Category: simonblack

Gold recently hit $2,500 marking an all time record high.

The reality is, there’s a very good case to be made that gold is still quite cheap compared to its trajectory. It’s possible that in a few years, $2,500 gold could look remarkably inexpensive.

Not to be overly dramatic, but Kamala Harris is a big reason why.

I’m not a D or R kind of guy, but it’s impossible to ignore the impact of the upcoming election on the future of the US.

At a press conference a few weeks ago, reporters asked Jerome Powell, the Chairman of the Federal Reserve, about the upcoming Presidential election and whether or not the Fed was modeling any potential policy changes depending on the outcome.

But the Fed Chairman was almost proud of the fact that the election outcome didn’t factor into their planning at all.

The Fed considers itself apolitical. Powell seemed to think it was somehow wholesome and responsible to completely ignore perhaps the single most important factor that could drive the economy in the coming years—the outcome of the Presidential election.

Two people with diametrically opposed views will clearly make a massive difference on the economy.

I saw a report yesterday that, since she stole the nomination exactly one month ago, Kamala has raised $500 million. That brings her total campaign war chest to a massive $1 billion.

It’s funny because I seem to remember Rep. AOC saying that, “No one ever makes a billion dollars. You take a billion dollars.” In this case, I’m inclined to agree with AOC.

Kamala took a half billion from Biden— the legitimate nominee— and raised another half billion by making the most outrageous claims and lying her ass off, without even bothering to sit for basic interviews or take legitimate questions.

She’s been coronated without scrutiny, and only now are we starting to see how she views the economy.

She seems to understand that a lot of people are suffering, and she at least partially diagnoses it accurately as the result of inflation. But she has no understanding of where the inflation comes from.

There’s no discussion of the government’s role in running multi-trillion dollar deficits, the unprecedented fiscal and monetary stimulus, and continuing to rack up trillions of dollars in debt every year, even though there’s no longer a national emergency.and weight of the federal government into attacking the private business sector.

Her plans will undoubtedly cause higher deficits and more inflation. For example, subsidizing housing is obviously only going to make everything cost more.

Giving new home buyers a free $25,000 just means houses will become $25,000 more expensive.

It’s exactly what happened during the pandemic when they started handing out stimmy checks— there was no increase in goods and services, just more money floating around, so prices went up.

The same thing will happen with housing and everything else the government pours “free money” into. But they have no understanding of this.

Now she’s talking about using the government and the legal system to go after priv

None of that factors into her thinking. To her, inflation is always and everywhere the result of corporate greed.

And her solutions to inflation involve essentially criminalizing “greed” and throwing the full force

ate businesses. She’s attacking grocery store chains, accusing them of being greedy when their profit margins are a measly 2-3%. Apparently, that’s greedy.

The Biden Administration has gone out of its way to destroy competition, even though competition is one of the most important factors in keeping prices low.

They attack oil companies and prevent the expansion of US energy production. Of course that makes energy prices higher, which in turn makes the price of everything else higher.

This is why it’s ultimately very difficult to see the dollar surviving as the global reserve currency through a single term of a Kamala administration. Her policies will create higher deficits, balloon the national debt, and drive up inflation.

The nature of a good reserve currency is stability. Foreign governments and institutions require stability in the reserve currency. Countries around the world are desperate for something they can actually rely on—something that won’t be inflated away or subject to a gargantuan national debt.

Another key element of a reserve currency is strength. Someone who backs pro-Hamas protesters is anything but strong.

This is why gold is reaching all-time highs.

Yes, some of it is investor speculation. But the biggest driver of gold prices is central bank demand, and they’ve been buying literal tonnes of gold.

To me, this is a clear and obvious sign that they are preparing for an end of the dollar as the dominant global reserve currency.

Gold is a likely and very reasonable reserve asset for them to hold in lieu of dollars, because it has a 5,000-year history of maintaining its value. Central bankers know that they can trade gold for other currencies or strategic assets, and it is this sentiment that is driving their gold purchases.

In short, central banks around the world are trading dollars for gold.

If Kamala wins, that trend will almost certainly continue, resulting in the eventually end of the dollar as global reserve currency.

And I’d expect the price of gold to go a lot higher from there.

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I’m currently en route to Chile, where I lived for about eight years from 2011-2018 before moving to Puerto Rico.

I remember when I first came down to Chile— the thing I found so remarkable was that it was a relatively conservative place, especially by Latin American standards. Back then the general tone was that you were pretty much left alone to do your thing.

I even recall being told by my lawyer that the Chilean constitution included the freedom to do business. I looked it up later and sure enough Article 19 Section 21 recognizes, ‘The right to develop any economic activity which is not contrary to morals, public order or national security…’

I found this quite remarkable. And during the years I lived in Chile, I encountered lots of interesting opportunities.

At the same time, like anywhere, it wasn’t perfect. Over time a number of challenges, problems, and imperfections became apparent. But overall, there was clearly still a lot of great potential.

But no place is static. Starting in 2019, there was a big social reckoning, and the atmosphere changed rather suddenly.

Leftist rioters hijacked the country. The worst of them, though a relatively small minority, would shut down highways, torch cars, and terrorize and rampage through residential neighborhoods.

They even foolishly burned down grocery stores and destroyed their own metro system. Way to stick it to the man!

It was full-blown disorder and lawlessness. And the president at the time was a hapless stooge who did nothing as he watched the country burn.

Frankly, the only thing that saved them from further violence was the pandemic. Everyone stayed home and stopped going into the streets.

But this small minority of leftists who had hijacked the nation’s sanity weren’t done. They spearheaded a political process to rewrite the constitution.

In a national referendum in 2020, over 78% of Chileans voted in favor of drafting a new constitution to replace the one from 1980.

That gave these same radicals who had been terrorizing neighborhoods the green light to elect a bunch of gender activists and climate fanatics as representatives to rewrite the constitution. It was crazy.

