Trillions of 2008-2010 bailout dollars did not lead to price inflation. Does this mean the Government can keep “printing” and spending trillions more (all of it deficit spending) with no side effects, indefinitely? Democrats—looking to the next election—think so. They are wrong. What does this mean for you and your family? What does it mean for the GOP?
- Price inflation is often explained as “too much money chasing too few goods and services.” What this describes is an imbalance in the supply of, and demand for, money.
- When there is more money in circulation than is necessary (demanded) to maintain the “real” (non-financial) economy—in other words, when money supply increases faster than goods and services available—the price of everything gets bid up, just like in a housing market under easy-credit conditions. After all, the money has to “go” somewhere. If consumers don’t rebel and stop spending, the price increases stick.
- New money being “in circulation” is essential to broad-based price inflation. If trillions of dollars are conjured up, but they go nowhere and merely sit with the banks, or bounce around between the Wall Street gambling dens, as in 2008-2016, price inflation outside of deeply finance-dependent assets (housing, stocks, commodities) is not possible. For consumer prices to rise, new money must be made available to the “real” economy.
- Price inflation is potentially more viscous and self-sustaining when there are already physical shortages in the economy, as in the USSR/Russia in 1990-1992. Today, building trades contractors can hardly plan their schedules due to material shortages. We hear about the extreme shortage in low-end labor in “blue” states, and how the global microchip shortage will affect everything from phones to cars to farm equipment through late 2022. On a simpler note, it’s very hard to find Diet Sprite or diet ginger ale at 7-11 nowadays. Surely, everyone has their own shortage story.
- Another difference between our 2008-2010 depression and today is that almost all the money conjured up lately is being circulated.
It is being handed out as “stimmy checks”—at this point, paying low-end labor not to work—and all sorts of bailouts and write-offs for favored groups and interests. (In fiscal year 2020 alone, Congressional emergency appropriations were about 1.5 times as big as the 2008 stimulus bill, the 2009 “Porculus” bill, and actual spending under the 2008 “TARP” bank bailout bill[1], combined. The Federal Reserve funded all this by buying Treasury bonds, but has not bailed out the banks as in 2008-2014, when it created so much money that reserves on deposit with “the Fed” grew by $2 trillion, which went nowhere, simply collecting interest for the banks.)
- With the economy recovering fast, Uncle Sam has not staunched his “emergency” money hydrant.
So far in 2021, we have seen the $1.9 trillion American Rescue Plan Act and the $250 billion U.S. Innovation and Competition Act, two party bags of wasteful giveaways, the latter with billions of dollars for unspecified generic infrastructure and education spending to support imaginary “tech hubs” in depressed areas (first and foremost, to buy votes for Chuck Schumer in upstate New York), and, in a repeat of the Obama-era “green energy” handouts to bankrupt/doomed but well-connected companies, tens of billions more for new microchip factories that will never be profitable, if they are even built.
- So far in 2021, Congress has authorized new spending about equal to all 2020 emergency spending. And if Democrats have their way, we will see another six trillion dollars, for mostly “social” infrastructure—e.g., “tax credit” checks for daycare and every other social need—to be disbursed within the next two to three years, plus whatever else they can think of a few months from now, and then again in a few months, through the 2022 election at least. (Does anyone think they will stop? They are on a frenzy.)
They don’t have the money, but as usual, the Federal Reserve—if it doesn’t quit on us—would create it by buying Treasury bonds. (China pretty much stopped buying our debt years ago.)
- There would be many beneficiaries, but the middle class and working poor would ALL pay for it through the “inflation tax.”
Many or most of those who think they are getting something, would, in fact, find themselves at a loss, although they might not understand until after it’s over. This is how inflation always works—someone always pays.
- Democrats are using the 2008-2010 depression and its aftermath as their reference point. They don’t grasp the difference in their current plans (or they don’t care.) They are still fighting the last war, hoping the runway for the inflation airplane is endless—that Government can shovel out unlimited money with no negative consequences.
