Inflation to Get a Boost

Last Friday, Chairman Ben Bernanke of the Federal Reserve Bank, made a very important speech.  More so than his typical speech.  It should be clear to anyone that all attempts to stop the current depression have failed.  We have unemployment on the national level of nearly 20%, when all discouraged job-seekers are counted, and the numbers are counted as they historically have been kept.  Shadowstats uses an algorithm like this and argues that the real national unemployment rate is around 22%.  In this plot, the red trace is the one you hear about on the news; the gray plot is the broadest measure of unemployment, and the dark blue is the best guess taking all of the known corrections and omissions out.  In places, this number must exceed 30%.  I'm hesitant to say much higher, but there are tent cities many places in America.  

So since the Fed has been running essentially zero interest rate since 2008, and that has only allowed the well-connected to borrow money for free and speculate with it, what can Helicopter Ben do? 

Well, fire up the helicopter and drop more money.  Ben says inflation is too low.  The official inflation number is close to zero.  Unfortunately, the Consumer Price Index does not include food and energy in it's "core inflation" that's reported.  Howard Ruff reports the following:

For example, Agricultural Raw Materials are up 24%, The Mineral Index is up 25%, The Metals Price Index is up 26%, Coffee is up 45%, Barley is up 32%, Oranges are up 35%, Beef is up 23%, Pork is up 68%, Salmon is up 30%, Sugar is up 24%, Wool is up 30%, Cotton is up 40%, Palm oil is up 26%, Hides is up 25%, Rubber is up 62%, Iron Ore up 103%. Those are prices at the wholesale level.

Remember the AOL Finance article I reported here about two months ago that said:

...(at Walmart) the price of a 32-ounce bottle of Windex household cleaner jumped 50%, a 12-ounce box of Quaker Oats instant grits climbed 65% and a 50-ounce container of Tide detergent rose by more than 50%

Inflation is what we expect from keeping rates low and creating money out of thin air, and we see inflation.  You can expect your grocery bill to be going up in the range of those numbers Ruff gives.  Everything is going to get much more expensive.  You will note that the reports earlier this week that social security was not going to pay a cost of living adjustment because inflation is so low.  How long before we see seniors starving?  How long until grandma and grandpa go dumpster diving? 

Nevertheless, the Fed says we need inflation now, so he's going to devalue the money supply some more.  His idea is to get you to go buy something before your money becomes worthless.   I don't understand why those highly exalted Ph.D.s at the Fed can never see step 2.  OK- so we go spend our savings; then what?  We buy a car or a TV or a refrigerator; then what?  Then we're in worse shape than we are now.  If nothing else, we create a short term bubble and long term price crisis like "Cash for Clunkers" did.  And Helicopter Ben is going to maintain the zero percent interest rates, because if the rates go up, the Federal.budget line item for interest on the debt goes up, and we have to sell more bonds.   Here's the thing.  Everyone knows we're doing this.  Everyone who owns dollars knows they're going to be worth less and less until they're worthless.  So they'll stop buying bonds at the current interest rate.

Over at the Economic Collapse blog, they make a good argument that this is just to bail out the bankers without saying the words "bail out".  They call it The Biggest Bank Robbery In History. 

Friends, I don't see a way out of this.  I've been beating on this drum since I started here.  Do your best to prepare. 

A balloon at the moment it pops (Ted Kinsman photo from here).

Epilog to Fed Watching

So what did the Bernank do?  He did just about nothing, it's what he said.  He issued a tepid statement early in the day, 10 AM eastern, which is 8 AM out in Jackson Hole.  If they had announced the QE round, they probably would have issued that statement after the markets closed, at 3 or 4 PM out in Wyoming.  No, this appears to have been done to cause the market to go up.  My opinion only, of course.  The Blaze reported:

Chairman Ben Bernanke sent a clear message Friday that the Federal Reserve will do more to “help” the still-struggling U.S. economy. His remarks seemed to leave two questions: What exactly will the Fed do? And when? 

The "what" is pretty obvious.  With interest rates essentially zero, there's not much room to lower them; what's another quarter percent going to do?  The "what" will have to be some form of QE, most likely buying more US Treasury bonds, as they've been doing for quite some time.  The Wall Street Journal put it this way:

Fed Chairman Ben Bernanke left almost no doubt this morning that he’s leaning toward another bond-buying program, quantitative easing,  a so-called QE3. He offered a studied defense of everything the Fed’s done so far, and he isn’t sold on economic growth. Inflation’s only a ghost, so the deck’s are clear on that front.

Inflation's only a ghost!  "That Minx!  What a lively sense of humor" (Otter - Animal House).  Food inflation of 10% is just a ghost!  Non-existent!  Hahahahahahahaha!  Wew.  After that knee slapper, the WSJ continues:

From our reading of the speech, it appears that Bernanke has given up on the idea of Congress stepping up and taking care of its business, which means he thinks the “fiscal cliff” will remain an issue through the November election and likely right up to the end of the year. The drag on the economy will only get worse the longer that hangs around, and that’s apparently unacceptable to the Fed chieftain.

And from my reading of the WSJ and the markets' reactions, they all believe Bernanke is going to "take care of business".  The major indices, DJIA,  NASDAQ and the S&P 500 were all up about 0.6%, but the metals were up more:  Gold was + $36.30, 2.19%, Silver + $1.30,  4.27%.  The dollar, not surprisingly was down, 0.52%.  So, now the "when" question comes up.  My guess is whenever this little goose to the markets starts to decay away, or if the election looks too close.  End of September?  Just a WAG.

Helicopter Ben will ride again.

Pi Day

As usual, I pretty much missed it.  Most people will see this on 3.15 and not 3.14.  It's a slow news day in Space, and while the news made me want to do a piece on central bank insanity, the problem is that there's nothing new there.  I have lots of old articles I could repost, with the built in problem that they all have things in them younger readers won't understand.  Simple example: if they don't know who Ben Bernanke was, how will they understand references to Helicopter Ben or The Bernank?  What about Alan Greenspan?  What about when Janet Yellen was the "head of the Fed?"

Of the few pi day posts I've done, this one appeals to my warped sense of humor the most. 

From Saturday Morning Breakfast Cereal. 

Being an engineer, which one never really retires from, I'm required to be pedantic enough to point out there can only be a pi day in countries that use month/day format rather than day/month.  According to the Wikipedia, it's not strictly an American thing.  It's the US, Philippines, Federated States of Micronesia and Marshall Islands.  The last two were US territories until the 1980s while the Philippines became independent from the US in 1946 after WWII. The rest of the world will never know Pi day.

