“No, you’ve already made the choice. Now you have to understand it.” – The Matrix Reloaded
I spent hundreds to rent a limo, but there was no driver. All that cash on a limo, and nothing to chauffeur it.
I did posts about inflation before inflation hit, but I’m not a psychic. It’s not like I work for ESPN or something. No. This inflation was absolutely predictable, and in fact, has been absolutely predictable since 2008. Ben Bernanke’s Fed© Approved™ solution to the Great Liquidity Crisis during the Great Recession was simple: print a lot of money.
Make no mistake, the economic problem was big back then in 2008. I personally saw an entire segment of the economy reach a full dead stop. Rail cars piled up at the sidings on my drive to work near Modern Mayberry because the railroads had no place to put them – miles of them. I mean, without rail cars how could new railroad employees train?
Why did this happen? Nobody knew which banks had money and which ones didn’t. The trust that underlies the system had been blown up by a series of banks defaulting, with stocks crashing, and bonds plummeting. Heck, even physicists stopped trusting atoms – they make up everything. The Fed’s® solution to this lack of trust? Like I said, print money.
They were sneaky about how they did it – they printed money and gave it to the banks by buying up the awful assets they had on the books. The money vacuumed up the bad debt like Charlie Sheen on the set of Two and a Half Grams.
Something tells me he’d be a more thoughtful Fed® chairman than the one we have now.
The printing also kicked the can down the road. We could spend all day about the causes, but the reality is that we are the can that was kicked down the road. Our current inflation is the result of keeping the party going even when the system should have cleared out the bad debts, cleared out the dead companies, and cleared out the waste that caused the crisis.
Would it have been tough? Sure, especially on elevator repairmen – but their business is always up and down anyway.
So, now what?
The reality is simple. As a nation, we face only two choices.
The first choice we could make is to keep doing what we’re doing. We can keep printing money, and keep pretending that the economic problems are created by the sanctions we put in place over a regional border conflict that we helped create and certainly encouraged.
The result of the decision to keep printing will first be higher prices. Higher fuel prices mean less driving, but they also mean that the cost of nearly everything you buy costs more: food, trash service, beer, PEZ®, posters of Elvis (especially posters of the The King after he discovered carbohydrates), everything physical will cost more.
Why can’t Elvis drive his Cadillac™ in reverse? He’s dead.
Oh, sure, hyperinflation seems like fun at first. Rising prices, rising wages . . . but the wages never keep up with the prices. And businesses can’t keep up with the rising costs, so long-term contracts that had been great are now unprofitable. Bare shelves show up. People rush to ditch cash to buy stuff because they know that Kraft© Mac n’ Cheese™ is going to be 20% more next week, so canned goods have a better rate of return than the stock market. Some people don’t like canned food, but for me it’s ate out of tin.
But then banks have finally gotten wise, and we’ll see higher interest rates on car loans, home loans, and student debt. Higher costs on cars plus higher interest costs mean lower new car sales, especially when people are struggling to find change in their couches to buy Pizza Rolls® and Twinkies™.
Lower new car sales mean fewer new cars made. Which requires fewer workers. Which increases unemployment. Eventually, there’s a recession or depression as economic activity ceases to be meaningful – weird things happen as people resort to a manic level of activity.
The banks finally get wise and loans don’t come with an interest rate, they come with a scheme to create a way that the bank doesn’t go bankrupt as the currency value plummets. The values are pegged to a commodity (like gold) or an inflation index. Bankers have been through this before in country after country and know every trick to keep themselves whole. I assure you, inflation has their interest.
I saw a homeless man talking to his shadow. That means six more weeks of inflation.
Ultimately, the orgy of printing results in destitution, unemployment, and a political and moral crisis. How bad is it? Reminders of the hyperinflation caused by worthless money during the Revolutionary War are still in the Constitution – “No state shall coin money, emit bills of credit, or make anything but gold and silver tender in payment of debts.” I even keep a copy of the Constitution on the wall – The Mrs. calls it the Decoration of Independence.
Wonder why the German bankers are so crazy about not letting the euro hyperinflate? They’ve been through that before. And German bankers are generally pessimists, which is why they study Russian.
Sadly, we’re seeing these impacts even though many of the trillions in printing haven’t even hit the economy yet. Biden’s Bipartisan Infrastructure Bill hasn’t even hit the economy yet. Think construction is expensive now? Wait until there are a trillion more dollar in construction contracts that hit the economy in the next six months. That will lead to millions of guys standing around trying to look busy.
I wanted to build highways, but I decided not to go down that road.
