“Inflation is always and everywhere a monetary phenomenon. A society which is socialist cannot also be democratic.” Milton Friedman, Nobel Prize Winner in Economics, 1973
Hello Everyone, Happy Thursday.
Man, oh man, these debates keep becoming better and better. Kamala and Biden keep spewing out lies and deflecting about their God-awful policies. Moreover, the debate “moderators” keep interrupting Trump and Pence, almost as if they were attempting to debate them. Two more to go, hopefully we can recruit Joe Rogan for the remaining two.
Harris/Biden still have not answered about whether they are going to pack the Supreme Court when Judge Amy Coney Barrett becomes Associate Justice to the United States Supreme Court Amy Coney Barrett. Wow. That has a beautiful ring to it.
Regardless, it is safe to assume that Harris/Biden and the Democrats will attempt to pack the Court, the entire Democrat Establishment and Democrat Elite are saying they will. Even if they make an about face, remember how we were supposed to be able to keep our doctors and healthcare plans, and premiums would go down?
How well did that work? Oh…
Good thing, though, they can only do that if they have the power to do so, i.e. the House and Senate. Oh, and the Presidency. Moreover, because Harris/Biden do not call their “green plan” the “Green New Deal” does not mean that it is not the GND. A dog has four legs, it would not have five because you called the tail a leg. And, for the love of all that is Holy, anyone who says they will raise tax rates and be able to “create” more jobs, increase wages, inter alia is lying to you, sort of how our parents told us Santa was real. Except, these lies have real world ramifications. As I have explained, here, it is an asinine assertion.
That is enough about the Veep debate, for now.
Our topic of discussion for today shall be a more concise column concerning the State of Our Union and what Congress should not do because of the negative consequences in the future—the very near future. The Democrat’s $2.2 trillion-dollar fiscal stimulus Inflation* bill is a wet dream for special interests and bailouts. Congress should pass something more akin to the “skinny” Senate Bill. Or as President Trump stated, more directed, solo bills to where “stimulus” is actually needed. Moreover, Grim Reaper McConnell already said the $2.2 trillion bill will die in the Senate, as it should.
We are already running a deficit of $3.3 trillion. Let’s not try to dig our debt graves any deeper than is necessary because it would be detrimental. When the house is already on fire, you do not throw gasoline on it. As you can see in this chart below my group of engineers and I made using data from the Federal Reserve Bank of St. Louis, Our Union is engulfed in flames—and it has been a debt bomb for some time. Though, we can still change that. We have time, but not a lot.
With the CARES Act, Red States bailed out Blue States, by a wide margin. They should not have the first time. If Authoritarian Governor’s will continue incessant lockdowns and needlessly halt wide arrays of their economies, then, at most, the only aid passed by Congress should be direct federal aid to individuals and businesses most harmed by their dictators. I mean…Governors.
Congress should not pass trillions of dollars debt* in more spending that will benefit State and Local Governments who are falling short of their budgets, such as Illinois, New York and California. It should be a teaching lesson to those governments, the richest States in our Union, to learn what is worth spending and what is not. Maybe take an accounting course. Because for those American Taxpayers in Arizona, Florida, Texas, and the Fly Over States, it is not their fault, nor their responsibility, to make up for the shortfalls of other governments that are poorly run. To our fellow Americans in those areas run by terrible leaders, maybe elect some new ones for a change. Maybe some that have actual experience in the real world. Maybe ones that do not use tax dollars to buy votes. Someday, you run out of other peoples’ money. Just some thoughts.
The Federal Reserve, for all my, apprehensions, concerning it, launched a Special Purpose Vehicle under its §13(3) Emergency Powers to lend or loan money to State and Local Governments in need. At a really, really, really cheap interest rate—interest rates not available to the average American. So, those States and Local Governments in need of money, they should do what the rest of us have to do in times of financial peril and take out loans and learn to live within their means—or default and go into Bankruptcy. I am sure you can get some solid advice from Sen. Warren, she wrote the book on it—literally.
Seems unfair to Americans and properly run States that their counterparts would get a free handout from Congress. And by free, I mean money from taxpayers in other states who have nothing to do with the fiscal issues and concerns of those places. Seems pretty wealth-redistribution-y. I.e., communist.
I digress.
Back to our topic of discussion for today.
Debt, Deficit, & Inflation
I saw a tweet today, unfortunately, which stated an economy is something we made up, it does not exist, and sadly, it had over 102,000 retweets and over 610,700 likes, as of this writing. Wow, education is going down the drain. Those gender studies degrees really are doing the trick.
I was unaware there were people out there who did not know what an economy is. Forgive me for my ignorance, let me explain.