In addition to being pi day, it's also Albert Einstein's birthday and the day that Steven Hawking shuffled off this mortal coil. I think nobody in the current generation of scientists has been compared to Einstein as much as Hawking was.  It's interesting they have the same day as major bookmarks in their lives.  One checking in, one checking out.

Odds and Ends And Stuff

Feeling a little better as an unplanned day off closes.  I have an almost Brigid-like post (as if that's possible) about houses, homes and the lives they see rolling around in my mind, but some other time.   

Yesterday, John at Improved Clinch had a link to a post by Vin Suprynowicz "Do You Really Believe They're Going to Pay Off This Debt?".  If you've been around here, you might know that I believe "things that can't go on, won't go on" and we can't possibly pay the debt off.  Vin believes they will default on the dollar, declaring all the bonds worthless.  I tend to think they plan to inflate our way out of the debt.  I commented,

I don’t think they intend to pay off the debt in any real sense. Ben Bernanke once said, “people know that inflation erodes the real value of the government’s debt and, therefore, that it is in the interest of the government to create some inflation.”  I think they may intend a period of hyperinflation to devalue the currency.
Maybe this creates the atmosphere that enables a default, and maybe they just print the money owed to China/whomever on a roll of Charmin (same difference).
I came across a quote from Helicopter Ben the other day that reveals more insight into his “thought” processes. In 1999, he wrote: “A central bank can… extend loans to depositories, other financial intermediaries, or firms and households…. ” Households?? If the Fed directly depositing money into everyone’s accounts isn’t inflating and devaluing the currency, what is?
The guy has not had an original thought since his graduate school work on the depression, which means even more years since he had a correct original thought.

That first Bernanke quote is originally here and the second is here. In the article "50 Statistics About the US Economy That Are Almost Too Crazy To Believe", the authors say the US next year is going to issue almost as much debt as the rest of the world combined.  A couple of months ago, in one of this blog's very first posts, I commented about that, saying

First off, think of how much money that is. With a deficit of 1.4 trillion year to date (again, ATTOTW), we have to sell around 280 billion in bonds per month. Who has the money to soak up that much in bonds? According to the 2009 CIA World Factbook, that’s more than the annual GDP of economies smaller than the 32nd largest economy of the world (South Africa). See: this list on Wikipedia which is pretty much the only kind of facts I trust to the Wikipedia. So who can continue to buy up that kind of debt? Things that can’t go on, won’t go on.

In just the time since the end of February, when I wrote that, the projected deficit has increased to 1.6 Trillion.  If we have to issue more bonds than a country's entire GDP, we can't count on selling them many bonds.  It leaves us with the world's largest economies as our only realistic customers.   That's the EU, China, Japan, Canada, India and a few others.  In case you missed it, they all have plenty of problems of their own.  

Events may keep all those nice plans of mice and men from going forward, though.  The middle east appears to be lurching toward open warfare, possibly between Turkey, Iran and Israel.  Israel is frequently quoted as being a nuclear power, although I believe they have never confirmed that.  Wikipedia says the Turkish air force has 40 (presumably) US B61 nuclear bombs.  Iran, of course, has been working on attaining nuclear weapons for some time, and I suspect they may well have some number of them; either bought or made in country.  The world's first nuclear war?  If a country did not intend to use nuclear weapons, but had nukes used against them, would they then use their nuclear weapons?  What if their entire country was on the verge of destruction or their entire people on the verge of annihilation, would they use them then? 

Turkey has been moving away from US interests for some time - remember how in 2003 they refused to cooperate with the start of the Iraq war? - joining Iran should cause us to drop relations with them, and could conceivably cause the disintegration of NATO.  Not that burying NATO is necessarily a Bad Thing. 

According to this article in the Guardian, the next big attempt to run the blockade could be soon, but probably not later than September. 

Israel's no-compromise attitude to aid convoys could be tested again after two Lebanese organisations pledged to send boats to Gaza in the next few days. Reporters Without Borders is attempting to assemble 25 European activists and 50 journalists for a boat leaving Beirut. The Free Palestine Movement is planning a similar attempt.
George Galloway, the founder of Viva Palestina, announced in London that two simultaneous convoys "one by land via Egypt and the other by sea" would set out in September to break the Gaza blockade. The sea convoy of up to 60 ships will travel around the Mediterranean gathering ships, cargo and volunteers.

Israel is close enough to Turkey that it won't take long for things to happen once the ships are sailing.

The Strategy Page posts this article that offers other viewpoints that moderate the what I've quoted here.  Important points are that Turkey and Iran have never been allies historically, and are probably just joining together for bluster.

Turkey and Iran have offered to provide warships to escort another aid convoy for Gaza. This is pure posturing, as neither Turkey nor Iran could carry that out in the face of Israeli naval and air power. Moreover, the Turkish military is much more pro-Israel than the current Islamic government (which is using all this to divert attention from economic and corruption problems.)

...

Iran, which leads the effort to destroy Israel (and makes frequent public announcements to that fact) sees the May 30th incident off Gaza as an excellent diversion from efforts to move more missiles into Lebanon (for Hezbollah to use against Israel), and gather more European and Arab support to break the blockade of Gaza. Most Arab states fear Iran (historically, a real threat) more than Israel (mainly a threat to Arab pride). But pride and reality don't get along in this part of the world, and currently pride is winning. That will quickly change as Iran makes another move against an Arab state, something that is happening with increasing frequency these days.

...

Iran is also making nice with Turkey. This, historically, is an unnatural act. The Turks and Iranians have been arch-foes for over a thousand years. They have never made peace before, just ceasefires. The current phony peace ignores Iranian calls for Iran to replace Saudi Arabia as the guardian of Mecca and Medina, and for Iran to establish a new Caliphate (Turkey had held that largely empty title for centuries, but gave it up in 1924). The only thing the Turks and Iranians have in common is the rough way they treat their Kurdish minorities. Iran has a large (25 percent) Turkic minority, but these Azeris tend to be anti-Turkey and very Shia.

What's going to happen?  It's hard to say.  I think it comes down to the individuals in all of the command seats at the critical times, as it has so many times in the past. 

It is frequently said that the President of the United States is the leader of the free world.  Right now there is no leadership; there is no leader of the free world.  Indeed, the "free" world itself may be on the brink of vanishing.