So, that’s path one – keep going and wait for everything to blow up like slobber from a pasty dingo with a bag of decade-old beef jerky, which seems like an oddly specific analogy, but I have my reasons. What will be on the other side? No one can say – often, hyperinflation destroys the entire fabric of the country, making the people desperate, willing to do anything, even watch another Marvel® movie.
There is, of course, a second choice:
Quit printing money.
Stop entirely.
Have the Fed® increase the interest rate to slow down the economy and re-value the currency. Stop the shenanigans.
The result of that is, of course, also a major recession – probably worse than the Great Recession of 2008. Possibly as bad as the Great Depression.
There will be plummeting home values as interest rates increase. There will be unemployment. But once the debt clears, in a decade or so, what will be left will be an economy that is based, perhaps, on a more fundamentally sound currency, or even one that won’t inflate until it is worthless. I can dream, can’t I?
It’s not a pleasant idea, going through that pain. But in the end, it provides a chance for economic prosperity.
That’s it. Those are really the only choices I see in the economy. We’ll have to pick one.
I have no faith that the second path will be taken. Why? This graph, for one. Looks like people who like free stuff, vote for people who give them . . . free stuff.
Romney supporters signed their checks on the front, Obama voters signed theirs on the back.
It requires making a hard choice, a knowing difficulty. It’s like having the discipline to eat the broccoli and skip the ice cream before they wheel you out to read things off the teleprompter. I have seen no sign of the political class of the United States being willing to make any difficult decision. I have seen only a little appetite in the general populace to take the tough road.
No, I think we’ll make the first choice. When inflation gets worse? My bet is that the reaction of the political leadership will be to send checks to everyone. Wait and see.
No, I’m not a psychic. But I wish I was a remote viewer. I’m still looking for the one from the stereo.
Read that 18-34 year olds want more free money and Obiden will relax the student loan debt forgiveness bubble until the summer.
The Marxist U comrades want that basket weaving degree to be free of cost since it is worthless in the real world.
The plan is for quarterly stimulus checks which won’t go very far when grocery shopping is like going to Neiman-Marcus.
The CPUSA is out to burn it all down by any means necessary and they didn’t Long March for 100 plus years just to turn back now.
The banksters always turn to WAR when they have taken the fiatbux Ponzi as far as it can go and losing in a humiliating way is a feature and not a bug to the CPUSA.
End of the line for smoke and mirrors delusions in the empire of LIES.
But . . . but . . . we can always print more, right?
The ones that will fight this, tooth and nail, are:
– Democrats
– Public Employees at ALL levels – the state and local ones in Dem-leaning states depend on getting more money from the Feds in grants
– The Able-to-Be-Employed who need to be kicked off the dole.
– and, most importantly, the Seniors, who, more than any other time, have fixed incomes, unwillingness/inability to live with family and stretch their budget. That’s Baby Boomers, the Remaining Silent Generation, and perhaps a smidge of the Gen X who are currently dependent on Taxpayer Cash.
Now, in Real Life, we all know that the Actually Disabled will not lose benefits. Those who have military retirement or service-related disabilities will be OK. And the Senior popluation who honestly cannot work will be fine.
Who will likely lose out?
Those on SS benefits who have other income – likely, me and my husband, who also have a state retirement. Will that throw us into poverty?
No, but it will mean trimming the budget, and taking disbursements from our retirement funds at a faster pace. We will also have to step up selling the second house (in process, but we could actually handle two mortgages for a while).
The Seniors who literally have no other source of income will be protected. But, they, like many others, will have to live with the consequences of inflation, and forego the COLA adjustments. It won’t be pretty.
Amazon stock will take a nose-dive – a lot of their business is discretionary purchases. Same with many other stores. Buying will focus on the absolutely necessary.
You’re right, it will be a 10-year slog to reach a plateau, and from that, America can begin to see the end of debt. During that time, non-essential government activities will be slashed – support for higher education, lavish retiremments (a good start would be to put a cap on retirement funds paid out. Those cities that have pay as much or MORE to retired employees? No gonna continue.)
All those departments and bureaucracies that are excuses for employing Liberal Arts majors and lawyers? Gone.
Public Works projects that are a not-so-subtle payoff for supporters? Gone.
Industries that depend on taxpayer handouts? Gone.
Administer to worker ratios in ANY organization that are top-heavy with non-producers? Gone.
That last sentence should be corrected – Administrator, not Administer. I apologize for the other errors.
Linda, I think “administer” works about as well. Like “minister,” except on the Dark Side.
