Dear Friends,
It seems to me, we are being ground between the twin millstones of inflation and recession. The one ruins the currency, the other erodes our prosperity. Not an optimal path to societal wealth. Then again, one only takes a path that goes where they want to go. Since societal wealth is clearly not the goal of the elite, they must have another goal. Otherwise the elite would not have created inflation by shutting down supply, while stimulating demand to create inflation, and regulating our economy into recession. Both doctrines are entirely an innovation of the elite. So here we are, inflation eroding the purchasing power of our money and recession threatening to take it away anyway. Meanwhile, the elite could fix it in an hour, but that would weaken the elite’s power.
Inflation is always an imbalance of supply and demand. It can be created by printing currency as was the case in Wiemar Germany, Czechoslovakia and Argentina. A currency is effectively a commodity. Its value is dependent on demand divided by the quantity available. Like any other commodity. If the demand then is less than the quantity available, it becomes less valuable. There is inflation. If demand exceeds the amount available then money becomes more valuable. There is deflation. There are two sides to the coin however. Supply is also a factor. If the supply of a thing goes up, over matching the demand for it, its value decreases. Just as if the supply is cut, so demand exceeds supply, then its value increases and so does the price. Creating inflation outside money printing. Our leaders have done both.
Collapsing markets destroy wealth as assuredly as fire destroys paper. The role of recession in a free market economy is to shake out poor investments, slay zombie companies and clean the way for more efficient allotment of capital. When government protects cronies, rent seekers and zombies, that protection comes at a cost. The effect of recession is not “creative destruction” but merely destruction. Which allows so much dead flesh to build up in the corpus economic, that it cannot but become terribly infected, and perhaps even die. The crony companies become zombies. Who then shamble around the economy, killing the young startups, that would have provided the next generation of innovations. Just as the rent seekers become ever more powerful and voracious.
Both inflation and recession lead inevitably to societal poverty. If you need to shrink a pie to get more of it for yourself, doesn’t that mean others are not only going to get less, but they are going to get much less, if they get any at all? The other way could be to grow the pie so your piece will grow with the whole. The path taken by the elite is to shrink the pie to get ever more of it. It doesn’t take a genius to know that a shrinking economic pie is synonymous with growing societal poverty. Clearly then, societal poverty is something the elite are willing, for the rest of us to pay, so they can have more. How does shrinking the pie make the elite richer? Because inflation grows the value of commodities, enriching the elite, while recession crushes the little guy, impovrishing us.
Inflation and supply shortages are all because of the elite. The last two recessions have been characterized by the federal reserve stepping in to protect the bad actors and propping up their cronies. This has led to the US economy becoming based more and more on rent seeking and not on actual productive activity. Even as the federal reserve is squeezing demand from the private economy, with increasing interest rates, that interest rate also drives up the cost of the national debt, so that merely servicing that debt is sufficient to maintain inflation. Let alone the unimaginable increases in federal spending this year alone. Then there are the regulations. No one does business in the US anymore, the regulatory costs are just too high, because of the elite’s plan to shrink the pie, to get more of it.
Sincerely,
John Pepin