What’s All This Gold and Weiner Stuff, Anyway?

This past week, Congressman Anthony Weiner (D – Wolf 359) started a campaign against Glenn Beck and Goldline, a company that sells gold coins and bullion. Beck has responded by (1) making fun of his name and (2) posting real facts from good sources that contradict Weiner. Perhaps the most stupid argument was that you shouldn’t buy from Goldline, just buy the gold ETF, ticker symbol GLD. I subscribe to Beck’s website, originally because I found him funny, but really have no dog in this fight. I am not a customer of Goldline, and I fund this blog entirely anyway (notice there are no ads?) as long as my day job holds. The arguments against Goldline are easy to refute and irrelevant, largely just a harassment tactic (get your “enemy” off message, off balance and out of their comfort zone). What I want to talk about is gold, economics and investing.

As mature adults, we are beyond making fun of the name “weiner”.Heh heh, heh heh. He said "weiner".

In the summer of 2000, Mrs. Graybeard and I took a course in lost wax casting - the process by which most jewelry and many small, fine-detailed mechanical parts, are made. We cast several pieces in silver and for my final project, I wanted to work in gold. I noticed gold was around $250/oz., and that seemed cheap. I didn't follow the price of gold, but remembered prices in the $700 - $800 range in the early '80s. As it turns out, that $250/oz was just about the dead bottom of a multi-year bear market in gold.

Why is gold around $1200/oz now when it was $250/oz in the summer of Y2K? Why is oil high when demand is low from the big consumers? Is it those "ebil, debil speculators?" From watching the cable TV channels talk about stocks and other investment vehicles, and from other observations, I'm convinced most people - even people who advise on stock and other financial instruments - don't understand inflation.Most people don't even really understand our financial system.

Around that time in Y2K, it was occurring to me that my 401k had not grown as fast as I'd like and maybe I should do more than just follow the standard recommendations. So I started reading about gold along with other investment opportunities. Remember, this is late 2000; the tech bubble had just burst. I lost money in that like everyone. The real estate bubble had not started. I found that in the '70s it was standard advice to have about 20 to 30% of your IRA in gold as a safe haven, "just in case". As my research moved on, I started to read the commentators on Kitco.com.

 I quickly encountered a group of people called "gold bugs" who seemed like a lunatic fringe.  They vocally say "gold is money" and "all fiat currencies (like the dollar) eventually collapse", "inflation is going to get worse" and so on.  I thought they were lunatics.  I was more interested in the technical analysts who pointed out demand was getting ahead of supply for gold and the time needed to get a mine deposit found, developed, and producing gold (about 10 years) means that the demand will exceed supply for a long time.  Can you say increasing prices?  So I found some ways to include gold in my retirement plans, and have happily watched it do well as everything else is having troubles.

Then a funny thing happened.  Some of the "lunatic" gold bugs' predictions started coming true.  About 2005 (I think), I started reading predictions of problems related to something called "sub-prime mortgages" that I had never heard of, and they warned that it had the potential to take down the entire world's economy.

For you people who still think this just isn't mainstream enough for you, would you listen to Robert Kiyosaki, whose "Rich Dad/Poor Dad" series has become a wealth building franchise and a staple of fund-raising events on Public Television?  One of his guys has a book called, "Guide to Investing in Gold and Silver".


If that's too staid, the "Angriest Guy in Economics", the Mogambo Guru, might be more your speed.  A little tough to "get" the first time I read him, I eventually thought if you took a classic Robin Williams full-tilt-bozo comedy bit from the late 70s and made it about economics, it might sound like the Mogambo.

In the 70's, a guy named Howard Ruff wrote a book on how to survive the inflation  of that decade.  He's still around, and following one little piece of advice from his book has made me thousands.

Inflation is always a result of monetary policy.  Always.  How does inflation occur?

Imagine you had a printer that could make perfect copies of any dollar denomination you wanted.  Because it's technically, you know, highly illegal to do this, you want to be disciplined about how you use it and reserve it for emergencies.  You need to buy a car and get into a bidding war at an auction.  You win because you can always pay a higher bid, just by printing a little more money, and you always get away with it.  Can you imagine that after a while, you would use this power more often?  Now imagine everyone had such a printer.  Can you imagine that the prices of everything would be bid up by the larger supply of dollars?  This is the essence of price inflation: an increase in the number of dollars available to bid pushes up price. 

And that's what the Federal Reserve is doing.  By flooding the markets with "liquidity", they really mean currency.  They used to release data on the size of the money supply, but stopped some years ago.  I assume it was because they thought it was too scary for us hicks to look at.  Too much negative feedback from economics writers.  Ben Bernanke, who was just a member of the Federal Reserve board at the time, famously said (in response to questions about deflation, in 2002), "The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost,"  What would you think if you had a big pile of dollars, like OPEC or China or the various countries that we buy from?  You would think, "If there's much more of them, mine will be worth much less; I'd better store my wealth in something else".  Exactly that happened, and the price of gold spiked immediately after his statement.  The image of the Federal Reserve dumping baskets of currency out of a helicopter was coined by economist Milton Friedman.  Bernanke's remark about the printing press earned him the nickname "Helicopter Ben" (don't remember where I stole this picture - if it's yours and you don't want me to use it, just comment).

Bernanke also said, "people know that inflation erodes the real value of the government's debt and, therefore, that it is in the interest of the government to create some inflation."   Maybe, but it's not in the population's interest.  The problem is that if you're a saver, your money is going to be devalued by that inflation.  If you are living on a retirement pension, social security or some other similar benefit, you are screwed.  The government horribly understates the cost of living because they don't include food or energy costs.  Your social security cost of living adjustment will never keep up with the real cost of living.   

And that's largely why oil is expensive today, despite low demand.  Oil costs more dollars because each dollar is worth less.  Thinking oil seems very expensive is like everyone on the Titanic thinking the water seems awfully high, not that they're sinking.  Think the stock market is doing well - or was?  Have you seen the DJIA or S&P 500 corrected for inflation?  Corrected for inflation, you are loaning companies money for about 1.6% per year return.  Some periods are less, others are more.  The $1200/oz price of gold includes inflation and increased demand due to the widespread concern that the worldwide currency system is failing.

We call our dollar a fiat currency because it's worth is declared by fiat.  It's worth exactly what someone is willing to give you in exchange for one.  We do not promise any amount of gold, silver, wheat, rice, pebbles or manure in exchange for one.  Inherently, it's only worth the paper and ink used to make it. 

