Are we headed for a world wide meltdown?

[Texas Contrarian]

Originally Posted by CaptainMidnight

I'm inclined to wait and see whether the narrative shifts from the "i-word" to the "r-word" within the next 6-12 months.

Originally Posted by lustylad

If memory serves me right, isn't that what happened to Jerry Ford? Back in the Fall of 1974, he wanted all of us to sport WIN buttons on our lapels. "WIN" stood for Whip Inflation Now lol.

Within 6 months, the buttons were gone and all of his energies were directed toward fighting the recession.

Jerry had sort of a double-barreled problem, since the nation was in the throes of a recession at that time as well as suffering from a high rate of inflation. The term "stagflation" was apparently coined by a member of the UK parliament in the 1960s, but first came into widespread use in the US during the early part of Ford's short term in office.

This recession (the most severe since the Great Depression) started in the fall of '73 and lasted until early spring of 1975. The "WIN" button campaign was obviously ridiculous, but apparently Greenspan (then CEA chair) and other Ford officials were out of ideas and decided to try a little "cheerleading," apparently figuring that at least it wouldn't hurt anything.

Less than two years earlier, the Nixon administration discovered that you can't stamp out inflation by simply outlawing it (Yes, seriously! Wage and price controls).

A little history here, courtesy of the WSJ:

Opinion | Nixon Taught Us How Not to Fight Inflation
William N. Walker


President Richard Nixon announced a 90-day freeze on all prices and wages in the U.S. on Aug. 15, 1971. Suddenly and with no warning, every shop and factory was forbidden to raise prices for every product sold anywhere in the country. It was a watershed moment—a radical program that imposed direct government control over the economy aimed at breaking the cycle of inflationary price and wage hikes.

A half-century later, the policy seems almost otherworldly. Does anyone think factory owners and shopkeepers would accept a peremptory presidential directive to freeze prices today? Resistance to government action has become deeply ingrained. In the face of the pandemic, Americans routinely flout governmental decrees to wear face masks and maintain social distance. Opposition to a freeze directive would almost certainly be swift and overwhelming.

Yet 50 years ago, retailers and employers, small and large, accepted Nixon’s order. Consumers, whose purchasing power had been eroded by years of rising prices, felt as if they’d caught a break; government had stepped in and forced greedy merchants to stop gouging them, at least for a while. What was not to like?

A Democratic Congress had passed the Economic Stabilization Act in 1970, with language authorizing the president to impose price controls to fight inflation. Nixon signed the law, but Democrats were confident that a Republican president would never freeze prices. They planned to use his failure to do so as a political cudgel in the 1972 campaign. Nixon’s surprise announcement turned the tables.

It worked—for a while. The freeze persuaded organized labor to temper wage demands and broke what had been an inflationary spiral of price and wage hikes that sapped consumer buying power. But Phase II of Nixon’s program imposed increasingly complex rules that became both unpopular and a political burden. After the initial burst of popularity—which lasted long enough to boost Nixon’s landslide re-election in 1972—the program failed spectacularly and ushered in nearly a decade of so-called stagflation—high inflation coupled with slow growth, which reduced living standards for millions of Americans.

Safely re-elected, Nixon ended the experiment on Jan. 15, 1973. The stock market promptly plummeted and the rate of inflation exploded. Government and private forecasters alike failed to recognize that during the price-freeze period, demand had grown exponentially, putting such severe pressure on supplies that within months, prices of nearly everything—commodities, foodstuffs, minerals and petroleum—would soar, an inflationary shock that left the economy in shambles.

The Nixon administration flailed at trying to halt the damage. Treasury Secretary George Shultz threatened to “take the club out of the closet” and reimpose controls, but to no avail. The administration slapped a freeze on beef prices, but ranchers retaliated by withholding cattle from slaughter, and meat disappeared from store shelves. It declared an embargo on exports of soybeans to avert an impending shortage. Nothing worked.

Then, on June 13, 1973, in a show of defiance as the Watergate hearings unfolded, Nixon decreed a second nationwide price freeze and follow-on control program. This time, the measures were deeply unpopular. The novelty had worn off for consumers, and farmers and business owners disliked the new round of bureaucratic rules. Then the economic fundamentals of the program were upended by two dramatic and unforeseen events. In October 1973, the Saudis doubled the price of crude-oil exports, leading to a rapid escalation of gasoline price. Then, the Organization of the Petroleum Exporting Countries declared an embargo on all shipments of oil to the U.S. and other Western nations. By the first quarter of 1974, imports dried up. American motorists endured long lines at the pump in the greatest supply disruption the nation has ever experienced.