- We have just seen an inflationary breakout that never happened in 2008. Wholesale-level price inflation is at the highest ever recorded in this country. And that’s just today.
According to a Bank of America report, financially stable households and entities that deferred expenses during the epidemic (e.g., vacations, relocations, eating out, etc.) are sitting on up to $3.5 trillion in “excess” savings. If this is spent, on top of everything the Feds are spending, the report anticipates several years of higher inflation.
- On top of that, if Democrats keep handing outtrillions and trillions more, directly to consumers and favored localities and special interests, that money would be circulating and driving up prices beyond anything that anyone today thinks he or she can tolerate.
- In the northern Virginia suburbs of Washington, DC, it’s not just food and gas ($3.05-$3.15/gallon) that are up. Residential rents have spiked 10 percent so far this year. New or renewal contracts on storage lockers are up over 15 percent. “Mosquito Joe” hiked its monthly lawn spraying from $78 to $84, almost eight percent. And, despite the recent heat wave, for the first time ever, just about no one is watering their lawns, not with water/sewer charges having gone up by half in the last two years. Even now, almost all experts believe inflation is already higher than Uncle Sam’s ability to measure it.
- Financial authorities (U.S. Treasury and Federal Reserve) say this price inflation—on a level not seen in close to 40 years—will be “transitory.” They say it’s only about supply chain issues” from the shutdowns, even though 2020 was the worst of it and somehow most prices stayed flat last year and through this winter, only really taking off around March. Moreover,
since the dawn of econometrics in the 1930s, the U.S. has not had a case of broad-based, high inflation that only lasted a few quarters or a year. This is very likely to be a longer-term phenomenon.
- Looking at the Democrats’ current plan for $6 trillion in deficit-financed, election-buying handouts, whether it passes or not, it’s clear that between now and the midterms, we will see these battles on a nonstop basis. The closer to the election, the more desperate Democrats will be to buy it.
Republicans cannot hope to win a debate over any spending bill, just by highlighting its wastefulness. The public is numb to wasteful, politicized Government spending. No one cares if our national debt in one-dollar bills can stretch around the Earth or the Sun three times. That doesn’t matter to anyone’s life.
- Republicans should not shy from explaining that consumer price inflation today is the result of Democrat-led, uncontrolled deficit spending. The more “Monopoly money” they create for their wasteful spending, the higher the prices will go, because, like air or water, the money must go somewhere. As a guest stated on Tucker Carlson’s show, price inflation is a tax to pay for deficit spending. You are paying that tax, today.
- If Democrats maintain power, their solution to high inflation would be more spending, leading to even higher inflation. As readers may know, many countries have tried this.
- The RNC and Congressional Republicans should start getting the “INFLATION TAX” into the public consciousness today, to prepare America for the outcome of Democrat policies. We already see the GOP mobilizing around “antiracist” brainwashing and white guilt tripping in the schools as an election issue. There’s no reason to hold off on taking on inflation. It’s not going away; it will get worse.
- Democrats see Government as the answer to everything, but if Government can’t solve higher prices, and is in fact their cause, Democrat ideology breaks down. They are not prepared for this.
We’ve seen them claim that a July 4th cookout cost 16 cents less this year, but they are comparing it to early summer 2020, when there was a nationwide meat shortage and panic buying due to COVID at the slaughterhouses. That’s the best they can do. What little their media has said on the topic, has been about oil prices and how this is probably “transitory.” They have done no exploration of broad-based price hike impacts at all. They’d rather talk about how our flag and anthem are symbols of “white rage.”
- Every Republican organization down to the county committee level should start thinking about tracking prices and posting it on their website/Facebook and in their email newsletters. What goods and services are most important to your area? Track them. Come 2022, share this information with Republican campaigns for their ads and mailings.