Money is different from currency: currency is the paper and base metal coins you have in your pockets while money is something that has value and is used as a medium of exchange.  For much of history, money was gold or silver.  People on Yap Island used large stone rings.  Paper money was invented as a way around carrying large amounts of coins.  I've heard it argued that there is nothing special about gold or silver and that's true.  They are simply something that has a universal history as valuable.  People want them.  You could theoretically have a fiat dollar like we do and have it be stable.  It requires politicians, bankers and everyone involved to be honest, and responsible.  It requires politicians not create vast amounts of currency so they can deficit spend, go to war, hand out food, healthcare or any of the other things governments do with this made-up money.  In other words, fiat currency will never work in the long term. 

The basis of money only has to be agreed upon, relatively portable, and dividable (diamonds are out: you can't cut one to give change).  Gold and silver fit the bill.  If the fiat currency system collapses, they will be accepted.  There will be barter and other primitive ways of dealing with each other.  Realize that if there is widespread collapse, your gold ETF will be an abstract, almost worthless thing.  If there is enough gold to fill all their orders, you will still need a functioning world to get it out.  If you buy coins or bullion, you don't have that concern. 

The world currency system collapsing?  There are writers who think we are seeing the death throes of fiat currency.  Historical writers are fond of pointing out that fiat currencies always collapse because politicians and bankers just can't resist screwing with them.  It might also be the death throes of Keynesian economics that essentially asserts governments should spend more when they're out of money (in a depression, tax revenues are down just when Keynes says we should spend more).  While that will be painful, it might be like getting an antibiotic shot for a bad infection: pain now for complete cure in the long run.

The War on Cash, and Nearly Comic Book Levels of Absurdity

Today's Telegraph (UK) news site contains an article adding fire to the war on cash: "How to End Boom and Bust: Make Cash Illegal " by Jim Leaviss, identified as being, "head of retail fixed interest at M&G Investments". 

The gist of the article is that once all money is controlled by the world's governments, everything will be wonderful.  They'll have total control over all of us and all of our lives for once.  If people think they should save money, the governments can start charging us to keep it - a tax on savings called negative interest (currently in use in Sweden, Denmark, Switzerland, the European Central Bank, and Australia).  Negative interest will make us spend if the alternative is watching our money evaporate.  Likewise, if we're spending too much, they'll be able to offer interest payments to incentivize us to save money.  If they want to steal calculate they need to confiscate money out of everyone's account, a  Cyprus Haircut, it's a simple as adjusting all the accounts at once.  If despite the negative interest rates being calculated to ensure everyone spends, the velocity of money isn't high enough, they can emulate the helicopter Ben or helicopter Janet fix easily by directly creating money out of nothing for your account.  It would make the scenario Jim Rickards described here drop dead easy. 

I can't even accept his basic premise that he could remove "boom and bust cycles".  The other word for this is the business cycle, which economists have been studying for a few hundred years.  I believe that to be a natural consequence of how markets work.  I can't believe they'd remove it by manipulating us.   

With no need to be slowed down by people bringing actual cash to banks, they have computer control, such that they could change the value of your money as often as they want.  Conceivably day by day or even second by second - if they thought control of the economy required that.  Of course, if all business is conducted this way, the black market disappears (in theory) and tax collection is on 100% of transactions (in theory).

What could possibly go wrong?  I mean besides everything.

The article, and the others like it, is full of glittering nonsense that flies in the face of every aspect of human nature.  They completely destroy the essence of what money is.  Money is more than just a medium of exchange; it's also a store of value or purchasing power; and a standard of value.  By changing what money is "worth" from day to day, they obliterate money's role as a store of value, a store of purchasing power and a standard of value.  The only role left is the medium of exchange.  In a cashless society, all you'd ever know is you exchange some number of credits for some amount of a good or service you need.

I'd think it would become impossible to save for retirement or any major purchase if these policies were in place, but central bankers seem to hate savings.  They want everyone to buy on credit.  It's hard enough now with the interest rates going negative (in real terms) like the Fed and world central banks have in effect.  (If the interest cost on a loan is less than the rate of inflation, the interest payment is negative in real terms.  The US has had negative real interest rates since at least the 2008 crash.) 

It's impossible to carry cash if it doesn't exist.  Why even carry a debit card if they can just put a tracking chip in your arm or somewhere?  In reality, you know there were would be barter based on something people value and want, be it shiny pebbles (gems) or old coins that they don't confiscate.  Doesn't 5000 years of human history demonstrate they'll fail?  

Absolute control over every person on the planet, right?  The absolute end of individual freedoms?  You're reduced to nothing but an economic unit who buys or saves depending on how they choose to control you.  It sounds like the "CONSUME" signs in They Live.  Only worse. 

The Administration and Their Lies About Inflation

The word "lies" might be a bit harsh sounding because it implies they really know that what they're telling everyone is false and it's entirely possible that the whole lot of them are simply too stupid to know it's a lie.  Does, "... and Their Idiocy About Inflation" sound better?  Seems about the same to me. 

Today's post is a result of one from Ron Paul on the Mises Institute website: "Respect the Fed?  No, End the Fed."  The great Milton Friedman famously said, inflation is “always and everywhere a monetary phenomenon” and thus the responsibility of central banks. and in this case, it's primarily due to the insane monetary creation that has been going on under the Bidenistas and really since the early 2000s.  It accelerated due to the Quantitative Easing (QE) episodes and ZIRP (Zero Interest Rate Policy) under "Helicopter" Ben Bernanke, chairman of the Federal Reserve before Janet Yellen.  

Before I go to Ron Paul's argument, I want to remind everyone of a great quote from Thomas Sowell, one of America's most brilliant economic thinkers.  

“The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.”

That lesson, that politicians disregard the realities of economics, is visible everywhere.  You don't have to go to the extreme that the ruling class is systematically trying to destroy the country and everyone in it, although I sure won't argue it necessarily isn't that.  It's possible they're not so much malicious and evil as they are incompetent idiots, who are also drunk, stoned, or otherwise impaired.  I mean, have you ever actually listened to what people like AOC or Elizabeth Warren say? 

Within moments of taking office, Biden acted to destroy American energy independence and started spending trillions that was created by fiat - by declaring money to be there to spend.  Those two by themselves would kick off terrible inflation, especially in fuel prices (which add to everything else we buy), but they're just the start.  There are many more idiotic policies that have added to it.  Now they say they're creating policies to counteract inflation, which is to say to counteract their previous policies.  Feel better?

