Author Topic: Scott Grannis and other Supply Side  (Read 20375 times)

G M

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Re: Scott Grannis:
« Reply #50 on: April 17, 2020, 05:06:59 PM »
"plan accordingly"

is there a way to screen out all photos of a gracelessly aging Madonna
from my life?

Not without great effort.


Crafty_Dog

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Scott Grannis on the monetary expansion
« Reply #52 on: April 23, 2020, 03:01:40 PM »
"It’s just another QE episode: QE4. 1, 2, 3 were also huge monetary expansions, with no resulting inflation. Why? because the Fed was simply accommodating increased money demand. Same as now. It might be inflationary in the future, but that remains to be seen."

ccp

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investopia on debt
« Reply #53 on: April 23, 2020, 03:21:05 PM »
Grannis has his opinions.



". It is easy to understand why people (beyond politicians and economists) are starting to pay close attention to the issue these days. Unfortunately, the manner in which the debt level is explained to the public is usually pretty obscure."


https://www.google.com/search?q=national+debt&oq=national+debt&aqs=chrome..69i57.5607j0j8&sourceid=chrome&ie=UTF-8

Crafty_Dog

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Re: Scott Grannis:
« Reply #54 on: April 23, 2020, 04:12:45 PM »
When it came to predicting the inflationary consequences of QE in the aftermath of 2008 he was quite right and we here were spectacularly wrong.

ccp

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Re: Scott Grannis:
« Reply #55 on: April 23, 2020, 06:27:29 PM »
"When it came to predicting the inflationary consequences of QE in the aftermath of 2008 he was quite right and we here were spectacularly wrong"

I don't recall predicting inflation.


he may be right, for now.

we said no biggie when debt was 2 trillion .  even for inflation it is much higher now.




Crafty_Dog

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Re: Scott Grannis:
« Reply #59 on: May 29, 2020, 08:27:16 PM »

ccp

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Re: Scott Grannis:
« Reply #60 on: May 30, 2020, 05:19:53 AM »
interesting
comparison to Argentina
with regards to money supply , etc.
Scott has been right so far.












Crafty_Dog

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DougMacG

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Re: Some particularly outstanding work from Scott
« Reply #72 on: May 28, 2021, 08:24:25 AM »
https://scottgrannis.blogspot.com/

A lot of information there including historical context.  Here's one piece of it:



The new Biden budget is $6 trillion on revenues of $4 trillion, not including the 'emergency' trillions in spending?

Question for 'journalist' to ask Pres. Biden, if given the chance:

If you had a teenager living in your house who makes $400 per year and proposes to spend $600, as a parent, what might you ask him or her?  Something like, HOW DO YOU PLAN TO PAY FOR IT?

In this case, we are talking trillions, not dollars, and there is no one in the world who would lend it to us much less gift it.

The teenager confronted with the above deficit might say, okay I'll work more then.  But in the macroeconomics of the nation, we will not work more because a major part of agenda is to add across the board disincentives for employers to invest, expand or hire.

God help us.  Economic collapse by choice with women, minorities and children hurt worst is not the best path forward.

Crafty_Dog

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Re: Scott Grannis:
« Reply #73 on: February 08, 2022, 12:06:55 PM »
https://scottgrannis.blogspot.com/?fbclid=IwAR2iMakIuRcHRCODZvbHyZt3Cxg3yRPujxhs_jAkOhn2Kpp4pDM7FJXK4d0q


Observation: If my math is correct, at 8% inflation in real terms the burden is reduced by $2.4T annually. Do I have this right?

Observation/Question: With 30 year bonds at roughly 2%, and inflation at 8%, what is the calculation to be made?

Questions: How much were we paying annually in interest before the Wuhan Cooties Spending Surge?

How much are we paying now?

Scott Grannis ?

=============

Related:

https://www.nationalreview.com/2022/02/the-perfect-storm-is-coming/?fbclid=IwAR35KwBXF4Uh-GXfyn5yar_HGfRKbZnCVsfTN6WoiCnuVgyVdmKX61MRQgk

https://www.zerohedge.com/markets/ive-never-seen-market-goldman-sees-shortages-everything-you-name-it-were-out-it?utm_source&utm_medium=email&utm_campaign=470&fbclid=IwAR3Y4fBOVtkdUlvunDT1X-M_-nxPTC0ebQncq6JXFJqK4sQKQ2StYN_2Z9Q
« Last Edit: February 08, 2022, 12:31:53 PM by Crafty_Dog »

ccp

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goldman sachs guy
« Reply #74 on: February 08, 2022, 01:46:38 PM »
of course at end of the article writing about commodity shortages he adds this woke line:

Separately, Currie said that the world needs a global tax on carbon to reduce emissions, as ESG measures are a “blunt tool” that push up fuel prices too quickly, noting that for climate change, “local solutions don’t solve the global problem.