On July 4, 2022, they unveiled their masterpiece: their vision was to turn Chile into an eco-socialist nation, and their constitution was full of all the same gender and climate nonsense that would drive the economy into the ground and inflame social tensions.

Many Chileans agreed that their system had a lot of political and economic problems that left people behind. There was an appetite for change, which lent some level of support to the left’s desire to rewrite the constitution.

But when people finally saw this monstrous vision that the Left had put on paper, they were horrified.

They realized they were standing at a precipice, staring down into an abyss. They didn’t like what they saw, and they stepped back.

In another national referendum on September 4, 2022, Chilean voters flatly rejected the new constitution by a landslide.

There are many instances throughout history where a nation finds itself staring into the abyss. Sometimes they pull back.

Often it seems like a huge majority of people agree with, in this case, a leftist cultural revolution. But when push comes to shove, rational interests take over.

People ask themselves if this is what they want for their children. People think about how it will affect their bank accounts and livelihoods. They especially consider their financial well-being and safety, which usually drives them to make a sensible decision.

We’ve seen so much of this same insanity in the US over the past couple of years, months, and now especially over the last few weeks since Kamala stole the nomination.

As the Democratic National Convention begins today, it’s only going to get worse. Anyone bored enough to watch will have to stomach the hailing of Biden as the second coming of George Washington.

The level of propaganda that the media will crank out will also be staggering. They’ll continue to act like everyone is on board with Kamala and her agenda.

Who wouldn’t want a Gender-Queer Eco-Woke Green-DEI Utopia? Clearly if you’re against this kind of progress, you’re an extremist in the minority.

The legacy media will continue attempting to gaslight the public into believing that Kamala is wildly popular, and that it is a foregone conclusion that she will be the next commander-in-chief.

But despite the fact that she refuses to do real interviews or answer legitimate questions, everyone can see, plain as day, what she stands for.

Her economic policy is based on full-blown communism: price controls, government subsidies, regulation piled on top of regulation, higher taxes, and so on.

My guess is that number one, this supposedly great energy and electoral momentum is entirely manufactured.

And number two, while it may seem like the radical left is a massive group, most people are actually pretty moderate and not interested in socialism.

Frankly, a huge majority of Americans will go into the ballot box this November not liking either of the candidates on the ballot. But I have a feeling they know which one will be better for the economy and order.

Just like in Chile a couple of years ago, standing at the edge and staring into the abyss, I don’t think people like what they see.

But as always, I have to acknowledge that I could be wrong. And it is important to understand that whoever is elected come November, the US still faces massive challenges ahead.

There is always reason for hope. But it would be crazy not to have a plan B.

When you can anticipate risks, you can also take steps to mitigate them. And then you can come at whatever happens next from a position of strength.

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Just as Peter predicted on Wednesday after the monthly inflation report came out, Joe Biden and Kamala Harris almost immediately went into self-congratulatory mode to brag about how great they are at managing the economy.

As President Biden told a gathering of reporters on Wednesday, “I said we’re gonna have a soft landing. We’re gonna have a soft landing. My policies are working.” He then commanded them to “start writing that way”, and we have no doubt their lackeys in the media will dutifully comply.

Not that it matters. It’s clear that neither the people making the decisions, nor the “experts” advising them, nor the journalists covering them, seem to have any real fundamental grasp of the economy.

Peter wrote on Wednesday that, while the monthly inflation report was cheered for posting a 2.9% annualized rate, the details of the report showed a much different picture.

On a monthly basis, inflation is accelerating. Plus, if you strip out the temporary phenomenon of falling used car prices, the actual rate of inflation is closer to 5%.

Then yesterday, the retail sales report came out… and once again the experts cheered: the consumer is still strong! The soft landing is in sight!

Of course, this euphoria was equally misguided. The retail sales report showed that consumer spending is up 2.7% over the past twelve months. Sound fine… except the report explicitly states that they do not adjust the numbers for inflation.

So, wait a minute– if consumers are spending 2.7% more over the past twelve months, but inflation is up 2.9% over the same period, then, after adjusting for inflation, consumers are actually spending LESS.  

This is not a sign of a healthy consumer economy. And data from corporate earnings back this up: everyone from McDonalds to Mercedes-Benz to Deere and even Apple have reported trouble… either slowing growth, or even outright sales declines.

Walmart reported strong growth… and the experts viewed this as yet more proof that the consumer is strong. But they’re missing the obvious: Walmart is the bottom of the retail ladder. So, the fact that more people are shopping at Walmart is a sign that consumers are struggling, i.e. willing to trade down to lower quality products to save money.

But, still, the headlines are all positive… and incredibly supportive of both Joe Biden and Kamala Harris.

This is nothing new, of course. Especially for Kamala. Ever since she stole the nomination, the fawning press coverage at both the national and local level has been nauseating.

Upon visiting the swing state of Arizona, a local paper ran a story entitled “Kamala Harris went to this Mexican restaurant. Where else should she have dined?”

Wow. Such hard-hitting journalism.

Not to be outdone, CNN ran its own Pulitzer-worthy piece, “Kamala Harris joined TikTok. See her first post”.

I’m reminded of Joe Biden’s basement campaign in 2020 in which the toughest question he ever faced was “what flavor of ice cream” did he like best.

The media is perfectly happy to go the rest of the campaign without asking Kamala a single tough question. And they’re now trying to build her up as some kind of economic savant.

Case in point, today she plans on taking this newly conjured reputation for a test drive when she unveils a bunch of idiotic ideas that are supposed to pass for an economic platform.

Her signature piece is to “call for 3 million new housing units” targeted at low income and first-time home buyers. And the media is already orgasmic in its coverage.

These people seem to think Kamala has the ability to conjure new houses out of thin air, or to order them into existence, as if she’s ordering a pizza. It’s ludicrous.

Just look at Transportation Secretary Pete Buttigieg’s track record. This guy was given $7.5 billion to build 500,000 electric charging stations across the country. He built eight. I think my cat could have done a better job than that, and probably still had plenty of money left over at the end.