This bitter legacy—shortages of gasoline, red meat, soybeans and many other products. together with ruinous price increases—discredited price controls in the eyes of the American people. Congress allowed the Economic Stabilization Act to expire, and, with it, the president’s authority to impose controls, but the damage inflicted by the program continued until Paul Volcker was appointed to run the Federal Reserve in 1979 and began the interest-rate increases that would finally break inflation at the cost of a steep recession. The economy didn’t recover until 1983, halfway into Ronald Reagan’s first term.

Nixon’s price controls put the federal government in direct control of the American economy. Despite its good intentions, the freeze caused lasting damage. It’s a lesson worth pondering 50 years on, when the Biden administration is proposing new government interventions on an unprecedented scale.

Mr. Walker is a retired diplomat and lawyer and author, most recently, of “Target Switzerland: A Paul Muller Novel of Political Intrigue.” He served as general counsel and deputy director of the federal Cost of Living Council, 1972-74.

https://www.wsj.com/articles/nixon-f...ve-11628885071

Why is discussion of this relevant today? Well, because some people learn nothing from history and keep trying to resurrect terrible ideas. (See next post.)

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[Texas Contrarian]

Opinion | The Senators From Venezuela
The Editorial Board
6-7 minutes


As night follows day, the economic problems caused by government are invariably followed by government solutions that would make everything worse. For a classic of the genre, consider the bill introduced by Democratic Senators to fight inflation by attacking price “gouging.”

Massachusetts Senator Elizabeth Warren and seven Democratic colleagues in the Senate and six in the House want to punish companies that raise prices more than they like. The result would be price controls by another name, and they would produce what price controls always do—supply shortages. If you like today’s baby formula mess, pass this bill.

The legislation unveiled last week would grant sweeping new powers to the Federal Trade Commission. It bans companies with $100 million or more in revenue from selling goods or services “at an unconscionably excessive price” during a market shock. The public employees in their Beltway offices would define what is “unconscionably excessive,” and they could then slap offenders with a penalty of up to 5% of annual revenue. Not profits, mind you, but revenue.

The scheme is the latest attempt by Democrats to blame inflation on business. In a statement on the bill, Sen. Warren denounced “corporations taking advantage of the current crisis to prey on consumers,” and listed grocery stores, car-rental firms and drug companies as nefarious price gougers. She wants you to forget that federal spending contributed to soaring prices, as well as to the labor shortages across the economy.

The bill puts the burden of proof on companies, letting them avoid the penalty only if they can show that their price increases are the result of business costs beyond their control. Producer prices have outpaced inflation in the past year, and unpredictable component shortages are popping up across the supply chain.

But the current FTC, run by Warren acolyte Lina Khan, has already declared its intention to punish business for various alleged offenses. Regulators ordered to search for “widespread” gouging—as Sen. Warren puts it—are likely to find it, even if the price increases have sound business explanations.

The economic consequences would go far beyond fines on specific companies. The vaguely worded bill would force all large companies to think twice before raising prices to keep up with costs.

Consider Kroger, which Sen. Warren called out by name. Grocery store margins are notoriously narrow even when inflation is under control. If the retail giant fears the FTC will fine it for raising prices to keep up with costs, expect some economic consequences. Store shelves would thin out as Kroger decides not to stock items that politicians are targeting for scrutiny. Or perhaps you’ll wait longer in the checkout line as the chain cuts back on labor costs.

The Democratic proposal is in one sense hard to take seriously because price controls are so obviously dumb. President Nixon froze beef prices during the inflation run of 1973, and ranchers responded exactly as you’d guess: by withholding supply. Nixon also tried wage and price controls across the entire economy. This produced so many distortions that Nixon had to repeal the controls, and prices soared again.

More recently, price controls were the crown jewel of a Venezuelan economic plan that made basic goods disappear while doing little to curb overall inflation. Even that country’s socialist dictator, Nicolás Maduro, was obliged to loosen the price controls.

But Ms. Warren’s bad ideas have a way of influencing President Biden’s policies. Think student loan forgiveness. The danger is that the idea of price controls spreads beyond the Senate’s Venezuelan caucus and into the Treasury and White House. It’s the definition of economic insanity, which means in this Administration it is all too possible.

https://www.wsj.com/articles/the-sen...es-11652738230

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[Chung Tran]

Price controls is not a serious idea. Maybe 5% of Democrats will promote it. That's easy to do when you know it has zero chance of happening.

