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Posts Tagged ‘inflation’

TGIF: Inflation Is Evil | The Libertarian Institute

Posted by M. C. on October 16, 2021

Imagine if the government had to fight its decades-long wars with open taxation. Would Americans stand for global intervention if every penny of the trillion-dollar military had to be paid to the Internal Revenue Service? The poor military contractors might have to find other things to produce, maybe even things that consumers really want.

https://libertarianinstitute.org/articles/tgif-inflation-is-evil/

by Sheldon Richman

When will Americans demand that the government denationalize money and free the market to do what it does better than anything else: serve the general welfare rather than the special interests?

It’s hard to know what it would take to bring this about, but inflation talk is once again in the air, and that’s bad. Worse, it’s in the shops. It had to happen after years of Fed Reserve’s money creation, through the banking system, in the name of stimulating this or stimulating that. Forget the printing press. All the Fed has to do is buy up oodles of bank assets (government debt and bad private assets), leaving those institutions with billions of conjured-up dollars in their computer accounts. Eventually the funny money would get out among us and do its damage. It had to happen sooner or later. Only the schedule was in doubt.

So why was the monetary system ever trusted to politicians and their bureaucratic appointees in the first place? The idea that a free society cannot provide sound money was an article of faith based on no evidence, like the idea that a free society cannot provide roads or law and order. The alleged failures of market-based money were really the result of government intervention. The “authorities” could never resist tampering whenever they saw the chance. Power is a strong drug.

Inflation is insidious. When central-bank policy robs people of their purchasing power by reducing the value of money, life gets harder. It’s obviously worse for the most vulnerable: the low- and fixed-income members of society, who can least afford the rise in the cost of living. But inflation does so much more. Savings melt away for most people, wreaking havoc with their ability to plan and to take care of themselves.

Even that does not exhaust the ways that the government’s central bank harms us. Prices rise, but not uniformly as though the “price level” were a real thing rather than a construct. What counts are relative prices (interest rates are prices too), which in the unmolested market reflect the relative changing of supply and demand. Market prices are indispensable for signaling that some things are being overproduced and while others are being underproduced. Since Fed-created money enters the economy at particular points in society, it changes relative prices in ways that differ from what would have taken place with market-based money. More havoc in the planning of production that would otherwise have served the general welfare.

Expectations change because of Fed policies, and those new expectations lead to employer and employee decisions that will turn out to be wrong when the inflation ends. When the Fed becomes nervous that things are getting out of hand, it will, as the saying goes, step on the brakes. Then many people will suffer anew from the recession, the great revelation of all the mistakes made under the government-distorted signals. And that’s not the end: the recession will be the excuse for new government interventions, which will only introduce further distortions. Never let a crisis pass without increasing power–that’s the politicians’ motto.

Does this sound like fun? Of course it doesn’t, but that’s what the state has done to us over and over. It keeps happening because government officials gain (though not necessarily in the traditional way), and they are good at blaming others for the bad effects. Economics is not intuitive, especially monetary economics.

Can we hope that the politicians and those who profit from their interventions will let go of the power? Why would they unless they had no choice? Inflation is magic: it, along with the power to borrow, enables our rulers to keep the support of constituencies without the explicit taxes they’d have to levy if the central bank did not exist. (Borrowing might still be an option but also might be more limited without central banking.) To put it another way, inflation is taxation by stealth, embezzlement rather than armed robbery. We pay for the largess the government bestows on special others, but much of it appears from thin air. When people pay the bill at the retail counter, most of them won’t know the government is to blame. That’s just evil.

Imagine if the government had to fight its decades-long wars with open taxation. Would Americans stand for global intervention if every penny of the trillion-dollar military had to be paid to the Internal Revenue Service? The poor military contractors might have to find other things to produce, maybe even things that consumers really want.

We owe it to ourselves and future generations to change this madness once and for all.

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Congrats Poverty, for winning the war on poverty

Posted by M. C. on October 1, 2021

Another war lost. Poverty and inflation won.

But the fundamental premise is flawed. Government can’t eradicate poverty anymore than it can eradicate a virus.

For starters, poverty in the US was already in decline, dropping from 18.5% in 1959, to 13.9% in 1965 (according to US Census Bureau data).

Yet in 1974, a decade into LBJ’s ‘all-out war’, poverty started rising again. Go figure— the 1970s saw the beginning of hardcore economic stagnation and debilitating inflation.

No amount of government support could counteract the destruction they were causing.

And by 1993, the poverty rate in the US was roughly the same as it had been in 1965.

So essentially the United States government had declared War on Poverty… and Poverty won. It was a stalemate at best.

See the rest here

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The Biggest Federal Reserve Scandal

Posted by M. C. on September 27, 2021

A limited audit authorized by the Dodd-Frank Act found that between 2007 and 2010, the Federal Reserve committed over 16 trillion dollars to foreign central banks and politically influential private companies. Imagine what a full audit would find. It is time to end the scandal of allowing a secretive central bank to have so much power over the economy and our liberty. It is time to audit, and end, the Fed.

https://mailchi.mp/ronpaulinstitute/sept11at20-115662?e=ff526b933a

Sept 27 – Following revelations that Federal Reserve officials made trades in financial assets while the Fed was taking extraordinary efforts to “stimulate” the economy, Federal Reserve Chairman Jerome Powell ordered a review of the Fed’s ethics rules. While these trades appear problematic, they pale in comparison to the biggest Fed scandal — the Fed’s impoverishment of ordinary Americans, enrichment of the elites, and facilitation of government debt and deficits.

The depression induced by coronavirus, though really caused by so-called public health actions government took in response, was the official reason for the Fed’s increased asset purchases last year. However, the Fed actually started ramping up its money creating activities in September of 2019, when it began pouring billions a day into the repo markets, which banks use to make short-term loans to each other, in order to keep repo market interest rates low.

