Dear Friends,
It seems to me, why is it, when confronted with inflation, the expert’s only plan is to crush the little guy? If inflation equals demand divided by production. I=D/P. Then instead of always crushing demand with higher interest rates… why not increase production? How? By lowering impediments to production. Reducing impediments to production have a cost. That cost is paid by the bureaucracy, experts and elites. While the dividend is paid to all of society equally. The elite didn’t get to be elites because of their charity, ethics or human heartedness, they got there by hook and by crook. They would have to give up hard won power to benefit some rubes. That’s not going to happen, unless the rubes make it happen, by demanding lowered regulations from our “representatives.”
Milton Friedman said, in his Nobel winning work, that inflation is caused by there being too many dollars chasing too few goods. He went on, as long as the growth in money supply matched the growth in GDP, inflation would remain at zero. If the growth in money was faster than GDP, then there would be inflation, and if money grows slower than GDP, there is deflation. Deflation is where your money goes further instead of becoming worth-less. The elite and experts despise deflation. It increases wages of the middle class, and thus our standard of living. The argument that deflation causes recessions is disproven by the 19th and 20th centuries. The second half of the 20th century didn’t have a period of deflation, yet had plenty of recessions, while the deflation of the 1800’s didn’t lead to disaster.
Since inflation can be triggered by printing too much money, so too much money is chasing too few goods, then it stands to reason that inflation can be triggered by shortages as well. The same amount of money chasing less goods would cause inflation. Couple shortages with profligate money printing and government spending, and you have the equation for inflation. If that’s true, then the opposite must also be true. If shortages can cause inflation, gluts can cause deflation. Too few dollars chasing too many goods. Experts answer to inflation is always and everywhere, to harm the little guy, by raising interest rates to lower the money supply, and therefore diminish demand to come more in line with supply. This strategy only works when government printing and spending remains constant however.
If government is printing and spending two dollars for every one the federal reserve squeezes out of the private economy, inflation will continue roaring ahead. There is no amount of crushing the little guy that’s going to slow it. The source is elsewhere. Examples abound of how this is a failed strategy. Why not instead, try cutting the limits on production? If regulations are lowered, lawyers are muzzled and the courts could be made to be fair again, those huge sources of friction to production, would be eliminated. Put another way. If you want your car to go, pushing the gas pedal to the floor, only works if you lift off the brakes, at least a little. Our experts are like grannies that ride the brakes, and argue brake companies should be sued, for making such short lived products.
The elite aren’t likely to give up power just so the economy can thrive. The heat their friction creates is graft in their pockets, power in their hands, and a boost to their egos. That’s one reason they so despise Trump. He had a policy of eliminating two regulations for every new one they wrote. Galling! No wonder the bureaucracy turned on him like a rabid Saint Bernard. Kujo has got out of control. It’s economic arm, he Fed, is crushing the little guy so the big guys can clean up. The inflation is simply the symptom of the theft. The only way to get a handle on inflation is to get control of government spending, and cut regulations to spur production. That would address the correct side of the inflation equation. Instead of harming to help, why not help… to help?
Sincerely,
John Pepin