Or just look at how much money the City of San Francisco, or the State of California, spend on the homeless: $24 billion over five years, which works out to $28,000 per homeless person per year. And they haven’t even come close to solving the problem.

So, I can only imagine how much money will be spent per house that Kamala dials up. The US government’s low-income starter homes will probably end up being the most expensive real estate in the world on a per square foot basis.

Not to completely ignore the private sector, Kamala also wants to create new tax incentives which will make it more attractive for real estate developers to build new low-income homes.

This is extraordinary. It’s almost as if she finally realized that lower taxes stimulate economic activity… and higher taxes reduce economic activity!

Yet bizarrely, a second major focus of Kamala’s economic platform is to raise taxes on businesses and successful individuals.

Hello, irony? This is Kamala. Seriously, lady, if low taxes are a good idea to boost production in the real estate sector, then why the hell aren’t low taxes a good idea for, you know, the rest of the economy?!?!

But the lunacy doesn’t stop there… because the other signature piece of her new economic policy is to tackle the true root cause of inflation.

And if you’re thinking “outrageous government spending” or “Fed money printing”, then you’re wrong. The true root cause of inflation, according to these people, is corporate greed.

So, Kamala plans on… I don’t even know… banning greed? She’s going to “monitor” corporations and somehow prevent price increases. No one understands what this possibly means, least of all Kamala. But again, the press is already running with it, and experts are acclaiming that it will bring down the debt, end inflation, create jobs, and pretty much every rosy scenario imaginable.

I used to think it would be really hard for someone to be more idiotic and destructive than Joe Biden. Based on details now emerging, it’s clear I was wrong.

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Sometimes I have to ask myself if the people in charge actually know how to read.

Honestly I’m not entirely sure. Perhaps they know how to read… but they choose not to do so. Because it’s pretty obvious no one is paying attention to the details in the government most recent inflation report, which was just released this morning.

Everyone is cheering the news of 2.9% inflation, which the government said is “the smallest 12-month increase since March 2021”.

Sure, on the surface, it’s decent news. And I’m sure Joe Biden and Kamala Harris are going to issue some remarks patting themselves on the back– something like, “while there is still more work to be done, today’s report shows that we are making significant progress in fighting inflation thanks to my policies. . .”

But if they just scroll down even a few paragraphs into the inflation report, they’ll see the details which really matter.

One glaring issue is that inflation first reached a low of 3% in June 2023– more than a year ago. This means that, over the past thirteen months, the annual rate of inflation has dropped from 3% to 2.9%.

That’s a decline of just 0.1% over the past year. Is this really something to celebrate? At that rate, it will take more than a decade for inflation to reach 2%.

The next issue is the month-by-month data.

The “headline” inflation number means that the Consumer Price Index has increased by 2.9% over the last twelve months. But they also track this on a monthly basis.

In May, for example, the monthly increase in inflation was unchanged at 0%. In June, the inflation rate actually fell month over month, i.e. -0.1%.

But the monthly increase from June to July increased to 0.2%. That’s not slowing inflation. That’s increasing inflation.

At least 0.2% is a relatively small number, though. So let’s skip that for now and move on to the other details, and check out the prices of the things that Americans actually buy.

Electricity prices are up almost 5% year over year. Shelter (i.e. rent and housing costs) are up more than 5%. Medical costs are up 3.3%. Services in general, which include everything from childcare to  tax preparation, are up almost 5%. Transportation is up nearly 9%. Motor vehicle insurance is up 18.6%!

Even food prices are up; as the report states, “the meat, poultry, fish, and eggs index rose 3.0% over the last 12 months” while prices of vegetables fell by 0.2% year over year.

So, good news if you’re vegan I suppose. But everyone else is paying more. Also, costs to eat out, including restaurants, take-out, and fast food, are up 4.1% over the past year.

You might have noticed by now that most of these numbers are well in excess of the 2.9% headline inflation rate.

9% increase in transportation costs. 5% increase in shelter. 3.3% increase in medical. 5% increase in electricity. How does all of this inflation somehow average DOWN to just 2.9%?

Well, there was a minor dip in gasoline prices year over year, but that’s relatively minor at just 2%.

The BIG decline that’s dragging the average inflation rate down to 2.9% is USED CARS. That’s it.

According to this morning’s report, used car prices are down nearly 11% over the past twelve months. And rightfully so, to be honest. We probably all remember how prices of used cars surged during the pandemic because of a complete breakdown of the supply chain.

Well, those high used car prices have now fallen back to normal levels. This nearly 11% price drop is essentially the tail end of that cycle… meaning that future inflation reports several months from now won’t have the benefit of used car prices dragging down the inflation average.

The reality is that there’s still a lot of inflation in the real economy, and the government’s own numbers support that assertion. This temporary phenomenon of falling used car prices is masking the true inflation number.

It’s similar to how the explosion in government jobs is masking the true weakness in the private sector labor market right now. If you strip out the growth in government jobs from the labor reports, the real unemployment rate would be much higher than 4.3%. Similarly, if you take out the short-term impact of falling used car prices, the real inflation rate would be much higher than 2.9%.

Joe Biden and Kamala Harris are still going to take a bow today, as if their high deficits and anti-capitalist policies have solved the problem. But few people will be dumb enough to believe them.

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I was one of the millions of people listening to the live conversation last night between Elon Musk and Donald Trump.

And if you missed it, Trump was Trump. You pretty much know exactly what you’re getting with him, and there weren’t any major revelations.

Elon, on the other hand, came off as a genuinely concerned citizen who recognizes the problems facing the country and is exasperated why the people in charge aren’t implementing common sense solutions.

Honestly, I feel bad for the guy; Elon is blasted as a hard-core, right-wing nut job… and there are people who literally want to put him in prison because of his views.