Coronavirus was just a convenient excuse for the Fed to do more of what it was already doing. Now, the Fed is using the limited reopening as a scapegoat for rising prices. Of course, anyone who understands Austrian economics understands that rising prices are a symptom, not a cause, of inflation. Inflation is the very act of money creation by the Fed.

Rising prices that diminish the average American’s standard of living are not the only result of the Fed’s manipulation of the money supply. The manipulation distorts economic signals, producing results including booms, bubbles, and busts.

Inflation has always benefited the well-connected elites who receive the Fed’s newly created money before the new money causes widespread price increases. The true motivation behind Fed policies was revealed by former Fed official Andrew Huszar in 2013. Huszar, writing for the Wall Street Journal, confirmed that quantitative easing kept stock prices high, instead of helping Americans struggling with the aftereffects of the 2008 meltdown.

Other beneficiaries of the Fed are big-spending politicians. The Federal Reserve’s purchase of federal debt instruments keeps the federal government’s debt servicing costs manageable. This is why, despite Chairman Powell’s recent suggestion that the Fed will soon begin “tapering” its purchases of Treasuries, the Fed is unlikely to significantly reduce its purchase of Treasuries or allow interest rates to significantly increase.

Powell is also unlikely to upset President Biden and Biden’s congressional allies as long as progressives are urging Biden not to reappoint Powell. Progressives want to replace Powell with someone more committed to fighting climate change and systemic racism, two boogeymen routinely bought out as excuses for vast expansions in government spending and power.

Another major scandal involving the Fed is Congress’ refusal to pass the Audit the Fed bill and let the American people know the truth about the Fed’s operations. Audit the Fed authorizes a Government Accountability Office (GAO) audit of the Fed’s dealing with foreign governments and central banks, the Fed’s discount window operations, reserves of member banks, securities credit, interest on deposits, and open market transactions. Audit the Fed would finally reveal the truth about the Fed’s operations.

A limited audit authorized by the Dodd-Frank Act found that between 2007 and 2010, the Federal Reserve committed over 16 trillion dollars to foreign central banks and politically influential private companies. Imagine what a full audit would find. It is time to end the scandal of allowing a secretive central bank to have so much power over the economy and our liberty. It is time to audit, and end, the Fed.



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Too Much Inflation? Just Raise the Inflation Target! | Mises Wire

Posted by M. C. on September 24, 2021

But it’s a safe bet that if the accepted inflation target were increased to 4 percent, we’d be hearing little to nothing right now about tapering, normalization, or any other effort to cut price inflation. The Fed would then be more free to keep the easy money spigot open longer without having to hear complaints that the Fed has “lost control” of price inflation. That would be great for stock prices and real estate prices. Ordinary people, on the other hand, might fare less well. 

https://mises.org/wire/too-much-inflation-just-raise-inflation-target

Ryan McMaken

In late August, Fed chairman Jerome Powell suggested that the Federal Reserve would begin tapering before the end of the year, an admission that price inflation was rising above the 2 percent target. Nonetheless, the Fed took no immediate action in the following month. This week, Powell again suggested a taper would begin soon, stating it would begin soon enough that the process could “conclud[e] around the middle of next year,” and maybe could begin in November. This, of course, was highly conditional, with Powell noting this taper would only happen if “the economic recovery remains on track.”

Some interpreted this as a hawkish turn for Powell, but again, we should expect no immediate action on this. Lackluster economic growth remains a concern and Powell’s qualifier on the “recovery” remaining on track will be key. Last week, Goldman downgraded the US economic growth forecast, and the Beige Book—which always casts economic growth in a rosy glow—also reduced its description of the economy during July and August to “moderate.” Meanwhile, the Bank of England today signaled a worsening global situation with its own downgrade of growth expectations. In other words, if the economy isn’t improving enough—according to the Fed—then it can simply abandon plans to taper.

The Fed may be talking taper, but fears of low growth among doves will fuel ongoing calls for continued stimulus. In fact, we’re already seeing some calls for abandoning the 2 percent inflation target in favor of even higher targets. This, it is believed, will allow for longer and more aggressive periods of stimulus. 

A Weak Recovery

The root of this drive for more inflation lies partly in the fact that many inflation doves believe that the Fed was too timid with stimulus after the Great Recession. Indeed, growth was remarkably slow in those days, producing “the slowest economic expansion” in many decades.1 This was in spite immense amounts of monetary stimulus. Nonetheless, the Fed repeatedly spoke of an “improving economy,” and repeatedly hinted at tapering. But it was only in 2016 that the Fed finally dared to allow the target interest rate to inch upward. This was largely done out of fear the Fed would have no room to maneuver in case of another crisis. Price inflation, after all, remained low in the official measures.

But in 2017 and 2018, when CPI inflation began to push above 2 percent, the expectation arose that the Fed would begin to meaningfully taper to keep inflation near the stated 2 percent target. This alarmed some inflation doves who were concerned—with good reason—that any reining in of the Fed’s easy money policies would end the very fragile and lackluster recovery then underway. They wanted to keep the asset-price inflation going—to reap the benefits of the so-called “wealth effect.” These fears were partially borne out when, in spite of the timidity of the Fed’s tapering efforts after 2018, the repo crisis of 2019 suggested trouble was indeed brewing. And it’s not surprising. Economic “growth” rested largely on a mountain of zombie companies and a financialized economy addicted to artificially cheap credit. 

How that would have played out in the absence of the covid panic is unknown. In any case, efforts at reining in monetary inflation evaporated with the covid crisis and the target interest rate was quickly returned to 0.25 percent. Additional asset purchases resumed at breakneck speed, with the Fed’s portfolio soon topping $8 trillion.

