40. When Dementia Replaces Meritocracy – Chaos and Failure Occur
Over the last week, there have been some notable failures originating in organizations focused on Social Justice as the proper criteria for advancement rather than ability/meritocracy.
1. Modern Monetary Theory (MMT) so proudly promoted by the Biden Administration and Demented Marxists is being relegated to the dust bin of history by the pain of the economic destruction occurring globally as The Fed raises interest rates. The Bank of England was humbled by British pension funds, two European major banks are racing to become Lehman Bros., and the American economy is gliding into a severe recession.
2. The result of the MMT ideocracy in the USA is rampant inflation that is accelerating despite the current reduction in the price of gasoline. With inflation accelerating, The Fed cannot afford to pause, and thus they have continued to say they intend to raise the Federal Funds Rate to at least 4.5%. Now that OPEC has announced a reduction in production of oil by 2 million barrels, gasoline and inflation will both soar. More damage ahead.
3. Massive losses in the commodity, stock, and bond markets have occurred this year through the month of September. Although the stock market appeared to rally in early October probably due to shorts having to cover their positions and some folks believing the global financial damage was so severe that The Fed would pause in raising interest rates. The real question is what happens when –
a. publicly traded companies begin to report their result for the 3rd quarter and have to convert their oversea revenue into highly appreciated Dollars.
b. The Fed raises The Federal Funds Rate again because inflation is accelerating.
c. The already tight oil market has 2 million barrels less product available.
4. Another proponent of MMT is biting the dust as China’s economy continues to implode. The value of the Chinese Yuan has tanked against the Dollar, their Belt and Road Plan program has cratered and thus been suspended. Xi still seems to still be in power despite rumors of a coup mixed with reports that the Chinese population is quite unhappy.
Focus on the combination of the Chinese economy imploding, the European economy crashing, and our economy gliding into a very serious recession. This “economic dislocation” could easily evolve into an economic depression. The solution is Supply Side Economics – cut taxes and regulation to spur an increase in the supply of goods including petroleum. No recovery will occur in the global economy until there is economic growth.
Unfortunately, the current administration is full of Environment, Social, and Governance (ESG) believers in leadership positions and they have neither real-world experience nor any proven ability. What a difference selection based on meritocracy would have made!!!!!!
In a sign that Putin is as out of step with his citizens as Biden, it was reported this week that when the newly activated Russian units reach the front line of the Ukrainian war, they call the Ukrainian hotline set up so they can surrender. It is funny but also dangerous as dictators do not have any constraints on their decisions and tend to not have a sense of humor when they are
being embarrassed on the world stage.
As Biden continues to destroy our fossil energy industry without a realistic replacement source of energy available not to mention an electric grid that is unable to handle the needs of all electric vehicles, the cost of gasoline will rise sharply. That will lead to higher inflation across the board. The Fed will be forced to continue to increase interest rates thus further trashing our economy. But the 11year old children and their mental equivalents that are setting US policy
will be happy…although they may be in the dark, hungry, and cold.
Based on recent conversations, this week’s sort of positive news is that The Fed has successful reduced the demand for new homes. As a result:
1. Several home builders have informed me that their pace of sales has slowed.
2. Engineers have reported a reduction in demand for building permit application plats and engineering services.
3. Infrastructure contractors have reported fewer supply chain bottlenecks and with increased availability and a softening in pipe costs.
While you are waiting to see what else The Feb breaks in the global economy, keep score by watching for these steps:
1. The strength of the Dollar will cause companies with substantial foreign earnings to report lower earnings thus reducing the value of their stock.
2. Higher interst rates has slowed new home construction which will generate layoffs in the construction trades and ripple through their suppliers.
3. Things in the economy will break.
4. There will be a stock market capitulation.
5. Economic recovery does not start until The Fed begins to reduce interest rates.
Residential development land will probably be the next land market segment to experience softer prices due to less demand. I expect some short-term declines in land values because of increased interest rates. Environmental regulations will continue to drive up the cost of development as illustrated by the new regulations regarding two bat species and Wood Turtles. Fortunately, no dinosaurs have been found alive, so they are not on the Endangered Species list.
Self-delusion is rampant in the current administration, congress, and as many of the participants and financial analysts on Wall Street. Their singular focus the accumulation of earthy treasures is something to watch tempered by the reality of the pain they are causing others.Fortunately, God is real, Jesus was resurrected, the Holy Spirit is active, and God is in control, but He expects us to be his hands and voice.
“They were convinced by him, and when they had called in the apostles, they had them flogged. Then they ordered them not to speak in the name of Jesus and let them go. As they left the council, they rejoiced that they were considered worthy to suffer dishonor for the sake of the name. And every day in the temple and at home they did not cease to teach and proclaim Jesus as the Messiah.”
(Acts 5:40-42) New Revised Standard Version, Oxford University Press)
Stay healthy,
Ned
October 6, 2022
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