I don't agree the answer to everything is NOT MORE TAX.

ccp

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Grannis: inflation great for government finances though it hurts everyone else
« Reply #75 on: February 08, 2022, 02:39:51 PM »
"The bad news is that sustained inflation of 7-10% will cause significant problems in the months and years to come. Inflation will be a boon to federal government finances, but it will be the bane of the rest of the economy, because inflation is essentially a hidden tax that all holders of money end up paying the government"

bad

Crafty_Dog

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From Scott Grannis:
« Reply #76 on: February 08, 2022, 04:21:32 PM »
Posting his answers to my questions on his behalf:
========================================

To begin with, the debt in question is the amount held by the public, which is currently 23.5 trillion. The 30 trillion is inflated by double-counting what has been borrowed from social security. So at 8%, the real value of that debt declines by about 1.9T per year (23.5*.08). But the burden of the debt is best defined as debt/nominal GDP, the latter of which is increasing by 8% (inflation) and ~2.5% (real) which totals almost 11%. So the burden of the debt is declining (currently) by about $2.5 T per year, which is pretty substantial, no?

In one of my recent posts I have a chart of the interest cost of federal debt as a % of GDP (ie., the interest rate burden of the debt). That is now at a record low, because interest rates are so low. So taken together, the current debt looks huge in nominal terms, but it is shrinking (in burden terms) by $2.5 T per year, which happens to be the current level of the federal deficit.

I think the deficit is going to continue to shrink, thanks to rising incomes and prices, and spending is going to slow down, so the deficit is likely to shrink meaningfully in the next year or so. So in the end, the federal debt is far from being a calamity. But those who hold it are losing trillions in purchasing power. Inflation helps the government pay its debt, and currently that's huge.


DougMacG

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Re: From Scott Grannis:
« Reply #77 on: February 09, 2022, 06:21:46 AM »
"Inflation helps the government pay its debt, and currently that's huge."

"Inflation helps the government pay its debt, and" ... I think that is criminal.

G M

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Re: From Scott Grannis:
« Reply #78 on: February 09, 2022, 09:09:38 AM »
"Inflation helps the government pay its debt, and currently that's huge."

"Inflation helps the government pay its debt, and" ... I think that is criminal.

Of course it is.

ccp

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inflation rising
« Reply #79 on: February 10, 2022, 07:13:46 AM »
https://www.newsmax.com/finance/streettalk/inflation-7-5-percent-biggest-spike-in-40-years/2022/02/10/id/1056294/

according to Scott this is great for revenues
to the Treasury

politically. this is bad for the crats
since they caused this as usual

we get money robbed from all angles directions

like that guy who lost to Mohammed Ali
early in Ali's career - he can hit you from all angles and directions

My wallet is looking a lot like another boxer who fought Ali later , Chuck Wepner's face after the fight

Crafty_Dog

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Re: Scott Grannis:
« Reply #80 on: May 03, 2022, 11:40:54 AM »

Crafty_Dog

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Crafty_Dog

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Re: Scott Grannis and other Supply Side
« Reply #82 on: July 05, 2022, 08:51:37 AM »
See his entries of June 29 and June 30 (on BTC)

https://scottgrannis.blogspot.com/

Crafty_Dog

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Crafty_Dog

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Re: Scott Grannis and other Supply Side
« Reply #84 on: September 30, 2022, 08:42:42 AM »
I sent the following article from the WSJ to Scott:


The Silent Price You’ll Pay for Our Mounting National Debt
The cost of borrowing is near untenable levels. If we aren’t already in a ‘doom loop,’ we’re getting close.
By Red Jahncke
Sept. 29, 2022 6:05 pm ET


After an unexpectedly hawkish Federal Reserve raised interest rates by 75 basis points for the third consecutive time last week, all eyes were on markets and the economy. Few, however, paid attention to the effect persistent inflation and higher interest rates will have on Uncle Sam.

That’s surprising. The gross interest expense on the national debt hit $88 billion in August, according to the Monthly Treasury Statement. That’s $1.06 trillion a year. Interest on the national debt is exploding and heading toward what economists refer to as a “doom loop”—the vicious circle in which the government’s borrowing to pay interest generates yet more interest and yet more borrowing.

