Category Archives: Economics

Miscellaneous economy stuff

Inflation Expectations

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We consumers have them, and The Wall Street Journal Editorial Board ran one of their own in their Sunday piece. They also published the graph below, depicting consumer inflation expectations for the nearby future, originated by the University of Michigan’s Survey of Consumers.

Notice that. Between 2015, when the Obama “recovery” from the Panic of 2008 finally began to take hold, and 2021, when the Biden administration took office and renewed Jerome Powell’s and the rest of the Fed’s management team DOC, consumer inflation expectations remained remarkably steady in the range 2%-3%, just a skosh above the Fed’s currently claimed 2% target inflation rate.

Of course, those six years were in the face of the Fed’s artificial suppression of interest rates. Interest rates are a major driver of inflation.

However, with the Fed insisting on continuing to artificially suppress interest rates, now coupled with the Biden/Pelosi/Schumer-led Progressive-Democrat spending spree—a “checks in the checkbook, money still in the account” binge that makes Obama, and Trump, look like misers—and the resulting Federal deficit and national debt explosion, us consumers are recognizing that the money flood will override the interest rate suppression.

Because, in the end, inflation is always and everywhere a money phenomenon, not an interest rate one.

It’s possible that American consumers aren’t as dumb as our Central Bankers, enclosed in their own Beltway Bubble, make us out to be.

How Does This Work, Exactly?

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In a Thursday article concerning Colonial Pipeline apparently paying ransom to get their systems back online the Wall Street Journal‘s writers let this tidbit slip.

Bloomberg reported earlier Thursday that Colonial had paid the hackers a sum of nearly $5 million, and that the decryption tool ultimately wasn’t effective in restoring operations. Instead, Colonial was able to recover by relying on system backups, Bloomberg reported.

Which raises two questions. If Bloomberg‘s reporting is accurate,

  • Where were Colonial’s CEO, COO, and CIO that they allowed the hack to occur in the first place?
  • Where were Colonial’s CEO, COO, and CIO that they didn’t go to those backups right away instead of rewarding their attackers for the privilege of being their victim?

Colonial management’s apparent cowardice not only serves to expose their company to further extortion, it exposes their peers in the industry and businesses everywhere to this sort of extortion.

Just as bad is the Biden administration’s timid response. The longstanding (not just under this administration) vulnerability of all of our nation’s financial, power, water, fuel infrastructure, coupled with Biden’s ducking away from the current attack (it’s a private matter), exposes our nation to state-level attack and crushing defeat.

That’s Nice

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The Senate Homeland Security Committee held a hearing last week regarding the Colonial Pipeline fiasco (which has much wider implications than just one company cravenly paying off its attacker/rewarding its attacker for the attack).

Congressman John Katko (R, NY), Ranking Member of that committee also wrote a letter to Brandon Wales, Acting Director of the Cybersecurity and Infrastructure Security Agency, which is a part of the Department of Homeland Security. In his letter, Katko asked a number of questions regarding how well CISA works with its counterparts in other agencies and how well CISA’s inspections of the nation’s pipelines were going.

He also wrote optimistically

[T]he Pipeline Cybersecurity Initiative, housed within the National Risk Management Center (NRMC), has shown promise as a voluntary, public-private partnership between CISA, Transportation Security Administration (TSA), Department of Energy (DOE), and a range of pipeline-dominant critical infrastructure stakeholders. It is the Committee’s understanding that the core of this initiative revolves around conducting Validated Architecture and Design Review (VADR) assessments on pipeline assets.
These VADR assessments have proven effective at identifying a wide range of potential vulnerabilities within pipeline systems – some of which have been publicly distilled. Better understanding common security flaws and common misconfiguration issues is in everyone’s best interests, and these aggregated insights will help enhance national resilience.

It’s good to erect barriers that actually work.

Two things remain necessary, though. One is, once those barriers are set up, to go clean out the areas behind the barriers: to identify and remove existing malware from the operational and support software, to clean out the existing backups—both of software and of data—to improve training of human operators and support personnel regarding their role in preventing malware from reentering via phishing, spam, and so on, with more severe sanctions than heretofore applied to personnel who fail.

The other is to recognize that those barriers—software and human—will always be imperfect, will always become obsolete in the ongoing arms race between malefactors and targets, and will always need development, upgrade, and anticipation of future developments and potentials for attack.

“Student-Loan Debt Is a Burden on the Young”

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A number of letter writers The Wall Street Journal‘s Wednesday Letters column expressed their concerns about student debt. One comment, though, jumped in my direction.

It is time for the federal government to get out of the student-loan business.

The writer is well along; that’s a critical half of the problem.

The other critical half, is to not borrow in the first place. If a person can’t afford to go to college on his own nickel or on scholarships, he should go to a trade school or a community college that teaches trades.

Then get a job. The trades are more than honorable jobs, they’re their own Critical Items in our economy: nothing gets built—including the Progressive-Democrats’ turtles all the way down infrastructure—without them. And, the trades provide a nice income as well as actual work experience and time in the real world during which the person can arrive at a more informed decision about what he wants to do with his life and/or what he wants to get out of college.

And in the latter case, he can be accumulating a sum of his own money with which to cover his college costs.

Inflation is Upon Us

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…or is it?

The editors at The Wall Street Journal worry that the current rise in inflation might not be as “transitory” as Fed Chairman Jerome Powell thinks it will be. It’s a concern worth taking seriously. As the editors cite Milton Friedman as saying,

inflation is always and everywhere a monetary phenomenon

and the Feds—and the Fed—have been pumping lots of tons of cash into our economy.

Couple of things, though, on this inflation…spike.

The current inflation is impacted by all the “stimulus” checks coming from the Federal government, and money is the source of demand, not how much folks want things. It’s money that pays the prices, not folks.

The current inflation also is impacted by the return to more normal pre-Wuhan Virus situation demand levels being faster than producers can ramp back up to meet that recovering demand.

That slower production ramp-up is itself impacted by producers’ inability to get employees back to work. So much of the value of those “stimulus” checks makes not working more valuable than working, and recipients, far from being lazy, are making the economically rational decision to not return to work yet.

Underlying all of this is that 2020 was an aberrational year. The economic drop was caused by politics, not a confluence of economic forces, and the present interference with recovery also is politically caused; a slowing unwinding of that confluence isn’t a factor. Inflation comparisons with 2020 are themselves distorted.

A better inflation measure would be against 2019.