Biden announced a three part plan.  First, the plan has government agencies “fix” the supply chain problems that their policies created, such as shutting down the country for a year.  These have led to real shortages of many things, adding legitimate supply vs. demand pressures to the mix.  

The second point, is spoken of as deficit reduction, but (of course) they're going about it completely wrong.  They're not proposing cutting welfare or warfare spending, they're creating tax increases.  At this point, repeat the mantra that tax rates are not the same as tax revenues - it's called Hauser's Law.  Lots more at that link, but regardless of the tax rates, in postwar America tax revenues have remained at about 16.8% of GDP.  Yes, as a general rule tax rate cuts have increased tax revenues and tax rate increases have cut tax revenues.  Also, as Ron Paul points out, "History shows that tax increases unaccompanied by spending cuts end up increasing the deficit."

Finally, they're calling on the Fed to fix things, saying that the Federal Reserve “has the primary responsibility to control inflation.”  Riiiight.  Unless they do things to reign in monetary creation and cut deficit spending, nothing good will happen.   

I'll leave final words to Ron Paul.

Treasury Secretary and former Fed Chair Janet Yellen and Chairman Powell have both admitted they were wrong to publicly dismiss inflation as “transitory.” The fact that the two most recent Fed chairs made such a huge blunder (or purposely refused to admit what was clear to many people for over a year), shows the folly of relying on a secretive central bank to manage monetary policy. Instead of “respecting the Fed’s independence,” President Biden should work with Congress to audit, then end the Fed.

 

 

Another Warning

BMO Capital Markets says, "Go to cash in plain English". 

Mish has a translation into "Non Financial Guy" although the original link is pretty good, too.  From the BMO piece:

Conclusions

We see credit crisis II as just beginning. Few markets are untouched. Few signs of optimism can be seen. We are now at the tipping point when the crisis becomes more obvious. Markets will get more dangerous during this phase.

We advocate a zero weight toward equity, and that investors convert their equity positions to cash.

We will continue to provide updates in our daily Market Elements, Relative Strength Filter, and our topical Focal Points publications.

Gee didn't Helicopter Ben say everything is just peachy?  Can't understand why people might want to buy gold? 

Asked whether a double-dip recession is likely, Mr. Bernanke repeated a reassurance he offered Monday that he doesn’t think so. The Fed is forecasting moderate growth in the 3.5% range, with modest declines in unemployment, and it’s sticking with that forecast. An important transition could be underway for the economy — away from government support and toward private demand, he noted. That’s a formula for continuing expansion.

Helicopter Ben Rides Again

It has been a busy night.  But in light of the goosing of QE3 today, I thought I'd link to this old post of mine, from April of 2011 saying the Fed would be forced to do QE3. 

I'll grade it a "B".  Big picture is right, but some details really changed in the last 17 months. 

It's Time to Be Afraid. Be Very Afraid.

To update my Halloween piece on how today was going to be the scariest day of the week, it turned out to be worse than I was afraid of.  Helicopter Ben is going to dump an unprecedented amount of cash out of that chopper of his.  First, the straight news:

The Federal Reserve will buy an additional $600 billion of Treasuries through June, expanding record stimulus and risking its credibility in a bid to reduce unemployment and avert deflation.

Sounds pretty tame.  Why should we be afraid?  Denninger points out this gem hidden in the report from the Treasury Borrowing Advisory Committee of the US Department of the Treasury (you will note it is dated yesterday, 10/2, in one place and today in another).

The presenting member stated that the market expects the Federal Reserve to purchase $100 billion per month, as well as $30 billion per month in MBS reinvestments.  This will total $1,560 billion in Treasury purchases over the next year.  The member stated, however, that market participants believe the Fed will leave the status of QE2 open ended, with purchases ultimately dependent on economic conditions.  The presenter also noted that the program should last six months to two years.

$1560 Billion - $1.56 Trillion??? That's the entire fracking annual deficit!!  So it's not "$600 Billion", it's the entire deficit that they're going to create.  This is Zimbabwe stuff, folks, this is going to hurt so bad you won't be able to see straight.  Yesterday, it was reported that the expected $500 billion in QE would reduce the value of your dollars by 20%.  Just read that as your salary, savings, every dollar you own would be cut by 20%   But this report says over three times as much QE; that means your pay just went down by 60%!!  Your IRA?  Down by 60%.  Everything wiped out by the Federal Reserve.  The banks, however, will be fine.  As usual, the Fed will protect the banks by shooting you, the unarmed, non-threatening civilian, striving to take care of yourself and your family.


I don't know how long this will take to percolate through the system.  As I've said before, at least for me, the general direction and effects are easy to see, the timing is difficult.  The reaction of the markets was puzzling to me: metals markets were slightly down and the stock market slightly up.  It seems that the markets have been expecting this and the current prices reflect these expectations.  As they read and understand the releases fully, I expect commodities to rise further.  I don't see how they can do anything else.  


You will hear this being referred to as Keynesian economics, and this part is.  I have heard that John Maynard Keynes himself never said the government should deficit spend in good times, only as an emergency measure.  Especially after news like this, I need a laugh, even if it's just laughing at stupid people.




I don't see much distinction between this group of idiots and the ones at the Fed and Treasury.  To borrow from the wonderful Dr. Thomas Sowell:

Guess who said the following: “We have tried spending money. We are spending more than we have ever spent before and it does not work.” Was it Sarah Palin? Rush Limbaugh? Karl Rove?

Not even close. It was Henry Morgenthau, secretary of the Treasury under Franklin D. Roosevelt and one of FDR’s closest advisers. He added, “after eight years of this Administration we have just as much unemployment as when we started. . . .  And an enormous debt to boot!”

QE2 won't work - it will just hurt you.  And that has been known for over 70 years.  Forget the Wookie suit.  It's getting to be time for a ghillie suit. 

Could the US Return to a Gold Standard?

