The Implications of Inflation in Today’s Economy
Once again, the spectacle of Donald Trump’s impeachment captivated the nation this week. However, this seems to carry little weight given the prevailing sentiment about the character of the current Congress.
The 117th Congress is often perceived as a gathering of opportunists, with the recent impeachment vote merely confirming what many already suspect.
On a more significant note, President-elect Biden’s plan introduces $1,400 “stimmy” checks. This amount adds to the previously approved $600, bringing the total to the promised $2,000 for voters.
This strategy aligns perfectly with the overarching goals of America’s central planners: to lockdown the economy, significantly hurt small businesses, and then stimulate consumer spending through artificially generated funds. The transition from control over the population to that over the economy and financial markets seems seamless.
The global pandemic has offered an unprecedented opportunity to influence the lives of countless individuals. For instance, in Los Angeles County, health officials are recommending that residents wear masks at home. This directive represents a new initiative known as Los Angeles County Responds: Confronting COVID-19, implemented on January 11, 2021.
Throughout history, numerous misguided policies have been attempted, such as the federal income tax and legal tender laws. However, the real measure of a poor decision lies in the devastation it inflicts.
Take communism, for example. It wreaked havoc during the 20th century, despite the best efforts of the Soviet Union’s state planning committee, which produced five-year plans intended for the centralized development of the economy.
The initial five-year plan focused on collective farming, with bureaucrats dictating crop choices and land use. Unfortunately, the outcome was not the anticipated abundance but rather widespread famine.
One might assume Mao Zedong would draw lessons from the Soviet centralization failures of the 1930s; instead, he perpetuated these mistakes during his Great Leap Forward, leading to the Great Chinese Famine.
State Sponsored Collapse
In contemporary America, the influence of progressivism has taken hold, and no harmful idea seems too great to reject. From climate change initiatives and gender-neutral directives to controversial reparations and internet censorship, the array of issues is overwhelming.
At the center of this ideological storm lies a concept that has sparked fervent support among central planners: the belief that endless funds can be created out of nothing to sustain a growing dependence. The theory purports that if one stimulus check is beneficial, then logically, two must be even better.
The ultimate aspiration here is Universal Basic Income (UBI) – sometimes referred to as Citizen’s Basic Income or Guaranteed Basic Income. Under a UBI framework, citizens would receive monthly stimulus payments indefinitely.
This notion, rooted in Modern Monetary Theory (MMT), suggests that limitless money could lead to boundless progressive ideas. However, we must scrutinize whether such unlimited funds truly exist.
Just like with collective farming, MMT may face inherent limitations. As we advance through 2021 under a progressive Congress, we may begin to hit these natural boundaries sooner than anticipated. Indeed, signs of this reality are already visible.
For instance, the yield on the 10-Year Treasury note has quietly but sharply increased since August. What might happen if it were to double again? Agricultural commodities have surged to five-year highs, as have industrial metals like copper.
The price of West Texas Intermediate crude has surpassed $53, rising from about $40 just two months prior—a staggering increase of 32 percent. Is this fluctuation seasonal? Geopolitical? Indicative of a thriving economy? Or is it something deeper lurking beneath the surface?
Fruits of Inflation Are Blossoming
The Bureau of Labor Statistics indicates a 1.4 percent rise in the consumer price index over the past year. Concurrently, the U.S. unemployment rate stands at 6.7 percent, resulting in a misery index of 8.1 percent — the sum of unemployment and inflation rates.
While an 8.1 percent misery index pales in comparison to the staggering 19.72 percent witnessed during Jimmy Carter’s presidency, any index above 10 percent will inevitably lead to widespread discontent.
Eventually, the MMT approach and perpetual stimulus checks will likely unravel. Here’s why:
Just as a rich harvest can be demanded from the land, a continuous supply of money can be expected from the central bank. However, it’s crucial to recognize that, like harvests, economies operate under the principle of “you reap what you sow.” Not all money is created equal.
True wealth is generated through productive efforts, while counterfeit money is artificially produced by central banks pressing buttons. Although counterfeit and genuine money may seem indistinguishable, the former ultimately undermines the latter’s value.
“Cause and effect,” Ralph Waldo Emerson once said, “are two sides of one fact… The effect already blooms in the cause, the end preexists in the means, the fruit in the seed.”
In essence, the quality of money is a reflection of its quantity. The seeds of free money have been sown, and the fruits of inflation are indeed beginning to flourish.
Sincerely,
MN Gordon
for Economic Prism
Return from Fruits Of Inflation Are Blossoming to Economic Prism
