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Jim Cook

 

RUNAWAY SOCIAL SYMPATHY

Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

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The Best of Jim Cook Archive

 
Essay Of The Month
July 7,, 2017
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CARMEGGEDON

By David Stockman

We have frequently pointed out that the essence of monetary central planning is the systematic falsification of financial asset prices. These misbegotten intrusions in the financial nerve center of capitalism, in turn, lead to a cascading contagion of capital misallocation, malinvestment and economic decay. Mispriced money initially fosters speculative excesses in the canyons of Wall Street. The latter then spreads through a pandemic of financial engineering in the corporate C-suites that shunts cash flows and borrowings back into Wall Street rather than productive assets. Eventually these misallocations infect the entire main street economy.

The unfolding disaster in the auto sector is one example of this insidious process. It started with the scramble for yield that is implicit in ZIRP and massive bond market yield suppression under QE. These drastic falsifications of financial asset prices literally caused a stampede of funds into all branches of the auto debt market in search of higher yields relative to the comparatively meager returns available on government securities and bank deposits. This tsunami of auto debt floats on a sea of upwards of $1.5 trillion in mispriced debt. Owing to monetary central planning, auto debt is way too cheap. That means, in turn, that there's way too much of it. This has led to a vast inflation of auto demand, and also far more inflation in auto prices.

Cheap auto debt has become a self-fulfilling economic curse. It drives up the price tag on cars, requiring the consumer to take on more of it – though loans, leases and day rentals – just to stay in wheels. The point here is that the financial asset boom-and-bust cycle that is inherent in monetary central planning is making the main street business cycle more unstable, not less. It means that the next auto cycle bust is certain to be a doozy. Carmeggedon is now metastasizing rapidly. The drop in used car prices is accelerating. During April prices of most classes of used vehicles plunged sharply – especially among passenger cars and smaller SUVs.