and those who play them.

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13 hours ago

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March 13, 2024

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Cosy games exploded in popularity during the pandemic. Takoyaki Tech/Shutterstock

The COVID pandemic transformed our lives in ways many of us are still experiencing, four years later. One of these changes was the significant uptake in gaming as a hobby, chief among them being “cosy games” like Animal Crossing: New Horizons (2020).

Players sought comfort in these wholesome virtual worlds, many of which allowed them to socialise from the safety of their homes. Cosy games, with their comforting atmospheres, absence of winning or losing, simple gameplay, and often heartwarming storylines provided a perfect entry point for a new hobby. They also offered predictability and certainty at a time when there wasn’t much to go around.

Cosy games are often made by small, independent developers. “Indie games” have long been evangelised as the purest form of game development – something anyone can do, given enough perseverance. This means they can provide an entry point for creators who hadn’t made games before, but were nevertheless interested in it, enabling a new array of diverse voices and stories to be heard.

In May 2020, near the start of the pandemic, the small poetry game A Solitary Spacecraft, which was about its developer’s experience of their first few months in lockdown, was lauded as particularly poignant. Such games showcase a potential angle for effective cosy game development: a personal one.

Personal themes are often explored through cosy games. For instance, Chicory and Venba (both released in 2023) tackle difficult topics like depression and immigration, despite their gorgeous aesthetics. This showcases the diversity of experiences on display within the medium.

However, as the world emerges from the pandemic’s shadow, the games industry is facing significant challenges. Economic downturns and acquisitions have caused large layoffs across the sector.

Historically, restructurings like these, or discontent with working conditions, have led talented laid-off developers to create their own companies and explore indie development. In the wake of the pandemic and the cosy game boom, these developers may have more personal stories to tell.

Making my own cosy game

I developed my own cosy and personal game during the pandemic and quickly discovered that creating these games in a post-lockdown landscape is no mean feat.

What We Take With Us (2023) merges reality and gameplay across various digital formats: a website, a Discord server that housed an online alternate reality game and a physical escape room. I created the game during the pandemic as a way to reflect on my journey through it, told through the videos of game character Ana Kirlitz.

The trailer for my game, What We Take With Us.

Players would follow in Ana’s footsteps by completing a series of ten tasks in their real-world space, all centred on improving wellbeing – something I and many others desperately needed during the pandemic.

But creating What We Take With Us was far from straightforward. There were pandemic hurdles like creating a physical space for an escape room amid social distancing guidelines. And, of course, the emotional difficulties of wrestling with my pandemic journey through the game’s narrative.

The release fared poorly, and the game only garnered a small player base – a problem emblematic of the modern games industry.

These struggles were starkly contrasted by the feedback I received from players who played the game, however.

This is a crucial lesson for indie developers: the creator’s journey and the player’s experience are often worlds apart. Cosy, personal games, as I discovered, can change the lives of those who play them, no matter how few they reach. They can fundamentally change the way we think about games, allow us to reconnect with old friends, or even inspire us to change careers – all real player stories.

Lessons in cosy game development

I learned so much about how cosy game development can be made more sustainable for creators navigating the precarious post-lockdown landscape. This is my advice for other creators.

First, collaboration is key. Even though many cosy or personal games (like Stardew Valley) are made by solo creators, having a team can help share the often emotional load. Making games can be taxing, so practising self-care and establishing team-wide support protocols is crucial. Share your successes and failures with other developers and players. Fostering a supportive community is key to success in the indie game landscape.

Second, remember that your game, however personal, is a product – not a reflection of you or your team. Making this distinction will help you manage expectations and cope with feedback.

Third, while deeply considering your audience may seem antithetical to personal projects, your game will ultimately be played by others. Understanding them will help you make better games.

The pandemic reignited the interest in cosy games, but subsequent industry-wide troubles may change games, and the way we make them, forever. Understanding how we make game creation more sustainable in a post-lockdown, post-layoff world is critical for developers and players alike.

For developers, it’s a reminder that their stories, no matter how harrowing, can still meaningfully connect with people. For players, it’s an invitation to embrace the potential for games to tell such stories, fostering empathy and understanding in a world that greatly needs it.

Looking for something good? Cut through the noise with a carefully curated selection of the latest releases, live events and exhibitions, straight to your inbox every fortnight, on Fridays. Sign up here.

Adam Jerrett does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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KIMM finds solution to medical waste problem, which has become a major national issue

A medical waste treatment system, which is capable of 99.9999 percent sterilization by using high-temperature and high-pressure steam, has been developed…

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17 hours ago

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March 13, 2024

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A medical waste treatment system, which is capable of 99.9999 percent sterilization by using high-temperature and high-pressure steam, has been developed for the first time in the country.

Credit: Korea Institute of Machinery and Materials (KIMM)

A medical waste treatment system, which is capable of 99.9999 percent sterilization by using high-temperature and high-pressure steam, has been developed for the first time in the country.

The Korea Institute of Machinery and Materials (President Seog-Hyeon Ryu, hereinafter referred to as KIMM), an institute under the jurisdiction of the Ministry of Science and ICT, has succeeded in developing an on-site-disposal type medical waste sterilization system that can help to resolve the problem caused by medical waste, which has become a national and social issue as the volume of medical waste continues to increase every year. This project was launched as a basic business support program of the KIMM and was expanded into a demonstration project of Daejeon Metropolitan City. Then, in collaboration with VITALS Co., Ltd., a technology transfer corporation, the medical waste treatment system was developed as a finished product capable of processing more than 100 kilograms of medical waste per hour, and was demonstrated at the Chungnam National University Hospital.