“That if any of the gold or silver coins which shall be struck or coined at the said mint shall be debased or made worse as to the proportion of fine gold or fine silver therein contained, or shall be of less weight or value than the same ought to be pursuant to the directions of this act, through the default or with the connivance of any of the officers or persons who shall be employed at the said mint, for the purpose of profit or gain, or otherwise with a fraudulent intent, and if any of the said officers or persons shall embezzle any of the metals which shall at any time be committed to their charge for the purpose of being coined, or any of the coins which shall be struck or coined at the said mint, every such officer or person who shall commit any or either of the said offences, shall be deemed guilty of felony, and shall suffer death.” –Chap. 16 , Section 19 of the Coinage Act of 1792, passed by the United States Congress on April 2, 1792.  (source)

While driving home the other day, I heard Dick Morris talking about presidential politics.  Nothing new there; this is the guy who helped get Bill Clinton elected, then had "an awakening" and became a conservative.  He was talking about Ron Paul in this instance, calling him an "appalling <blank>hole", then ripping Dr. Paul a new one for advocating a return to the gold standard.  His rip was classic "barbaric relic" rhetoric, about how we got off the gold standard because it "held our economy back", and "the US economy shouldn't depend on some miner in South Africa" succeeding in a gold mine.  Just look at the increase in wealth since we got off the gold standard!

Then he went on to add a disclaimer that, sure, Bernanke has printed too much money and the Fed was troublesome, but "there's a big gap between abstention and alcoholism" and we simply need to be somewhere between those two limits.  (That's his actual quote, as best as I can recall).

For a little necessary background, the term "barbaric relic" for gold is from John Maynard Keynes himself, and has been widely parroted by those opposed to a "real money" standard.  "Seriously, Muffy, no civilized, advanced society need be bound by having actual, physical, gold, must they?  Why, gold is what caused the Spanish to rape and pillage South America, the pursuit of El Dorado, after all!" To keep this down under a million words, I won't get into Ron Paul or any of the other candidates' politics: that's not the point of this. 

The point of this is "could we go back on a gold standard"? (and when I say gold standard, understand it could be any commodity that people value; anything but fiat paper that can be printed in infinite amounts).  Perhaps the place to start is the converse, why did the world go off the gold standard?  From where I sit, they did that so that government spending, and therefore government, could grow essentially without limit.  Is that a good thing?  As one of my heroes, the (now-retired) Mogambo Guru once put it,

Whether or not this theory is true, I don’t know, but I don’t think so, as I have never read anything like, “From the moment that the government started creating and spending large amounts of money, everything got better and better, and the more money that was created for the government to spend, the better things got, until they reached Utopia and everybody lived happily ever after.”

If we were on a gold standard, we would need to spend less - but we wouldn't necessarily have to balance the budget.  Some debt - my rough guess: 20% of GDP - would be possible, as long as other nations and people felt that the interest we paid was reasonable and they were confident they'd get it back.  The free market would have to set interest rates, not Helicopter Ben (or his ilk).  You can bet your butt our interest rates would be much higher and the monetary shenanigans the Fed creates wouldn't be possible.  In turn, that means it would be harder for the government to fund wars or an ever-growing entitlement state; the quantity of gold would have to expand to increase the money supply. Increasing our money supply – the thing that Morris thinks has improved the economy – has (IMO) led to the gradual decline of the middle class.

Buried in Morris' assumptions is that if we go back to the gold standard, we go back to the 1972 dollar, but why would that be?  We could declare a dollar to be worth any amount of gold we wanted between 1972's $35/ounce and today's number of dollars divided by the amount of gold we have.  In other words, 1972's $35/oz - meant each dollar bill was backed by 1/35 oz of gold. According to Wikipedia, the US claims 147.2 million ounces of gold in Ft. Knox.  The amount of dollars in circulation is harder to know, but there are some available estimates of that, called the M1 money supply.  If we simply divided the 2.2 trillion dollars in the M1 money supply by the amount of gold in Ft. Knox, that would bring the price of gold to $14,900 per ounce, so each dollar would be backed by 1/14,900 of an ounce (around 2 milligrams).  I have seen writers suggest that the M1 supply is drastically under reported; that would increase that $14,900 price.  Likewise, if there is less gold in US hands, that also acts to increase the price - which reduces the amount of gold behind each dollar. I'm sure you've heard the people who speculate that there is no gold in Ft. Knox and the Fed took it all.  That would make gold almost unobtainable in dollars. 

Gold at about $15,000/oz. would shake the jewelry business to its core, making gold only practical for plating, if that, and making platinum, palladium and silver the jewelry metals.  (I'm sure you've seen rhodium plated items, often considered cheap jewelry, but rhodium costs about as much as platinum).  Platinum is currently cheaper than gold; they crossed this past summer (IIRC) for the first time I can recall.  The market for scrap gold, the rings and things that people have and just keep for no particular reason, would probably drop well below that price as the supply would spike like crazy - as would theft of gold jewelry.  There are still many industrial uses for gold; it's used in electronics for plating contacts of many kinds, in optics, and dental work, of course.  Electronics would either increase in price, or alternatives would be found - probably less reliable alternatives.  I believe the price of gold would cascade into the other metals, too, but can't predict how much they'd go up. 

Backing the dollar with $15,000/oz gold wouldn't affect today's prices in fiat dollars, like going to $35/oz gold would.  It wouldn't scale prices to 1971 levels; your $250,000 house wouldn't suddenly be priced at $583 (the same ratio as 35/15000).  I think that sort of disruption is what people opposed to the gold standard are thinking of.  If we said dollars had to be backed at $35/oz of gold, we'd either have to drastically multiply our supply of gold (not bloody likely) or drastically decrease the number of dollars.  That would be quite a disruption. But any move in the direction of a new standard would cause disruptions world wide - and guess what? they're happening already. 

Note that we haven't devalued the dollar with respect to 1972, we just pegged it in place to the current supply of gold we have.  Devaluing the dollar from being backed by about 900 milligrams of gold to 2 milligrams is what the Fed has been doing since we got off the gold standard, and ultimately since their formation in 1913. The dollar has about 3% of the value it had when the Federal Reserve started. While it's true (as Morris said) that Bernanke has been printing too much money, the majority of that decrease in value, percentage-wise, was long ago and was handed to Bernanke by Alan Greenspan.  When the full series is plotted, you see that the dollar is worth about 5 cents in 1913.  When you look at this plot, you can see that Bernanke has decreased the value of the dollar, but most of the damage was done by his predecessors.  This is one of the arguments against what Dick Morris said.

So when Dick Morris or anyone says our economy has grown since 1972, has it really grown, or is it just inflation - the same as devaluing the dollar?  Another aspect of the Fed's action and the way the government reports statistics is that it's harder to tease this information out.  Inflation has the effect of making the economy look better and the country look richer, while it's actually robbing the people.  You have more dollars, but more are required to buy what you need.  This appearance of a growing economy is what the government wants, though – the better to fool you with.  Most people don't think of this: they see their house price is up, or the Dow is hovering around 12,000 and never think that without the last year's inflation alone, the Dow would be about 11,000.