Net interest expense (gross expense minus the interest received) hit $63 billion in August, or $756 billion a year. That’s a lot of money in the context of a $6 trillion federal budget and a $25 trillion economy.

The August numbers barely reflect the impact of the Fed’s interest-rate hikes between March and July, much less last Wednesday’s increase and the additional 1.25% by year’s end implied by the Fed’s new guidance. It’s highly likely that gross interest expense will rise well above $1 trillion a year and surpass Social Security as the largest item in the federal budget.

The Fed’s more hawkish guidance calls for “higher rates for longer,” even if it brings on recession. The central bank is also shrinking its holdings of Treasurys under its quantitative-tightening policy, requiring the Treasury Department to find alternative buyers. Weak demand will likely push rates higher, if not destabilize the Treasury market to some degree.

Yet even if the Fed backs off, or recession intervenes, that won’t relieve pressure on Uncle Sam. Treasury debt has reached record levels, and higher federal interest expense is already baked in. That will constrain Washington’s capacity to deliver fiscal stimulus to a struggling economy during the next recession. Constrained or not, the government will doubtless attempt to do so. That means issuing more debt, since the federal budget is in perpetual deficit.

That is exactly what has happened in the past 2½ years: Uncle Sam issued $7 trillion of new debt during the Covid pandemic, which took publicly held national debt to its present $24 trillion up from $17 trillion in February 2020.

The driving force behind the growth of our national debt alternates between surging interest costs attending a strong or inflationary economy and enormous additions to principal from deficit-financed stimulus during recession. In either case, the national debt is growing inexorably. How could financial markets ignore it?

One school of thought asserts that so long as the economy is growing at a faster rate than the debt, the increase in the national debt doesn’t matter.

But that certainly isn’t happening now. In principal amount, the national debt has exploded and the cost of debt service is escalating, too. The current $756 billion annual net interest expense on the $24 trillion of publicly held debt implies a required economic growth rate of more than 3% in a $25 trillion economy in order for the debt “not to matter.” The average forecast for economic growth in calendar year 2022 is less than 1%, and many economists expect negative growth—i.e., recession—in 2023.

Not only are rising interest rates driving up federal interest expense dramatically; inflation is propelling growth in government spending. Social Security benefits are adjusted based on the average of the consumer-price index reports for July, August and September each year. We have reports for two months and don’t need the third to know that benefits will increase next year to roughly $1.3 trillion from $1.2 trillion (or more than 8%).

Healthcare costs always exceed the rate of inflation, too. That guarantees double-digit growth next year in Medicare from about $710 billion in fiscal 2022 based on the first 11 months, and in the other government healthcare programs categorized as “health” in the Monthly Treasury Statement, which amounted to $915 billion in fiscal 2022. Assuming only 10% healthcare inflation, these two categories combined will grow by $163 billion.

Naturally, if we do slip—or plummet—into a serious recession, federal income-tax revenue will erode. Even before recession, the past nine months of declining stock and bond prices virtually assure an almost complete collapse in capital-gains-tax revenue come tax time next April. Loss of that category alone—which averages about 12% of federal individual income-tax revenue—will necessitate hundreds of billions in borrowing to replace lost revenue.

Inflation and interest rates are inflicting painful damage today. Yet seemingly without notice the national debt is working like a cancer sapping the nation’s long-term economic vitality. Whether we reach the “doom loop,” or just become mired in stagflation, unchecked government spending and mounting national debt will drain all growth potential from the national economy sooner rather than later.

Mr. Jahncke is president of the Connecticut-based Townsend Group International LLC

=============================

My accompanying comments were as follows:


​Scott:

Perhaps my memory plays tricks on me, but it seems like not so many years ago the interest on the debt was in the neighborhood of $250-300B and now this article from today's WSJ is talking about $756B-$1.06T and climbing!

(Simpleton that I am, I confess I am unclear on the logic of his distinguishing publicly and privately held debt i.e. why he is saying the debt is $24T and not the $30T I see elsewhere.)

Here are some simpleton ideas I am working with:

a) For napkin level calculations if we are staying with the $30T number and working with bonds being 3.5% and inflation being 13.5% (crudely compounding out the current monthly level of .1%) then the real burden of the $30T to the government is declining 10% a year.  Does this make sense or am I making some sort of serious error in logic?  This would seem to cut against the doom spiral this article is talking about?  Or are things teetering on the edge of a spiral?  And if so, what are the implications for a 70 year old man and his wife with what to do with their savings?

b) If I understand correctly, inflation is a monetary concept, but much of what we have now are price increases for many goods and services due to supply contraction.  If my distinction is correct, then interest rates are the wrong tool.  (If I have it right, I am following your analysis in this)

The Adventure continues,
Marc

===================================

Here is his reply:

Debt held by the public is the only number that makes sense to use, and the latest figure is $24T. The $30T number is bogus, but that is the one you see most often.

