Dear Friends,
It seems to me, this bout of inflation is unlike others, in that instead of being led by demand growing to exceed supply, this one is being led by supply destruction, and being fought with the traditional means of demand destruction. Which creates a race to the bottom. Keynesians believe inflation happens when aggregate demand exceeds aggregate supply and deflation happens when supply exceeds demand. Monetarists argue that inflation is always and everywhere the result of printing too much money. One could unify the two theories with the understanding that too much money, by definition, drives up demand, while too little money cuts demand. If only because more money is on hand to buy that which is available. Again, showing that at its core, inflation is when demand exceeds supply.
If we agree that inflation happens when demand exceeds supply, then clearly, it can be created by increasing demand, printing money for example, or because supply is destroyed. Either side of the equation can be changed to get the outcome one wants. However, a truly malevolent or deeply stupid leader might destroy supply even as he increases demand, with government money printing. Say, shutting down an economy (destroying supply) while at the same time printing trillions and handing it out like pez at a party. I couldn’t think of a more genius way to create dollar destroying inflation. Should a government do such a thing however, wouldn’t the experts call attention to it, warning us, and the government that was being so magnificently stupid? Apparently not.
The elite fear deflation more than anything because it empowers workers and savers and disempowers borrowers and profligate spenders. No worries though, the elite have outsmarted economics by controlling the interest rate. Holding it artificially low so that demand always exceeds supply. While the resulting bubbles obliterate lifetimes of savings in a single event, the effect of controlling sticky wages, stealing the savings of workers stealthily and creating a materialist consumer mindset, far outweighs the human ruining bubbles. That cost is paid by workers anyway. The elite always have a way out. If workers try anything to protect their wealth the elite will simply take it by fiat as Roosevelt did to gold. A government that doesn’t hold itself to basic ethics will not hold itself to Constitutional limits.
Counter intuitively, governments believe that runaway inflation is a good thing, because it allows them to flush the results of their extravagant spending down the toilet… along with many people’s savings. Those bubbles that keep frothing up due to the Federal Reserve maintaining perpetual inflation, sometimes don’t just ruin people’s savings and jobs but the currency as well. If our debt is valued in greenbacks and the greenback loses all its value, then your debt goes away too. Well, not your debt or my debt but the debt of the elite and government does. If, for example, the US dollar were to become worthless, all the US debt would go away. Debt held mostly by American taxpayers. Our savings would become worthless as well. Our debt for our homes, cars or college tuition… would not however.
The reason the experts claimed that inflation was temporary last year, was because they knew it was largely generated by supply destruction and extravagant spending. They assumed the spending would slow down and the supply would rebound. What they failed to account for, was the globalist’s deep and lasting commitment, to continued supply destruction through regulation. Of course, that inflation evaporates not only the trillions the government owes, on the books, but the literally hundreds of trillions the government owes that is off the books. They are called unfunded liabilities. Central Bank Digital Currencies, CBDCs, will be touted as the “only” answer, after their Hegelian play has ended. So, the human suffering on an epic scale will have worked out, for the elite who caused it.
Sincerely,
John Pepin
