Shrinkflation Is Not A Joke, It's Inflation

"Remembering" (AI-e collaboration)

If I am a baker and the cost of flour goes up, and the taxes on my bakery building go up, and the wages of my employees go up, it seems apparent that my prices would have to go up. 

If I own a cookie factory, and my taxes go up plus my costs for raw materials, and wages go up to keep my employees, I have very few options in order to break even. Option One: raise my prices. Option Two: reduce the number of cookies in the package, or... Option Three: reduce the size of the cookies in the package. This latter is what the president mockingly calls Shrinkflation.

President Biden seems to get a kick out of deriding businesses that make their products smaller. Does he not understand that it's GOVERNMENT POLICIES that are causing this? A business has to make a profit in order to pay for the cost of doing business. When businesses fail to make money, they eventually go out of business. Why this is not obvious to most people is a mystery to me. 

So the president brags about his policies making life better while things keep getting worse and people living in the trenches, down on the streets, know it. 

President Biden wants to have the FDA punish companies that reduce the number of chips in a bag or the size of cookies in a package. Which means what? The prices for these products will have to go up. 

When I go through the grocery story lines and buy four items for twenty or twenty-five dollars, I see people fork over $200 for a couple bags of groceries. I'm not sure how they can do it. Eventually it will be $200 for one bag of groceries. In short, this is another form of "shrinkflation" in which grocery stories give us fewer goods for the same amount of cash. Should we punish the grocers also?

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Worth Reading (if able): Biden's Partisan State of Disunion

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As Ronald Reagan famously observed, the nine most terrifying words in the English language are, "I'm from the government and I'm here to help." 

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Cocaine in the White House? More Bread and Circuses

Lines of cocaine on a mirror. (Public domain)

So there's been a kerfuffle this past week over cocaine found in the White House, as if it has never happened before. The news story triggered the memory of an incident in which members of The Turtles snorted cocaine in the Lincoln Library. The band, famous for their pop hit "Happy Together," had been invited to play at Tricia Nixon's Rose Garden wedding. Though the coke activity never made the news, the perps did mention it in an interview later.

Another cocaine story during Nixon's tenure did make the news. In 1974, The president's personal secretary, Rose Mary Woods, was found to have cocaine in her possession. Ms. Woods had been Nixon's personal secretary for 17 years and was considered a close confidant of the president. Evidently she claimed she had accidentally ingested it while cleaning her desk with a cotton swab, which she then swallowed. The incident damaged her reputation and she later resigned. These events came at a time when the Nixon regime was already shaken from the ongoing Watergate investigation and less than two months later he would resign as well.

(EdNote: Ms. Woods was apparently complicit as the cause of the gap in the Watergate tape. She testified that she must have accidentally pushed the wrong button after a phone rang, thus erasing 18.5 minutes of the famous tape.)

For some reason I had it in my mind that cocaine would be more likely found in the Clinton White House. Yes, there were allegations, but no evidence other than hearsay. Actually, the two other prominent "cocaine in the White House" stories took place during the Reagan years. The first was a Secret Service agent who in 1982 was found to have cocaine in his possession. He lost his job over it. Four years later the illegal white powder was found in the White House residence. Press secretary Larry Speakes (great name for a White House press secretary) claimed it had been brought into the White House by a visiting foreign dignitary. 

It would be no surprise to learn that other instances have occurred. These did not find their way to the public airwaves, or the megaphone of social media.

Let's close out this episode with a couple cocaine related tracks from Bob Dylan's Tell Tale Signs and Johnny Cash, Live at Folsom Prison.

Links Here: 

Cocaine Blues  Bob Dylan, Tell Tale Signs

Cocaine Blues  Johnny Cash at Folsom Prison

A Few Notes from Michael Shellenberger's San Fransicko

This past six months or so I have been researching the topic of homelessness ever since I read about the 2007 St. Louis County initiative called End Homelessness In Ten (EHIT). The EHIT story caught my attention mostly because by 2020 homelessness in the region not only continues but seems to have doubled.

It would be easy to make a barbed remark here about politicians creating slogans for programs. MAGA and Build Back Better aren't the first such declarations. In Duluth the population has been in the 86,000-87,000 range for the 35 years I have lived here, but because of the the need to expand our tax base the former mayor Don Ness initiated a 90/20 goal. That would be a population of 90,000 by 2020. 

It was a worthy objective, and hopefully the effort produced a few insights as to where the obstacles lay.

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In order to gain a better understanding of homelessness I created a Google Alert on the topic which delivers a daily feed of news stories about this issue. This is how I became aware of Michael Shellenberger's San Fran-sicko: Why Progressives Ruin Cities. 