One way to measure whether or not wealth is actually increasing or if you're just seeing inflation is to divide GDP by the population: normalize GDP per capita.  Porter Stansberry's research group produced this chart of an inflation adjusted GDP per capita.  It shows that the per capita GDP went down drastically during the 70s (Nixon and Carter) with a strange, but short, reversal in about 1977 and slowly increased until around 9/11/01 (through Reagan, Bush 1 and Clinton).  Since the middle of Bush 2's term, wealth has been in a nose dive and is now the lowest it has ever been. 

Stansberry's graph only extends back to about 10 years before the final death of the gold standard, not to the start of the Federal Reserve Bank.  Nevertheless, it completely disproves Morris' statement that getting off a gold standard has led to increased wealth.  

This plot is an example of one of the most important ideas in economics, the marginal utility function.  The simple idea here is that if you have one dollar, another dollar is very useful; but if you have a billion dollars, the next dollar doesn't have much utility – and that's the hole that Bernanke finds himself in now.  He has flooded the world with dollars, and there simply isn't much more utility in the next dollar being created.  The next round of QE – whatever they call it – can't be as useful as the first one.  Which wasn't very useful.

It has been said that an ounce of gold buys today about what it did at any point in the past.  Stephen Harmston, former economist at Bannock Consulting, wrote that “across 2,500 years, gold has retained its purchasing power, relative to bread at least” which is seemingly proved when one considers that “It is said that an ounce of gold bought 350 loaves of bread in the time of Nebuchadnezzar, king of Babylon, who died in 562 BC” which is roughly what it buys today, a stretch of 2,500 years.  With some judicious selection of the exact brand of bread, you get remarkably close to 350 loaves (and I'm sure there was some variation in what a loaf of bread cost even in King N's day).  Likewise, you'll hear that an ounce of gold would buy a good toga and sandals in pre-Christian Rome, and buys a well-tailored suit and shoes today, or you'll hear that a $20 gold piece bought an 1851 Colt Single Action Army revolver, and today buys a good grade 1911.  The point of all of these is that the price of gold is a standard by which other things can be measured.  Sure, technology marches along and brings down the cost of some things, but most things that increase in price over the long term do so because the currency inflates.  

It is not true that a gold standard removes inflation and deflation, and it's not true that depressions are impossible with a standard.  The 1800s had a few periods of inflation over 5%, including a big jump for the civil war, to over 25%; but after those inflation periods, the government took their medicine and dialed back the spending to reign things back in.  In 1895 during a bad depression, J.P. Morgan personally bailed out the US; in 1907, Morgan and John Rockefeller bailed out the country together (ref).  In those cases, the Federal government was small enough that individuals, although millionaires, could bail it out.  So even though the gold standard could not prevent inflation and deflation, the standard kept inflation and recession under more control, so that they weren't as bad as they could have been.  In 1900, the “cost of living” was actually lower than it was in 1800, a reflection of improved productivity in farming and other aspects of life.

 

It's hard to actually get numbers because the way the statistics were kept over the years has varied.  The Federal Reserve Bank of Minneapolis has calculated a time series and posted it.  I take this with a grain of salt because I can't help but believe they do things to make themselves look better.  For last year, for example, they use an inflation value of 1.7%, which certainly uses the BLS statistics, not the way it was calculated before.  Shadowstats, using the 1980s algorithm, says the rate was closer to 10% which would make these plots look even worse for the Fed.  That said, I think these plots don't make them look good at all, so just look at these and say “it's really worse than that”.    

The increase in the "CPI since 1800" plot shows the compound interest effect of that "Inflation Since the Birth of the Fed" graph almost always being centered above zero, and especially since the final decoupling of the gold standard in 1971.  Note how in the 1800-1912 period, the inflation graph stayed centered around zero more of the time.  

The Keynesians are right about one thing: there is nothing inherent to gold that makes it a standard.  Nothing besides the fact that people have always valued gold, wanted gold, and very probably always will.  A currency does not need to be based on a gold standard.  As I've said before, we could have a fiat dollar and just not debase it.  Our leaders and central bankers would have to not play politics with the dollar, not use the printing press to buy votes, not try to change the dollar's value to tweak other countries (cough - China - cough) and they would have to live within a constrained budget.  They should not be allowed to print money to fund foreign wars or the welfare state.  All they would have to be would be grown up, mature leaders.  

In other words, we're screwed.  We could and should return to a gold standard. The details will be messy and need to be watched like a hawk.  But these are messy times, and they're fixin' to get messier. 

The Kerfuffle Over Interest Rates is Telling Us Something

The popular story is just fodder for the news media to bash Trump about.  If you look deeper than the headlines, it's a perfect example of why we need to end the Federal Reserve.

I know I've written about this before, and a search shows I did a piece last July, almost exactly 13 months ago.  I understand why Trump thinks what he does.  The Fed practically gave Obama his second term by figuratively air dropping money as we always used to say about Helicopter Ben Bernanke.  The difference is that if money really were dropped from helicopters, it would have been more equitably distributed than the 6 to (as much as) $8 Trillion dollars created by quantitative easing; that money exclusively went to big banks, big Wall Street firms and the extremely well connected and rich.  About a third to a half of that went to banks in other countries to keep them afloat.  Where does the US Federal Reserve Bank get the authority to create money for foreign entities.

As Dr. Mark Thornton noted in "The Skyscraper Curse":

"A monetary system that is dominated by a central bank, such as the Federal Reserve, and uses fiat money, as in our current monetary system, can expect to benefit certain people, such as bankers, financiers, and people with debt. Likewise, because such a system is inflationary, it tends to hurt wage workers and savers. Such a system can be expected to hurt the lower-and middle-income classes and enrich those in the financial industry and the upper-income class.

A gold standard has historically had a tendency for prices to be stable or slightly deflationary. This means that wage rates, cash balances, savings, and bonds tend to gain purchasing power over time. This type of monetary system rewards the hard-working and frugal classes, which leads to an expansion of the middle-income class and the economy."

I understand where Trump is coming from.  He's naively thinking, "if the Fed did for me what they did for Obama, I'd win by a Yuge margin".  It's a truism that people generally vote their wallet and blame the president for the economy.  If things are good, they vote to reelect; if things are bad, they vote for a new guy.  The (supposedly not political) Federal Reserve helped Obama, why not him?

