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How Inflation Changes Culture

How Inflation Changes Culture

Authored by Jeffrey Tucker via DailyReckoning.com,

The midterm elections are over (no Red Wave), but nothing…

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11 months ago

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How Inflation Changes Culture

Authored by Jeffrey Tucker via DailyReckoning.com,

The midterm elections are over (no Red Wave), but nothing has changed. In fact, the Biden regime will probably become even more emboldened to pursue destructive economic policies because it will interpret the lack of a Red Wave as some kind of mandate.

Every day seems to be a day of spin, with every regime apologist assuring the public that inflation is getting better. Just look at the wonderful trend line! They point to the latest inflation numbers, which were down a bit from the month prior.

The regime insists that yes, inflation will vex us for a bit more time but will settle down in a few months. Plus, the president is working to fix this! And we know the American people are on board with him since no Red Wave materialized.

But in the footnotes, you’ll find the truth: it was a tiny drop and mostly for technical reasons and the main reason for the drop has already disappeared from the price trends.

Has any political propaganda on this topic ever been this ineffective? It’s truly a joke.

Where’s the Relief Coming From?

The producer price index that came out recently paints a clearer picture. It’s grim. It reveals no softening at all. In fact, it shows that there are plenty of coming price increases. Here is the index by commodities from 2013 to the present.

Remember how last year many people finally came to the conclusion that we had to learn to live with COVID? That was a smart choice because there was no way that the China-style suppression method could work.

Well, here we are now with a preventable inflation pandemic and the realization that we have to learn to live with inflation. Soon we’ll realize that we have to live with recession at the same time.

But what does this mean?

The impact will be felt not just in terms of economics but in culture. Inflation causes a society-wide shortening of time horizons.

True Prosperity

Let’s review some basics. All societies are born desperately poor, fated to live off foraging and just getting by. Prosperity is built through the construction of capital, which is the institution that embodies forward thinking.

To make capital requires the deferral of consumption: you have to give up some today in order to make tools that enable more consumption tomorrow. This means discipline and a future orientation. And it means, above all, savings that can be invested in productive projects. Only through that path can societies grow rich.

A key component of this concerns the stability of the medium of exchange. And not just stability: a currency that rises in value over time incentivizes saving and thus investing for the long term.

The late 19th century provided a good example of this. Under the gold standard, money grew more valuable over time, thus rewarding long-term thinking and instilling that outlook in the culture at large.

Live for Today

Inflation has the opposite effect. It punishes saving. It forces a penalty on economic behavior that is future-oriented. That means also discouraging investment in long-term projects, which is the whole key to building a complex division of labor and causing wealth to emerge from the muck of the state of nature. Every bit of inflation trims back that future orientation.

Hyperinflation utterly wrecks it.

Living for the day becomes the theme. Taking what you can get now is the method and the theme. Grasping and spending. You might as well because the money is only going down in value and goods are in ever shorter supply.

Better to live hard and short and forget the future. Go into debt if possible. Let the devaluation itself pay the price.

The Seeds of Destruction

Once this attitude becomes instilled in a prosperous society, what we call civilization gradually devolves. If inflation persists, this kind of short-term thinking can wreck everything.

This is why inflation is not just about rising prices. It’s about declining prosperity, the punishing of thrift, the discouragement of financial responsibility, and a culture that gradually falls apart.

Another factor in reducing time horizons is legal instability. This was my first concern when the lockdowns began. Why would anyone start a business if governments can just shut it down on a whim? Why plan for the future when that future can be wrecked by the stroke of a pen?

Many people had assumed that this new path would be short-lived. Surely the politicians would wise up and stop the madness. Surely! Tragically, it got worse and worse. The spending and printing began and ramped up over time. It was a perfect storm of sheer madness, and now we are paying the highest possible price.

The Hinge of History

We need to speak frankly about what’s happening to the global economy. It’s not just about supply chain breakages. Those can be repaired. It’s not just about inflation affecting every country. We are living amidst a fundamental upheaval in the whole world.

The most significant single danger to global prosperity now comes in the form of a devastating and deeply tragic wreckage of the country that was set to lead the world in finance and technology: China.

The WSJ summarizes the current pain:

China in 2021 accounted for 18.1% of global gross domestic product, according to International Monetary Fund data, behind the U.S. at 23.9% but ahead of the 27 members of the European Union at 17.8%. It accounts for almost a third of global manufacturing output, according to United Nations data from 2020. China’s economy expanded modestly at the beginning of the year but data for March and April point to a sharp slowdown.

The trouble there traces to the top. When Xi Jinping locked down Wuhan, the world celebrated him for achieving what no other leader in history had achieved: the eradication of a virus in one country. Even now, he gets accolades for this.

