Dear Friends,
It seems to me, no amount of Federal Reserve tightening will lower inflation, as long as the federal government increases spending, five dollars for every dollar the Fed wrings out of the private sector. Add to the drastic increase in the money supply, driven by print and spend policies, the supply reducing effects of over regulation, bans and cronyism, and you have the perfect equation to cripple the private economy with inflation, while canceling public debt by the same mechanism. Elegant, though psychopathic, if you think of it. The US is taking the Argentine path to economic oblivion. Wring the economy of wealth through print, spend and regulate, leading to currency destroying inflation, then rinse and repeat. Inflation always and everywhere moves wealth from the bottom to the top.
Most people only think about the demand side of the inflation equation. The supply side has the same effect on inflation as demand. In the case of our over regulated economy, any increase in interest rates, especially coupled with burdensome regulation, will result in supply shortages. Supply shortages themselves lead to inflation, as long as those shortages last. Offshoring can mitigate the effect but the utility of screwing workers is coming to an end. So, even as the Fed raises interest rates to ostensibly lower inflation, those increases actually exacerbate the supply shortages, while doing nothing to cut demand. Because, if Keynes is to be believed, government demand is equal to private demand. Increases in regulations, taxes and outright bans on production, must lead to inflation.
The reality is, the benefits of profligate spending are immediate, while the negative side effects often take years to develop. Because the stuff purchased can be used immediately. That’s why so many people buy toys they can’t afford. “Buy now pay later…” is the motto of the shark. Since this game works so well on the masses, who actually have a personal responsibility to pay the money back, how much more effective do you suppose it is to a politician, who gets the benefit, while someone else pays it back… later? That’s why politicians will never cut spending, it’s not in their interest, cutting spending is in someone else interests. So, like corruption, blurting out in anger, and drunkenness… profligate spending bestows the benefit immediately, while the cost is paid later.
The interest payments on the debt amount to almost a trillion dollars a year. The debt surpassed 33 trillion dollars and is shooting up. The US debt to GDP ratio is over 122%! Nations across the globe are looking to divest themselves of US debt, and create an alternative to the US dollar, as the world’s reserve currency. In that environment, the US elite simply can’t print and spend enough. No need to raise taxes, inflation will drain us tax mules, in stealth mode. Even as the government is spending trillions a year (37% of GDP), the Fed is raising interest rates forcing the consumer to spend less, so the elite can spend more. No amount of crushing us will squeeze enough spending out of the economy, to lower inflation, as long as the government spends five dollars for every dollar squeezed out of us.
Print, spend and regulate policies lead to economic destruction. Moreover, they’re almost unavoidable in our system of government. The incentives are to tax, print and spend… the nation into oblivion. This outcome reverberates throughout history. To fight the inflation their policies inevitably create, the elite squeeze the little guy. Then they increase their own spending driving inflation up ever more. The real brilliance is that the elite make it so difficult, even to the point of literal shut downs, that supply shortages become a factor of doing business. Which, in and of themselves, will trigger inflation. What we have then, is an elite doing everything in their power to increase inflation, while using that nation impoverishing inflation, to gain power, permanence, and enrich themselves… how Hegelian of the elite.
Sincerely,
John Pepin