Shellenberger is not immune to controversy. His book Apocalypse Never created something of an upheaval because he had been for two decades a super-advocate for environmental action. When he began running into young people who were planning to not have families because of their belief in an environmental apocalypse, he realized that environmentalists had been striing the "end of the world chord" a little too hard. At first, they felt they needed to make enough noise to create awareness. Instead, they created a fear vibe that permeated a generation. Panic is not rational and difficult to reason with. 

That was his last book. His latest is about California. Here are a few notes.

Between 2008 and 2019, 18,000 companies including Toyota, Charles Schwab, and Hewlett Packard, fled California due to a constellation of problems sometimes summarized as “poor business climate." California has the highest income tax, highest gasoline tax, and higher sales tax in United States, spends significantly more than other states on homelessness, and yet has worse outcomes.

California has had its share of troubles for decades, he notes, but things have grown exponentially worse in the past ten years.

I was confused. So I have been a progressive in this Democrat all of my adult life, I find myself asking a question that sounded rather conservative. What were we getting for our big high taxes? And why after 20 years of voting for ballot initiatives promising to address drug addiction, mental illness, and homelessness, had all three gotten worse? Why had progressive Democratic elected officials stopped enforcing many laws against certain groups of people, from people suffering mental illness and drug addiction in San Francisco, Los Angeles and Seattle, to heavily armed and mostly white anarchists in Seattle, Portland, and Minneapolis?

Shellenberger says he wrote San Fransicko because he didn’t have the answers to those questions and he felt he needed them. I identified with that feeling because it's what drove me to read hundreds of pages of think tank reports on this issue so as to organize my own thinking. My aim is to apply what I learn to our community, just as Shellenberger's intent is to get clarity about his city.

From 2005 to 2020, San Francisco experienced an astonishing 95% increase in unsheltered homelessness has the number of permanent supportive housing units offered by the city rose from 6487 to 10,051.

Today San Francisco has the greatest quantity of permanent supportive housing units per capita of any major city in the United States. It has 11 permanent supportive housing units per thousand people which is nearly 3 times as much as New York City and Chicago and over six times as much as Miami-Dade County. All of that and yet the sheltered homeless population of New York City, Chicago and Miami fell 11, 10 and 50% respectively between 2005 and 2020 whereas San Francisco’s rose 95%. Why was that?

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Correcting Another Narrative

One of the canards that people have repeated so often that it's accepted as truth is that Ronald Reagan was responsible for the closing of mental institutions. Shellenberger, leaving no stone unturned, digs into this a little further unearth's this.

While it's true that as California’s governor Reagan oversaw the closure of mental hospitals, he didn’t start the de-institutionalization. It began nationally in the 1930s, mostly to save money. The closure of California’s mental hospitals began in earnest in the 1950s, more than a decade before Reagan became governor. The emptying of state mental hospitals continued at the same rate between 1959 and 1969. By the time Reagan took office in 1967 nearly half the patients in California state mental hospitals had already been released.

As for the Lanterman-Petris-Short Act, it was a creation of civil libertarians, mental health professionals, and anti-psychiatry activists. Sponsored by two Democrats, it passed by a 77-1 vote. It would’ve passed even had Reagan vetoed it. And while Reagan, as president, cut over 300,000 workers from Social Security insurance and Social Security disability insurance, he reversed course a year and a half later. By the end of his presidency nearly 200,000 won back their benefits.  

In reality it was a Democrat who got the de-institutionalization of psychiatric hospitals rolling. President John F Kennedy proposed successfully proposed and successfully advocated a crucial 1963 reform that required the federal government to fund community mental health centers but leave it to the states to fund these mental hospitals. 

In 1963, JFK argued that medical advances would enable "most of the mentally ill to be successfully and quickly treated in their own communities and return to a usual place in society." 

Optimism may be good at the beginning, but when the problems worsen, it seems new approaches need to be considered. 

Shellenberger has an issue with the abundance of human poop on the sidewalks and the acceptance of open air addiction communities. Most of us have images in our heads of Amsterdam's Needle Park. Shellenberger flew there to see it for himself and discovered that it has all been cleaned up. The outcomes were troublesome and unhealthy. Amsterdam solved their problem by having the police and social workers working together to help individuals get off the junk and on to a new kind of life. 

This is not what's been happening in California. 

More can be said, but our research has only just begun. 

Related Link

The Mismanagement of Man (Review of San Fransicko)

Trillion Dollar Meltdown

Yesterday I finished listening to the audio verson of a powerful book by Charles R. Morris explaining the recent collapse of the financial markets called Trillion Dollar Meltdown. Published in late 2007, the book predicted all of the disastrous events of the past eighteen months and how they came to be. The scope and clarity of its many insights and anecdotes are worth pondering more deeply. I will get to those shortly.