- VERY SOON, IF NOT ALREADY, EVERY AMERICAN WILL HAVE THEIR OWN PAINFUL “INFLATION STORY” (OR STORIES.) WHAT’S YOUR’S?
[1] TARP funds, though Congressionally authorized, did not go into the “real” economy as circulating cash. Total Federal stimulus (from 2008 on) to the real economy was less than $1 trillion—less than half of Fiscal Year 2020 emergency spending—of which not all was disbursed until after 2010.
For decades, the political rhetoric has been that we are saddling future generations with our debt—as in, our children or grandchildren will be paying it (when they grow up.) That was always only partly true. No one was ever going to literally “pay down” any national debt, not to mention that we now owe about half of it to our own Government (the Federal Reserve and Social Security Administration.) Rather, the time is upon us when you and your still-un-grown kids are paying for current deficit spending—indirectly, the only real way—today.
UPDATE ON INFLATION MESSAGING : July 25, 2021
A fairly brief note, mostly to ask everyone to be careful about what inflation measures you pass around. Even the Republican Study Committee (RSC) included a “used cars up by this much” metric in their May 24th “Tie Biden Agenda to Inflation” memo. Of course, used car prices were in the gutter in 2020, so this is a poor choice of a data point. And, the average person is awake enough to know why hotels, airlines, etc. are charging more than they did in the worst months of the epidemic. It hurts our own logic and credibility to pass around year-on-year price comparisons of goods and services that were demolished by the Chinavirus. Any comparison must be to 2019, or else to items that did not change much in price in 2020.
For example, anyone who has walked around a home appliance store recently, knows that dishwashers have gone up in price by about 20 percent, relative to last year and the year before. And of course, most building materials have gone up at least 10 percent. These are the kinds of things you want to track.
Also, be confident, the media’s ridiculous explanations for these price hikes won’t stand the test of time. This is like CNN experts telling you in January/February 2020 that the Chinavirus is just the flu (because they didn’t want to distract from Impeachment.) It may fool people for a few more months, but six months or a year from now, no one will believe that paint and resin products are still rising in price because of an ice storm in Houston, Texas in February 2021. The real, number one reason, as explained in my below fact-sheet from two weeks ago, is that everyone across every supply chain (oftentimes starting in China) is charging more, because they can, because America has cranked up the “printing press” even when the economy has basically recovered, so there’s no reason for each and every supplier not to collect a little more, if the money’s there for the taking.
A second likely reason is, we have a situation where many middle aged and older trades people and specialists have taken Social Security disability or simply cashed out of their booming 401Ks and retired early during the epidemic, and they’re not coming back, and their skills and knowledge are no longer available. This explains all the “truckers wanted, earn $4000/week ads” you’ve seen online lately. It also explains why many ATM’s have been running dry for days at a time, as (well-paying) servicers such as Loomis are experiencing “staff shortages.” In short, the narrative about only dishwasher-type jobs being hard to fill—as the lowest rung of the workforce prefers to collect their “stimmy checks”—is simply false.
Rather, what we have is a historic, comprehensive dislocation of the workforce, due in large part to Democrat and media fear-mongering and power-grab shutdowns, which will take years to resolve. This wouldn’t necessarily affect prices much, except that the Democrats are determined to keep greasing trillions of new, election-buying dollars into an economy that has already recovered. Thus, be confident that—sadly—inflation is not “transient.” Sit tight, be right, and plan your messaging accordingly. This will most likely be the number one (BY FAR) issue of the midterms.
PS: If you doubt that Republican messaging is already winning, consider that Senator Mark Warner (Virginia) has suddenly gotten cold feet over the $6 trillion (or however much it is now) “social infrastructure” monster bill that his boss Schumer is pushing. Why? Because he made the connection, he admitted as much. Democrat northern Virginia (the DC suburbs), which now controls the state, elections-wise, is getting absolutely hammered by inflation. Food price inflation here is especially bad, worse than most other parts of the country, even most large urban areas.