Pushing Inflation Targets Upward

The covid crisis gave doves an opportunity to press for a more “flexible” inflation target. In August of 2020—with central bankers looking for new ways to justify continued stimulus—the Fed adopted a new policy in which it would pursue an average 2 percent inflation goal. In other words, the Fed could now pursue a price inflation goal above 2 percent for some periods so long as it all averaged out to 2 percent over time.

But even that hasn’t been enough for the advocates of ever more price inflation. We’re now seeing calls for ending the 2 percent target altogether—and raising it.

For example, writing at the Wall Street Journal earlier this month, Greg Ip noted that Powell appears to be banking on the inflation rate soon returning to 2 percent. But what if it doesn’t? Ip says if inflation remains above targets, the Fed should just raise the targets. He writes:

One strategy [Powell]—or his successor—should consider in that eventuality is to simply raise the target.

And why pursue higher inflation? Ip takes the popular view of the “mythical trade-off between higher employment and inflation,” as Brendan Brown describes it. For Ip, higher inflation is the way to ensure an employment-fueled expansion, and he writes:

Why would higher inflation ever be a good thing? Economic theory says modestly higher, stable inflation should mean fewer and less severe recessions, and less need for exotic tools such as central-bank bond buying, which may inflate asset bubbles. More practically, if inflation ends up closer to 3% than 2% next year, raising the target would relieve the Fed of jacking up interest rates to get inflation down, destroying jobs in the process.

According to Ip, the too-low 2 percent target places the Fed in an intolerable bind. The Fed needs more room to breathe. Rather than feel the pressure to taper just because price inflation has risen above the 2 percent target, Ip wants to make sure the Fed can just keep on with the stimulus until price inflation exceeds 3 percent, or maybe even 4 percent. And who knows? After that, maybe “economic theory” will tell us that 5 percent inflation is an even better target. Certainly, that would be no less arbitrary a number than 4 percent or 2 percent.

How Inflation Fears Put Political Limits on Easy-Money Policies

The need to raise the target rate is essentially political. Presumably, the longer inflation persists above the target rate, the more the Fed will feel pressure to bring inflation back down through some sort of tapering. After all, the adoption of a 2 percent target implies 2 percent is the “correct” inflation rate. Anything higher than that is presumably “too much.” With the Fed moving toward the 2 percent target since the 1996 —and having formally adopted it in 2012—the Fed’s credibility is on the line if the Fed simply ignores the target.

But it’s a safe bet that if the accepted inflation target were increased to 4 percent, we’d be hearing little to nothing right now about tapering, normalization, or any other effort to cut price inflation. The Fed would then be more free to keep the easy money spigot open longer without having to hear complaints that the Fed has “lost control” of price inflation. That would be great for stock prices and real estate prices. Ordinary people, on the other hand, might fare less well

  • 1. Brendan Brown, The Case Against 2 Per Cent Inflation: From Negative Interest Rates to a  21st Century Gold Standard, (Cham, Switzerland: Palgrave Macmillan, 2018), p. 8.

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Contact Ryan McMaken

Ryan McMaken is a senior editor at the Mises Institute. Send him your article submissions for the Mises Wire and Power and Market, but read article guidelinesfirst.

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Inflation is a quiet but effective way for the government to transfer resources from the people to itself, without raising taxes.

Posted by M. C. on September 23, 2021

Thomas Sowell

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Our New Normal: Inflation, Poverty, Starvation, Economic Collapse, Fascism, Marxism, Communism, and Murder – LewRockwell

Posted by M. C. on September 18, 2021

In reality, it has but one objective, and that is to achieve total global governance and universal control over all.

https://www.lewrockwell.com/2021/09/gary-d-barnett/our-new-normal-inflation-poverty-starvation-economic-collapse-fascism-marxism-communism-and-murder/

By Gary D. Barnett

“So long as the people do not care to exercise their freedom, those who wish to tyrannize will do so; for tyrants are active and ardent, and will devote themselves in the name of any number of gods, religious and otherwise, to put shackles upon sleeping men.”

~ Voltaire

The gullibility of man it seems has no bounds, for if it did, how could so many be so blind? As I reflect on the past 18 months or so, it is quite alarming to understand the scope of this scam called a ‘pandemic,’ and how this entire country (and world) have embraced lies, deception, and tyranny of such magnitude. Mass murder at the hands of the state has already begun, but with the rollout of deadly and poisonous injections purposely mislabeled as ‘vaccines,’ the murder of large numbers that is democide, will be evident among this entire population for years to come. The perpetrators of this genocidal takeover of society are now coming after all children, and will attempt to poison as many as possible with their ‘vaccines’ over the course of this year and next.

Only a nation of pathetic cowardly fools would allow such an abdominal fate for their own defenseless offspring. This type of behavior indicates a total lack of intellect, and a mass ignorance of reality. It also indicates widespread indifference, which is the incarnate of a sick and immoral society.

So, it seems that the so-called “new normal” of totalitarian rule over a slave-like society, is not just the fault of those who wish to rule over us, but more so the people at large for allowing this to happen without proper resistance. Blaming the enemy is easy, but accepting blame of self is avoided at all cost, and this attitude is even worse than that of tyrants. It is expected that the evil among us who are the ruling class exist, but the evil of mass apathy can never be accepted or excused.

In the course of the past few months, this country’s citizens have fully acquiesced to the will of a totalitarian regime, and in the process, have laid bare their weaknesses due to an unfounded fear. Many believe there is safety in numbers, but that is only the mindset of herd animals, not humans. By voluntarily allowing for the death and destruction of part of the herd, the rest survive to live one more day, but when people accept this attitude, they also have to accept the death and destruction of their family, friends, and neighbors as normal for survival. If that is the case, it seems that the evolution of the human species is going backward, and that is exactly what collectivism is meant to accomplish.