The Student Loan forgiveness is being nudged off the table. The latest is a pivot that says wealthier borrowers would gain disproportionately to lower income recipients.

[Texas Contrarian]

Originally Posted by Chung Tran

Price controls is not a serious idea. Maybe 5% of Democrats will promote it. That's easy to do when you know it has zero chance of happening.

The Student Loan forgiveness is being nudged off the table. The latest is a pivot that says wealthier borrowers would gain disproportionately to lower income recipients.

Of course this should not be considered a serious idea, but this is a profoundly corrupt and unserious group of people. Some of them will waste a lot of time and political capital in efforts to divert attention from other issues while trying to rally the public to blame "greedy capitalists" and "rich people."

Try to make an effort to understand the point of commentary for a change.

Or maybe you can just go back to blaming those who hedge portfolios with put options for "taking money from" and "discouraging" naive young investors? That sure did a good job of bolstering your credibility!

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[Chung Tran]

Originally Posted by CaptainMidnight

Or maybe you can just go back to blaming those who hedge portfolios with put options for "taking money from" and "discouraging" naive young investors? That sure did a good job of bolstering your credibility!

Huh? What in the Fuck are you moaning about?

I never said anything like that.

I think you took a joke post personally. Your abilty to discern sarcasm is alarmingly low.

[Tiny]

Originally Posted by CaptainMidnight

The legislation unveiled last week would grant sweeping new powers to the Federal Trade Commission. It bans companies with $100 million or more in revenue from selling goods or services “at an unconscionably excessive price” during a market shock. The public employees in their Beltway offices would define what is “unconscionably excessive,” and they could then slap offenders with a penalty of up to 5% of annual revenue. Not profits, mind you, but revenue.

The scheme is the latest attempt by Democrats to blame inflation on business. In a statement on the bill, Sen. Warren denounced “corporations taking advantage of the current crisis to prey on consumers,” and listed grocery stores, car-rental firms and drug companies as nefarious price gougers. She wants you to forget that federal spending contributed to soaring prices, as well as to the labor shortages across the economy.

The bill puts the burden of proof on companies, letting them avoid the penalty only if they can show that their price increases are the result of business costs beyond their control.

But the current FTC, run by Warren acolyte Lina Khan, has already declared its intention to punish business for various alleged offenses. Regulators ordered to search for “widespread” gouging—as Sen. Warren puts it—are likely to find it, even if the price increases have sound business explanations.


Consider Kroger, which Sen. Warren called out by name. Grocery store margins are notoriously narrow even when inflation is under control. ll too possible.

https://www.wsj.com/articles/the-sen...es-11652738230

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Insane. Look at one of their examples, Kroger. Its net profit margin going back 8 years was always less than 2%, except for 2019 when it was 2.55%. In addition to supermarkets, Warren singled out rental car companies. Hertz's average net margin has been negative in many years. An arbitrary fine of 5% of revenues could wipe out years of profits for these companies.

How's this going to work for oil companies, who lose money when the price of oil is $40 a barrel, then mint it when oil's $100 a barrel? Take away their profits through fines when they're doing well so they'll have no incentive to invest going forward?

Question, If grocery stores' net margins are less than 2%, how the hell are they going to cut prices enough to satisfy Senator Warren without going bankrupt?

[Chung Tran]

Hertz needs to be slapped, but not because of high margins.

https://www.usatoday.com/story/money...ts/9515487002/

[Texas Contrarian]

Originally Posted by Chung Tran

Huh? What in the Fuck are you moaning about?

I never said anything like that.

I think you took a joke post personally. Your abilty to discern sarcasm is alarmingly low. I saw where you got into a spat with another Poster recently, where you believed you were slighted.

Didn't look like sarcasm to me! And speaking of abilities, your ability to understand economic policy issues is alarmingly low.

But aside from that -- just yesterday in this thread, you quoted one of my posts and called it "bullshit," when it was plain for everyone to see that you had no understanding of the issue (as lustylad pointed out to you).

You need to learn one simple thing, Chung Tran. If you're going to call someone's post "bullshit," you need to explain why in a cogent, coherent fashion. Otherwise just read and learn.

Sorry, but I don't suffer obnoxious fools gladly. If you don't like it, you can always put me on ignore. Problem solved! LOL

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[WTF]

This is how you make money in volatile times...bet on the side you think will implement their policies.

I know which way I'm betting and it isn't with price controls!

It is towards energy security instead of efficiency.