Wednesday, April 6, 2022
8:21 AM
The problem I see with your scenario about baby boomers moving in with their kids, is that a lot of Boomer’s kids either don’t live in homes large enough to accommodate Mom and Pop, or live in apartments, which also are usually limited in size, unless the kids or Mom and Pop are rich and can afford large four or five bedroom homes or apartments. Too many people living in cramped quarters can lead to problems. I know other cultures manage it, but in the good ol’ US of A, we becamed spoiled with all the room we have and the constant admonition that “keep your nose to the grindstone” and buy some land, build a house. Unfortunately for our grandkids, that dream probably won’t become a reality.
I would love to still be working at my last job and they would love to have me back, but I had to retire early to take care of my disabled wife, who became unable to take care of herself. Thankfully, I was at the right age to apply for early SSN. Since we own everything outright, we only have the usual monthlies and one of our checks takes care of all those. Plus we sold an investment property, so we have some extra money…if a couple of the kids would keep their hands out of our pockets.
In my job, I traveled around the country up fitting and remodeling retail space for major corporations. I really liked that job.
In the not so distant future, I see the government confiscating people’s IRAs and 401Ks to fill in the gaps for the FSA,( free stuff army ).
Linda, a well thought out comment. I do like the way you think!
As we used to say in my Strategic Air Command days, to err is human to forgive is not SAC policy. 🙂
She is awesome!
Linda did I misunderstand you here?
“Now, in Real Life, we all know that the Actually Disabled will not lose benefits. Those who have military retirement or service-related disabilities will be OK. And the Senior population who honestly cannot work will be fine.”
Did you notice that in the high inflation of the 70’s that was NOT TRUE? Seniors and fixed income folks including Military Retirees struggled hard to decide if electricity OR Food OR Medicine was to be paid for each payday?
Fixed Income always suffer when high inflation (the Gov.com’s fav escape hatch) occurs.
Please expand on your thoughts.
Thanks
People who trust the government $ and promises? Wiped out. People who have stuff?
Will be less poor.
Linda my dear, from your lips to God’s ears. I am a senior and for the past few years since the family lit out of here, forging brave new… anyway, in that time i have initiated a quiet life of living almost within my means. I make progress every day in incremental changes toward adversity; truly believing that’s where we are headed.
I stole this quote from JHK’s “Clusterfuck”
“America is staring into the abyss… and signing a lease”. Peace, and Lord bless.
Original Grandpa
Great new Goldcore article on ZH yoday also talks about two choices facing the Fed / USA : inflation OR recession to cool off the inflation.
They argue convincingly that given the recent yield curve inversion…
https://www.cnbc.com/2022/03/31/2-year-treasury-yield-tops-10-year-rate-a-yield-curve-inversion-that-could-signal-a-recession.html
…that recession (and thus inflation relief) is already baked into the cake and on the way to save the day…
https://vblgoldfix.substack.com/p/we-are-in-a-recession-by-design?s=r
…but I think Ray is right and we’re goin’ back to the future for a dose of Carter-era stagflation : inflation AND recession:
https://www.cnbc.com/2022/03/31/2-year-treasury-yield-tops-10-year-rate-a-yield-curve-inversion-that-could-signal-a-recession.html
But don’t worry, Barron’s think it’s different this time.
https://www.barrons.com/articles/inverted-yield-curve-recession-wall-street-51649170366?tesla=y
I’ll believe THAT when I see it.
It will be bigger than the Great Depression.
Ack! HERE’S what Ray has to say…
https://www.dailymail.co.uk/news/article-10687919/Billionaire-hedge-funder-Ray-Dalio-warns-stagflation-send-America-1970s.html
Don’t worry, Linda, just repeat my favorite mantra, to err is humam…. 🙂
I’ve been a student of these matters since the 2008-2009 fiasco. I began to pay attention shortly before that by reading the life changing book “The Creature From Jekyll Island” by G. Edward Griffin, which I was compelled to read after “World Without Cancer” by the same author. Those books were seminal works, and the beginning of my great awakening to The Way Things Really Are.
I don’t see how this plays out any differently than John does. I just can’t believe it has taken this long. I also can’t believe how few people in this world-not 1 in 100-knows what is about to befall them. If the world exists 50 years from now, they will be teaching about 2022 in history and economics classes. It will be known as the greatest transitory time in generations.
How it has taken this long? Inertia. The Titanic went a long time after the iceberg.
Bankers have short memories, strong wishes, and a great desire for profit. They won’t be teaching 2022 economics in 50 years. They’ll be averring that we just didn’t print enough money correctly, and they’ll get it right this time. Kind of like socialists.
Second Choice?
I have a long term client that co-owns a large residential RE company in Winston-Salem. whose husband will be unemployed in Jan 2023. In 2008 he called her from DC to go to an ATM ASAP and withdraw whatever she could get.