The rest of the world followed, and elites in all countries said that this path was the future.

Going Backwards

Now the virus is on the loose all over the country, and the eradication methods are intensifying. This is crushing economic growth and now threatening genuine economic depression in the country that only a few years ago was seen as the greatest economic engine of the world.

It’s truly the case that Xi Jinping has put his personal pride above the well-being of all people in China. The scientists in the country know that he is wrong about this but no one is in a position to tell him.

We cannot really trust the data coming out of China but officially the rate of infection in that country is one of the lowest in the world. Billions more people need to get the bug and recover in order to have anything close to herd immunity. This means that lockdowns are the way for years to come so long as the present regime remains in power.

American prosperity for decades has relied on: relatively low inflation, fairly stable rules of the game, and widening trade with the world and China in particular. All three are at an end. Yes, it is heartbreaking to watch it all unfold.

I’m not defending China’s human rights abuses. Far from it. But the best way to end these abuses is through engagement, not estrangement.

We all need hope right now but it’s very difficult to find, since we are on a course that is not likely to be fixed for a very long time.

Tyler Durden Wed, 11/30/2022 - 19:05

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Fighting the Surveillance State Begins with the Individual

It’s a well-known fact at this point that in the United States and most of the so-called free countries that there is a robust surveillance state in…

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It’s a well-known fact at this point that in the United States and most of the so-called free countries that there is a robust surveillance state in place, collecting data on the entire populace. This has been proven beyond a shadow of a doubt by people like Edward Snowden, a National Security Agency (NSA) whistleblower who exposed that the NSA was conducting mass surveillance on US citizens and the world as a whole. The NSA used applications like those from Prism Systems to piggyback on corporations and the data collection their users had agreed to in the terms of service. Google would scan all emails sent to a Gmail address to use for personalized advertising. The government then went to these companies and demanded the data, and this is what makes the surveillance state so interesting. Neo-Marxists like Shoshana Zuboff have dubbed this “surveillance capitalism.” In China, the mass surveillance is conducted at a loss. Setting up closed-circuit television cameras and hiring government workers to be a mandatory editorial staff for blogs and social media can get quite expensive. But if you parasitically leech off a profitable business practice it means that the surveillance state will turn a profit, which is a great asset and an even greater weakness for the system. You see, when that is what your surveillance state is predicated on you’ve effectively given your subjects an opt-out button. They stop using services that spy on them. There is software and online services that are called “open source,” which refers to software whose code is publicly available and can be viewed by anyone so that you can see exactly what that software does. The opposite of this, and what you’re likely already familiar with, is proprietary software. Open-source software generally markets itself as privacy respecting and doesn’t participate in data collection. Services like that can really undo the tricky situation we’ve found ourselves in. It’s a simple fact of life that when the government is given a power—whether that be to regulate, surveil, tax, or plunder—it is nigh impossible to wrestle it away from the state outside somehow disposing of the state entirely. This is why the issue of undoing mass surveillance is of the utmost importance. If the government has the power to spy on its populace, it will. There are people, like the creators of The Social Dilemma, who think that the solution to these privacy invasions isn’t less government but more government, arguing that data collection should be taxed to dissuade the practice or that regulation needs to be put into place to actively prevent abuses. This is silly to anyone who understands the effect regulations have and how the internet really works. You see, data collection is necessary. You can’t have email without some elements of data collection because it’s simply how the protocol functions. The issue is how that data is stored and used. A tax on data collection itself will simply become another cost of doing business. A large company like Google can afford to pay a tax. But a company like Proton Mail, a smaller, more privacy-respecting business, likely couldn’t. Proton Mail’s business model is based on paid subscriptions. If there were additional taxes imposed on them, it’s possible that they would not be able to afford the cost and would be forced out of the market. To reiterate, if one really cares about the destruction of the surveillance state, the first step is to personally make changes to how you interact with online services and to whom you choose to give your data.

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Stock Market Today: Stocks turn higher as Treasury yields retreat; big tech earnings up next

A pullback in Treasury yields has stocks moving higher Monday heading into a busy earnings week and a key 2-year bond auction later on Tuesday.