First and foremost, we did make up an “economy,” the theoretical concept. That is true. Since that point, we have tested different types of economies: mercantile, feudal, communist, “socialist,” others, but most importantly, capitalist, i.e. market economy. One of these works better than the rest. We made up the theory of an economy sort of how we made up…oh, I don’t know…government. “We” as in, people, made them. Because something is a theoretical concept does not mean it “does not exist” in practice. Gravity was a theoretical concept; then turned out to be real thing.
An economy was and still is a necessary condition for civil society. It was first theorized many, many, many moons ago to be able to properly facilitate the needs and wants of a civil society. For those who do not know, an economy is an area of production, distribution and trade, and the consumption of goods and services by independent agents acting according to the inherent incentives and constraints imposed by the laws and regulations of the government which oversees said economy. The United States is a market economy, driven by a system of free enterprise. I explained most of this here. And some more here.
Now, in Economics, there are two types of broad reaching government policy tools which affect our daily lives—now, in the near future, and for the many decades that will follow. (Odd that such a thing which does not exist has such consequential implications…) And the longer we take to see the Doctor, get the diagnosis, and start treatment; the longer, more painful, and more severe those treatments become to fix our ailments. Takes guts and grit to face the music.
For a light review—or an introduction for some—Economics is the science concerned with the cause and effect relationships between individuals in an economy regarding the allocations of “scarce” resources which have alternative uses. Scare quotes around scarce because, unlike oil, wheat, and land; the US dollar is only as scarce as the amount of “money” currently in supply. And our government likes spending.
There are two paramount and broad fields of study in economics: macroeconomics and microeconomics. The former relates to the economy as a whole at the national level, phenomena such as balance of payments and gross domestic product. The latter deals with the incentives and constraints on the individual level, such as prices and consumption. To be sure, there is a lot of crossover between the two, both are necessary for a proper understanding economics.
Then, one very important item, the law of supply and demand. Sort of like the laws of thermodynamics. Or…gravity.
To the aforementioned broad government policies. The first is called Fiscal Policy. The second is Monetary Policy.
Fiscal Policy concerns the way a government uses spending and taxation to influence and change the incentives and constraints which are inherent in an economy. Sometimes for worse, and sometimes for not as worse.
Monetary Policy, evidenced by its name, is concerned with the money supply—which is controlled by our private central bank. The Federal “Reserve.” Among the liberal economists and politicians, there is a new fad among the Elite: Modern Monetary Theory. Which, boiled down to its plain meaning: we can keep printing and “monetize,” i.e. make cheaper, our debts because it’s our dollar. Which also makes your dollar worth less.
Bear with me, we are about to go to school. I promise, I explain easier and better than my college professors and it important for our discussion and futures. Plus, I’m more of a visual learner, too.
In the chart above, S is supply and D is demand. The vertical axis is price (P) of the commodity and the horizontal axis is the quantity (Q) of the commodity. Where supply and demand meet in the middle is called the market equilibrium, or the market price of the commodity. This only applies in free markets. Not commie markets, or command economies. That is because in command economies they do not have a free price system, nor the subjective theory of value.
Here, in this chart, we have S1 (where supply started) and S2 (where supply shifted). Then, D1 (where demand started) and D2 (where demand shifted). On the vertical axis, we see P1 shift down to P2, that is decrease in the price of the commodity. Where it then creates our Q1, current quantity. It’s easier to look at this chart clockwise, starting with S1-S2 then D1-D2. And then imagining S1 and D1 disappearing, only then to look at S2 and D2.
This is important because, “money,” akin to every other commodity, decreases in value, or price, the more there is in supply at the rate said commodity outpaces demand. I am sure we have all heard of FOREX. Except, one crucial distinction: the US Dollar is used to buy other commodities and resources. Those commodities and resources are used to create final products. When the dollar becomes less valuable, commodities, resources, and final products become more expensive—that is, inflation. The more spent, the higher the inflation, and the lower standards of living. It is almost universally accepted in the field of economics that inflation occurs six-to-nine months after the money supply is increased. When was the CARES Act passed, again?
Governments and nations are under the same economic rules and laws as individuals/households and companies. The more debt that they take on, the higher the interest payments. Just as individuals cannot live within their means, one day, governments, too, learn the cruelness of debt collectors and bankruptices. Except, the debt collectors and bankruptcy courts for governments is with other governments—and these other governments, such as Communist China, get to set the rules of restructuring debt.
With Our rating here at the Rogue Review and the Political Action Committee I work for, Decouple China, of Communist China’s human rights record as “Mostly Peaceful,” one can only imagine how they would treat These Beautiful United States in Bankruptcy Court. And thus, American Taxpayers, as well.
Our government is a business. Its product is the dollar. Our dollar is the global reserve currency (sort of.) I wonder how happy our government’s customers will be if they continually, harshly, and repeatedly keep making their product worse and less valuable. One can only imagine. This coming election, we have a choice between more stimulus Inflation* bills, or a proven leader and administration who is very good at creating an economic framework that lets American’s create prosperity through our inherent ingenuity.
