The character Mike Campbell in Ernest Hemingway’s 1926 novel The Sun Also Rises was asked about his money troubles and responded with a vivid description embracing self-contradiction: “‘How did you go bankrupt?’ Bill asked. ‘Two ways,’ Mike said. ‘Gradually and then suddenly.’”
Ground-hugging interest rates for more than a decade kept the inefficient and the incompetent in business. Now, the jig is up, with a Mother’s Day weekend corporate massacre that saw the bankruptcies of seven corporations, each with liabilities of nine figures or more—in four cases, with more than a billion dollars in liabilities each.
This cluster of large bankruptcies happening in less than forty-eight hours is the most since 2008. Libby Cherry writes for Bloomberg (reprinted on Time): “Firms across every sector

Despite the soothing hot air from the White House and Fed officials, the financial system is becoming increasingly fragile and unstable. Maybe all of that intervention the past decade was not wise.

Original Article: "Finance Discovers Sting: "How Fragile We Are""

The talking heads on financial TV ask everyday where we are in the banking crisis. Is it over yet? After scooping up First Republic, JP Morgan’s Jamie Dimon said, “This part of the crisis is over.” After he said that, however, the shares of regional banks such as PacWest, Zions, and Western Alliance were cut in half. The market doesn’t believe Mr. Dimon.
Elisabeth Kübler-Ross described five stages of grief: denial, anger, bargaining, depression, and acceptance. ‎On Twitter, describing the typical timeline for a banking crisis, Real Vision’s Raoul Pal posted:
It’s one bad apple,
Well maybe it’s just a few
“Banks remain strong”
It’s the evil short sellers (we are considering a ban)
Ok, now we are banning shorts
Oh, seems that didn’t work
Cut rates
That didn’t work
Panic
Change . . .

Austrian business cycle theory points out that easy money leads to malinvestments. Once easy money disappears, the crash begins. Time to clean up malinvested assets.

Original Article: "Paying the Piper: Time to Clean Up the Latest Malinvestments"

An ongoing debate concerns the plunge in the four-week Treasury note yield in relation to the three-month Treasury yield. At least one tweeter claims it’s all about the coming debt ceiling showdown with the difference in rates (3.145 percent versus 5.070 percent) reflecting the risk of having liquidity tied up within three months as the debt ceiling exercise is run through DC sausage making.
On the other side is Eurodollar University’s Jeffrey Snider who tweeted in response, “The behavior of bills today, esp. 4w[eek], was way too like April 2008 not debt ceiling. Just massive demand for these things to the point that it’s 2008-style below other money alternatives. This ain’t debt ceiling rather pure collateral run.”
Snider tweeting again:
Let’s put this to rest right now: bills and debt

Walter Bagehot, as Jim Grant writes, believed that bankers and central bankers should exhibit financial discipline. He would not recognize today’s banking world.

Original Article: "From Discipline to No Discipline: The Sorry Evolution of Modern Banking"

The Austrian business cycle theory teaches us that low interest rates manipulated by the central bank lead to malinvestments, which are cleared when the central bank lets rates rise, reflecting a truer cost of capital. A real-time example is happening in the United States commercial office real estate market. Combine that with the government’s covid lockdowns, which forced employees to work from home. Now, employees never want to change out of their pajamas while on the clock. Notwithstanding Jamie Dimon’s call for JPMorgan Chase & Co. employees to return to the office five days a week, most employers have acquiesced to their employees, and the need for office space has diminished.
In downtown Louisville, Kentucky, the twenty-nine-story Fifth Third Bank building, which is only half

The government wants to make gas cars a lot more expensive. But electric vehicles are so expensive in the longer term that gas cars still look like a better deal.

Original Article: "Peak EV: Electric Vehicles Will Fade as Their True Costs Become Clear"
This Audio Mises Wire is generously sponsored by Christopher Condon.

