This Is What You Call A Win/Win Deal. US Steel Wins. Nippon Steel Wins. America Wins. Japan Wins

This Is What You Call A Win/Win Deal. US Steel Wins. Nippon Steel Wins. America Wins. Japan Wins

Notes From the Field By James Hickman / Simon Black  January 7, 2025

The year was 1901, and it was pretty much a who’s who of American business and finance at the time. Andrew Carnegie. JP Morgan. Charles M. Schwab. Elbert Gary (namesake of the city Gary, Indiana).

It would be as if Elon Musk, Billy Gates, and Carl Icahn all got together on a new venture. It would be pretty much guaranteed to be a big deal. Those early 20th century titans formed what would become the world’s largest and most important company in that era— US Steel.

This was a period of history in which the United States was growing by leaps and bounds. Entire cities were built from nothing. Rail was being feverishly laid across the country. New buildings and skyscrapers were going up in major cities.

And steel made it all possible. In 1901 it was the most vital commodity in the world, far more important than oil. And US Steel dominated the market; they had— by far— the best quality, the most efficient production, the most reliable distribution.

But that was more than a century ago.

Today US Steel is barely alive. It loses more than a billion dollars each year in negative Free Cash Flow, and it has only managed to survive by issuing a mountain of debt.

Now, it would be easy to blame US Steel’s problems on competition with rising, low-cost manufacturing superpowers like China and India (whose nations boast the world’s #1 and #2 steel producers respectively).

But that’s a far too simplified (and frankly incorrect) explanation. The US economy— including the steel manufacturing industry— is far more productive than India or China. Way more.

China’s Baowu Steel Group is the world’s largest steel company by production volume, with an annual output of more than 130 million metric tons. But with nearly 400,000 employees, the Chinese firm’s steel production per employee is less than HALF of what a US Steel worker can produce.

So, US Steel is still able to out-produce its Chinese competitors.

Cost is obviously a factor; US workers are clearly more expensive. But a far greater issue is all the wasteful political bureaucracy. The unions. The endless regulations and permitting. The parade of government inspectors. And most of all, politicians who deliberately hurt the company for political points.

The latter failure now belongs squarely to Joe Biden, who recently went out of his way to destroy any hope of US Steel resurrecting its former greatness.

It started in late 2023, when Japan’s largest producer, Nippon Steel, made an offer to buy US Steel. Nippon made a pretty sweet offer— $55 per share, a premium of almost 60% above US Steel’s stock price at the time.

On top of that, Nippon pledged to invest billions of dollars into US Steel to revitalize its factories and upgrade production capacity. They promised to honor all union contracts. They committed to support any national security related export controls.

This is what you call a win/win deal. US Steel wins. Nippon Steel wins. America wins. Japan (one of America’s closest allies) wins. Win/win. That’s what capitalism is all about.

TO READ MORE:  https://www.schiffsovereign.com/trends/two-weeks-before-leaving-office-joe-biden-fks-america-again-151935/

A Former Fed Official Finally Tells The Truth About Inflation…

A Former Fed Official Finally Tells The Truth About Inflation…

Notes From The Field By James Hickman / Simon Black 7-29-24

My sister used to be a reporter for Fox News based in south Florida and would regularly be assigned to cover NASA press conferences.

And she’s often told me about how reporters were terrified to ask any real questions. They’re not astrophysicists and don’t understand the first thing about rocket propulsion, and most of the journalists never bothered to learn even the basics of the topic.

So, the majority of the questions were very superficial; quite simply the reporters didn’t want to embarrass themselves.

This is how the media covers the Federal Reserve. Most reporters don’t have a clue about central banking, so, not wanting to look stupid, they just sit quietly and give the Fed a pass. There’s no real scrutiny.

At the same time, Fed officials are generally in lockstep with one another; it’s not like politics where the two sides constantly chastise one another. With the Fed, there is virtually no public dissent.

Even former Fed officials who have long left the bank maintain an almost mafioso code of silence.

The end result is that no one really criticizes the Fed. And because of this, the Fed has been able to cultivate a reputation that they’re in total control of the situation… even though their track record proves the opposite.

The Fed completely failed to predict inflation in 2020 after engaging in record money printing. Then they missed the warning signs in early 2021, then misdiagnosed inflation as “transitory” in late 2021, then still failed to act until early 2022.

Yet despite such failures, the Fed is still sticking to the narrative that they know what they’re doing. And with hardly anyone challenging them, it’s been easy to maintain a veneer of omnipotence.

But Kevin Warsh broke ranks this weekend. As a former Fed governor, he is the ultimate insider… and he penned an editorial published in the Wall Street Journal on Saturday blasting many of the Fed’s decisions.

Warsh describes how, when he joined the central bank in 2006, its entire balance sheet was just $800 billion. But in order to deal with the 2008 financial shock (yet another crisis that the Fed missed), they invented “quantitative easing”, or QE.

QE was just a fancy way to say they were conjuring massive amounts of money out of thin air. Informally we could say they were ‘printing money’, though almost all of the new money was created in digital rather than paper form. They click a few buttons, and, poof, new money.

Naturally the Fed promised to eventually unwind QE and drain all of that new money out of the financial system. But they never did.

On the contrary, the Fed embarked on THREE distinct rounds of QE between 2008 and 2013, increasing the balance sheet each time. In the end, the Fed’s balance sheet peaked at $4.5 TRILLION, more than 5x its size prior to the 2008 crisis.

And they kept it at that level for years. Even by 2020, the Fed balance sheet was still around $4 trillion in size.

So much for unwinding. And when the pandemic hit, the Fed quickly pulled out its QE playbook and embarked on a fourth round of money printing… exploding the balance sheet all the way to NINE TRILLION dollars.

Warsh eviscerates the Fed policymakers for failing to see such obvious consequences and explains that there is a very clear connection between the size of the Fed’s balance sheet, i.e. the amount of money it prints, and inflation.

“The monetary base is up 60% since the pandemic. Another measure of money, M2, is up 36% in the past four years. The inflation surge in the same period-- cumulatively about 22%-- shouldn’t have been a surprise.”

“The high priests of central bank dogma might consider it blasphemy,” he writes, but “less money printing, less inflation.” Duh.

He goes on to say, “The American people are still paying a high price for the central bank’s policy error,” and that if the Fed really wants to tame inflation, they’re going to have to slash their balance sheet, i.e. unwind most of the new money that they printed.

Fat chance.

In fact, Warsh points out that the Fed has already indicated they will NOT reduce the size of their balance sheet any longer. And Peter and I both believe the Fed will soon embark on even more QE.

Why? Because the federal government has a serious spending problem. Even the government’s own budget forecasts show an additional $22 trillion in deficit spending over the next decade.

And where will the bulk of that money come from? Most likely from the Fed. They’ll launch QE5, QE6, and beyond, to print the trillions and trillions of dollars that the US government will need to make ends meet in the coming decade.

Sure, it’s possible that the government gets real… that they cut spending, eliminate some entitlements, slash regulations, abandon idiotic green initiatives, and stop standing in the way of conventional energy.

But the window of opportunity is extremely narrow… and depends on the election this year. Plus, a lot of things will have to go right, and very little can go wrong.

So, it’s reasonable to anticipate more deficit spending, which means more Fed printing. And more inflation.

To your freedom,  James Hickman  Co-Founder, Schiff Sovereign LLC

https://www.schiffsovereign.com/trends/a-former-fed-official-finally-tells-the-truth-about-inflation-151193/