The ugly truth is that the Fed had expanded their balance sheet so much in the wake of the 2008 collapse that they had to "unwind" it from a practical standpoint.  They had to raise interest rates and do some quantitative tightening to reel some of that $8 Trillion worth of digitally created cash back in, and generally do the austerity program that they began when the economy started doing much better under Trump.  In reality, they barely started.

Nobody asks, "why are bankers doing anything for any president?"  Nobody is asking, "how does the Fed Open Market Committee know what the Prime Rate should be?  Shouldn't that be between buyers and sellers?"  The prime interest rate is among the most important pieces of information in the economy.  It sets the price of money which flows into an almost unlimited number of decisions.  Why should a group of unelected bankers have that much power?  In a country that allegedly promotes free markets, why is banking run like the Communist Party of China?  The mere fact that both the US and the People's Republic of China have the same structure with the Federal Reserve Bank here and the People's Bank of China there should be a shocking revelation, not the "ho-hum" it gets.

As I've said many times, the Federal Reserve Bank and all central banks are the worst bit of central planning that the entire world has fallen for and I believe they're not just unnecessary they're damaging.  The only things they add to the financial world are all the things wrong with the financial world: destructive levels of debt, countries engaged in constant currency manipulations to try to get an advantage over each other, the creation of money out of nothing, money as debt rather than asset, the destruction of the information channel in monetary transactions.   Everything that's wrong with the world's economies goes back to central banks. 

Fed chair Jerome Powell (Asia Times).

Companies Describe Mars Sample Return Studies

Since I first heard of it in 2021, I've been trying to keep on top of the Mars Sample Return (MSR) mission originally conceived as an add-on to the Perseverance Rover (and the Ingenuity helicopter) currently on Mars. The idea has been that Perseverance would save particularly noteworthy samples of rocks or other things it comes across on Mars, stored inside the rover. At some time later, the MSR mission would rendezvous with the rover, they'd transfer the samples and MSR would return the samples to Earth.

The problem is that the mission is exceptionally expensive and NASA has been concerned it's essentially not doable. The numbers being talked about to do the mission were up to $11 billion. Briefly, in September of '23, NASA received a report from an independent review board saying that the MSR Mission was unworkable in its current form and wasn't feasible on the schedule and costs they were working under.  They recommended the issues be studied. The studies were disclosed on April 15th, and the agency said everything but that nasty word “cancelled,” ending instead with saying they will seek “out of the box” ideas in a bid to reduce the costs and shorten the schedule for returning samples from Mars.

On June 7, NASA selected seven companies to provide 90 day studies, valued at up to $1.5 million each, to examine different concepts that could reduce the cost or improve the schedule for MSR. Those companies are Aerojet Rocketdyne, Blue Origin, Lockheed Martin, Northrop Grumman, Quantum Space, SpaceX and Whittinghill Aerospace. 

Since 90 days - three months - from June 7 is approximately September 7 is when the studies are to be submitted, and they've probably barely started, it's not surprising that nothing has been formally released as ready “for prime time” and to be talked about. Fortuitously, this week is the AIAA ASCEND Conference, being held in Las Vegas. (That's the American Institute of Aeronautics and Astronautics Conference dedicated to making humanity interplanetary)  Some of  those seven companies are present for the conference and released some information. Jim Green, former NASA chief scientist, spent some time in the conference on July 30 that featured three of the companies selected for those awards. Neither the companies nor NASA had released details about their studies beyond the titles of their proposals selected by the agency in June. 

Some are looking at ways to revise the Mars Ascent Vehicle (MAV), the rocket that will be delivered to the surface of Mars by a lander that will then launch the samples collected by Perseverance into orbit. NASA, in its request for proposals, highlighted the MAV as a specific area of interest to the agency.

The MAV, as currently designed, is a two-stage rocket using solid motors that is about three meters tall. “We’re going to study how to best optimize going smaller,” said David McGrath, senior fellow at Northrop Grumman, about his company’s study.
...
Quantum Space, a startup developing spacecraft that can operate in cislunar space, is focused on another element of MSR, the final return of samples to Earth. Ben Reed, co-founder and chief innovation officer of the company, said their study is looking at ways to simplify the Earth Return Orbiter (ERO), the ESA-developed spacecraft that will pick up the sample canister, known as the OS, placed in Mars orbit by the MAV and carry it back to Earth.

The study, he said, is “leveraging the investments we have made in cislunar capabilities to allow ERO to only have to bring the OS, the sample canister, back to lunar orbit.” That canister would then be picked up by a version of his company’s Ranger spacecraft for an “anchor leg” back to Earth.
...
Other studies are looking more broadly at the overall MSR architecture. That is what Lockheed Martin is doing, said Beau Bierhaus, principal research scientist at Lockheed Martin Space, making use of the company’s decades of experience developing Mars and other solar system missions and previous studies of MSR that date back to the 1970s.

One focus will be reducing complexity, he said. Past NASA flagship planetary missions typically have had no more than two elements, an orbiter and lander. MSR, he noted, has up to nine, depending on how an element is defined. “Complexity doesn’t scale linearly by the number of elements,” he said. “Each of these things is co-dependent, co-mingled, and there are ripple effects between them, so the complexity scales non-linearly.”

I'd like to leave it there, but I kinda just can't. I'm going to re-post the only other thing I've heard about proposed changes to the MSR mission; this time, from Boeing. You might have noticed that they weren't one of the companies chosen to provide their input in the paragraph up top. They just had to speak up. 

You'll Never Guess What Boeing Proposed to Lower Mars Sample Return (MSR) Costs

Except you won't be surprised when I tell you their proposal was to "simplify the mission" by using the SLS. It reduces the mission to one flight of one (heavy lift) rocket, and you can argue that might be a good way to reduce risk. The problem is that SLS is the most expensive rocket flying in the world and NASA is trying to cut the cost of the MSR mission. Doesn't quite seem like the road to be going down.

What's that saying about "when you only have a hammer every problem looks like a nail?" When you only have an SLS ... 

A conceptual sketch from NASA/JPL-CalTech, showing a helicopter, Perseverance, and the ESA Mars lander on the bottom row, with the ESA's Earth Return orbiter, top row left of center, and NASA's Mars Ascent Vehicle (MAV) top row right.  The upper left corner picture appears to be a gibbous Earth, but Earth couldn't possibly appear that big from Mars. I'll write that off to someone at JPL-CalTech being overly artistic.