THE BIDEN ECONOMY: BIG GOVERNMENT INFLATION

If you understand what’s going on in the world of money, economics and government policy, it’s plain to see that all of central governance is rife with corruption, riddled with erroneous information and false narrative, all of which is covered by a blanket of elitist arrogance intended to hide their incompetency and/or ill-founded motives.

The Biden Administration is perhaps the most deceitful and dishonest in American history, and by far the most incompetent. In every case he appears either cognitively disabled or coherently incompetent, and definitely not up to the job. He is a puppet guided by the radical communist Left, and is failing on every front. His policies, the manner in which they are being carried out, and their according results are proof positive.

A prime example of their deceit and dishonesty is their position that a $3.5 trillion supplemental spending bill can and will cost nothing. The entire Biden administration not only says so but does so with a haughtiness that portrays non-believers as stupid because their logic can’t reason how $3½ trillion in spending can occur at zero cost.

Call me stupid, but here is simple reasoning for that impossibility…

Inflation is a cost that affects every active participant in this economy. Today inflation is running at a 5.6% rate, a pace not seen since Reagan’s policies began to arrest the malaise Jimmy Carter inspired, a president Joe Biden pales in comparison.

Inflation is primarily driven by one thing: unbalanced growth in the supply of money, which creates a condition where too many dollars are chasing too few goods. The worst thing to do in an inflationary period is to inject more new money into an unbalanced system.

In order to finance big government’s response to Covid-19 the Federal Reserve returned to the QE well and began buying bonds (government deficit) to keep yields low during the government induced recession. In order for the Fed to buy bonds they must first print the money to effectuate the exchange. By doing so they expand the money supply, which always causes inflation.

So to say higher inflation is good because demand is higher, as do Treasury Secretary Janet Yellen and White House Press Chief Jen Psaki, is not only dishonest but ignorant. It denies facts, mathematics, history, science and logic – all common themes in Leftist politics today, and for even some on the Right.

For the record (and the record is theirs, these are government numbers) Real GDP (that is, GDP adjusted for inflation) grew at just .5% in the most recent quarter (the Q3 2021 change from Q2), which translates to a meager 2% annualized rate (the quarterly rate multiplied by 4).

Higher demand, really, Madame Treasury Secretary?

Nominal GDP (also called, Current Dollar GDP) grew at 1.9% in Q3, or at a 7.6% annualized rate. Inflation therefore (the difference between Nominal GDP and Real GDP) was 5.6% on an annualized basis (7.6% – 2.0%).

That’s inflation 5.6% and Real Growth 2.0%. In other words, the price of goods is rising at 2.8 times the rate of growth. 

Pricing pressures have nothing to do with higher demand because demand is weak.

By comparison, since recovery from the Great Recession in 2010 GDP growth averaged a sluggish 2.1% in Real Terms, while inflation averaged 1.7%. Nominal growth therefore averaged 3.8% per year. In other words, Real growth represented 55% of the change in economic activity and inflation represented 45%.

Today inflation represents 74% of economic change, and Real growth just 26%.

Inflation is the real problem in America, not higher demand, and it’s being caused by massive expansion in the money supply driven by enormous central government debt and deficits that have been facilitated by the Federal Reserve’s abuse of cheap and easy money policies like quantitative easing (QE). To blame anything else is as wrong as it is corrupt.

Think of it in this light… the third largest economy in the world behind the U.S. and China is Japan with a GDP of $5 trillion. Last year, in 2020, the 535 people that make up the U.S. Congress spent $6.6 trillion, generating an outrageous $3.4 trillion deficit – a whopping 15% of the entire economy, and more than double the highest deficit incurred during the ’08 financial crisis.

To finance that deficit the U.S. Treasury issued new bonds that the Federal Reserve printed new money to purchase, resulting in a historic expansion of the money supply that continues to this very day.

Inflation has now been above the Fed’s 2% target for five consecutive quarters, prompting Federal Reserve chairman Jerome Powell to prove that he too is a blatant liar and big government communist.