Every decade or so bank failures and the subsequent bailout response via central bank intervention appear. The latest jangling of depositor nerves involved US regional banks and a certain Swiss bank of great systemic importance. As James Grant writes in his book Bagehot: The Life and Times of the Greatest Victorian, “In economics, the most ostensibly rigorous of the social sciences, progress–and error, too–are cyclical; we keep stepping on the same rakes.” Sounding Rothbardian, Grant writes, “In banking, though, accidents came in clusters. Bank runs, unlike train wrecks, were contagious.” Nothing has changed.
Walter Bagehot famously urged the Bank of England—or “the Old Lady,” as the world’s first central bank is referred to in Grant’s elegant telling of Bagehot’s life and the economic

“On Wednesday, the Environmental Protection Agency plans to announce tough new tailpipe emission standards designed to effectively force the auto industry to phase out the sale of gas-powered cars,” reports The Verge, with the provocative headline “The End Is Nigh for Gas-Powered Cars.”
Environmental, social, and corporate governance (ESG) is the newest religion, and we all know who the practitioners are. Electric vehicle (EV) owners sing “Hallelujah” when they pull out of their garages. The investor-class ESG evangelists believe the new belief is in its beginnings. Whatever the Biden EPA does, investor Harris Kupperman thinks it’s likely just the Church of What’s Happening Now.
Kupperman, referred to as Kuppy by Real Vision’s Maggie Lake, told her, “Well, I think we’re nearing peak ESG,

Because of inflation and a lack of a savings ethic, Americans are less prepared for retirement than ever. The numbers are discouraging.

Original Article: "Ready for Retirement? Fewer and Fewer Americans Are Saving for That Time"
This Audio Mises Wire is generously sponsored by Christopher Condon.

If you watched the Fed Chair Jerome Powell testify before the senate and the House, you heard over and over that banks are well capitalized. The non-sequitur should inspire the Shakespearean quote “Methinks you protest too much.” The very next day after the hearings, shares of SVB Financial Group, parent of Silicon Valley Bank, fell 60 percent (and another 30 percent in afterhours trading at this writing) after a Wall Street Journal article revealed, the bank “had sold large portions of its securities portfolio and would raise fresh capital, highlighting a broader problem for U.S. lenders who have seen rising interest rates hammer the values of their bond holdings.”
In What Has Government Done to Our Money? Murray Rothbard reminded us:
The bank creates new money out of thin air, and does

Thus, the nearly half the adults in America who haven’t saved remain childlike and live in barbarism.
For those who are saving, volatile markets point to a less-than-cozy retirement for the majority. Last year’s beat down of the average 401(k) plan was 20 percent, which didn’t help. But retirement participants are keeping the sunny-side up, believing “they’ll move closer to their retirement goal by ending 2023 with more in retirement savings than at the end of 2022.” We can only wonder what makes folks believe that.
Most retirement savings are invested in index funds which track the S&P 500 and, “particularly for older savers, in actively managed equity funds heavily weighted in the benchmark index’s top stocks,” writes Woolley.
Shares of giant tech companies, fueled by zero-percent

The line for the self-checkout registers at my neighborhood Albertsons stretched into the store’s produce section. Is this human progress? I wondered, scanning my groceries—this just after I had filled my car’s gas tank at a not-so-convenient convenience store near work.

The subject of time and money has hit a boiling point. Just look at Sri Lanka and Iran, where food riots have turned deadly, or, shall we say, currency riots have. People can’t buy food, and “protesters angry at the soaring prices of everyday commodities including food, have burned down homes belonging to 38 politicians as the crisis-hit country plunged further into chaos, with the government ordering troops to ‘shoot on sight,’” reports invesbrain.com.

The Wall Street Journal reported on September 22 that Turkey’s central bank cut that country’s benchmark interest rate to 12 percent from 13 percent, pushing the Turkish lira lower as much as 0.4 percent against the dollar to a new record low after the decision. One US dollar recently bought 18.3866 lira.

The average card-carrying Austrian would say that the Federal Reserve is creating money by the bale, with evidence being Consumer Price Index prints of 8.6 percent per the Bureau of Labor Statistics or over 15 percent per John Williams’s shadowstats.com computation based on the way the government calculated CPI back in 1980.

Monetary inflation results in a general rise in prices, often called "price inflation." But rising prices are not always "inflation." In any case, more government regs and subsidies won’t help.

Back to 2020, the federal government’s covid-mandated shutdown of meat production plants hobbled the nation’s meat production capabilities, leaving farmers with nowhere to send their beef. This resulted in them having to cull cattle and other livestock. The uncertainty caused farmers to scale back their production at the time, which Arun Sundaram told CNBC “can affect production more than a year, year and a half down the road.”

When the economics profession turns its attention to financial panics and crashes, the first episode mentioned is tulipmania. In fact, tulipmania has become a metaphor in the economics field. Should one look up tulipmania in The New Palgrave: A Dictionary of Economics, a discussion of the seventeenth century Dutch speculative mania will not be found.