Morris begins by giving an overview of the past six decades from the perspective of wealth creation, business expanse and retraction, the market drivers during this period and the political context of it all. You really cannot understand particulars without an overall context and often Americans forget this simple fact. What is happening today is an outcome of decisions made over a period of decades, not days, weeks or months.

According to one review on Amazon the book is written toward university level students, and it may be heady for some but even if you have a marginal understanding of economics and markets, you will glean plenty in my opinion.

I remember in high school my father invited a representative from the Dreyfus Fund come to our Bridgewater home to help teach me how to invest my savings. The fellow had stock market charts with all kinds of data, along with prospectuses and documents designed to show me the power of investing my money in the market. Well, I took $500 out of the bank and opened an account. I never saw that money again.

This is not an argument against investing. It is simply a statement that there's no such thing as a sure thing. This period in which I salted a few hundred dollars away was, according to Morris, the tail end of the Liberal/Keynsian era in economics. The resulting collapse of the markets in the 70's, with a simultaneous inflation so that your real holdings in dollars was about 75% less than they had previously been worth, culminated in Carter's disastrous presidency. (This is not to say Carter was not or is not a good man.)

It could be argued that half the debacle of the Carter era (double digit inflation, double digit interest) was due to the circumstances he inherited. In the end, it is during desperate times that a sea change can be set in motion. Thus was Reaganomics born, a new period of deregulation as Chicago-school economics gave the boot to Keynes.

Milton Friedman's ideas carried the day and the market climbed higher (with a few hiccups along the way) than anyone could have even dreamed. But, and it is an important part of the equation, part of the reason markets climbed so far is that the enormous size of the Baby Boom generation was becoming older now and, staring at retirement with a little more earnestness, they began to save more. This resulted in increased stock valuations. It also gave unscrupulous money managers increasing quantities of cash to play with, which was leveraged in extremis.

Morris shared how computers helped companies create financial instruments (bonds, etc.) that were so complicated even the people who sold them did not understand them. It was an amazing run. And when variables shifted, some companies had no idea how to determine their own true valuations. Some of these disappeared completely.

Add to this the increased debt loads and the absurdly high real estate valuations and you have a witch's brew of disaster in the making.

Though Morris published the book before Obama was elected, he accurately predicted that the pendulum is about the swing the other way. It certainly wasn't good to see 401K retirement plans shrink in value by 40% while the men who managed them made quarter million dollar a year salaries on average.

There are ideologies at war in the economic realm of which the average person usually has the most simplistic understanding. And this particular author lays some heavy blame on the Alan Greenspan camp. Morris gives the impression that he is in love with Paul Volcker.

Funny thing how every time things are good, the reigning president takes credit, and when things are bad the reigning president says he inherited it. And how politicians are ever trying to re-assure us that things are not as bad as they seem.

Not everyone who reviewed this book on Amazon liked it. Some found it biased against free market economics. One called it "A Coherent Rant." But I still found it raising good questions. He compared the complexity of the markets to Yertle the Turtle, in which everything is so interdependent that when you modify one variable it can have a serious impact on the stability of the whole.

My great-grandfather was scammed late in life by a fellow who was going to invest great-grandpa's life savings. The man lost everything and had his heart torn out. It's a scary thing to work hard and save and do all the right things only to have it plucked away with no legal recourse. This tragic family event led to my mother being more careful with her retirement assets. I myself took a measure of comfort in knowing (or believing) that the U.S. investment markets were the most regulated and reliable in the world, unlike many nations where there are no disclosure requirements or where banks can close and without warning take all your money saved (Russia) or where the government can devalue their currency by 50% overnight (Mexico 1981).

So how is it that a man like Bernie Madoff, former head of the NASDAQ stock exchange can make off with 50 billion dollars of other peoples' money right there under the big spotlights of our regulators? How about all the funds that invested in Enron because of the high returns and the approving nods of auditor Arthur Anderson?

Morris predicted a financial mess and he predicted right. What many of us wish to know is what happens next? Yesterday's paper carries a feature story with newly elected Senator Al Franken claiming the economy will "come back strong." I want to know how that will happen and why? Unemployment keeps rising. Our investment in bailouts and overseas military enterprises continues unabated.

I am especially curious what book being published today will be the one that most accurately portrayed the next two years? Maybe we'll find out in five. If sooner, you can be sure I'll write about it here.