With this comes the consequences of non-action, and under these circumstances, those consequences are always at the discretion of the tyrants. What has happened to date should be enough for anyone to see the folly of having confidence in any state or nation. What began with lockdowns and quarantines, led to business closings, job loss, extreme stress, supply line disruption, shortages, higher prices for goods and services, (inflation) and of course economic chaos. This in turn led to much more poverty, despair, and starvation, setting the stage for the next phase of this takeover. By this time, the people should have recognized the totalitarian nature of what was going on, but alas, they remained obedient and passive, and watched as their world was decimated.

In order to see the writing on the wall, one must seek out and accept the truth, regardless of the risk involved in doing so. To avoid the truth in favor of hiding from reality, hoping that someone else will ‘fix’ things, is exactly what all tyrannical rulers seek in the populations they are attempting to control. It is my expressed opinion, that the timing of this takeover coup was based fully on the fact that the master class knew that the general population was too afraid, too dependent, and too apathetic to fight back against this dictatorial authoritarianism that had been planned for decades. The timing of this was genius, because the masses acted in exactly the manner desired.

While no such thing as ‘Covid-19’ actually exists, and has never been identified, the real threat that is the real pandemic, had been held aside for just the right moment, and early this year the ‘vaccine’ pandemic was released. The ‘vaccine’ is the bio-weapon, and the so-called non-existent variants a of a non-existent virus, are the result of the deadly ‘vaccines.’ In other words, the ‘vaccine’ is the pandemic, and all those who have voluntarily taken the injections will be the victims of this staged pandemic. Once the deaths from these jabs reach unprecedented numbers, and they will, the rest of society who have not succumbed to the idiocy of taking such a dangerous concoction, will be blamed. In effect, all will have been targeted by the criminal state, whether they got the injection or not. The ‘vaccinated’ group will be sick and dying, while the unvaccinated group will be hunted by the state. This is why this society has already been divided by stealth in order to pit those vaccinated against those who are unvaccinated; a sinister plot meant to solidify control of both groups.

This is a communistic takeover attempt, that has all the elements of Fascism, Marxism, and Communism rolled into one. It is the most dangerous time in history for the inhabitants of this planet, as it is an attempt to achieve a globalized takeover of all in order to convert to one technocratically controlled system, where there are an ‘elite’ few’ at the top, their enforcers and corporate partners below, including government, with the rest being a slave class known as the proletariat.

While this ‘pandemic’ is thought to be about a mystery virus, it is not, as the virus narrative is just the tool being used to accomplish the real agenda, which has its roots based in the guise of ‘sustainable development’ marketed through the idiocy of man-made climate change. This has been fully outlined in the UN’s Agenda 21 and Agenda 30, and in the aptly named “Great Reset’ agenda described by Klaus Schwab and the World Economic Forum. In reality, it has but one objective, and that is to achieve total global governance and universal control over all. To be successful in this venture, many hundreds of millions, or more likely billions, will need to be murdered. The ‘vaccines’ are the tools of murder, so avoidance of these injections at all cost is imperative.

This is not a new threat, but it has been carefully manipulated to occur at this time in order to coincide with the people’s ignorance and indifference, their prepared division, their weakness and dependence on the state, and therefore their cowardice in the face of adversity. This ‘vaccine’ is the key to success for the evil and criminal rulers, so the fewer of us that take this witches brew, the more of us who will be able to fight back against this heinous attempt to destroy humanity. Our only hope is to remain non-compliant, to disobey every order, and to abolish the current governing system that has assumed dictatorial powers with the voluntary cooperation from the masses.

“The opposite of love is not hate, it’s indifference. The opposite of art is not ugliness, it’s indifference. The opposite of faith is not heresy, it’s indifference. And the opposite of life is not death, it’s indifference.”

~ Elie Wiesel

Source and reference links:

The silent weapon that is the mRNA ‘vaccine’

The non-existent ‘virus’ called ‘Covid-19’

Sustainability and super pandemics

Agenda 21

Agenda 2030: Global communism unleashed

‘Covid’ equals murder: the children are next

Covid-19 ‘Vaccine’: A slow-motion genocidal bioweapon

Gary D. Barnett [send him mail] is a retired investment professional that has been writing about freedom and liberty matters, politics, and history for two decades. He is against all war and aggression, and against the state. He recently finished a collaboration with former U.S. Congresswoman, Cynthia McKinney, and was a contributor to her new book, “When China Sneezes” From the Coronavirus Lockdown to the Global Political-Economic Crisis.” Currently, he lives in Montana with his wife and son. Visit his website.

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Doug Casey on How Politicians Will Try to “Fix” Inflation with 3 Dangerous Policies

Posted by M. C. on September 2, 2021

Since people don’t understand that the government is the cause of the inflation, they’ll demand more government intervention and planning. Over the last few generations, they’ve come to think of the government as a magic cornucopia.

https://internationalman.com/articles/doug-casey-on-how-politicians-will-try-to-fix-inflation-with-3-dangerous-policies/

by Doug Casey

International Man: The US government has printed more money recently than it has in its nearly 250-year existence.

It’s the biggest monetary explosion that has ever occurred in the US, and it shows no sign of slowing down.

Retail prices are already starting to soar.

Where is this all headed? Is inflation out of control?

Doug Casey: It doesn’t look terribly out of control yet on a retail level. A Big Mac is generally under $5, and gas is around $3. The tens of millions of Americans earning $10–15 an hour can still scrape by after taking in a roommate to cover rent at say $1000 a month—especially since millions of them are still stiffing their landlords with rent and mortgage “forbearance.” But as that goes away and a radical wave of inflation washes over the country, a lot of them will wind up on the street.

