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Printing Time - by Angus Bylsma
The dominant interpretation in Germany was the “balance-of-payments school”, which argued reparations were the root cause. Finding the foreign currency to meet reparations placed downwards pressure on the mark and induced a trade surplus. Inflation, so it went, was hence not primarily a result of currency creation, but depreciation ‘inevitably’ induced by fulfilling (or attempting to fulfil) Versailles. This theory made the inflation not Germany’s ‘problem’; and implicitly sent an ultimatum to the Allies: choose reparations, and suffer unemployment as your industries are outcompeted by a Germany that must continually devalue.
Outside of Germany, however, the “quantity school” was more influential. It stressed that the balance-of-payments issue was exaggerated, while deficit spending of the Weimar government was to blame for the inflation. This, of course, suited many Allied politicians, who argued Germany was not taking reparations seriously; spending beyond its means - on food subsidies and the railroads, in particular - while deliberately using inflation as a tool to support heavy industry. Pleading poverty was intended to undermine Versailles: that the eight-hour day, a keystone of the Revolution, remained while reparations payments were left unmet seemed a smoking gun.
Thames Water Bills to Rise 48% to Fix Pipes and Leaks Around London - Bloomberg
The company said
Bloomberg Terminal
Monday its proposed investment — running from 2025 to 2030 — would help fund a 28% reduction in storm overflows and a 30% decline in the number of pollution incidents. The average monthly bill may rise by £14.55, which amounts to an increase of about 48%, according to Bloomberg calculations.
We have shortages of resources. We have shortages of manpower. A population bust the like of which we have never seen, particularly in a few countries like China. We have an incredible growth in inequality, which I think is the poison in the political system. And we have a great surge of toxicity. I think we’ve made our planet unfavorable to life in every form, including homo sapiens. And these are real issues. They’re moving incredibly fast. They threaten perhaps the existence of a stable global society.
It’s largely out of his hands. The forces work. I suspect inflation will never be as low as it averaged for the last 10 years, that we have reentered a period of moderately higher inflation, and therefore moderately higher interest rates.
10-Year Treasuries Are a ‘Screaming Buy’ as Fed Shows Credibility, BMO Says - Bloomberg
Lyngen sees a 3% yield on 10-year Treasuries sometime in 2024’s first half. “But we can easily close in a range of 3.5 to 3.75 this year,” he said. Real rates as measured by the spread between 10-year Treasuries and their inflation-protected peers should be in a range of 1.65% to 2.15%, “well within what the Fed wants to see,” Lyngen said.
Soaring Cost of Insurance Due to Storms, Fires Is Crushing Homeowners
Along with the increased natural risk, Waters blames Gov. Ron DeSantis for the crisis. Without robust rate caps such as those in California, insurance costs have risen by over 200% while DeSantis has been in office. And the actions DeSantis, who has received $3.9 million in donations from the insurance industry since 2018, has taken have done little to mitigate Floridians' concerns. In May of last year, DeSantis approved a $2 billion reinsurance fund that aimed to reduce prices and keep insurance companies from bankruptcy. He also signed legislation in December that protects insurance companies from liability claims and disincentivizes homeowners from filing claims to begin with. At the bill signing, Desantis said, "The issues in Florida's property insurance market did not occur overnight, and they will not be solved overnight." Despite these policies, insurance prices have continued to go up and insurers have continued to flee the market. Farmers Insurance and AAA are the most recent names to join the growing list of insurance companies that have stopped issuing policies in Florida.
Bond Bulls at JPMorgan, Allianz Keep Piling Into a Bet Gone Bad - Bloomberg
For his part, JPMorgan’s Michele is confident bond yields will fall once the Fed winds down its tightening cycle, long before the first rate cut.
“Whether the US economy enters recession or a soft landing, the bond market rallies after the last rate hike,” he said. “The Fed may keep rates at these levels for quite some time, but growth and inflationary pressure continue to slow.”
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Oceangoing container freight is an unsung hero of the globalization age. Before its invention in 1956, shipping could account for half or more of the price of international goods, says John McCown, a senior fellow at the U.S. Center for Maritime Security. Today it’s more like 2%.
Why is Hungary the EU Inflation Leader? Inflation as a “Hungaricum” By Les Nemethy, CEO Euro-Phoenix M&A Advisors, former World Banker, and Dr. Peter Akos Bod, Economics Professor, former Governor of the Central Bank of Hungary - Europhoenix
Corruption is inflationary. Transparency International has just ranked Hungary the most corrupt country in the European Union. The Government pays a corruption-inflated price for much of its procurement.