But last night he said things like:

– “the legal system is supposed to be protecting the public from violent criminals”
– “we want safe and clean cities”
– “we want secure borders”
– “we want sensible government spending”
– “we want to restore both the perception and the reality of respect in the judicial system”
– “I’m pro-environment, but I don’t think we should vilify the oil and gas industry”

These are clearly not radical values, and my guess is that most people in the country would probably agree with his values.

About an hour into the call, Elon outlined what he thinks would bring prosperity back to the United States:

1) “Solve government overspending”. He correctly explained that extreme government deficits create inflation… so if you want to really get inflation under control, you have to stop the spending.

In theory, this shouldn’t be hard.

The Treasury Department expects to collect nearly $5 trillion in tax revenue this Fiscal Year (which ends on September 30^th). And $5 trillion is an absurd amount of money.

As recently as five years ago (FY2019), $5 trillion would have been enough to pay for ALL federal spending and still have a surplus of more than $500 billion to start paying down the debt.

So, if they had simply frozen spending in place at FY2019 levels, even after adjusting for inflation and higher interest rates, $5 trillion in tax revenue this year should still be sufficient to keep the national debt from growing any further. And that’s without making any significant cuts to government spending.

But spending has increased by nearly 50% in five years. Is the government 50% better? Do taxpayers receive 50% more service? Clearly not. They’ve just let spending spiral out of control with no commensurate benefit to the taxpayer.

2) Deregulate.

Elon’s second point was that a lot of regulations are destructive and make no sense. Volumes and volumes of rules hold back businesses from innovating, hold back citizens from being productive. And that’s what the country truly needs to be prosperous– innovation and productivity.

And those were his two big points… and that if a government can do those two things, the future can be much brighter.

He’s right, and the math clearly supports this view.

Various Presidential administrations over time have increased, or decreased regulations. When there have been decreases in the number of regulations, US economic productivity tends to increase, and overall GDP growth rises. During periods of growing regulations (like right now), productivity wanes.

Higher productivity means that the economy grows faster. And a faster growing economy means more tax revenue for the government. Combined with spending constraints, this would leave plenty of money left over to pay down the debt… or simply set aside for a rainy day.

Imagine being able to obliterate a major threat to the nation, or shore up security to the power grid, or support an ally, without having to go into debt? It’s unimaginable given today’s national finances. But with real productivity growth and sensible spending, it’s absolutely a reality.

Failing to do BOTH of these things most likely results in a pretty bad outcome for the United States.

If the debt keeps spiraling out of control, and government regulators continue to constrain productivity, it’s extremely difficult to imagine the US dollar remaining the world’s primary reserve currency.

Continued deficit spending and a ballooning national debt will create even more inflation and cause foreign governments, central banks, and businesses to lose confidence in the dollar. It’s already happening… and one of the reasons why gold is hovering near its all-time high.

The US dollar’s global reserve status is one of America’s premier financial benefits. Losing it would be disastrous… and Elon’s approach is pretty much the only way to save it.

Will it happen?

With Kamala I think there’s zero chance. She does not strike me as someone who will cut spending and slash regulations. Quite the opposite. So honestly if she wins, I think it’s game over at that point. America does not have another four years to waste under the rule of Inspired Idiots.

With Trump I think there’s a chance. But a lot will have to go right, so the outcome is far from certain.

Honestly this is why it makes sense to have a Plan B. And I don’t mean that as a catchphrase or hollow aphorism.

As Elon said last night, “I think we’re at a fork in the road of destiny of civilization.” I don’t think is hyperbole; the differences in the potential outcomes are monumental. Any rational person ought to consider the probable consequences… and take sensible steps to reduce the impact.

Taxes might go through the roof. But there are completely legitimate ways to keep them low and reduce what you owe.

Inflation could easily spike. But you can hedge against inflation with real assets (many of which are absurdly cheap right now).

There are so many more examples; the point is that it’s really time to think clearly about how to navigate the road ahead.

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He was the most powerful man in the world in the year 1536. But even Charles V– Holy Roman Emperor, King of Spain, Lord of the Netherlands, Duke of Burgundy, Master of the Americas– still needed his mommy.

Like many monarchs of his era who lavished themselves with unhealthy diets, Charles had developed a nasty case of gout– a painful, often disfiguring inflammatory disease typically brought on by poor eating habits.

And Charles’s gout was causing him a LOT of pain.

So, in 1536, his mom, Queen Joanna of Spain, started looking into remedies. She had heard stories of native tribes in their far-off colony of Venezuela who healed afflictions with a medicinal oil.  And Joanna ordered colonial officials in Venezuela to bring as much of this oil as possible to the Emperor.

This order has gone down in history as the first-ever oil export from Venezuela, nearly 500 years ago.

Back then, there was so much oil in Venezuela that it was literally just oozing out of the ground. And centuries later when global demand for oil skyrocketed, no one needed a PhD in geology to figure out that Venezuela would become a top producer.

By the mid-20th century, Venezuela had become one of the wealthiest countries in the world. But it all changed in 1976 when Venezuela’s government nationalized the oil industry and drove the new state-owned oil company into the ground.

This isn’t much of a surprise. In the private sector, business is supposed to be about maximizing profit.

Now, sadly, ‘profit’ has become somewhat of a dirty word. But it shouldn’t be. Maximizing profits over the long-term means that everyone has to win.

You have to treat employees well and pay them fairly, otherwise you won’t be able to attract talented people… and profit will suffer.

You have to put out quality products that fill your customers’ needs. You have to innovate. You have to cut costs, i.e. use as few resources as possible to create as much value as possible. This ultimately what profit really means.

But governments aren’t profit-seeking. They squander resources to buy votes, cover up past mistakes, pay for idiotic vanity projects, line the pockets of their cronies, or just steal for themselves.

This is ultimately what happened in Venezuela; government mismanagement of the oil sector led to multiple financial crises, stagflation, and finally full-blown socialist revolution in the 1990s.

Hugo Chavez took over 25 years ago, and, through his ‘Bolivarian Socialism’ he ran the country even further into crisis. Chavez (and his successor Maduro) plundered resources, seized assets and businesses. They chased away talented people. They heavily indebted the nation. They regulated wages and prices.