The US monetary and economic situation is going to get insane, with the Fed monetizing $120 billion of debt every month. And the worse it gets, the more dollars the Fed is going to print in a vain attempt to hold the system together. It’s going to throw people who are just holding on off-balance.

So far, the vast majority of the trillions of dollars that the US government/Fed has created have gone into the financial markets. It’s boomed stock, bond, and property prices, making rich people even richer. The situation is still under control.

But it’s going to start filtering down to a retail level.

Here’s an example I encountered just today: As a lifelong car guy, I follow the prices of exotic cars. I saw a 1968 Porsche 911R soon to be auctioned—a low mintage car, but nothing exceptional in my opinion. Just a lightweight 911 with only a 220-horsepower engine. It’s estimated to trade hands for $5.5 million. That’s insane.

There’s been a growing bubble in exotic cars for years, but now it’s cresting. The funny part is that the listing said, “Maybe it’s time for you to take your winnings from GameStop and buy this Porsche.” I don’t know if the writer was being sarcastic or serious, but his words pretty well frame today’s mood.

It’s quite surreal. I’ll wager, however, that within 10 years, there will be hundreds of exotics, now being bought as instant collectibles, that will be found in barns with flat tires, dead batteries, and birds roosting under the hood. Their owners will have lost both their money and their interest in collecting. Nobody will want to be seen driving them for fear of being outed as a rich guy—which isn’t good during a depression. The same thing happened to Cords, V-16 Cadillacs, and Duesenbergs during the last depression

Here’s the bottom line… I think you can plan your life around monetary chaos over the next few years.

International Man: In a misguided effort to address rapidly rising prices, could the US government impose price controls and wage controls? What are the implications?

Doug Casey: At this point, the US government is capable of doing almost anything. Remember that the prime directive of all living entities—whether an amoeba, a person, or a government—is to survive. They’ll do that at any cost. The government isn’t “We the People;” that’s fictional. It’s a discreet entity with a life of its own. Worse, it’s a parasite. It produces nothing but just lives on its subjects.

With an anticipated new injection of $3 to $5 trillion into the market on top of all the other money that has been created in recent years, plus a large drop in production because of COVID hysteria and lockdowns, at some point, prices will absolutely explode across the board.

Of course, people will then clamor for the government to “do something”—not understanding that the government is the cause of all of this.

But the question is: Are they stupid enough to try wage and price controls?

When it was attempted under Nixon in 1971, he created an economic disaster. But neither the government nor the people learned anything from it. They blamed high gas prices and gas shortages on greedy oil companies. They blamed high beef prices on evil ranchers. Politicians think that since they now have much more control over the economy that perhaps controls will work this time. I wouldn’t put it past them to impose wage and price controls, and foreign exchange controls as well. Price controls, likely combined with some form of Guaranteed Annual Income, will absolutely affect the supply of goods and services because it will make the production of some things uneconomic. This will inevitability create shortages.

We haven’t seen anything yet.

International Man: The Argentine government once outlawed the publication of independent inflation statistics. Under the guise of combating so-called “misinformation,” could the US government do the same?

Doug Casey: It’s almost as if the US government is taking lessons from the Argentine government.

Right now it seems that the US is only about one cycle behind Argentina. And it’s not just economic information that is selectively reported and distorted—the problem is much broader than that.

I trust the US government’s figures only slightly more than those of the Argentine government. The problem is that Argentina is a backwater, whereas the whole world revolves around Washington, DC. The problem is that the people currently in control of DC are Bolshevik-style ideologues, identical in nature to the Peronists and Kirchnerites in Buenos Aires. They’ll do to the US exactly what’s happened to Argentina.

The biggest example of phony reporting is in COVID-19. The US government hasn’t made it illegal yet, per se, to say things that run counter to the official story on COVID-19. But it’s minions, Facebook and Google, that have made it almost impossible to get other information out.

As a result, we don’t know what’s really going on with the so-called pandemic. Doctors are actively discouraged from even discussing treatments for the disease. The only palliative on offer are vaccines, which in most cases are unnecessary, appear to be ineffective, and quite possibly are dangerous. But, in the absence of accurate statistics—everything is totally politicized—all we have is unanswered questions. One question I have is “Where are all the carts whose drivers call ‘Bring out your dead’ as they go through the streets every morning?”

International Man: What other second- and third-order effects of out-of-control inflation do you anticipate?

Doug Casey: There are lots of them, and they’re serious. First, inflation wipes out the savings of the average guy.

We have to remember that the average American—if he saves any money at all—saves in the form of US dollars. If those dollars are inflated, it’s going to impoverish many millions of Americans on the low end of the economic scale.

If inflation goes much higher, especially in an environment of artificially low or suppressed interest rates, nobody is going to save dollars for the same reason Argentines don’t save pesos. People will instead redouble their consumption, acting more and more like foolish grasshoppers and less and less like prudent ants. The result will be a dearth of capital. Lots of currency, but no capital, will gradually transform the US into Argentina or Venezuela. Innovation will diminish. Technology, which lives on capital, will slow down. Among other things, it will result in chaotic markets.

Since people don’t understand that the government is the cause of the inflation, they’ll demand more government intervention and planning. Over the last few generations, they’ve come to think of the government as a magic cornucopia.

Political chaos will accompany the economic chaos. Then we just have to wait for a strong man to come along who’ll say, “Look, things are out of control. You need me to get them back into control.”

I don’t see any way out of a downward spiral at this point.

International Man: What are the investment implications?