Why is Hungary the EU Inflation Leader? Inflation as a “Hungaricum” By Les Nemethy, CEO Euro-Phoenix M&A Advisors, former World Banker, and Dr. Peter Akos Bod, Economics Professor, former Governor of the Central Bank of Hungary - Europhoenix
4. Malinvestment. While investment usually has the effect of improving productivity, this does not apply where resources have been misallocated:
a, Government “prestige” investments such as soccer stadiums, or acquisitions of banks or telcos.
b, private sector investments that have been distorted by grant criteria or cheap loans.
Why is Hungary the EU Inflation Leader? Inflation as a “Hungaricum” By Les Nemethy, CEO Euro-Phoenix M&A Advisors, former World Banker, and Dr. Peter Akos Bod, Economics Professor, former Governor of the Central Bank of Hungary - Europhoenix
Devaluation as a strategy for competitiveness. Hungary is an open, export-driven economy, exporting primarily to the EU. Hungarian productivity growth (at about 0.8% per annum between 2010 and 2022) was roughly half the EU average. Hungary’s competitiveness rankings (according to IMD) plummeted last year from 39th to 46th place. The Hungarian Government has done little in the form of long-term investment into competitiveness, with severe underinvestment in education and healthcare. Hence the Government seems compelled to allow a continuous downward drift of the HUF to maintain competitiveness. Rather than declare a target exchange rate, the HUF is subject to unexpected market forces and speculation.
Pret a Manger, Itsu Founder Says High UK Interest Rates Not ‘End of the World’ - Bloomberg
In fact, everything changed in the hospitality industry in about, maybe 1990. I can't remember. When they allowed people from Italy and Spain and France to come and work here. So young people would come here and work for two years, learn to speak English and go back. That changed hospitality forever. And again, most people...
Merritt: That's over now, right?
Metcalfe: A great many of your listeners won't know that, and they'll kind of take it for granted that thousands upon hundreds of thousands of better food places have opened in the last 50 years because of that.
Pret a Manger, Itsu Founder Says High UK Interest Rates Not ‘End of the World’ - Bloomberg
The restaurant business is incredibly difficult. It's very, very, very labor intensive. The better the food, the more fragile it is, the more temperamental it is, and the harder work it is. And then … I don't know if you've ever worked in a restaurant, but serving people … it’s extremely hard work. And so I would counsel a great many people who are thinking of opening a restaurant…don't, because it is much, much harder than it looks. My end of the business with Pret a Manger and Itsu is even harder because we are absolutely determined to keep the prices down.
What US Treasury Volatility Means for the Economy - Bloomberg
When combined, these factors point to three implications for the current Treasury market volatility: It is likely to diminish but not disappear; it is expected to result in range-bound yields overall unless the Bank of Japan fumbles in its YCC exit or the Fed tightens policy too much; and, with this important central bank qualification, it can be handled with relative ease by the economy and most segments of the financial markets provided they are not excessively levered.
Summer Travel in 2023 Means High Costs and Big Crowds - Bloomberg
United Airlines Holdings Inc. and JetBlue Airways Corp. are among carriers trimming about 10% of flying at busy airports in greater New York City and Washington at the request of federal regulators because of a shortage of air-traffic controllers.
Why eggs cost more in California than anywhere else - Los Angeles Times
“Luckily, our California egg industry has avoided any bird flu in commercial flocks,” California Poultry Federation President Bill Mattos wrote in an email. “Their biosecurity is outstanding and companies here are working very hard to keep wild birds out of facilities and farms across the state.”
But demand has grown much faster than cage-free flocks. Since Proposition 12 passed, at least six other states have voted to prohibit the sale of conventional eggs. Three of those bans are now in effect, including in Colorado and Washington, where conventional eggs were outlawed Jan. 1.
Russell Napier: The world will experience a capex boom
Remember I said that financial repression means engineering an inflation rate in the area of 4 to 6% and thereby achieving a nominal GDP growth rate of, say, 6 to 8%, while interest rates are kept at a lower level. Savers won’t like it, but debtors and young people will. People’s wages will rise. Financial repression moves wealth from savers to debtors, and from old to young people. It will allow a lot of investment directed into things that people care about. Just imagine what will happen when we decide to break free from our one-sided addiction of having pretty much everything we consume produced in China. This will mean a huge homeshoring or friendshoring boom, capital investment on a massive scale into the reindustrialisation of our own economies. Well, maybe not so much in Switzerland, but a lot of production could move back to Europe, to Mexico, to the US, even to the UK. We have not had a capex boom since 1994, when China devalued its currency.
Russell Napier: The world will experience a capex boom
As a third prerequisite you need a domestic investor base that is captured by the regulatory framework and has to buy your government bonds, regardless of their yield. This way, you prevent bond yields from rising above the rate of inflation. All this is in place today, as many insurance companies and pension funds have no choice but to buy government bonds.