And the natural result of these idiotic measures was economic collapse.

It’s extraordinary that food shortages and starvation became widespread in Venezuela– a country with nutrient-rich soil, a year-round growing season, and abundant water resources. Venezuela should be an agricultural powerhouse. And yet there’s not enough food. Something is seriously wrong with this picture.

California shares a similar origin story. The discovery of oil turned the state into an economic juggernaut in the early 20^th century, and even to this day its oil output is just behind Australia and Ecuador.

But California’s warm embrace of socialist ideals has been on hyperdrive over the past decade.

Gavin Newsom shovels outrageous sums towards the homeless, yet the problem grows worse each year. He spends even more on failed infrastructure projects, constantly whines about race, gender, sexual orientation, regulates wages, and chases business away.

Millions of Venezuelans have fled their country’s failed economy. And millions of Californians have left the state for greener pastures elsewhere. And that includes several high-profile businesses.

The latest is Chevron, which was actually founded as the Standard Oil Company of California. Chevron has been in the state for 140 years. But they announced last Friday that they’re moving to Texas.

Why? Because state bureaucrats want to put Chevron out of business.

This has been going on for years– not only from the Biden administration’s federal punishment of the oil industry… but also due to California statewide policies. These include drilling restrictions, a new “penalty”, i.e. tax, on “excess” refinery margins, climate change regulations that are virtually impossible to achieve, etc.

There are even some local governments that have piled on. The city of Richmond (in the San Francisco Bay Area), for example, is asking voters to approve a $1 per barrel tax on Chevron’s nearby refinery.

It’s no wonder that California fuel prices are among the highest in the nation.

But Gavin Newsom can’t seem to put 2 and 2 together. So, he created a special commission to investigate California’s high gas prices and make recommendations to solve the crisis.

Their report, released just days ago, is absolutely hilarious.

First off, the commission fails to make any connection between insane regulations and high gas prices. And their ‘solution’ is to essentially seize control of the industry.

According to the report, they recommend the government to “own refineries in the state to manage the supply and price of gasoline…” however they acknowledge that “the State has no experience in managing” such assets.

The commission also ponders the question: “What would drive how the State managed the refinery? Profit? Maximize production? Minimize production?”

This is actually in the report. The state wants to take over the oil refining business, but they aren’t even sure what their purpose would be.

So, in short, California’s politicians have driven gas prices up with ruinous policies. And they want to solve their own problem by letting inexperienced bureaucrats take over the state’s oil refining business without a clear purpose of what they want to achieve. What could possibly go wrong?!?

Chevron finally had enough, and they’re leaving the state. Many more will likely follow… yet the people in charge keep doubling down on the same destructive policies.

Californians already pay $1.16 more for a gallon of gasoline than the national average. But the obvious conclusion to these ideas is even higher prices, and even more inflation.

It’s a Venezuelan approach to problem solving: blame everyone else and dig yourself even deeper into a hole.

Frankly this is the same mentality that we also see from the federal government these days. And that’s a pretty compelling reason to have a Plan B.

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On Wednesday, March 8, 2023, Fed Chairman Jerome Powell was sworn in for testimony in front of members of Congress to deliver remarks about the state of the US economy.

Inflation had been raging for well over a year at that point, and, in response, the Fed had rapidly increased interest rates to levels not seen since 2007.

But nothing happens in a vacuum. The Fed cannot expect to jack up rates without some major consequences. And concerned members of Congress asked the Chairman about these potential consequences.

But Chairman Powell played them off, practically dismissing any risk to their raising rates and ‘tightening’ monetary policy, saying “nothing about the data suggests we’ve tightened too much. . .”

Two days later, Silicon Valley Bank went bust– in large part because of the Fed’s interest rate increases.

And it wasn’t just Silicon Valley Bank that was in trouble. In fact, the FDIC reported over $600 billion in unrealized losses across the entire US banking system, and most of that due to higher interest rates.

It’s not hard to understand. Banks typically invest their customer deposits in either loans or bonds. And rule #1 with bonds is that, when interest rates rise, bond prices fall.

Even a first-day intern at the Fed would have known that. The Fed chairman should have certainly known that.

It was also in their own data. Remember, the Fed is also one of the key supervisors of the US banking system, so they had access to all of Silicon Valley Bank’s financial records. They saw the losses piling up, they saw the risks.

This is what’s so bizarre. The Fed always claims to be looking at the data and says that their economic prognostications are based on data.

But again, the Fed had the data. It was glaring at them. But they failed to anticipate any consequences to their rate hikes– even TWO DAYS before a major bank collapsed.

Sadly, the Fed chairman seems to have outdone even that bad call.

Last week he told a room full of reporters that economic weakness is “not what we’re seeing” and that the economic data are “not signaling a weak economy. . . ”

He went on to say that chances of a “hard landing are low” and that “the picture [of the US economy] is not one of slowing.”

Yet once again, literally days later, a meltdown in financial markets took place worldwide… because investors finally realized that the Fed has no idea what they’re talking about.

And everyone from Pepsi to McDonald’s to Heineken to Cartier to Porsche has been reporting slower growth or declines in sales.

This morning Disney reported a slowdown in its parks division– which is typically rock solid. Proctor & Gamble reported a decline in sales of Tide laundry detergent and Charmin toilet paper. The list goes on and on.

Monday’s sudden market swoon has calmed. But in large part that sense of calm is because investors are now pricing in a near 100% chance of a 50-basis point (0.5%) rate cut at the Fed’s September meeting. There are even some expectations of an emergency rate cut before the September meeting.

Again, they claimed just a week ago that the chances of a hard landing “are low”, and that a 50-basis point cut is “not something we’re thinking about”. Yet just days later, it became clear that the economy is slowing, and unemployment is moving higher.

(It’s also notable that most of the growth in labor market now is with government jobs, which actually hurt the economy.)