Moreover, the installation and use of this product have been approved by the Geumgang Basin Environmental Office of the Ministry of Environment. All certification-related work for the installation and operation of this product at the Chungnam National University Hospital has been completed, including the passage of an installation test for efficiency and stability conducted by the Korea Testing Laboratory.

Through collaboration with VITALS Co., Ltd., a corporation specializing in inhalation toxicity systems, the research team led by Principal Researcher Bangwoo Han of the Department of Urban Environment Research of the KIMM’s Eco-Friendly Energy Research Division developed a high-temperature, high-pressure steam sterilization-type medical waste treatment system by using a high-temperature antimicrobial technology capable of processing biologically hazardous substances such as virus and bacteria with high efficiency. After pulverizing medical waste into small pieces so that high-temperature steam can penetrate deep into the interior of the medical waste, steam was then compressed in order to raise the boiling point of the saturated steam to over 100 degrees Celsius, thereby further improving the sterilization effect of the steam.

Meanwhile, in the case of the high-pressure steam sterilization method, it is vitally important to allow the airtight, high-temperature and high-pressure steam to penetrate deep into the medical waste. Therefore, the research team aimed to improve the sterilization effect of medical waste by increasing the contact efficiency between the pulverized medical waste and the aerosolized steam.

By using this technology, the research team succeeded in processing medical waste at a temperature of 138 degrees Celsius for 10 minutes or at 145 degrees Celsius for more than five (5) minutes, which is the world’s highest level. By doing so, the research team achieved a sterilization performance of 99.9999 percent targeting biological indicator bacteria at five (5) different locations within the sterilization chamber. This technology received certification as an NET (New Excellent Technology) in 2023.

Until now, medical waste has been sterilized by heating the exposed moisture using microwaves. However, this method requires caution because workers are likely to be exposed to electromagnetic waves and the entrance of foreign substances such as metals may lead to accidents.

In Korea, medical waste is mostly processed at exclusive medical waste incinerators and must be discharged in strict isolation from general waste. Hence, professional efforts are required to prevent the risk of infection during the transportation and incineration of medical waste, which requires a loss of cost and manpower.

If medical waste is processed directly at hospitals and converted into general waste by applying the newly developed technology, this can help to eliminate the risk of infection during the loading and transportation processes and significantly reduce waste disposal costs. By processing 30 percent of medical waste generated annually, hospitals can save costs worth KRW 71.8 billion. Moreover, it can significantly contribute to the ESG (environmental, social, and governance) management of hospitals by reducing the amount of incinerated waste and shortening the transportation distance of medical waste.

[*Allbaro System (statistical data from 2021): Unit cost of treatment for each type of waste for the calculation of performance guarantee insurance money for abandoned wastes (Ministry of Environment Public Notification No. 2021-259, amended on December 3, 2021). Amount of medical waste generated on an annual basis: 217,915 tons; Medical waste: KRW 1,397 per ton; General waste from business sites subject to incineration: KRW 299 per ton]

As the size and structure of the installation space varies for each hospital, installing a standardized commercial equipment can be a challenge. However, during the demonstration process at the Chungnam National University Hospital, the new system was developed in a way that allows the size and arrangement thereof to be easily adjusted depending on the installation site. Therefore, it can be highly advantageous in terms of on-site applicability.

Principal Researcher Bangwoo Han of the KIMM was quoted as saying, “The high-temperature, high-pressure steam sterilization technology for medical waste involves the eradication of almost all infectious bacteria in a completely sealed environment. Therefore, close cooperation with participating companies that have the capacity to develop airtight chamber technology is very important in materializing this technology.” He added, “We will make all-out efforts to expand this technology to the sterilization treatment of infected animal carcasses in the future.”

 

President Seog-Hyeon Ryu of the KIMM was quoted as saying, “The latest research outcome is significantly meaningful in that it shows the important role played by government-contributed research institutes in resolving national challenges. The latest technology, which has been developed through the KIMM’s business support program, has been expanded to a demonstration project through cooperation among the industry, academia, research institutes, and the government of Daejeon Metropolitan City.” President Ryu added, “We will continue to proactively support these regional projects and strive to develop technologies that contribute to the health and safety of the public.”

 

Meanwhile, this research was conducted with the support of the project for the “development of ultra-high performance infectious waste treatment system capable of eliminating 99.9999 percent of viruses in response to the post-coronavirus era,” one of the basic business support programs of the KIMM, as well as the project for the “demonstration and development of a safety design convergence-type high-pressure steam sterilization system for on-site treatment of medical waste,” part of Daejeon Metropolitan City’s “Daejeon-type New Convergence Industry Creation Special Zone Technology Demonstration Project.”

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The Korea Institute of Machinery and Materials (KIMM) is a non-profit government-funded research institute under the Ministry of Science and ICT. Since its foundation in 1976, KIMM is contributing to economic growth of the nation by performing R&D on key technologies in machinery and materials, conducting reliability test evaluation, and commercializing the developed products and technologies.

 

This research was conducted with the support of the project for the “development of ultra-high performance infectious waste treatment system capable of eliminating 99.9999 percent of viruses in response to the post-coronavirus era,” one of the basic business support programs of the KIMM, as well as the project for the “demonstration and development of a safety design convergence-type high-pressure steam sterilization system for on-site treatment of medical waste,” part of Daejeon Metropolitan City’s “Daejeon-type New Convergence Industry Creation Special Zone Technology Demonstration Project.”

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