1/15 REGRESSIVE TAXATION AND THE VASTER PROBLEM THEY REVEAL:
INABILITY TO TAX THE “AMERICASTOCRACY”
- PART 1
Kenneth Rogoff and Carmen Reinhart , in the book This Time is Different 👇 2/15 In their book Eight Centuries of Financial Folly (and gov debt defaults, repudiation and inflate away), the authors explain the problem of taxation.

1/ Fintech bros running with the cash register

So in this long post, we are going to divide it into five parts.

I) First, we show that real incomes are not growing, despite what official statistics suggest. We focus on dining out and the substitution to inferior goods. At the very least, this substitution is inconsistent with an increase in real income. It’s a topic we’ve discussed several times, so if you're already familiar with that, feel free to skip to Part II.

II) In Part II, we show that PNC, WFC, and USB are all on the back foot with consumer lending, reducing their exposure. USB is even outright selling portfolios, benefiting from reverse provisioning.

III) In Part III, we explain that PNC, WFC, and USB—by retrenching or selling—are effectively “selling high” because spreads are at record low levels. It’s smart: sell high, buy low. I AM NOT painting a disaster for the banks simply highlighting that those banks are COMPLETELY shunning more consumer lending.

IV) But who is buying high—meaning, buying with tight credit spreads? Well, personal loan growth has far outpaced income growth, and that is not sustainable. If you’re a bank that knows what it’s doing, then you don’t keep lending more.

V) But some entities are booking those loans or securitizing them at record-tight spreads. They are the “buy high” crowd—with the same mindset as the “buy high” crowd from 2005–2007. They’re probably just playing the music while running with the cash register. In the cash register part, we show insider selling by the people providing the unsustainable loans that the banks don’t want. 2/ CONSUMER BEHAVIOR INCONSISTENT WITH HIGHER REAL INCOME

This is the cohort of shoppers at Costco:

Costco Shoppers by Income Cohort

According to 2024 Numerator data, Costco consumer income distribution is:
~46% of members earn between $40,000 and $125,000 (middle income)
~36% earn over $125,000 (high income)

The remaining ~18% earn under $40,000 (low income)
Source: marketingscoop.com/consumer/costc…

So nearly half the customers fall in the middle-income range, with over one-third coming from higher-income households.

This is what is happening in consumer behavior at Costco, as related by the CFO of Costco:

Shift Toward Food-at-Home

This is what was happening in Q1 FY2025 (reported in November 2024):

In a December 2024 call, CFO Gary Millerchip noted shoppers are avoiding dining out and leaning on Costco for groceries instead. Sales of meat and produce are up, with increased purchases of lower-priced cuts like chicken, beef, and pork.

Sources:
finance.yahoo.com/news/costco-fl…

the-cfo.io/2025/03/31/cos…

“This was led by double-digit growth in meat, where we continue to see a shift toward lower-cost proteins such as ground beef and poultry,” he said.
In other words, even Costco’s more affluent customers are trading down.

What happened at Costco in the next quarter:

CFO Gary Millerchip highlighted that shoppers across income levels continue “tightening belts,” opting for lower-cost proteins like ground beef, poultry, and private-label items.

Sources: MarketWatch, The CFO, FinancialContent
Even Higher-Income Members Are Choosing Value

During the Q2 FY2025 call, Millerchip pointed out that not just budget-conscious but also higher-income members are seeking bargains.

There were strong gains in big-ticket items, but also double-digit growth in meat and poultry—specifically lower-cost proteins.

Source: businessinsider.com/costco-says-sh…

1/13 END OF DISSOCIATION OF CREDIT WITH GOLD FLOWS

Today we hear that the Gold Exchange of Shanghai is making it possible for trading partners with a surplus vs. China to get gold for their Yuan.

What is this move about?

https://x.com/BullionBrief/status/1938073273927143666

2/13
RUEFF explains

The gold-exchange standard of 1922 was in fact a copy of the Fuller Committee prohibition on India in 1898 to redeem their BoE notes for gold. It was the birth of FX as reserves using both USD and GBP on a worldwide basis. Here is how Jacques Rueff described it.

1/14 DELIGHT IN THE ABSURD
What are TRUMP’s tariffs about?
Trade deficits being felt in the U.S. credit structure—it's as simple as that. 2/14 When a Nixon-Volcker prohibition on G7 countries prevented the sale of excess USD acquired in trade into commodities within the G7, you ended up with a currency that was constantly overvalued in trade—an imbalance characterized by massive overconsumption versus production.

1/9 Large deficit IS NOT fiscal dominance
Large PRIMARY deficit is fiscal dominance.
So.
The previous central banker of Brazil might have been a traitor indeed.
He was "attending crypto conferences", ... "right".
explanation 2/9
If the deficit is large but the primary deficit is small, if you lower rates the private sector expands but your primary deficit (the non-interest part) might turn into a surplus because more taxes enter.