So, the Fed is almost certainly going to have to reverse itself and start making big rate cuts. Frankly, they have no other option, if for no other reason than the national debt.

The US government has trillions and trillions of dollars of bonds which are maturing this year and next.  And the Treasury Department clearly doesn’t have the cash to pay them back. So instead, they’ll have to reissue more bonds to pay back the old bonds. Sounds a bit like a Ponzi scheme to me.

Their problem is that the new bonds will carry a much higher rate of interest than the old bonds… which the federal government absolutely cannot afford.

Think about it: $10 trillion worth of bonds paying a 1% coupon costs $100 billion per year in interest. That’s a lot, but it’s manageable. If they have to refinance $10 trillion at 5%, the annual interest bill increases to $500 billion… which is showstopper.

So, the Fed HAS to cut rates– not only to jump start the economy and prevent a recession… but to bail out the US government and give the Treasury Department the opportunity to refinance its debt at a lower rate.

However, these rate cuts, combined with yet another round of quantitative easing (i.e. money printing), will just end up bringing a LOT more inflation to the US economy.

Naturally the Fed is not forecasting any of this. They don’t see the inflation problem ahead. They keep claiming that they’re looking at the data… yet they consistently misdiagnose what’s happening in the economy.

It’s like an ER doctor who examines a patient with a gunshot wound and prescribes a course of stool softeners. They’re missing what seems to be obvious to everyone else.

Look, these guys are human beings too. They’re not perfect, they’re going to make mistakes. But that’s the problem with this monetary system: a handful of bureaucrats with bad track records are awarded the most powerful authority in finance and expected to be infallible.

It’s a deeply, deeply flawed system, and it’s bizarre that anyone has any confidence in it.

The Fed is not all-powerful. Not only do they not see the coming danger, but they’re powerless to stop it.  And Monday’s meltdown is a sign that the market is starting to figure that out.

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Athenian general Miltiades was already a hero across ancient Greece when he set sail for the island of Paros in 489 BC.

Born into stardom as the son and nephew of famous Olympic champions, Miltiades made a name for himself as one of the most important and successful commanders in the Greek war against Persia.

In fact, Miltiades was responsible for devising the incredibly unique, surprise battle plan that confounded the Persian army at the Battle of Marathon in 490 BC. The Greeks were vastly outnumbered and outmatched… but they annihilated the Persians thanks to Miltiades’ tactical genius, making him an instant celebrity-hero throughout the region.

So, when he approached the Athenian government the following year and requested to lead a special mission to reclaim lost Greek territory in the Aegean Sea, they approved his mission without question. And the Hero of Marathon set sail a few months later with a fleet of 70 ships.

Unfortunately for Miltiades, his voyage was a total disaster; his fleet was nearly vanquished, he lost a great number of men, and he was unable to take the island of Paros. So, when he returned to Athens, all of his former heroics were forgotten… and people wanted his head. Literally.

It was commonplace in ancient Greece for politicians and military leaders to be held accountable for their decisions; many were even put on trial at the end of their rule and had their administrations publicly scrutinized.

These weren’t political witch hunts; rather, they were a form of checks-and-balances whereby anyone found to have been truly incompetent, disloyal, or duplicitous would be severely punished.

Miltiades– again, the Hero of Marathon– was charged with treason for causing such severe and embarrassing losses in his ill-fated Paros expedition. He was tried, convicted, and ultimately sentenced to death… however this was eventually reduced to a fine of 50 talents (roughly $10 million in today’s money) and a lengthy prison sentence.

Sometimes I feel like the Greeks were really on to something.

Sure, the world is complicated, and there’s never any guarantee of success in warfare, business, life, politics, etc. Decision makers don’t have a crystal ball and rarely have perfect information… so there can never be any certainty about future outcomes.

But leaders have a moral and legal obligation to always do their best… and to make rational decisions and take sensible risks. Most importantly, whenever there’s new information, they have an obligation to challenge their own decisions and adjust course if necessary.

Failure to do so is arrogant, deliberate incompetence.

We saw this all throughout the pandemic; at first, there was very little information available, and politicians’ knee-jerk reaction was to enact the most extreme measures.

But six-months later there was plenty of data. And politicians had plenty of opportunity to review the updated information, summon their courage, and make better, more rational decisions.

Some places (Florida) did. Others (New York, California) stuck to their failed, idiotic, destructive policies. They kept people locked down, they kept the schools closed, and they exacted an incalculable toll on their citizens.

But they will never be held accountable for their incompetence. Instead, they end up on lucrative speaking tours, awarded highly paid consulting or board positions, or advanced outrageous sums for their memoirs.

And this leads me to what’s happening in England right now.

As you’re probably aware, a sick-o teenager in northern England stabbed a bunch of kids last week in a horrifying rampage. Nine children were wounded, and at least three have died.

Rumors quickly circulated that the attacker was a Muslim refugee who had arrived by boat to England’s shores, and violent riots quickly broke out across the country.

The government and media were quick to correct the rumor; the 17-year-old attacker (he turns 18 on Wednesday) was born in the UK and is the son of Rwandan immigrants.

Then they further denounced the rioters as “far right” and “racist”, and the Prime Minister threatened to use the full force of the law against them.

Look, it’s completely inexcusable for rioters to engage in violence and destruction of property. But it’s also inexcusable for politicians to run their country into the ground.

The media has been quick to condemn the rioters. But they are completely silent, and frankly complicit, regarding the destruction of their country.

Just like the Biden administration has been dreadfully inept at securing the southern border, governments in Europe and the United Kingdom have been welcoming illegal migrants by the million for the past several years.

The effect in both cases is unmistakable. Americans in every state, border or not, can see and feel for themselves the impact on their communities.

The White House, on the other hand, tells people that their eyes are lying to them, that illegal migrants are a massive benefit to the nation, and that “the border is secure”.

The media dutifully jumps in to denounce anyone who has a problem with the migrants as “far right” and “racist”.

