In today’s world, the acceptance of misinformation as public policy has reached alarming levels. This article delves into this unsettling trend while shedding light on our economic reality.
Recently, the Bureau of Labor Statistics revealed that the Consumer Price Index (CPI) rose by 0.3 percent in January. At first glance, this may seem acceptable—unless you needed to fill your gas tank, which saw a significant 7.4 percent hike.
What’s driving these changes?
Over the last ten months, the price of oil has steadily climbed, recovering from a historic low of April 2020 to over $58 per barrel for West Texas Intermediate (WTI) crude oil. Simultaneously, the UN Food and Agriculture Organization’s food price index has reached its highest point since July 2014, largely due to rising grain prices.
We suspect that consumer prices will escalate more than the analysts at the Bureau of Labor Statistics expect in 2021. In the meantime, manufacturers of consumer goods are attempting to mask inflation by reducing product sizes while keeping prices intact. This tactic, known as shrinkflation, is not novel but becomes more prevalent in an environment of excessive currency issuance by governments.
Just last week, Nutella announced it would cut the weight of its 400-gram jars down to 350 grams due to rising production costs. This trend isn’t isolated; in 2020, packages of Nathan’s Pretzel Dogs were altered from five to four hotdogs.
Additional products that shrank that year include:
- Downey Unstoppables (from 10 oz to 8.6 oz)
- Charmin Ultra Strong (from 286 sheets to 264)
- Dawn dish soap (from 8 oz to 7 oz)
- Lay’s Potato Chips (from 15.25 oz to 13 oz)
- Keebler Club Crackers (from 13.7 oz to 12.5 oz)
- Charmin Mega Roll (reduced by 20 sheets)
- Powerade (from 32 oz to 28 oz)
- Puffs tissues (from 56 to 48 tissues)
- Hershey’s Kisses (family size bags down from 18 oz to 16 oz)
Manufacturers are merely adapting to the economic landscape. They realize that consumers are more apt to adjust their spending based on price increases rather than decreases in quantity. But what is fueling these changes?
Too Much Stimulus Is Never Enough
Has there been a sudden surge in demand for goods and services? Have grain crops been devastated by pests? Is the soaring oil price a typical seasonal adjustment?
While these factors may contribute to what appears as moderate consumer inflation—according to official figures—we believe much deeper issues are at play.
A prevalent topic of debate in Washington is: How much stimulus is sufficient?
Every politician has their own perspective. Treasury Secretary Janet Yellen argues that the proposed $1.9 trillion stimulus package will restore full employment by the next year. Senator Mitt Romney proposes $3,000 checks per child for American families.
Representative Alexandria Ocasio-Cortez and Senate Majority Leader Chuck Schumer are advocating for $2 billion to cover funeral costs for COVID-19 victims. Senator Bernie Sanders insists on the fulfillment of promises to distribute $2,000 checks, while other Democrats, including Schumer and Senator Elizabeth Warren, are urging President Biden to cancel $50,000 in student debt per student through executive action.
This is a classic case of financial exploitation. But where is this money originating? How was the $2.2 trillion CARES Act financed? What about the additional $900 billion?
These expenses are simply added to the national debt. But who is purchasing this debt? Who buys the Treasury notes issued to circulate these funds?
The truth is, the Treasury borrows this artificial money from the Federal Reserve, which creates additional credit from nothing.
This scheme not only allows for seemingly cost-free stimulus money but also keeps interest rates artificially low. This results in another bloated residential real estate bubble—a subject worth exploring another time.
According to Washington’s narrative, however, excessive stimulus is an ongoing requirement. Here’s why.
By Big Government For Big Government
It’s essential to recognize that consumer price inflation is just a symptom. True inflation originates from an increase in the money supply—this is where the real issue lies.
Inflation is fundamentally fueled by large government initiatives at the expense of individual freedoms and liberties. Austrian economist Ludwig von Mises, in his seminal work, The Theory of Money and Credit, explored this relationship extensively decades ago:
“Inflation is the fiscal complement of statism and arbitrary government. It is a cog in the complex of policies and institutions which gradually lead toward totalitarianism.”
Without inflationary policies, the existence of big government would not be feasible. This reality is not new; the exploitation of currency by governments has persisted for millennia.
The current devaluation of your dollars has been escalating since the Federal Reserve Act of 1913, intensifying following Nixon’s termination of the dollar’s convertibility to gold in 1971.
Since 1913, the dollar has lost over 96 percent of its purchasing power. In today’s terms, a dollar from 1913 would be worth less than four cents. Consider this:
The U.S. national debt exceeds $27.9 trillion, yet the real gross domestic product as of Q4 2020 was merely $18.8 trillion. The budget deficit for 2020 alone was $3.1 trillion, and additional coronavirus bailouts—after the $2.2 trillion CARES Act and $900 billion supplement—will ensure at least another $1.9 trillion or more will be added to the debt this year.
There’s no sustainable way for the economy to grow out of this predicament. The debt will not be authentically repaid; rather, it will be repaid through deceit. And you will ultimately bear the cost. In fact, you’re already doing so—through inflation.
Your dollars—what you earn, spend, and save—have been tainted.
As fake money continues to be circulated to stimulate the economy, the value of existing dollars diminishes. Consequently, this inflation bolsters statism and arbitrary governance, fostering the conditions for totalitarianism.
So, when consumer prices surge and political leaders scapegoat capitalist “price gougers,” proposing price controls to remedy problems they created, remember this truth: the real motivators are merely looking out for their own interests.
Stimulus is a deception…crafted by big government for its own gain.
Sincerely,
MN Gordon
for Economic Prism
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