1/7 WHAT BONDS ARE LIKELY TO DO IN THE COMING MONTHS WITH RATE CUTTS

UNPACKING BOTH GUNDLACH AND DALIO

Adding historical data and classical economics rationale to their statements.
GUNDLACH

youtube.com/watch?v=QqJhb-…

It’s pretty clear that the US will hit 3% inflation by year-end, especially with oil adding 0.4% for every 10 USD, he says the view from the Fed is that tariffs push prices higher.

COMMENT:

Sure, tariffs are not monetary inflation, but higher prices are higher prices. If Walmart and Amazon tell you that they will raise price, it’s fair to assume they will. Could the tariffs be a one-time hit? Most likely, but it hits nonetheless.

According to Gundlach, the Fed will have to choose between inflation and unemployment—and will throw away the inflation target.

COMMENT:
That’s short-term expediency. In the long term, they will have neither. The fiscal condition will cripple the US.

2% INFLATION TARGET GONE
In an old post from our previously hacked account, we mentioned that the US would eventually move its inflation target and shift toward inflationary financing:

graphcall.com/execute?task=N… 2/7 Back to Gundlach’s unpacking:
If unemployment rises, they give up on inflation.That’s his view

He also mentions the de-inversion of the 2–10 year spread, which is moving above its moving average. He says that when the spread moves above the moving average it means recession historically.

COMMENT:
That’s an interesting point. But under monetary dominance, de-inversion usually occurs with the entire curve falling, not rising. De-inverting with a rising curve signals fiscal dominance—disanchoring the long end and dragging the whole curve up.

Back to Gundlach:

U3 is at 4.2%,
It is above the 36-month moving average, which is typically a trend of deceleration.
But it's not accelerating.

COMMENT:
Gundlach says he's puzzled by the lack of acceleration. The puzzle might be simpler than it seems. When deceleration happens with little government stimulus (primary deficit = gov stimulus), there’s quick contagion and no artificial booster to stop the decline. That booster is uncovered spending (permanent Keynes now in operation).

BUT even with a large government deficit spending, the economy remains tepid. This was visible in our recent Q1 2025 review of Wells Fargo.
x.com/GraphCall/stat…

It should be a bit alarming—massive Keynesian boosting under both Biden and now Trump, and yet very little to show for it, coupled with reduced output. (Classic fiscal dominance.)

The reason deterioration is slow is due to a crowding-out situation, or “war regime”: lots of means of circulation (T-bills are quasi-money), little output.

The same thing happened between 1913–1919 (see
Kemmerer: High Prices and Deflation), which created abnormally high inflation and interest rates relative to output—if analyzed through a monetary dominance lens.

0/20 After the BLS data on inflation not adding up with inferior goods consumption trends...
Credit bureau data on delinquencies in unsecured debt does not seem to add up either.... let's review the data... 1/20 This is data gathered from different sources, including credit bureaus:
This data seems highly improbable on the side of improving delinquencies in subprime unsecured debt.

1/18 Different data points indicate a Liz-Truss Moment on April 4th.
There was extreme volatility on cash versus futures post- April 4th, with the 30 years going. We have seen the same dislocations and volatility in 2022, during the Liz Truss moment.

Why?bankunderground.co.uk/2024/07/17/fut… 2/18 Because pension funds sold what's liquid first, and it can be the futures.
And that's because people went too heavy on swap spreads, ignoring the fiscal dominance risk...

1/23 External Drains: The Juglar Episode

Why under the old AND new regime ONLY trade can stop Gold outflows (stop rising in a floating ccy)

And why "real rates" alone don't work to stop Gold in the old a new regime.

Are rates responsible for a fall in gold?
Forget what you learnt in FX as reserves, only indirectly via trade when FX as reserves is not obeyed!

A provocative view, yet perfectly logical explanation from Clément Juglar.

It becomes clear why there was a prohibition from Nixon/Volcker on G-7 countries from dumping their USD acquired in trade into precious metals. 2/23 Juglar starts by citing an example that seems to support that the higher rates themselves result in lower prices of Gold. (but wait...)

1/24 You probably remember the claims from Larry Summers and Jamie Dimon questioning the inflation calculation in the US?
I think that we can conclude that they are correct using a simple curve that most people in economics have learnt.
2/24 That is the demand profile for inferior goods versus normal goods.

So here is the chart that shows that inferior goods consumption increases with a decrease in real income.

1/16 “THERE IS TOO MUCH OIL”
Scott Sheffield
Former CEO of the largest independent shale oil driller in the United States (hardly a "green activist") — 1 month ago —
When someone like that says something like that, investors should pay attention.
PLAY 📺
here 👉rebrand.ly/too-much-oil 2/16 Once you connect the dots, it’s fairly simple to understand why he said that. Reporter “13 million barrels a day, can it be increased?” Scott Sheffield “There is a lack of tier-1 inventory. The Permian is running out of tier-1 inventory.