This is a constant theme; you are not allowed to believe your own eyes. And if you dissent in any way from the official narrative, then YOU are the problem.

This is what we’re seeing across the UK and Europe.

People feel the impact of the migrant crisis. They see it every day. They’ve watch angry refugees marching in the streets demanding shariah law and chanting “Allah Akbar”. They’ve witnessed horrific crimes in their local communities that they’ve never seen before: honor killings, gang rapes, etc. committed by migrant refugees.

The fact that the murderer from last week’s stabbing was born in the UK completely misses the point.

Yes, the guy isn’t a migrant refugee. It was the wrong trigger. But it doesn’t change the fact that people are still sick and tired of failed policies that bring boatloads of migrants to their shores. And most of all they’re tired of being told that they’re racist simply because they want a sensible immigration system.

Now there are literal fistfights breaking out, with Brits attacking migrants, and migrants attacking Brits. It’s chaos. And it’s totally inexcusable.

But, again, it’s also inexcusable that the politicians have run their country into the ground. It’s inexcusable that they failed to change direction despite such obvious consequences. And it’s inexcusable that they cannot even acknowledge the fear and the pain that people are feeling in their communities over these failed policies.

There’s plenty of data (not to mention the perceptions and experiences of their citizens) that the refugee experiment has been a total failure. Yet they still refuse to change course… which is a major reason that problems rarely get solved.

This is why I think the Greeks had a really great idea. There should be consequences for such willful and destructive incompetence.

But something tells me that the people who make the laws probably won’t make a law that holds them accountable… which is why it makes so much sense to have a Plan B.

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We all remember it. For more than two years, every single person in the United States was subjected to the exasperating melodrama known as Dr. Anthony Fauci.

A career bureaucrat who headed the National Institute of Allergy and Infectious Disease, Fauci hypnotized much of the country and convinced people that he was the second coming of Joan of Arc– a saintly, righteous holy warrior who would lead everyone to victory. Except his sword and shield were “science”.

We never heard the end of it. Fauci claimed that he was “following the science” about social distancing, mask mandates, vaccines, school closures, and more.

And rather than accept criticism and debate about his ideas (which is the very foundation of science), Fauci continued to insist that he had all the answers. In one of his most eye-rolling assertions, he even said at one point that any criticism of him was “dangerous. . . because I represent science”.

Of course, truth has a wonderful habit of eventually coming to light. It cannot be buried forever. And according to unearthed records we know now that much of this “science” was just made up.

For example, Fauci himself appeared recently before a Congressional panel and was forced to admit under oath that his 6-foot social distancing rule “sort of just appeared”, which strikes me as extremely unscientific.

It appears now that the Federal Reserve is following the example of Dr. Fauci. And as I was watching the Fed’s press conference yesterday after their decision to do absolutely nothing, I couldn’t help but see the similarities.

Instead of “science”, the Fed now makes repeated claims that they are ‘following the data’, as if the Labor Department’s inflation reports are some sort of magical fairy leading us to a soft landing.

According to this magical fairy, there is still not yet enough confidence “that inflation is moving sustainably toward 2%”. But apparently the magical fairy thinks that there will be enough confidence next month, so the Fed has all but promised a September rate cut.

Frankly, it all sounds made up to me.

Remember the Fed’s track record? They conjured trillions of dollars out of thin air during the pandemic and failed to predict any inflationary consequences. And when inflation did appear, they ignored it and even went as far as to gaslight anyone who asked them about it.

Eventually, when they could no longer ignore inflation, they insisted that it was “transitory”. And when they stopped calling in transitory, they still waited until inflation was more than 6% before they finally did something about it.

Best of all, the Fed then failed to predict any consequences from their rapid interest rate hikes.

Well, one obvious consequence that the Fed should have known about is that jacking up interest rates causes bond prices to fall. This is basic finance– bond prices and interest rates move in opposite directions. Even a first-day intern at the Fed knows this.

And guess who owns massive quantities of bonds? Commercial banks… including Silicon Valley Bank.

You probably remember what happened in 2023: the Fed’s interest rate hikes triggered major losses in Silicon Valley Bank’s bond portfolio, rendering the bank completely insolvent.

Yet literally TWO DAYS before Silicon Valley Bank collapsed, the Fed chairman told Congress that “nothing in the data” showed any consequences from their interest rate hikes. That’s some magical fairy.

The irony is that one of the Federal Reserve’s key responsibilities is to supervise and regulate the banking system… which means that Silicon Valley Bank sent regular reports to the Fed showing that they were in deep trouble.

In other words, “the data” proved very clearly that there were serious problems in the banking system. But the Fed still didn’t notice.

So now we’re supposed to take comfort in the fact that the Fed is “carefully assessing incoming data”. Well, that’s what they’ve theoretically been doing for the past several years. But they’ve gotten it wrong over and over again.

It’s worth pointing out that “the data” is a very limited set, and the Fed has its “preferred” metrics to measure economic activity. For example, the Fed favors the Personal Consumption Expenditures index as an inflation gauge, over the Consumer Price Index.

Cherry-picking one set of data over another and shutting yourself off from a much wider body of evidence, is another reminder of failed, pandemic-era decision making.

And the Fed seems to be deliberately ignoring some of the biggest economic drivers of all.

Earlier this week, as the Fed locked itself in a room with its magical fairy, the US national debt passed $35 trillion.

The national debt (and by consequence the US budget deficit) is a CRITICAL economic factor that should be keeping the Fed up at night. Continued deficit spending will be very inflationary and make it virtually impossible for the Fed to succeed in its mission.

But there was ZERO discussion of the debt yesterday. Apparently, the magical fairy doesn’t care about such things.

A few reporters asked about the upcoming Presidential election and whether or not the Fed was modeling any potential policy changes depending on the outcome.

But the Fed Chairman was almost proud of his ignorance and insisted that they were non-partisan, and that the election outcome didn’t factor into their planning.

