Inflation and Broken Windows

• John Mauldin, Thoughts from the Frontline
• |January 29, 2021

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Gripping Hand Update
Back with a Vengeance
Broken Window Fallacy
Implications
Robinhood, GameStop, et al.

I’m often asked if I foresee inflation or deflation. This week we had an “Ask Me Anything” session for Alpha Society members and it came up several times. Both are possible in their own ways, and frankly I feel a little funny telling people I think we will see both. I would just like to have a growing economy and dependable money that holds its value.

But for these letters, I have to distinguish between what I want and what I expect. The kind of stability I prefer isn’t on the menu right now. So today we will wrap up my 2021 forecast series with a look at this important debate.

By the way, my Over My Shoulder macro research service members already saw full versions of some of the reports I’ll quote below. If you aren’t one of them, now is a great time to join. Where else can you find an essay from a music lawyer comparing Robinhood to Napster? It was totally on point. Technology quickly transformed that industry. If you are in the market you need to understand those changes. Someone will become the financial equivalent of Spotify.

Getting tough‘ on China makes headlines, but abroad nobody cares what Johnson says

Date: 30‑01‑2021

Source: The Guardian

Most countries do not feel the need to pontificate about the failings of others. Change comes from within, not without

‘There is nothing that Dominic Raab and Boris Johnson can do about China, any more than they can about anywhere else they noted in the morning news.’

Boris Johnson was last week pressed by senior Conservatives to “take a tougher stance against China” on Uighurs, Hong Kong and human rights. What this means is obscure.

A British foreign secretary reaches his office each day amid images of imperial might. The Foreign, Commonwealth & Development Office is a gallery of murals of Pax Britannica, foreign victories, dazzling potentates, cowering enemies and grateful native peoples. By the time the minister’s feet are under his desk, he must feel the world is straining for his command.

The perfect target’: Russia cultivated Trump as asset for 40 years – ex‑KGB spy

Date: 29‑01‑2021

Source: The Guardian

The KGB ‘played the game as if they were immensely impressed by his personality’, Yuri Shvets, a key source for a new book, tells the Guardian

Donald Trump’s election win in 2016 was welcomed by Moscow.

Donald Trump was cultivated as a Russian asset over 40 years and proved so willing to parrot anti‑western propaganda that there were celebrations in Moscow, a former KGB spy has told the Guardian.

Yuri Shvets, posted to Washington by the Soviet Union in the 1980s, compares the former US president to “the Cambridge five”, the British spy ring that passed secrets to Moscow during the second world war and early cold war.

Biden’s First Week Was a Race to the Left

Date: 28‑01‑2021

Source: The Wall Street Journal By the Republican Karl Rove

The new president’s actions don’t suggest he’s interested in bipartisan progress.

If America were diabetic, it would be suffering from hyperglycemia after the sugary coverage of President Biden’s first week.

Much praise was heaped on the new administration in opinion commentary and what passes for straight journalism nowadays. Mr. Biden was celebrated for beginning the “healing,” punching plenty of “reset buttons” and extending a much‑needed “olive branch.”

Biden’s Grand Opening

Date: 28‑01‑2021

Source: Project Syndicate by James K. Galbraith

James K. Galbraith, a former Executive Director of the Joint Economic Committee, is Professor of Government and Chair in Government/Business Relations at the Lyndon B. Johnson School of Public Affairs at the University of Texas at Austin. He is the author of Inequality: What Everyone Needs to Know and Welcome to the Poisoned Chalice: The Destruction of Greece and the Future of Europe.

 With an economic rescue plan that is both ambitious and well targeted, US President Joe Biden and his team have demonstrated a clear understanding of the scale and range of action that the current situation requires. A broader reconstruction plan can and must come later; but crisis management remains the order of the day.