Doug Casey: In this economic and political environment, “investing” is a poor option. Investing can be compared to the planting of a seed in order to grow an ear of corn. It requires proper conditions in order to succeed. Investing capital requires certain minimums of stability and predictability. Those will be in short supply, along with many other good things. Markets will be going up and down wildly, like an elevator with a lunatic at the controls. That discourages investors.

Speculators, on the other hand, look to prosper in chaos. They don’t try to grow businesses; they just take advantage of politically caused distortions in the market. That’s why they have a bad reputation. But it’s an undeserved reputation since they’re just reallocating capital in the face of chaos—which is necessary and salubrious. In a stable free market, speculators would be largely unemployed—but unfortunately, that’s not the world we live in.

You’re going to have to learn to speculate. In the highly politicized environment we’re facing, there will be plenty of purely psychological panics to the downside and manias to the upside as well.

The next few years will have a lot of bad news for almost everyone, interspersed with some good news for a few.

The bad news is that in an increasingly inflationary, heavily taxed, heavily regulated society such as ours, the general standard of living will decline. One has to become a speculator out of self-defense. Just keep in mind that the public will look to blame speculators—not government—for their problems in the future, much as they have blamed oil and cattle producers in the past.

Editor’s Note: The economic trajectory is troubling. Unfortunately, there’s little any individual can practically do to change the course of these trends in motion.

The best you can and should do is to stay informed so that you can protect yourself in the best way possible, and even profit from the situation.

That’s precisely why bestselling author Doug Casey and his colleagues just released an urgent new PDF report that explains what could come next and what you can do about it.

Click here to download it now.

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War and the Money Machine: Concealing the Costs of War beneath the Veil of Inflation | Mises Institute

Posted by M. C. on August 24, 2021

We conclude, then, that monetary inflation is the crucial first step in the process by which government seeks to conceal from its citizen-subjects the enormous costs associated with war, particularly the progressive destruction of the nation’s productive wealth. Specifically, the inflationary process is indispensable for masking the capital decumulation crisis precipitated by war mobilization, which would otherwise be swiftly revealed to one and all by monetary calculation.

https://mises.org/library/war-and-money-machine-concealing-costs-war-beneath-veil-inflation

Joseph T. Salerno

n every great war monetary calculation was disrupted by inflation. … The economic behavior of the belligerents was thereby led astray; the true consequences of the war were removed from their view. One can say without exaggeration that inflation is an indispensable means of militarism. Without it, the repercussions of war on welfare become obvious much more quickly and penetratingly; war weariness would set in much earlier.1

[Governments] know that their young men will readily sacrifice their lives and limbs and that their old men will readily sacrifice the lives and limbs of their sons and grandsons, and that their women will readily sacrifice the lives and limbs of their husbands, their sons, and their brothers in what they believe to be a noble cause, but they have a deadly fear— sometimes, but not always, well founded—that women and old men will shrink from pinching the stomachs of themselves and the young children, so that warlike enthusiasm will decay if it once gets about that the association of war with abundance to eat, drink, and wear is delusive, and that there is still truth in the old motto of “Peace and plenty.”… True that to be pinched by high prices rather than by small money incomes and large taxes made the people rage in the first place against the persons who were supposed to profit and often did profit—most of them quite innocently—by the rise of prices instead of against Government.2

[T]he true costs of the war lie in the goods sphere: the usedup goods, the devastation of parts of the country, the loss of manpower, these are the real costs of war to the economies.… Like a huge conflagration the war has devoured a huge part of our national wealth, the economy has become poorer.… However, in money terms the economy has not become poorer. How is this possible? Simply … claims on the state and money tokens have taken the place of stocks of goods in the private economy.3

“War, huh, what is it good for? Absolutely nothin’.
It ain’t nothin’ but a heartbreaker
Its got one friend, that’s the undertaker.…
War can’t give life, it can only take it away.”4

1. Introduction

The costs of war are enormous, as the above quotations trenchantly indicate, and inflation is a means by which governments attempt, more or less successfully, to hide these costs from their citizens. War not only destroys the lives and limbs of the soldiery, but, by progressively consuming the accumulated capital stock of the belligerent nations, eventually shortens and coarsens the lives and shrivels the limbs of the civilian population. The enormous destruction of productive wealth that war entails would become immediately evident if governments had no recourse but to raise taxes immediately upon the advent of hostilities; their ability to inflate the money supply at will permits them to conceal such destruction behind a veil of rising prices, profits, and wages, stable interest rates, and a booming stock market.

In the following section I explain how war, completely apart from its physical destructiveness, brings about the economic destruction of capital and a consequent decline in labor productivity, real income, and living standards. The argument in this section draws on the Austrian theory of capital as expounded in the works of Ludwig von Mises and Murray N. Rothbard. Section 3 analyzes the reasons why different methods of war financing will have different effects on the public’s perceptions of the costs attending economic mobilization for war. The analysis developed in this section owes much to the classic discussion of inflationary war financing by Mises.5 Section 4 concludes the paper with a brief explanation of how inflation constitutes the first step on the road to the fascist economic planning that is typically foisted upon capitalist economies in the course of a large-scale war.

2. The Economics of War

The conduct of war requires that scarce resources previously allocated to the production of capital or consumer goods be reallocated to the raising, equipping, and sustaining of the nation’s fighting forces. While the newly enlisted or inducted military personnel must abandon their jobs in the private economy, they still require food, clothing, and shelter, in addition to weapons and other accoutrements of war. In practice this means that “nonspecific” resources such as labor and “convertible” capital goods including steel, electrical power, trucks, etc., which are not specific to a single production process, must be diverted from civilian to military production. Given the reduction in the size of the civilian labor force and the conversion of substantial amounts of the remaining labor and capital to the manufacture of military hardware, the general result is a greater scarcity of consumer goods and a decline of real wages and civilian living standards.

