Freedom Triumphs

"You can break a man's skull. You can arrest him. You can throw him into a dungeon. But how do you control what's up here? How do you fight an idea?"
--Sextus (Ben-Hur)

Events of Holy Week should make several things clear. 

Freedom, not safety, is God's gift. Freedom is the right and ability to make personal choices without someone else's permission. Free will.

Jesus was free to avoid the path to death. But, through exercise of free will, He chose to walk down the path instead.

Jesus challenged the status quo. He was fomenting a revolution in the hearts, minds, and souls of people everywhere. Through that revolution Christ was setting people free.

As such, He became a direct threat to all groups who held worldly dominion over those people. The scribes, the Pharisees, the chief priests, the Roman government. All of these groups, which together comprised the secular, religious, and political orthodoxy of the day, consequently conspired to kill Christ in order to quell the revolution.

Little has changed, has it?

By exercising His free will, Jesus showed us that we can liberate our souls from the slavery of sin and from the oppression of worldly tyrants.

Christ demonstrated that freedom triumphs in the end.

Unfadeable

Day after day it reappears
Night after night my heartbeat shows the fear
Ghosts appear and fade away
Come back another day
--Men at Work

The S&P 500 (SPX) closed the holiday-shortened week north of 4000--an all time high. Strength of bids underneath many individuals names is as firm as I can remember.

The contrarian in me says fade this tape. But then I'm reminded of the ocean of newly minted cash that is raising prices higher. 

Rulers and the Ruled

"My first thought is: a lot."
--Cameron Poe (Con Air)

How many people in this world aspire to rule others? How many people in this world wish to be ruled?

I suspect Mr Poe is correct.

Devil's Trade

I watched with glee

While your kings and queens

Fought for decades

For the gods they made
--Rolling Stones

Can't count how many times over the past few months of heard people say, "Government's job is to keep people safe."

Our founding ancestors knew otherwise.

The king had the army. And the four walls. Come inside the four walls and work for the king, and the king's army will keep you safe.

The safety trade turned generations into peasants who lived in squalor. And in fear of their personal safety from the same people that were supposed to keep them safe.

They were neither safe nor free.

Understanding this, the framers designed a government meant to preserve people's freedom. Not to take that freedom away in the name of security.

That is government's proper role. To preserve people's freedom. 

When people want government to do otherwise, they are trading with the devil.

Under Thumbs

Claire Standish: What's bizarre about you?
Allison Reynolds: He can't think for himself.
Andrew Clark: She's right
--The Breakfast Club

Attraction between rulers and intellectuals (including their intelligenstia media channels) is unavoidable. Rulers figure that they can rule more effectively when their policies are supported by 'experts.' 

Intellectuals think that they know how others should live, and having the ear of rulers provides them with an ideal channel to do so. The government pay and associated perks aren't so bad either.

Thus, rulers employ credentialed experts who will tell them what they want to hear and tell citizenry what rulers want the citizenry to do.

Why does such a corrupt system work? Because rulers assume citizens generally don't think for themselves. And when they outsource their brains to experts, citizens are under the thumbs of rulers.

Slowing Down

I'm in the mood
The rhythm is right
Move to the music
We can roll all night
--Foghat

Baby Boomers are known for shaping all sorts of economic and social trends as their demographic wave has splashed thru time. Now it appears that they are setting their sights on driving norms.

I drive several streets that have fairly long stretches of unencumbered straightaway roadway. Carefree, easy driving. 

It used to be that I would rarely encounter a car ahead of me driving below the speed limit on these stretches. Nowadays it happens routinely. So much so that driving at the speed limit or above has become exception rather than rule.

The Boomers are slowing down, it seems, in more ways than one.

Measurement Error

Here I am in silence
Looking 'round without a clue
I find myself alone again
All alone with you
--Information Society

All measurement systems have error. All of them. Error is the difference between a observed (measured) value and the actual (true) value.

error = observed - actual

Measurement error can be of two types. There can be a systematic error, or bias in the measurement system that causes a consistent offset from true value. For example, a scale that has not been 'zero-ed' might consistently read two pounds light. 

Systematic error affects accuracy, or the ability of the measurement system to capture the actual value. The higher the systematic error, the lower the measurement system's accuracy.

Measurement error can also be random in nature. Random error causes offsets from the true value, but they are neither consistent in magnitude or direction. A forehead thermometer might measure a different temperature depending on where precisely it is placed on the head.

Random error affects precision, or the ability of the measurement system to reproduce the same result repeatedly under similar conditions. The higher the random error, the lower the measurement system's precision.

The below picture summarizes the two types of measurement error well.

Because all measurement systems have error, the big challenge for decision-makers is to determine just how much error is baked into information systems that they want to use. Too much error renders a measurement system worthless.

Manchurian Americans

"Raymond Shaw is the kindest, bravest, warmest, most wonderful human being I've ever known in my life."
--Captain Bennett Marco (The Manchurian Candidate)

In the film The Manchurian Candidate, soldiers of a US Army platoon captured during the Korean War are brainwashed by their communist captors. Part of their programming is to respond with script answers to particular questions. For example, when asked about how they felt about Raymond Shaw, their platoon sergeant, the soldiers robotically utter a line identical to Captain Marco's above.

We are now seeing this play out on a daily basis in America. Script responses to people who contest the wisdom of masks, vaccines, global warming, programs of diversity and inclusion, open borders, social justice initiatives, et al.

No thought. Just programmed script.

Manchurian Americans.

Public Mindlessness

Now did you read the news today?
They say the danger's gone away
But I can see the fire's still alight
Burning into the night
--Genesis

One month later and Ten Year rates still climbing. Why no allergic reaction in markets yet?

I suspect that market participants collectively believe that the Fed will not allow rates to continue to rise. They think the Fed heads will initiate yield curve control or some other monetization measure to buy down rates.

Has American belief in central planning ever been this high? In all policymaking areas. Monetary. Fiscal. Health. Perhaps only during the Great Depression has confidence in bureaucratic prowess matched current levels.

Theory and history suggest that the public mind is in for a big let down.

All You Need to Know

Rain keeps falling
Rain keeps falling
Down, down, down, down
--Simple Minds

This report provides a nice sense of where we stand w.r.t. monetization. In particular, it shows just how active central banks have been during the CV19 period. We'll focus on a couple of the charts here.

Since early 2020, the four central banks pictured above have monetized over $10 trillion in securities, meaning that they have created $10 trillion out of thin air to purchase the financial assets that have been added to their balance sheets during the period. The Fed and ECB have been the largest money printers at about $4 trillion apiece in square wave fashion with the onset of the pandemic. The BOJ and PBOC have kicked in another $3 trillion over that time, although their contribution reflects more of a continuation of longer term monetization policy.

The obvious question is why haven't we seen the effects of this in goods and service prices? The quick answer is that we might be. Surveying the WSJ headlines, I am finding increased reference to higher prices both upstream and downstream in supply chains.

The longer answer is that it may take time for large chunks of this money to make it into the hands of consumers. The first users are financial firms, as they are the direct recipients of freshly minted cash when central banks lift bonds and other securities from dealer inventories.

And there can be little doubt that these firms are using this cash to bid prices of financial assets. Indeed, if you're trying to explain why stocks are currently hitting all time highs and have been since the onset of QE a decade ago, relationship portrayed in the above graph is essentially all you need to know.