Inauguration Trivia

It's official. At noon on Tuesday, January 20, we'll have a new president. Numero 44. Our first person of color to be officially seated in the Oval Office. Here are a few slices of inauguration trivia to help you get in the mood for this historic event.

Inaugurations used to take place in March. After Obama was elected in November, some people hoped that could be moved up to Thanksgiving, but alas... January it continues to be.

March 4, 1793. At his second inauguration, George Washington delivered the shortest inauguration speech on record. The speech totaled 135 words. There is but a single copy of this analog recording which is played once a year in the national archive to help us remember the father of our country. Inauguration speeches since the First Bush administration have been digital. All speeches since Lincoln, who incidentally was the first to have people of color in his parade, have been digitally re-mastered.

Our third president, Thomas Jefferson, was the first to have a parade afterwards down Pennsylvania Avenue.

James Madison was the first President to take the oath of office outdoors. March 4, 1817. The day has been described as warm and sunny with a temperature at noon estimated to be 50 degrees which allowed more Americans to enjoy and appreciate this grand event.

An unfortunate consequence was that it is seldom fifty degrees in Washington this time of year, especially now that inaugurations are in January.

In 1841 William Henry Harrison decided to brave the elements and deliver the longest inauguration speech ever, an oration lasting an hour, 40 minutes. His bluster was matched by equally blustery weather and Harrison, wearing neither coat nor hat, caught a cold which developed into pneumonia. A month later he died.

Not to be outdone, in 1853, President Franklin Pierce was also sworn into office on a cold and snowy day. The heavy snows continued from morn till just before the ceremony. But, events had been set in motion and the inauguration took place as scheduled. Unfortunately, Abigail Fillmore, First Lady to the outgoing President Millard Fillmore, caught a cold as she sat in the cold and damp during Franklin's swearing-in ceremony. The cold developed into pneumonia and she died by the end of the month.

Franklin D. Roosevelt's second inauguration was the first to be held on January 20, in 1937. Evidently he was eager to put his first term behind him and get on with the second. Some 200,000 visitors came to Washington for the event. Because of the cold, rainy weather -- nearly 2 inches of the wet stuff -- 3,214 people caught colds which developed into pneumonia. All but three died within a month.

The coldest inauguration came in 1985 when Ronald Reagan was greeted by an arctic blast that included extreme cold and wind. That morning it was 4 degrees below zero with the temperature reaching only 7 degrees by noon. The daytime high reached 17 degrees, but wind chill temps in the afternoon were well below zero. The swearing-in ceremony had to be held indoors and the parade was canceled when half the population of Northern Minnesota caught pneumonia and died. That evening President Reagan conceived of a satellite network which could alter the future of the world and bring an end to the Cold War. By the end of the decade the Berlin Wall fell.... and we've lived happily ever after.

The American Experiment

Am reading a great book right now: Dinesh D'Souza's What's So Great About America. There are so many passages I'd like to reproduce here that I'd risk copyright infringement, so I'll try to be brief. This book comes with my highest recommendation.

D'Souza brings a uniquely personal perspective to his theme. He was a native of India, but became a U.S. citizen by choice in 1991.

America, he points out, is not a place. It is an idea. People come to America because of a dream.

I first became acquainted with this notion in a book by John Warwick Montgomery nearly thirty years ago. The Founding Fathers really did create something original in the American experiment. Democracy, science and capitalism have been woven together into a culture without peer in today's civilized (or uncivilized) worlds.

Another facet of our achievement is the notion that history is not a purposeless and meaningless sequence or random events. Americans dream of progress. If I don't make it, my kids can make it.

Certainly we see this played out in myriad ways in our various personal histories. I see it in my family, my wife's famly, my friends' families. D'Souza notes that one part of the American dreams is "that knowledge is cumulative and that its applications to human betterment are continuous and neverending, that the future is certain to better than the past."

Of course this Utopian dream is scoffed at by many cynics and critics of all stripes. Nevertheless, it was this conviction that brought our nation to world leadership, a role that we have a responsibility to not abdicate or feel ashamed of.

The remarkable thing about the American Ideal is that we did not force the world to desire it or adopt it. We did not use guns to win the minds and hearts of our foes.

In one story, D'Souza tells how the TV media attempted to make President Reagan look bad during the "Reagan Recession" by interview the unemployed persons who had been disenfranchised, who were not experiencing the American dream. The Soviet Union showed these documentaries behind the Iron Curtain with the aim of making capitalism look bad. But the footage had the opposite effect as the cameras revealed that even our poorest poor had TV sets and cars and three meals a day.

The ideas in this book are far more vast than these piecemeal scraps. Despite its depth, it is an easy read. Find the book. His reasoned defense of America is well worth your time.