Come again?!?! Are these people so naive to think that there will be no difference in the economic policies of Kamala Harris versus Donald Trump?

Imagine if Bernie Sanders and AOC were running, and promised to default on the national debt, enact Medicare-for-All, provide free college tuition to everyone, forgive student debt, guarantee government jobs, and impose a $50 national minimum wage.

Would the Fed still claim indifference and insist that Fed policy would be unaffected by the election outcome?

It is so utterly bizarre that the Fed willfully ignores some of the most consequential economic drivers of our time… yet simultaneously insists they are ‘following the data’. It’s almost like Fauci is back in charge.

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There are only seven countries in the world that have a GDP in excess of $3 trillion: the United States. China. Germany. Japan. India. United Kingdom. And France.

Microsoft’s current market capitalization is also right around $3 trillion… which means that out of the 193 countries in the world that are recognized by the United Nations, 186 of them have an economy that’s smaller than Microsoft. Crazy.

Of course, much of Microsoft’s meteoric growth has taken place over the past three years because of the AI boom. And just like Nvidia is considered the most important hardware company in AI, Microsoft has positioned itself as the most important software company in AI… and they’re pretty much betting the business on it.

According to the company’s earnings release yesterday, Microsoft has generated an unbelievable $118 billion in Operating Cash Flow (OCF) over the past twelve months.

(OCF, if you’re not familiar, is a much more useful metric than ‘net income’ or ‘profit’ because it strips out all the non-cash accounting nonsense like depreciation.)

$118 billion in operating cash flow is a staggering amount of money. But what’s even crazier is that Microsoft spent almost every penny– more than $113 billion– making new investments in their business. And most of those were AI-related investments.

In short, Microsoft is a profit machine. But it’s dumping 96% of those profits into AI, in large part to justify having a $3+ trillion valuation.

Time will tell if those investments pan out, and whether Microsoft is able to build viable products that generate a sufficient return.

There’s no guarantee; AI is an extremely competitive industry where budding startups and giant tech companies are both working on the next big thing. And I have to wonder how much upside is left for a business that already has a $3 trillion valuation, relative to the competitive risks against Amazon, Google, Facebook, Apple, etc.

Yesterday the company announced that growth in their cloud ‘Azure’ business (which includes their AI revenue) was 29% year-over-year. That growth rate was slightly lower than last quarter’s 31% growth.

But even a tiny, 2% decline in growth had the market freaking out. And Microsoft stock initially plunged more than 8% in after-hours trading– roughly $250 billion in market value. That’s larger than the economy of New Zealand.

The stock recovered much of those losses this morning. But the mini meltdown is a clear demonstration of the risk involved: even a hint of a slowdown can trigger punishing losses.

Bottom line, AI is absolutely disruptive technology and a major game changer. But we’re still in very early days; there’s a long way to go, and it’s far too early to declare a winner. Yahoo looked like the dominant Internet titan in the late 1990s, but the landscape changed dramatically.

Maybe Microsoft ends up winning the race. But there’s a lot of uncertainty in drawing that conclusion right now.

One thing that’s NOT uncertain, however, is that AI someday going to be as integral to daily life as mobile phones and the Internet are today.

We also know that AI will continue to consume ridiculous amounts of electricity — electricity, which the US grid does not have right now (and Europe is in even worse shape relative to its electrical grid).

Thanks to horrendous government incentives and propaganda by the inspired idiots and climate fanatics in the media, electrical supply from “renewable sources”, i.e. wind and solar, has skyrocketed over the past few years.

It’s no coincidence that the country is simultaneously facing major capacity shortfalls and power outages… because, you know, sometimes the sun doesn’t shine, and the wind doesn’t blow.

The green fantasy is that wind and solar are going to save the planet. But if you’re honest about the math, they’re really not all that clean.

First, you must mine a lot of really dirty resources (like cobalt) in vast quantities from places in Africa which rely on child labor in extremely dangerous conditions. But you’ll never hear Greta Thunberg utter a word about that.

Then you have to manufacture 2-6x more solar panels and wind turbines… because, again, there are occasions when the sun doesn’t shine (like nighttime!) and the wind doesn’t blow.

In the end, wind and solar end up using a lot more resources per kilowatt-hour of electricity produced than many conventional sources, and a lot of the material used are really bad for the environment.

Nuclear is a far more environmentally friendly, far more efficient way to produce electricity. And hopefully that will make a comeback… though the nuclear renaissance is likely still some years away.

In the meantime, there is an incredibly cheap, abundant, and much cleaner source of fuel that can solve America’s electrical capacity shortages and power the AI revolution: it’s natural gas.

I wrote about this last week, saying that US natural gas is a ‘picks and shovels’ investment in the AI boom.

It won’t be clear for a long time who will win the AI race. In the late 1990s, Yahoo looked to be the dominant tech titan… but the landscape changed dramatically over the next decade.

But again, we do know that AI will consume more power than the US grid has available. And the ONLY viable option to supply that power right now is natural gas.

The US is one of the wealthiest nations in the world when it comes to natural gas reserves. In fact, supply is so vast that US natural gas prices are laughably cheap; relative to the amount of energy contained in a unit of US natural gas, it’s priced at the equivalent of about $15 oil. That’s cheap.

So cheap, in fact, that an electrical grid powered by natural gas can not only deliver the quantity of electricity necessary to power the nation (and AI boom), but it could dramatically reduce energy costs.

This is a big deal. Energy prices influence the price of everything. If electricity is cheap, consumers and families save money. Manufacturing costs less. Services cost less. Transportation costs less. Everything becomes cheaper and more efficient.

To be even more clear, a natural gas renaissance could generate greater US economy growth, potentially even leading to higher tax revenue and lower deficits.

In short, natural gas is one of the only ways that they’ll be able to tame the inflation problem and save the dollar. And with natural gas prices so cheap right now, it seems to me that there’s a lot more upside in the energy of the future, than in companies that are already selling for trillions of dollars.

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