AUSTIN – In the space of less than three months, events have conspired to transform the American political scene. First, the COVID‑19 pandemic defeated Donald Trump – not because public sentiment in this deeply polarized country changed, but rather because the virus forced open the gates of ballot access. Owing to a vast upsurge of early voting and mail‑in ballots, the 2020 election’s turnout surpassed that of 2016 by 20 million votes, and featured a greater share of the electorate than any US presidential election since 1900.

‘Stakeholder Capitalism’ Review: The Global, Olympian ‘We’

Date: 27‑01‑2021

Source: The Wall Street Journal

Nations decide which problems to solve through politics. Global elites already know what problems need solving. Just ask them.

Klaus Schwab, founder and executive chairman of the World Economic Forum.

Refugee Run is an immersive theatrical experience at the World Economic Forum in Davos, Switzerland, in which billionaires and other global elites pretend to be refugees for a little over an hour. In one promotional video, corporate executives wearing $1,000 loafers “escape” their “village” and make their way to a “refugee camp,” where they must “bribe” actors playing camp guards. Facebook’s Sheryl Sandberg flashes on‑screen to attest: “I found it incredible . . . that you can put yourself in a room like this and feel as much as you feel.” This focus on eliciting emotional responses from the wealthy and powerful at an Alpine ski resort, rather than providing material assistance to actual refugees, makes Refugee Run an appropriate charity for the Davos set.

China opens door to Ant Group’s stock market debut

Date: 27‑01‑2021

Source: BBC

China’s central bank governor has signalled that the door remains open for Ant Group’s stock market debut.

Ant, backed by billionaire founder of e‑commerce giant Alibaba Jack Ma, was set to list its shares in November.

Regulators suspended the listing and the People’s Bank of China later ordered a major shake‑up at Alibaba.

Questions also grew about Mr Ma’s whereabouts, after he missed a television engagement earlier this month.

Last week, he made his first appearance since regulators cracked down on his business empire, speaking to a group of teachers via video‑conferencing software as part of a charity event.

Bank governor Gang Yi has suggested that Ant Group’s share market listing could be reconsidered under the right circumstances.

Brussels warns Britain against downgrading EU ambassador’s status

Date: 26‑01‑2021

Source: The Guardian

Denying mission full privileges under the Vienna convention risks poisoning diplomatic ties, No 10 told

João Vale de Almeida, the EU’s representative in the UK, has not been granted full diplomatic status.

Downing Street has been warned by Brussels that downgrading the status of the EU’s ambassador to the UK will poison diplomatic relations for years to come.

The UK has so far declined to grant the bloc’s representative, João Vale de Almeida, and his 25‑strong mission the privileges and immunities afforded to diplomats under the Vienna convention.

The British government’s approach has stirred anger in Brussels as the EU has 143 delegations around the world, each of which has full diplomatic status.

Yet more good news from Brexit

Date: 26‑01‑2021

Source: The Guardian

Subject: Mastercard to raise fees by at least 400% for EU firms selling to UK customers

Change from October could lead to higher prices for those paying with UK‑issued cards

Mastercard has told EU firms that is charge for credit card and debit card payments made on UK‑issued cards will increase to 1.5% and 1.15% respectively.

Mastercard is to increase the fees EU firms face to take payments from online shoppers from the UK by at least 400%, in a move that could mean higher prices for consumers.

When a credit or debit card is used, a percentage of the purchase price is paid by the retailer to the bank that issued it as an interchange fee, which is set by a payments firm.

English and Scottish get drunk most often, 25‑nation survey finds

No wonder! (hfk)

Date: 25‑01‑2021

Source: The Guardian

Average of more than 33 times last year is more than twice the rate of several other nationalities

Beer, pre‑pandemic. English people were among the least remorseful in the survey about getting drunk. 

The English and Scottish have topped an international league table of how often people get so drunk that they lose their balance and slur their speech.

The Global Drugs Survey (GDS) for 2020 suggests the UK’s drink problem is far more dangerous than use of any other drug. More than 5% of people under 25 in the UK reported having sought hospital treatment after getting drunk, compared with a global average of 2%.