Can We Handle The Truth?
A Few Good Men
"A Few Good Men" is a compelling courtroom drama that delves into the intricacies of military honor and the moral quandaries faced by those who serve. Directed by Rob Reiner and featuring a stellar cast including Tom Cruise, Jack Nicholson, and Demi Moore, the film is renowned for its intense narrative and strong performances.
The story follows a young military lawyer, Lt. Daniel Kaffee (Tom Cruise), who is tasked with defending two Marines accused of murder. Initially dismissive of the case, Kaffee's perspective shifts as he uncovers a deeper conspiracy within the military hierarchy. Jack Nicholson's portrayal of Col. Nathan R. Jessep is particularly memorable, especially during the iconic courtroom scene where his character famously declares, "You can't handle the truth!" This moment epitomizes the film’s exploration of the conflict between truth and duty.
The script, penned by Aaron Sorkin, is sharp and laden with engaging dialogue that keeps the audience riveted. The film does an excellent job of balancing dramatic tension with a deeper message about the ethics of power and responsibility. "A Few Good Men" is a classic of the legal drama genre, offering not only a gripping story but also a thought-provoking commentary on the values and choices of those in command.
The Fed is Totally Wrong, and the Labor Market Isn't Strong
We have a case of incapacity to compute, to borrow the words of the Captain in Cool Hand Luke. That is to say, the lockdowns and stimmies that followed the pandemic severely tormented and distorted the US economy.
However, due to the decreased level of main street activity at the time, the $10 trillion in fiscal and monetary stimmies that were forced into the US economy during 2020–2021 could not be instantly absorbed. As a result, there was a massive and unprecedented accumulation of household cash balances, almost like stockpiling.
Household cash balances increased from a usual $13.4 trillion in Q4 2019 to a peak of $18.3 trillion in Q1 2022, at which point the main street economy had substantially benefited from the $6.5 trillion in fiscal stimmies. However, if the historical 59% ratio had been in effect in the first quarter of 2022, household cash balances would have been at or about $14.8 trillion, indicating that households were holding around $3.5 trillion in cash amounts that were above average.
This $3.5 trillion cash hoard has functioned as a counterweight to the Fed’s monetary braking action since March 2022. What has happened is that the earning power of those cash balances has soared as overnight rates went from 25 basis points to 525 basis points, even as households have been slightly reducing their extraordinary cash balances.
Even so, household cash balances remained well above average as of Q4 2023, at $18.0 trillion. Once more, the household cash balance in Q4 2023 would have been almost $16.5 trillion at the 59% historic ratio, indicating that the size of the cash hoard was still $1.5 trillion greater than usual.
Because of these massive, unprecedented cash cushions that have strengthened confidence, people have essentially continued to spend on consumption even while the Federal Reserve has worked to slow down economic growth. This massive cash cushion is effectively a type of delayed stimulus that was stashed during the pandemic era and is currently taking the place of what would have been a decrease in current consumption spending and an increase in the family savings rate.
The surplus balances have decreased from $3.5 trillion to $1.5 trillion, representing the liquidation of up to 60% of this remarkable family cash hoard. Furthermore, consumer psychology is expected to become more cautious as this financial cushion gets smaller over the next months and quarters, which will cause the measured savings rate to rebound.
In summary, the Federal Reserve (Fed) overreached itself (as usual) by providing easy credit during the Great Financial Crisis and then plunging into uncontrollably high levels of money production after March 2020. The Fed's failed historical playbook is exactly what led to the subsequent inflationary spike and turn to monetary brake action, which ensures that the next recession will be Fed-induced.
This time, however, there's a twist: the recession is being purposefully postponed. This is due to the fact that during the epidemic, the state's combined fiscal, monetary, and regulatory branches created a concoction of financial machinations that momentarily transformed an economic sow's ear into a silk purse.
The Jobs Report for March, released currently, offers a compelling example. The financial press called the 303,000-job gain "red hot" and "a blockbuster," but that's not how it actually happened. It was the behavior of an economy that, according to the cash cushion mentioned above, is living on borrowed time, and which the totally fictitious topline of the BLS establishment survey served to accentuate.
Regarding the news of the day, some perceptive observers have pointed out that almost all of the much-heralded job growth over the last few quarters has been in the part-time industry. To get there, though, you have to methodically peel back the absurdly twisted and goal-oriented headline jobs statistic from the BLS. The latter would have you believe that the US economy added almost 2.1 million new jobs between June 2023 and today's March 2024 report—a seemingly robust growth of 234,000 per month.
However, that comes from the purported "establishment survey." The latter is based on "mail-in" votes from approximately 119,000 US companies, or 2.0% of the 6.1 million business units in the country that employ at least one person. However, the BLS survey response rate is currently only 43%, down from 63% as recently as 2014. Furthermore, there is no particular reason to think that the 68,000 responses that are missing are a random sample or consistent with the mix of companies that have actually mailed in their results in previous quarters, months, or years. - David Stockman
Insight From the CEO of JP Morgan Chase
Jamie Dimon, the CEO of JPMorgan Chase, provided a candid perspective on the current economic landscape, particularly concerning inflation and Federal Reserve interest rates, in a recent discussion. Dimon highlighted that interest rates could fluctuate significantly in the coming years, potentially ranging from as low as 2% to as high as 8% or even more. This wide range reflects the uncertainty and volatility in the economic environment, influenced by various factors including geopolitical tensions, economic policies, and other macroeconomic variables.
Dimon also discussed the potential long-term effects of inflation, which he believes could be more persistent and impactful than many anticipate. The transition to greener energy sources and the overall impact of climate change pose additional inflationary pressures, potentially complicating the Federal Reserve's efforts to stabilize prices. Moreover, Dimon emphasized the challenges and risks associated with the Fed's quantitative easing (QE) and quantitative tightening (QT) policies. These monetary tools have been pivotal in recent years but carry risks that could affect the economic recovery and financial stability.
Overall, Jamie Dimon's insights suggest a cautious approach to the economic outlook, advocating for preparedness among investors and companies as they navigate a potentially bumpy financial landscape. His views underscore the complexities of managing economic policy in an unpredictable global environment. - Wolf Street