However, the transformation of the economy to a war footing implies much more than merely a “horizontal” reallocation of factors from consumer goods to military production. It also entails a “vertical” shift of resources from the “higher” stages of production to the “lower” stages of production, that is, from the production and maintenance of capital goods temporally remote from the service of the ultimate consumers to the production of war goods for present use. For, as Mises6 points out, “War can be waged only with present goods.” but, in substituting the production of tanks, bombs, and small arms destined for immediate use for the replacement and repair of mining and oil drilling equipment intended to maintain the flow of future consumer goods, the economy is shortening its time structure of production and thus “consuming” its capital. Initially, this capital consumption is manifested in the idleness of fixed capital goods that cannot be converted to immediate war production, e.g., plant and equipment producing oil drilling machinery, and the simultaneous over-utilization of fixed capital goods that can be so converted, e.g., auto assembly plants now used to produce military vehicles. In the short-run, then, the flow of present goods or “real income,” in the form of war goods and consumer goods, may actually rise, even in the face of a loss of part of the labor force to military service. But as years pass, and industrial and agricultural equipment is worn out and not replaced, real income inevitably declines—possibly precipitously— below its previous peacetime level.

Schumpeter7 has provided a graphic summary of the horizontal and vertical shifts of resources caused by the exigencies of a war economy, and the deleterious effect of the vertical shift on the capital stock:

First, “war economy” essentially means switching the economy from production for the needs of a peaceful life to production for the needs of warfare. This means in the first place that the available means of production are used in some part to produce different final goods, chiefly of course war materials, and in the most part to produce the same products as before but for other customers than in peacetime. This means,furthermore, that the available means of production are mainly used to produce as many goods for immediate consumption as possible to the detriment of the production of means of production-particularly machinery and industrial plant—so that that part of production that in peacetime takes up so much room, namely the production for the maintenance and expansion of the productive apparatus, decreases more and more. The possibility to do just this, that is to use for immediate consumption goods, labor, and capital which previously had made producer’s goods and thus only indirectly contributed to the production of consumer’s goods (i.e., which made “future” rather than “present” goods, to use the technical terminology), this possibility was our great reserve which has saved us so far and which has prevented the stream of consumer’s goods from drying up completely.… Our poverty will be brought home to us to its full extent only after the war. Only then will the worn-out machines, the run-down buildings, the neglected land, the decimated livestock, the devastated forests, bear witness to the full depth of the effects of the war.

In commenting upon the effects of World War I on the British economy, Edwin Cannan8 also drew attention to the crucial fact of the vertical shift of resources and the capital consumption it implies, observing that

… during the war addition to material equipment at home and foreign property abroad wholly ceased. The labor thus set free was made available for war production and for the production of immediately-consumable peace-goods.

[Moreover] everyone conversant with business knows that renewals, if not repairs, have been very seriously postponed in all branches of production and that stocks of everything have run down enormously. The labor which would in ordinary times have been keeping up the material equipment was diverted to war-production and the production of immediately consumable peace-goods.… It was chiefly the tapping of these resources that enabled the country as a whole to get through the war with so little privation.

It may be objected that empirically, the vertical shift of resources is likely to be trivial, because “investment” constitutes such a small segment of real output and therefore the increase in the output of war goods must come mainly from resources diverted from the consumer goods industries combined with a reduction of the leisure of the civilian population, i.e., through increased overtime and labor participation rates. But this fallacious consumer-belt-tightening theory of war economy is based on the Keynesian national income accounting framework, according to which capital investment constitutes a small fraction of total GDP. For example, during the fourth quarter of 1994, the annual rate of real gross private investment in the U.S. totaled $939.7 billion or slightly more than 17 percent of real GDP while real personal consumption expenditures in the same quarter equaled $3629.6 billion or almost 67 percent of real GDP.9

Unfortunately, in this framework the investment in “intermediate inputs” is netted out to avoid “double counting.” These intermediate inputs to a great extent comprise precisely those types of capital goods, namely, stocks of raw materials, semi finished products, and energy inputs, that can most readily be converted for use in the production of present goods, whether for military or consumption purposes. As Mises10 observes, this is one form that capital consumption took in Germany during the First World War: “The German economy entered the war with an abundant stock of raw materials and semi-finished goods of all kinds. In peacetime, whatever of these stocks were devoted to use or consumption was regularly replaced. During the war the stocks were consumed without being able to be replaced. They disappeared out of the economy; the national wealth was reduced by their value.” These future or higher-stage goods permanently “disappeared” because the resources previously invested in their reproduction had been withdrawn in order to augment the production of war materials.

In fact, in a modern capital-using economy, at any given moment during peacetime, the aggregate value of resources devoted to production and maintenance of capital goods in the higher stages of production far exceeds the value of resources working to directly serve consumers in the final stage of the production process. As an example, for the U.S. economy in 1982 total business expenditures on intermediate inputs plus gross private investment totaled $3,196.7 billion while personal consumer expenditures totaled $2,046.4 billion. Over 6o percent of the available productive resources, outside the government sector, was therefore devoted to the production of capital, or future, goods as opposed to consumer, or present, goods.11,12

3. The Financing of War

See the rest here

Author:

Contact Joseph T. Salerno

Joseph Salerno is academic vice president of the Mises Institute, professor emeritus of economics at Pace University, and editor of the Quarterly Journal of Austrian Economics.