[Texas Contrarian]

Originally Posted by Tiny

Insane. Look at one of their examples, Kroger. Its net profit margin going back 8 years was always less than 2%, except for 2019 when it was 2.55%. In addition to supermarkets, Warren singled out rental car companies. Hertz's average net margin has been negative in many years. An arbitrary fine of 5% of revenues could wipe out years of profits for these companies.

How's this going to work for oil companies, who lose money when the price of oil is $40 a barrel, then mint it when oil's $100 a barrel? Take away their profits through fines when they're doing well so they'll have no incentive to invest going forward?

Question, If grocery stores' net margins are less than 2%, how the hell are they going to cut prices enough to satisfy Senator Warren without going bankrupt?

Yes. I think especially with oil companies, earnings are so cyclical that capital accumulated during good times becomes desperately needed during the rough patches. Isn't ignorance of this issue what was so destructive about the "windfall profits tax" of just over 40 years ago?

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[Chung Tran]

Originally Posted by CaptainMidnight

Didn't look like sarcasm to me! And your ability to understand issues is alarmingly low.

But aside from that -- just yesterday in this thread, you quoted one of my posts and called it "bullshit," when it was plain for everyone to see that you had no understanding of the issue (as lustylad pointed out to you).

You need to learn one simple thing, Chung Tran. If you're going to call someone's post "bullshit," you need to explain why in a cogent, coherent fashion. Otherwise just read and learn.

It was sarcasm. Go back and read without hunching your back. It will be obvious.

I explained why your conclusion was Bullshit. You believe Biden is responsible for high inflation, I believe the Federal Reserve bears most of the blame. You think your opinion is more valid, I think mine is.

Politico says it's housing prices

https://www.politico.com/news/2022/0...ation-00015808

This article says your belief is POLITICAL. That the rescue plan is but a piece of many factors.

https://www.nbcnews.com/business/bus...rits-rcna16156

If interest rates had been raised in November, when inflation was known to exist at a high level, we would have nipped inflation to a large extent. If the FED had stopped their bond buying months earlier, inflation would be tamed.

I think you know that, but you hate Biden so much, it is easier to blame him.

[texassapper]

Originally Posted by Chung Tran

I think you know that, but you hate Biden so much, it is easier to blame him.

What was it that Truman used to say?

Oh yeah, the buck stops here....

[Tiny]

Originally Posted by CaptainMidnight

Yes. I think especially with oil companies, earnings are so cyclical that capital accumulated during good times becomes desperately needed during the rough patches. Isn't ignorance of this issue what was so destructive about the "windfall profits tax" of just over 40 years ago?

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Yes, in hindsight, the Windfall Profits Tax, like President Carter's price controls on natural gas, was ignorant and destructive. To be fair, some of the blame rests on M. King Hubbert's peak oil theory. Hubbert was a renowned geologist and geophysicist, who hypothesized that oil production for basins and regions as a function of time followed a bell curve. Supposedly there's a finite amount of oil and gas that will be produced, and we were on the back half of the bell curve. So why not jack up taxes and milk the oil and gas companies? There's only so much oil and gas that will be produced anyway.

Of course higher prices and technologies like horizontal drilling and hydraulic fracturing caused U.S. production to turn the other way. In reality, with sufficiently high prices and absence of government control, there's no reason why we can't sustain U.S. production for a long, long time. Or increase it.

[lustylad]

Originally Posted by Chung Tran

Huh? What in the Fuck are you moaning about?

I never said anything like that.

I think you took a joke post personally. Your ability to discern sarcasm is alarmingly low.

Nice try, chungy. I left the door open for you to say it was just a joke post, but you kept silent. Most of us took that to mean you were serious.

[Chung Tran]

Originally Posted by texassapper

What was it that Truman used to say?

Oh yeah, the buck stops here....

Sure it does. And???

Originally Posted by lustylad

Nice try, chungy. I left the door open for you to say it was just a joke post, but you remained silent. Most of us took that to mean you were serious.

I don't remember any door. I left that thread, I guess. So you didn't get the sarcasm either, but you weren't sure?

FYI, the Robin Hood traders are worthless to me. Robin Hood itself is a sham Company that encourages speculation, and will be out of business or merged by the end of 2022. Those who use it are gambling Idiots who deserve the losses they incurred. And I include family members in that group.

So many guys here seem to deliberately fail to understand shit. Too busy looking to attack the next post. It is a plague here, few want to really discuss and debate.

No sarcasm in this post. Feel free to quote me later.