Okay Dan, why do you have to call these people communists?

Because they are.

In 1984 George Orwell wrote of a communist regime that ruled a territory in a constant state of crisis and routinely changed history and the definitions of words, ending in a revised dictionary language called newspeak.

In a press conference after the Fed’s most recent meeting Chairman Powell addressed confusion surrounding the word “transitory,” a word in which he used to describe Covid-19 induced inflation. According to Powell transitory “means different things to different people.” Yet for everyone else in the world, and every on-line dictionary, transitory means short-term, temporary, or brief. Its definition is universal.

Powell went on, “Really, for us, what transitory has meant is that it will not lead to permanently or very persistently higher inflation.”

Really, Jay? Why not explain your meaning when you first used the word?

In that same vein – How much more persistent is very persistently, Mr. Powell, can you please enlighten us?—Is it more than five consecutive quarters, and if so, how many more?

In Powell’s effort to make things clearer he crapped on the window, and then followed suit by showing his willingness to follow the Party’s false narrative by reiterating the Biden administration’s stance that higher demand was contributing to higher inflation.

Could he possibly believe that, or is it a convenient excuse?

When a country’s central bank asserts authority to control market interest rates (yields) it bypasses the free-market to determine them – that is a government-controlled market, a.k.a. a communist market.

Current Federal Reserve policy is hell-bent on keeping yields artificially low under the false guises to “save” the economy, “encourage” maximum employment, or to “spur” economic growth. But their policies have nothing to do with those fake storylines. Their only motive is to finance central government deficit in the cheapest and easiest way possible. So they print money to buy bonds that cover deficits incurred by Congress, which keeps yields low.

If yields were allowed to act without authoritarian control inflicted by the Federal Reserve they would be much higher right now because there is not enough demand for the hundreds of billions of new debt issued each and every month with this level of reckless government spending – of which Biden wants to add another $3.5 trillion. Higher interest rates curb spending and stifle inflation – something sorely needed right now, especially when it comes to government spending.

The free-market has these checks-and-balances naturally imbedded into them to help keep markets honest, and somewhat responsible. Not so in the government-controlled market, which are forced to hold the line until they blow up, which is what’s happening today under current Fed policy.

Yields are in a pressure cooker and inflation is fanning the flames on newly printed money. Powell has his finger on the release valve while feeding the fire, hoping all the way that he can gradually reduce the pressure before it blows the shit up to the fan.

Powell’s not dumb, he’s just a power hungry communist, and therefore a corrupt American.

Inflation is a tax on money; and Powell is the chairman of the board for U.S. money. His policies create the inflation tax or eliminate it – outside of Congress, and nowadays, outside of the free market. Powell has authoritarian control; and by way of continuing to print and inject billions of new money in an environment of escalating inflation is a blatant show of his top priority – to fund the Party of big government at the expense of We the People.

For well more than a year the Fed has been buying $125 billion in U.S. bonds each and every month ($1.5 trillion per year). Every dollar of bond purchases represents at least one dollar increase in the money supply, which then should be added to the $6.5 trillion of U.S. central government spending—of which half is highly inflationary—and ergo today’s economic condition.

But now after more than a year into the upward trend of inflation the Federal Reserve has finally decided to start putting a stop to its “bond buying program.” Not a hard stop, mind you, but the beginning of a process that Powell estimates will take until next June to finally end – thereby adding another six or seven-hundred-billion to the money supply, and furthering inflationary pressures.

But then what?—When will the Fed actually reduce the money supply and their balance sheet by selling U.S bonds, and removing excess currency from circulation to arrest the advance of  inflation?

That’s the big question.

Because that’s when things get really interesting.

When it comes to investment there is one thing I’d never do: buy into communist markets at all-time highs.

That said, the mindset for stocks right now is to protect against the downside because sooner or later this thing is gonna blow. They always do.

Stay tuned…