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The US Housing Bubble Visualized – LewRockwell

Posted by M. C. on July 31, 2021

Sell now, buy later.

https://www.lewrockwell.com/2021/07/no_author/the-us-housing-bubble-visualized/

By Bern in Williamsburg, VA

Take a look at what the FED’s manipulation of interest rates has done to housing prices.  The chart below is from the data on their own website.  It’s in real dollars and the indices synch perfectly.  The USA is currently in the biggest housing bubble of all time.  A “correction” in the stock market will bring down housing also.  It’s going to be a mess.  And it could have been avoided if only there was “honest” money management at the FED.

I also downloaded the data and added a regression line for the Case Shiller Index.  It’s just another way to visualize the bubble we’re in.  I’ve given up on buying a house now because I don’t want to own a property that will be significantly underwater when housing corrects.  There’s no way that “normal” inflation can explain these prices.  It’s all been done by the dishonest policies of the FED serving their own interests and their banking clients.

Keep plugging away……..

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Shrinkflation, Inflation’s Sneaky Cousin, Is on the Rise | Mises Wire

Posted by M. C. on July 29, 2021

What is causing this increase in shrinkflation? Well, since shrinkflation is in fact a form of inflation, the short answer is that the same factors have caused inflation. As you may already be aware, many are blaming shortages and disruptions in the supply chain for the recent increases in inflation, but that hardly explains the whole story.

https://mises.org/wire/shrinkflation-inflations-sneaky-cousin-rise

Inflation has been on the rise for the past year and in the last few months it has accelerated. In June 2021, inflation, measured by the Consumer Price Index (CPI), hit the highest level since 2008. By inflation, economists refer to the increase in the general level of prices, which means that prices on average are increasing. The Bureau of Labor and Statistics (BLS) has a basket of goods and services that it tracks and uses to create a measure of the CPI. While inflation is the topic of the day in the news media and everyday conversations, many have not heard about its sneaky cousin, shrinkflation.

The term shrinkflation, is credited to British economist Pippa Malmgren, and refers to the shrinking weight of the products while the price for the package remains the same. This is in effect another form of inflation, since the per unit price of goods increases when products shrink. However, shrinkflation is trickier, since most consumers do not notice it (see here for a few examples of shrinkflation). Shrinkflation is an ongoing process, but we are seeing more of it in the past year, and especially the first half of 2021, as businesses scramble to catch up with increasing costs of production. Shrinkflation is so widespread today that there is a dedicated Reddit page for it.

Many complain about businesses resorting to shrinkflation and regard it as a sneaky way to increase prices. Yet many of the critics do not realize that businesses have no choice but to increase prices. Anyone who is paying attention to prices in the first half of 2021 will know that it is not only the price of consumer goods that it is increasing but also the prices of producer goods. In other words, the inputs used in the production of the goods we consume, including labor, have been getting more expensive. Consequently, businesses in a fight to maintain their profit margins have resorted to increasing prices or shrinking the size or weight of their products.

Normally, the BLS accounts for the weight of the products it tracks, which would allow them to account for shrinkflation, but as the Washington Post reports, the BLS has not been able to do this very well during the pandemic. This means that the current inflation measure, as measured by CPI, is most likely underreporting the extent of current inflation.

What is causing this increase in shrinkflation? Well, since shrinkflation is in fact a form of inflation, the short answer is that the same factors have caused inflation. As you may already be aware, many are blaming shortages and disruptions in the supply chain for the recent increases in inflation, but that hardly explains the whole story.

The two main candidates to blame are the Fed and the government. The Fed has printed tremendous amounts of money, which has led to the doubling of its balance sheet since March 2020. This is in fact what inflation is, and this is the cause of what we normally refer to as inflation, which, to be more accurate, is price inflation. In general, we know that the more money we print, holding all else equal, the more inflation we will get, and that is part of what we are seeing now. On the other hand, we have had the federal government spend money at record levels for a peacetime period. This also has led to an increase of demand beyond what one would expect in the circumstances we have been in since spring of 2020. For example, retail sales have increased rapidly and have been above trend since late 2020. While some of this can be seen as catching up after the decrease we saw in the second quarter of 2020, it is definitely gone beyond catching up, as is clear from the graph below. Government spending has become a topic of concern even for mainstream economists like Larry Summers, who is now worried about the economy overheating because of it.

Retail Sales

Lastly, while the supply chain disruptions are blamed on covid-19, it is the lockdowns instituted by governments, in the US and other countries, that are the main culprit behind these supply chain disruptions. The problem with the lockdowns was that they completely ignored the cost-benefit analysis by arbitrarily determining what constituted an essential business and what did not. As you may well know, one can ignore the laws of economics, but not their consequences, and we are now suffering the consequences of these arbitrary lockdowns. The million-dollar question today is, How long will this rising inflation and shrinkflation last? The Fed insists that this inflation is transitory, but many, including BlackRock’s CEO, are concerned that this may not be the case. With the inflation data from June, we have some evidence that inflation may be more than transitory. As can be seen from the graph below, the transitory portion of inflation (base effects) was expected to retreat for June (the bar after the dashed line), but CPI advanced beyond the increase in May (reflected in the green portion of the bar added to the predicted June CPI by Oxford Economics).

US Headline CPI Inflation
  (The graph is modified to show the actual CPI change for June, by adding the green portion of the bar.)

Hence, with all the money that the Fed has printed and is continuing to print, and the increased spending by the federal government, we may well end up seeing higher inflation over the next few years. Whether this will happen or not remains to be seen, but one thing is for sure: the shrinking size and weight of the products is here to stay and it will only get worse as inflation pressures continue to worsen. Author:

Klajdi Bregu

Dr. Klajdi Bregu is an assistant professor of economics at IU South Bend’s Judd Leighton School of Business and Economics and a fellow at the Center for Market Education. Prior to his appointment to the Leighton School faculty, Dr. Bregu taught at the University of Arkansas. He has published research in the Journal of Economic Dynamics and Control and the Southern Economic Journal.

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