Inflation Is Coming! Inflation Is Coming!
Today's Empires, Tomorrow's Ashes
You will soon hear talking heads in the mainstream media warning about the oncoming inflation in the price of consumer goods (See articles such as this one.) And as both prices and your cortisol levels rise, newscasters will likely spin a narrative proclaiming that this was inevitable. It wasn’t.
23.6% of all U.S. dollars ever created were created in 2020. You read that correctly; 23.6% of the U.S. dollars that ever existed were “printed” last year. This is what you get when you have unelected officials at The Federal Reserve printing money with reckless abandon at the behest of a used car salesman of a president. Zero leadership + free money. What could possibly go wrong?
And leave it to the Democrats to never let a good crisis go to waste. Admittedly, it is tough to step in after rich white men with daddy issues destroy the American economy time and time again, but this does not mean that they are guilt free, nor does it mean that endless stimulus equates to good leadership. So, what of this current $1.9 trillion bill that was just passed? Well, 37% of recipients plan to put their stimulus checks directly into stocks. (Reminder: The stock market is not the economy.) Beyond that, yes, some of the money will reach those in need directly, but a good amount won’t, and a good amount is just downright wasteful. I am of the opinion that many Democrats saw this bill as an opportunity to do more to pay back their donors than to support their constituents. See the articles below for more on the spending in the bill:
Is There Wasteful Spending In The New $1.9 Trillion Coronavirus Stimulus Bill? (Forbes)
Fact check: Breaking down spending in the COVID-19 relief bill (USA Today)
The Stimulus Package Won’t Cut Poverty, It Will Accelerate It (The Pomp Letter)
Some may argue that inflation won’t occur as a result of all of this money printing and spending, though. They argue that people panicked about inflation when The Fed printed money under Obama and that inflation never showed up. What’s interesting about this group of people is that they are wrong. Since 2008, inflation has shown up in the price of higher education. It has shown up the price of healthcare. It has shown up in the price of homes and rent, especially those closer to major city centers and those in well-to-do neighborhoods. Currently, it is showing up in the form of higher stock prices (as of August of 2020, the U.S. stock market was 77% overvalued) and rises in the price of store-of-value assets like fine art and, now, Bitcoin. (For more on how inflation works, I highly recommend listening to this interview between Michael Saylor, CEO of MicroStrategy, and Preston Pysh, host of We Study Billionaires - The Investor’s Podcast Network - mind expanding stuff.) We will likely see inflation in the price of commodities next, especially after the massive (I have my money on about 70-80%) correction that will likely be here by late summer/early fall in traditional markets. What frightens me deeply about the upcoming “commodity supercycle” (see below)
is that it will likely correspond with/be fully set in motion by the crash in traditional markets. What happens then? Do we print the next rounds of trillions of dollars and pump the markets back up to their previous artificially-inflated levels? Do we just allow 70% of the market’s value to be wiped out? Imagine the new heights to which populism will be taken when the right wing can claim that Biden destroyed the beautiful economy that Trump built. The truth is that Trump didn’t build shit. The truth is also that the eight-year bull market that we had under Obama was fueled by cheap credit and The Fed’s never ending quantitative easing (QE) programs (see below).
Since the onset of neoliberalism under Reagan, and especially since 2008, we have been putting future generations in debt in efforts to make sure that the stock prices only move in one direction - up. We print money not to invest in American people or in American infrastructure or in R&D; we print it to invest in an illusion.
But this time it will be different, right? We won’t become Rome or suffer a fate similar to The Weimar Republic in the early 1930s. Right.
Deep down, I am an optimist and I believe in the power of the human spirit to turn things around, but we are already well on the way to catastrophe, and we just don’t want to admit it to ourselves.
Best,
Frank
What I Am Listening To: “Today’s Empires, Tomorrow’s Ashes”, by Propagandhi
“…under cover of the customary gap we find between history and truth / the Founding Fathers bask in the rocket’s blinding red glare / The bomb’s bursting in air / One nation, indivisible?” -Propagandhi
