Since the beginning of the pandemic, time spent at home, like the price of gas, has seen quite a vast increase. During this time, the government has dramatically increased its deficit spending by around $5 trillion to fight our ‘war’ on the pandemic. Throughout history, when the United States has gone to war and spent such demonstrably large dollar amounts on wars—we usually were solving Europe’s problems.
Now, we are solving China’s problem.
Recently, the Chairman of the Federal Reserve went on public record and stated that inflation was nothing to worry about, that the Federal Reserve has it under control, and rising prices will become solved—whenever certain parts of the economy ruled by executive fiat open back up.
That is simply just not true. As if anything in life was just as simple. We can be sure that inflation and the economy are some of those things in life that are not simple. Surely, it may take more than twelve people to solve such a vast array of complex organisms which contribute to economics and its real-world applications.
There are two major and commonly accepted types of inflation, demand-push and cost-push. In short, demand-push inflation (DPI) means there are more people who want a certain thing than there is of that thing, at a given time. Cost-push inflation (CPI) means there is too much money in an economy, at a given time, then is necessary for the amount of resources available, driving up the prices of inputs. One means people want the thing sought, the other means the thing used to acquire other things is devaluing. The first one is good. The second one, not so much.
Currently, in the United States and abroad, there are vast and expansive lockdown measures. Supposedly, from Beijing all the way to Washington. That would mean, naturally, there is less oil demanded in the world. Not because people do not want to drive, but because the amount of driving they can do is substantially a lower standard than before the pandemic. Usually, when a good is in less demand, in a free market, the price of the good is lowered to sell sufficient supply to generate enough revenue over cost. In short, prices are lowered until profit is net profitable, after taxes.
Of course, there is the OPEC+, the international cartel of oil hoarders. An organization only President Trump was able to control with the United States formerly, for the first time, being energy independent. With Biden killing off the Keystone XL Pipeline, and others, and for putting a moratorium on oil exploration on federal lands—it eviscerated what leverage we had. Leverage, mind you, which was over countries he supposedly likes bombing indiscriminately with drone strikes. And that drastically, oddly, benefits Iran. All before Biden ever gets to the negotiating table.
It is truly a wonder, whatever the Biden Administration is thinking when it comes to economics and negotiations. The first tells you to keep the pipelines and lift the moratorium and issue more permits, especially with our oil industry in dire straits in Texas, increase the supply of cheap, quality oil to keep the price level from increasing. It would also tell the government to stop spending money we do not have by increasing our credit line ever so with the Federal Reserve. Gold is getting expensive. China has been buying, literally, tons.
The second tells you to not give up your leverage, before, during, and hopefully, after a negotiation. And it is always better to leverage up, not down. Biden must not be that good at poker. Or being the chief executive. That must be at least one of the reasons why Kamala has been taking calls from foreign leaders.
With such easy answers to solve so many of today’s problems with long-proven solutions, one begins to wonder when, if ever, they will be implemented?
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