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Updated at 11:52 am EDT U.S. stocks turned higher Monday, heading into the busiest earnings week of the year on Wall Street, amid a pullback in Treasury bond yields that followed the first breach of 5% for 10-year notes since 2007. Investors, however, continue to track developments in Israel's war with Hamas, which launched its deadly attack from Gaza three weeks ago, as leaders around the region, and the wider world, work to contain the fighting and broker at least a form of cease-fire. Humanitarian aid is also making its way into Gaza, through the territory's border with Egypt, as officials continue to work for the release of more than 200 Israelis taken hostage by Hamas during the October 7 attack. Those diplomatic efforts eased some of the market's concern in overnight trading, but the lingering risk that regional adversaries such as Iran, or even Saudi Arabia, could be drawn into the conflict continues to blunt risk appetite. Still, the U.S. dollar index, which tracks the greenback against a basket of six global currencies and acts as the safe-haven benchmark in times of market turmoil, fell 0.37% in early New York trading 105.773, suggesting some modest moves into riskier assets. The Japanese yen, however, eased past the 150 mark in overnight dealing, a level that has some traders awaiting intervention from the Bank of Japan and which may have triggered small amounts of dollar sales and yen purchases. In the bond market, benchmark 10-year note yields breached the 5% mark in overnight trading, after briefly surpassing that level late last week for the first time since 2007, but were last seen trading at 4.867% ahead of $141 billion in 2-year, 5-year and 7-year note auctions later this week. Global oil prices were also lower, following two consecutive weekly gains that has take Brent crude, the global pricing benchmark, firmly past $90 a barrel amid supply disruption concerns tied to the middle east conflict. Brent contracts for December delivery were last seen $1.06 lower on the session at $91.07 per barrel while WTI futures contract for the same month fell $1.36 to $86.72 per barrel. Market volatility gauges were also active, with the CBOE Group's VIX index hitting a fresh seven-month high of $23.08 before easing to $20.18 later in the session. That level suggests traders are expecting ranges on the S&P 500 of around 1.26%, or 53 points, over the next month. A busy earnings week also indicates the likelihood of elevated trading volatility, with 158 S&P 500 companies reporting third quarter earnings over the next five days, including mega cap tech names such as Google parent Alphabet  (GOOGL) - Get Free Report, Microsoft  (MSFT) - Get Free Report, retail and cloud computing giant Amazon  (AMZN) - Get Free Report and Facebook owner Meta Platforms  (META) - Get Free Report. "It’s shaping up to be a big week for the market and it comes as the S&P 500 is testing a key level—the four-month low it set earlier this month," said Chris Larkin, managing director for trading and investing at E*TRADE from Morgan Stanley. "How the market responds to that test may hinge on sentiment, which often plays a larger-than-average role around this time of year," he added. "And right now, concerns about rising interest rates and geopolitical turmoil have the potential to exacerbate the market’s swings." Heading into the middle of the trading day on Wall Street, the S&P 500, which is down 8% from its early July peak, the highest of the year, was up 10 points, or 0.25%. The Dow Jones Industrial Average, which slumped into negative territory for the year last week, was marked 10 points lower while the Nasdaq, which fell 4.31% last week, was up 66 points, or 0.51%. In overseas markets, Europe's Stoxx 600 was marked 0.11% lower by the close of Frankfurt trading, with markets largely tracking U.S. stocks as well as the broader conflict in Israel. In Asia, a  slump in China stocks took the benchmark CSI 300 to a fresh 2019 low and pulled the region-wide MSCI ex-Japan 0.72% lower into the close of trading.
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iPhone Maker Foxconn Investigated By Chinese Authorities

Foxconn, the Taiwanese company that manufactures iPhones on behalf of Apple (AAPL), is being investigated by Chinese authorities, according to multiple…

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Foxconn, the Taiwanese company that manufactures iPhones on behalf of Apple (AAPL), is being investigated by Chinese authorities, according to multiple media reports. Foxconn’s business has been searched by Chinese authorities and China’s main tax authority has conducted inspections of Foxconn’s manufacturing operations in the Chinese provinces of Guangdong and Jiangsu. At the same time, China’s natural-resources department has begun onsite investigations into Foxconn’s land use in Henan and Hubei provinces within China. Foxconn has manufacturing facilities focused on Apple products in three of the Chinese provinces where authorities are carrying out searches. While headquartered in Taiwan, Foxconn has a huge manufacturing presence in China and is a large employer in the nation of 1.4 billion people. The investigations suggest that China is ramping up pressure on the company as Foxconn considers major investments in India, and as presidential elections approach in Taiwan. Foxconn founder Terry Gou said in August of this year that he intends to run for the Taiwanese presidency. He has resigned from the company’s board of directors but continues to hold a 12.5% stake in the company. Gou is currently in fourth place in the polls ahead of the election that is scheduled to be held in January 2024. The potential impact on Apple and its iPhone manufacturing comes amid rising political tensions between politicians in Washington, D.C. and Beijing. Apple’s stock has risen 16% over the last 12 months and currently trades at $172.88 U.S. per share.  

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