The Shadow Is Born: How the Fed Helped Spawn a $23.7 Trillion Market - Bloomberg
Dwight Eisenhower ran on a simple platform best characterized by his homey “I like Ike” slogan, but also heavily steeped in dissatisfaction caused by the inflationary resurgence. In echoes of the debate over Modern Monetary Theory, Eisenhower repeatedly cautions against massive federal spending: “I know that anyone who speaks up against deficit spending is accused by the ‘sophisticated’ liberals of being more interested in money than in people. But I ask, what is more inhumane to more people than deliberately taking away the value of the money on which they must live in the future?”
A recession to tame inflation?
So why didn’t the 1970s recessions “cure” inflation? First, each downturn was relatively short-lived. Sudden price spikes cut spending power, but then real incomes bounced back. In today’s context, this is (sort of) good news because it points to a soft patch rather than a deep slump. The second reason the recessions of the 1970s did not alleviate inflation is that workers secured higher wages even as the economy deteriorated. This effectively replaced one source of cost-push inflation (commodities) with another (labour). The whole episode is synonymous with “wage-price spirals”, essentially a power struggle between labour and capital. Productivity declined and society spent the next decade trying to figure out who should bear the burden of this adjustment, until neoliberalism (Thatcherism, Reaganomics, etc.) provided a definitive answer – by crushing worker power. Up to that point, a young militant workforce was able to resist any sustained real-wage squeeze. And, at least for a period in the late 1970s, the private sector borrowed heavily and reduced its saving, which also delayed the moment of pain.
New Fed Paper Finds Surging Home Prices Driven by Demand — Not Supply - Bloomberg
“We estimate that a one percentage point increase in the mortgage rate lowers housing demand by 10.4 percent,” the authors write. “This is a larger demand sensitivity to rates than evidence using purely observable housing market variables suggests.”
New Fed Paper Finds Surging Home Prices Driven by Demand — Not Supply - Bloomberg
“Fluctuations in housing demand explain much more of the variation in home sales and price growth than do fluctuations in housing supply,” Elliot Anenberg and Daniel Ringo, both Fed board economists, write. “Fluctuations in demand explain essentially all of the variation in home sales, and 80% of the variation in prices, between 2002-2021.”
Note to the Federal Reserve: Don’t Panic About Inflation | The New Yorker
The details of the inflation report provide some evidence to back up these arguments, but also some evidence that is less supportive. The price of medical services rose by 0.6 per cent last month, the cost of domestic services (such as housecleaning) rose by 0.9 per cent, and the cost of haircuts and other personal-care services jumped by 1.2 per cent. These were significant rises. However, taking the services sector over all (less energy services), prices jumped by 0.4 per cent in January, compared with 0.3 per cent in December, and 0.4 per cent in October. That doesn’t look like a sudden takeoff.
The great demographic reversal and what it means for the economy | LSE Business Review
The great demographic reversal and the retreat from globalisation will bring back stronger inflationary pressures – this is our highest conviction view. Worsening dependency ratios naturally raise inflation. The lesser availability of labour at home and abroad will serve to restore the (previously diminished) bargaining power of labour. It will also end up raising the equilibrium natural rate of unemployment. Households will save less, and invest more in housing, than some mainstream models suggest. The non-financial corporate sector may have to invest more to hold down unit labour costs, though we are agnostic about the various causes for recent low investment rates. But we doubt that politicians, facing rising health and pension costs, will be prepared or able to raise taxes enough to equilibrate the economy via fiscal policy.
There Never Was a Real Tulip Fever | History | Smithsonian
The Dutch learned that tulips could be grown from seeds or buds that grew on the mother bulb; a bulb that grows from seed would take 7 to 12 years before flowering, but a bulb itself could flower the very next year. Of particular interest to Clusius and other tulip traders were “broken bulbs”—tulips whose petals showed a striped, multicolor pattern rather than a single solid color. The effect was unpredictable, but the growing demand for these rare, “broken bulb” tulips led naturalists to study ways to reproduce them. (The pattern was later discovered to be the result of a mosaic virus that actually makes the bulbs sickly and less likely to reproduce.) “The high market price for tulips to which the current version of tulipmania refers were prices for particularly beautiful broken bulbs,” writes economist Peter Garber. “Since breaking was unpredictable, some have characterized tulipmania among growers as a gamble, with growers vying to produce better and more bizarre variegations and feathering.”
After all the money Dutch speculators spent on the bulbs, they only produced flowers for about a week—but for tulip lovers, that week was a glorious one. “As luxury objects, tulips fit well into a culture of both abundant capital and new cosmopolitanism,” Goldgar writes. Tulips required expertise, an appreciation of beauty and the exotic, and, of course, an abundance of money.
U.S. Payrolls Rise as Jobless Rate Drops to Six-Year Low
The last time payrolls increased at least 200,000 for as many months was a stretch that ended in March 1995.