1/6
We have been explaining that for a while, that government figures and people close to the military like Michael Saylor are pumping the #BTC garbage (BIS paper 141)

https://twitter.com/zerohedge/status/1917594997244805503

2/6
Because as the paper 141 from BIS explains pumping #BTC and crypto garbage generates demand for stablecoins which in turn create demand for USD/UST.
In other words buying #BTC helps sustain the USD and UST

1/24 Currency Raiders EPISODE I
Ok, time to republish the Currency Raiders and explain how it ties to the Bonds Raiders series.
I am republishing an episode from my previous account that was hacked, @GraphFinancials.
All the sequences were described in Fall 2023. 2/24 In this media recording, you will be able to judge for yourself how far it was from the target, but here is the written version of what was said:
We have a classic John Law bubble sequence:
It starts with a Commercial credit bubble in 2008,

Play the Recording 📺
Here 👉 link.graphcall.com/Currency-Raide…

1/17
There are wide consequences of establishing the Gold deliveries outside of China. @Kathleen_Tyson_

https://twitter.com/KingKong9888/status/1915509626155786348

2/17
Gold spread means Gold is being shipped from West to East as people do a discharge of debt (USD). This is a very old trade settlement mechanism. H. Thornton 1802, Juglar 1880, Baring (basically everybody knows)

1/ PLANTATION MONEY

FX in foreign CB is a monetary aberration, expanded globally for the first time in 1922 and repeated post WWII (Triffin/Rueff), and has always resulted in a rug pull. There have been 2 rug pulls — 1927 and the 1960s — we are in the third. 2/ FX as reserves in Bretton Woods II is a system of plantation money. The beans and rice (energy – $Oil) are ONLY available if you have plantation money.

1/6 The old/ new Paradigm.
Gold has ALWAYS been THE PRIME source of liquidity.
Explanation by Thomas Tooke WHY.

For FX as reserves to work it requires that Central Bank of the G-7 with Volcker and Nixon be PROHIBITED from dumping their USD acquired into Gold market and use Gold as the liquidity source.

Why? Because it evidently is repeat of the mid-1960s external drain and kills the FX as reserves. 2/6 NUMBER 1 ANNOTATION:
Object is such universal demand

It's liquidity function is because it is the commodity with is the most marketable, very high demand for it worldwide (no #bitcoiners nothing to do with scarcity, scarcity is INEXISTENT concept in economics

1/17 Back to some fundamental concepts.

How Are Natural Rates Computed in the Absence of Government Debt?

Clément Juglar 1886 tells us.
A quick thread🧵 2/17 Some people on Twitter believe that free market rates are simply SOFR plus a spread, and they claim that natural rates without a government benchmark are "impossible." Nothing could be further from the truth.

1/7 TRUMP may have folded to bail out bond funds that don’t understand a key principle: the inverse correlation between credit and Treasuries breaks down under fiscal dominance.
Quick 🧵 2/7 Here’s how it works:
As Joseph Wang explained in an interview with Jack Farley, bond funds often operate with leverage — say, 130% of assets. They’ll buy Treasury futures to get 100% duration exposure and then use the extra 30% for credit.

1/13 THE FUNDAMENTAL ORIGIN OF CREDIT: HUMAN RELATIONSHIP OF TRUST
AND WHAT THE CURRENT ADMINISTRATION HAS DONE TO THE UST "CREDIT" (PART I)

The definition of credit by henry Thornton 1802. The fundamental principle of confidence. @rsrindy 2/13 The notion of confidence and sense of justice among credit partners.
There is nothing “just” in threatening to confiscate land from an economic area of a tiny country (Danemark) which is lending money to you and trusted you.

1/9 Precious Metals:
It stinks more than you think,
Let's stop & think for a minute.
What was happening in markets?
From Feb 21st the Nasdaq was already in trouble while
the Precious Metals Gold and Silver were ramping.
D-I-V-E-R-G-E-N-C-E
@DerivativesDon 2/9 We have notorious velocity problems with an insolvent Fed, and a quasi fiscal deficit. Meaning that the Fed has to pay Banks for not using reserves. IORB..
That's a sterilization short-term but inflationary long term.
A QFD as explained by Rodriguez at the World Bank is a very nasty condition of sterilization costs
documents1.worldbank.org/curated/en/465…

1/6 FINAL THOUGHTS ON TARIFFS 🤔,
Let's start with MV=PQ

MV is not affected in principles by tariffs.
That is the quantity of means of circulation is not increased by tariffs, nor should V, the velocity (albeit inflation expectations)

https://twitter.com/DerivativesDon/status/1907389389837119727

2/6 What is interesting is on the other side.
PQ, or GDP
Alright so here we go;
GDP=C+I+G+(X−M)

While consumption C in units will decline on imported good, the trade deficit (X - M) may shrink due to reduced imports.