Along that line the CEO of BB&T, John Allison told Paulson back then, “We don’t need any $$$.” Hank’s reply, “You’re not leaving this room until you do.”
To paraphrase, there will be no Second Choice
And this, sadly is the Last Chance.
Agreed. That’s why we live where we can survive. Until the Rooskies or Chinks nuke what I think is a resort that’s around 8 miles south of us called Parris Island. Really popular with college age males. And Demi Moore.
Is everyone here too Normie to not bring up the coming food riots that are going to crash civilization in the cities? Or the folks pissed off about their murdered kin folk and friends from the Klaut shot? Don’t forget the 15 to 30 million non citizens whom have nothing in common with or allegiance to the FUSA? Don’t forget the free shit army, or BLM or Antifa or the Commie hoards of “oppressed” youngsters. Pretty sure I left someone out, sorry…I’mold. If I get modded out, no offense, I understand.
No, Tree Mike, everyone here knows. They’ve already moved out of the cities, mostly.
No modding here (72 out of several thousand)- and no normies in the comments.
We know. Welcome.
Good to hear, you seem to have the same “freedom of speech” policy as The Burning Platform. Hope you have a “man with no name”. I haven’t been here long, I learned about you from somebodies link, because of the scamdemic. I frequently read little pearls from here to the wife, usually lauhghed at, always appreciated. We’re in the sticks too. Thanks For Your Service.
Thanks for commenting – yeah, we’ve had issues, thankfully not as big as Jim’s.
As an aside, if you’re following the military situation in Ukraine, here are some good resources:
https://liveuamap.com/
https://www.uawardata.com/
https://www.understandingwar.org/backgrounder/ukraine-conflict-updates
Next up, once everybody gets their chess pieces in position, is The Battle Of Sloviansk, southeast of Kharkiv on the Ukranian “interstate highway” M-03. This will determine whether or not the Russians encircle and cut off the Ukranian forces fighting on the Luhansk / Donetsk front. This is gonna be a major turning point for both sides, one way or the other.
If the Ukranians hold Sloviansk, the odds of tactical nuke use go up. This mess has legs.
The longer it goes, the worse it can get.
My two scenarios are very different from yours, John.
1) The good ‘ol USA will do what every other third world country does when the banks start sniffing around. They’ll default. Then it becomes Somebody Else’s Problem. It’ll be a Big Problem for Somebody Else too. We might have to start managing our natural resources and build our own stuff again.
2) The powers-that-be simply need to run out the clock. My guess: 5 years. Communists LOVE 5-year plans. We’re scheduled to lose a lot of folks due to never-ending pandemics. Dead bodies can now be composted, so we’ll be able to make our own fertilizer.
Of course, it could be both. We’re going to raise a generation of hard men whether we want to or not.
Quizzer – same choices. Choose, or don’t. I think your 1) and 2) are . . . the same.
One major problem is that so many normies don’t understand that the PTB will take option one because kneecapping the economy is part of the plan.
It is. And you don’t have to do anything to take that option.
John, in 1996 Philip Long published The Return of Thrift: How The Collapse of the Middle Class Welfare State Will Reawaken Values in America. Although I do not necessarily buy into Mr. Long’s premise that the Middle Class Entitlements created the situation alone – and history of the last 20 years suggests otherwise – what I do buy into is his ultimate suggestion that for the individual at least, the only way out of this is to adopt a thrift-based ethic seen in 19th and early 20th Century Europe and America.
My prediction is simply that it will be no change and print money until the cows stroll in, late and unaccompanied, into the barn. There is not a single policy maker that has an incentive to do anything different. Then Recession – made worse by the fact that things went on as long as they did. Then, possibly, some kind of plateau. There are two problems with this of course. The first is that it we have see nothing like the social disturbances to come and a lot of people that feel life – or more correctly their fellow citizens – owe them a living are about to get an awful surprise. The second is that this does not happen in a vacuum. We may emerge from the Recession on to find we are one of many and a new leader of the world and the economy has arisen. And we may not like the way that plays out.
America in 1996 only slightly resembles America in 2022. We don’t revere freedom like we did.
Money? It’s a sideshow. But you already know that.
You had to print my buzzwords, “Kraft Macaroni & Cheese”. It used to be a perfect survival food ( limited basis, a comfort food, or a quasi junk food as a meal ). The bastards didn’t just jack up the rate 20% on an already overpriced item. They took out all the pasta flour and the noodles are now mostly bread flour. It now tastes like ass, unless you like soggy noodles. I would not advise buying anymore.
It’s been five years. Is it that bad? Sad. Many such cases.