Current cost of debt service is about $600-700 B, and that is only 2.4% of GDP, which is about as low as it’s ever been. The debt service burden (interest cost as a percent of GDP) is NOT currently a problem, not at all. But of course it is going to be rising now that interest rates are moving a lot higher. Still, it takes time for the recent rise to work its way through the Fed’s holdings, most of which still carry very low coupon yields.

CPI inflation is close to 10% but it has most likely peaked and is declining meaningfully (i.e. gasoline). PCE Core inflation—the Fed’s preferred measure—is only 5% and it is peaking but declining very slowly.

I think we’ll see gradual declines in YOY inflation for the next 6-9 months. The Fed has done what it needs to do. Most importantly, M2 is no longer increasing. No one is talking about that! That’s the elephant in the room.

Meanwhile, stocks have taken a huge hit. Now wouldn’t be a bad time to invest if you are sitting on a pile of cash.

If you are still risk averse and worried about everything going to hell in a handbasket, consider the TIP ETF. It has a real yield of about 1.7%, so your dividend is 1.7% plus whatever the CPI turns out to be. If the economy really crashes and the Fed overtightens, the real yields are going way down and the price of the fund will go up 10-20% on top of its dividend. So it’s a great hedge against bad stuff happening. Real yields can’t go much higher unless the economy takes off like a rocket, and that’s not happening under Biden.

Yes, there’s a certain amount of supply-constrained inflation in the CPI, and that is gradually going away. If M2 continues flat then overall inflation is going way down. The bond market agrees, with breakeven inflation now falling to a mere 2.1% over the next 5 years.


ccp

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Re: Scott Grannis and other Supply Side
« Reply #85 on: September 30, 2022, 09:05:37 AM »
Like I said he would say:

"Debt held by the public is the only number that makes sense to use, and the latest figure is $24T. The $30T number is bogus, but that is the one you see most often.

Current cost of debt service is about $600-700 B, and that is only 2.4% of GDP,"

no biggie

nation economy is powerful !  sleep well tonight!

 :roll:

DougMacG

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Re: Scott Grannis and other Supply Side
« Reply #86 on: September 30, 2022, 09:45:37 AM »
Great post Crafty, lots to digest there.

1.  "why he is saying the debt is $24T and not the $30T I see elsewhere".

The difference is government indebted to itself, paying interest to itself.  24T is still a very BIG number.  3 times higher than when Obama was elected.  https://www.usdebtclock.org/2008.html

2. "Current cost of debt service is about $600-700 B, and that is only 2.4% of GDP, which is about as low as it’s ever been."

Oops he clarifies that further in:
"it takes time for the recent rise to work its way through the Fed’s holdings, most of which still carry very low coupon yields"  Meaning the cake is already baked to nearly double that debt burden, from not-affordable (given our other spending) to perhaps catastrophic, not including the effects of the worsening spiral.

3.  "I think we’ll see gradual declines in YOY inflation for the next 6-9 months."

Fair enough, that is his view and the view of many economists (who are often admittedly wrong predicting the future), but this is the optimistic take on the scene.  In other words, the outcome if everything goes right.  BUT, we just had two pipelines blown up with winter coming.  The escaping gas isn't being sold elsewhere on the world market.  Europe will pay anything, and have to, to outbid others for oil and gas otherwise sold elsewhere, and up goes the price in the US and worldwide.  Also, the real current cost we see is hidden by the selling off of the Strategic Midterm Petroleum Supply.  Now we have emergencies coming, will have to either deplete it further or replenish supplies, raising the future cost much more than it was artificially lowered.

Furthermore, what other prices are affected by rising energy costs?  a.  The cost of governments paying all the people not working when all the businesses shut down.  b.  The cost of food worldwide.  And so on.

If you want to know the real inflation rate, walk into a Subway sandwich shop and ask "How much for the $5 footlong?"  $13-$14 in the Midwest, more elsewhere I'm sure.  That tells you how much labor, meat, vegetable, bread and general business expenses went up in 2 years, and it's almost triple, not 10 or 20% increase.