For the Wall Street sequel, the subtitle was Money Never Sleeps. But the Oliver Stone reprisal of Gordon Gecko was the stuff of 2010. In America, a decade plus ago, money slept. Now, it truly doesn’t, with cryptocurrency prices gyrating 24/7/365. This frantic activity has spread to other asset markets.

The financial covid crash of 2020 came and went in a month as the US government threw every monetary and fiscal trick it had at the government-imposed flash panic. We’ll never know which malivestments would have been cleansed. We live on with goods and labor shortages and with higher prices we’re assured by experts are transient.

While bankruptcy has a negative connotation in the business world, “Bankruptcy fulfills the crucially important social function of preserving the available stock of capital."

“If the market continues to see wild swings based on Elon Musk tweets, it’s going to be a big setback for this asset class,” Matt Maley, chief market strategist for Miller Tabak + Co. told Bloomberg. “The fact that it sees such wild swings to the tweets from one person takes away the legitimacy of the asset class.”

In Las Vegas, asset price inflation is combining with rising prices on building materials to create a real estate bubble of remarkable proportions. 

Banks and accounting trickery go together. Last year, as I remember back to my banking days, financial institutions followed the advice once proffered by one of our board members, “If we’re going to the dump, let’s take a full load.” 
When the pandemic struck, banks dumped plenty in their loan-loss provisions, $60 billion, expecting the worst.

A gentleman who does work for us sent me a text recently saying the price of his supplies has increased 20 percent, so he wants to increase his monthly fee 10 percent. It was a nice way to ask, and I said sure, especially given that he’s willing to take a haircut on his labor to make the increase more palatable.

Rothbard: “At the outset of every step forward on the road to a more plentiful existence is saving….Without saving and capital accumulation there could not be any striving toward nonmaterial ends.”

Something good is coming out of the covid lockdowns. Economist David Rosenberg released a special report via the eponymous Rosenberg Research, concluding “the pre-COVID-19 ‘norm’ of a 7% personal savings rate will morph into a post-COVID-19 norm of 10%.

The New York Times managed to find some young people whose silver spoons provide a sour taste in their mouths. To hear them talk, their good fortune is making them sick. 

“Russia, Russia, Russia,” the current president used to sarcastically chastise opponents for wondering about 2016 election tinkering from Putin’s principality. Recent MAGA rallies featured “Covid, covid, covid,” with President Trump complaining that the press could think of nothing else.

Make the money cheap enough and government intrusive enough, and incongruous headlines appear side by side. For instance, from the Las Vegas Review-Journal comes this head-scratcher: “Las Vegas Housing Market ‘on Fire’ as Economy Limps Along.”

During Real Vision’s Daily Briefing of August 13, Ed Harrison asked rhetorically, “How is it possible for you to have a bull market, a new leg up in the business cycle when bank stocks, the traditional value cyclical trade are 30% off their highs? That’s not a signal of bull, it’s a signal of secular stagnation.”

Economist Irving Fisher famously said just before the 1929 stock market crash, “Stock prices have reached what looks like a permanently high plateau.” Whoops. Fisher wasn’t just any old economist. Joseph Schumpeter called him "the greatest economist the United States has ever produced." Milton Friedman and James Tobin agreed.

While the economic storm caused by COVID-19 has seemed to wane (temporarily?), the stock market can’t seem to go but one direction—up. Graham and Dodd’s meaty 700-page Security Analysis has soared to number 7695 on the Amazon best-seller list. According to Warren Buffett, the book is A road map for investing that I have now been following for 57 years.

Listen to the Audio ​Mises Wire version of this article. Does a pandemic trump entrepreneurial foresight? Many in business will say yes, “nobody saw this coming.” Lack of customer demand and government lockdowns are “no fault of their own.”
But Penny Chutima, co-owner of the Lotus of Siam restaurant, did see it coming. Chutima and her mother, Saipin, have operated the off-Strip Las Vegas staple for years.

The year 2006 seems like a lifetime ago. The housing boom seemed to be going full throttle, but danger lurked. I wrote on LewRockwell.com in March of that year, concerning a Las Vegas real estate seminar, that “nary a discouraging word was spoken.”

In a bit of holiday news no one will care about, the Treasury announced it would return to selling twenty-year treasury bonds to aid in funding the nation’s trillion-dollar deficit. It was 1986 when the Treasury last issued twenty-year paper. Of course the question is: who or what will be the buyers?