4. "there’s a certain amount of supply-constrained inflation in the CPI, and that is gradually going away."

IMHO, partly true, partly not.  See previous.  Lumber is partly back down - because home building has crashed.  Not a good thing.

5. "The bond market agrees, with breakeven inflation now falling to a mere 2.1% over the next 5 years."

Optimistic view.  My view is that even 2% inflation, compounding forever, is criminal and killing people who have long term investments they can't sell without being taxed on the majority inflation component.  Assets locked in place is the opposite of supply side economics.

6. Risk of war escalation is real.  People here think Putin could use nukes, provoke retaliation and escalation, and th pipeline retaliation, plus the (world) war in Taiwan scheduled for spring.  Larger than normal risk, more like Germany in the 1930s than the US in the 1950s or 1990s.

Note:  Scott is on our side.  None of this is meant as negativity on him.

G M

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Re: Scott Grannis and other Supply Side
« Reply #87 on: September 30, 2022, 09:48:50 AM »
Outstanding analysis, Doug.



Great post Crafty, lots to digest there.

1.  "why he is saying the debt is $24T and not the $30T I see elsewhere".

The difference is government indebted to itself, paying interest to itself.  24T is still a very BIG number.  3 times higher than when Obama was elected.  https://www.usdebtclock.org/2008.html

2. "Current cost of debt service is about $600-700 B, and that is only 2.4% of GDP, which is about as low as it’s ever been."

Oops he clarifies that further in:
"it takes time for the recent rise to work its way through the Fed’s holdings, most of which still carry very low coupon yields"  Meaning the cake is already baked to nearly double that debt burden, from not-affordable (given our other spending) to perhaps catastrophic, not including the effects of the worsening spiral.

3.  "I think we’ll see gradual declines in YOY inflation for the next 6-9 months."

Fair enough, that is his view and the view of many economists (who are often admittedly wrong predicting the future), but this is the optimistic take on the scene.  In other words, the outcome if everything goes right.  BUT, we just had two pipelines blown up with winter coming.  The escaping gas isn't being sold elsewhere on the world market.  Europe will pay anything, and have to, to outbid others for oil and gas otherwise sold elsewhere, and up goes the price in the US and worldwide.  Also, the real current cost we see is hidden by the selling off of the Strategic Midterm Petroleum Supply.  Now we have emergencies coming, will have to either deplete it further or replenish supplies, raising the future cost much more than it was artificially lowered.

Furthermore, what other prices are affected by rising energy costs?  a.  The cost of governments paying all the people not working when all the businesses shut down.  b.  The cost of food worldwide.  And so on.

If you want to know the real inflation rate, walk into a Subway sandwich shop and ask "How much for the $5 footlong?"  $13-$14 in the Midwest, more elsewhere I'm sure.  That tells you how much labor, meat, vegetable, bread and general business expenses went up in 2 years, and it's almost triple, not 10 or 20% increase.

4. "there’s a certain amount of supply-constrained inflation in the CPI, and that is gradually going away."

IMHO, partly true, partly not.  See previous.  Lumber is partly back down - because home building has crashed.  Not a good thing.

5. "The bond market agrees, with breakeven inflation now falling to a mere 2.1% over the next 5 years."

Optimistic view.  My view is that even 2% inflation, compounding forever, is criminal and killing people who have long term investments they can't sell without being taxed on the majority inflation component.  Assets locked in place is the opposite of supply side economics.

6. Risk of war escalation is real.  People here think Putin could use nukes, provoke retaliation and escalation, and th pipeline retaliation, plus the (world) war in Taiwan scheduled for spring.  Larger than normal risk, more like Germany in the 1930s than the US in the 1950s or 1990s.

Note:  Scott is on our side.  None of this is meant as negativity on him.

Crafty_Dog

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Several recent entries from Scott Grannis
« Reply #88 on: October 25, 2022, 04:27:48 AM »
https://scottgrannis.blogspot.com/

If I read correctly, his assessment of liquidity in the system is completely different from that of the ZeroHedge piece that GM posted earlier today.
« Last Edit: October 25, 2022, 11:41:24 AM by Crafty_Dog »

Crafty_Dog

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Grannis: Sky is not falling
« Reply #90 on: February 09, 2023, 03:52:43 PM »

Crafty_Dog

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Scott Grannis April 12, 2023
« Reply #91 on: April 16, 2023, 08:46:58 PM »

Crafty_Dog

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As always, a quality read
« Reply #92 on: May 10, 2023, 07:47:00 PM »