Posted on 03/01/2023 7:34:42 PM PST by SeekAndFind
Rapidly rising food, housing, medical, and tuition prices are squeezing Americans, and many do not understand the real cause of their falling living standards...
That confusion opens the door for opportunistic politicians who promise supposed freebies to ease the pain of inflation. Many, unfortunately, succumb to this siren’s call.
Perverse as it is, the policies offered to people suffering from inflation create even more inflation. In other words, inflation has a way of perpetuating itself, much like a heroin addiction.
We are already seeing cockamamie schemes in the US, like “inflation relief checks,” which attempt to solve the problems of inflation by creating more inflation.
The political-inflation cycle follows a clear pattern:
Step #1: In a fiat currency system, the government will inevitably print an ever-increasing amount of currency to finance itself.
Step #2: This makes prices and living costs rise faster than wages.
Step #3: The average person feels the pain but doesn’t understand what’s happening.
Step #4: More people support politicians who promise freebies to relieve the pain inflation causes.
Step #5: The government prints more currency to pay for the freebies.
Step #6: This creates even more inflation, and the cycle repeats.
At this point, we have to ask ourselves whether the political situation in the US will improve.
Unfortunately, the data points to a troubling but inevitable answer… “no.”
When you count everyone who lives off political dollars instead of free-market dollars, we’re already well north of 50% of the US population.
In other words, the US has already crossed the Rubicon. There’s no going back.
The growing majority of voters who collect net benefits from the government is a built-in constituency to perpetuate policies financed by ever-increasing inflation. That’s why I think the US has entered an unstoppable inflation death spiral.
The notion that people living off government largesse and political dollars will come around to a libertarian way of thinking is a pipe dream.
In short, there is simply no hope for positive change from the political system. That means one thing is sure: an ever-increasing amount of inflation to pay for all these government programs.
For many decades, Argentina has infamously been trapped in a perpetual cycle of hyperinflation and socialism from which it cannot escape. And now, the US has entered that same inescapable cycle.
Although many don’t realize it, interest rates are simply the price of money.
And they are the most important prices in all of capitalism.
They have an enormous impact on banks, the real estate market, and the auto industry. It’s hard to think of a business that interest rates don’t affect in some meaningful way.
However, interest rates are controlled by a politburo of central planners at the Federal Reserve, not set by the market like any other price.
It’s bizarre that most people don’t understand the implications of this or thoughtlessly accept it as a “normal” part of a supposed free-market economy.
Further, it should be self-evident to everyone that economic central planning doesn’t work.
In Marx’s Communist Manifesto, the 5th plank calls for the “centralization of credit in the hands of the state, by means of a national bank with state capital and an exclusive monopoly.”
That is a perfect description of the Federal Reserve and other central banks.
In reality, the Fed is nothing more than a politburo of bureaucrats attempting to centrally plan the economy by tinkering with the money and interest rates—the most important prices in all of capitalism.
Even if we presume the Fed has benign intentions—which it doesn’t—central planning is impossible, and failure is inevitable.
That’s why the Fed is in a mission-impossible situation—much like it was impossible for the Soviets to centrally plan their economy.
Here’s the bottom line…
The Fed can’t save the day any more than the State Planning Committee of the USSR could.
The media, politicians, and financial analysts often flippantly use the word “trillion” without appreciating what it means.
A trillion is a massive, almost unfathomable number.
The human brain has trouble understanding something so huge. Let me put it into perspective.
If you earned $1 per second, it would take 11 days to make a million dollars.
If you earned $1 per second, it would take 31 and a half years to make a billion dollars.
And if you earned $1 per second, it would take 31,688 years to make a trillion dollars.
So that’s how enormous a trillion is.
When politicians carelessly spend and print money measured in the trillions, you are in dangerous territory.
It took until 1981 for the US government to rack up its first trillion in debt. The second trillion only took four years. After that, the next trillions came in increasingly shorter intervals.
Today, Congress has normalized multi-trillion dollar federal spending deficits.
The US federal debt has gone parabolic and is well over $31 trillion.
If you earned $1 per second, it would take over 995,000 YEARS to pay off the current US federal debt.
And that’s with the unrealistic assumption that it would stop growing.
The US federal government has the largest debt in the history of the world. And it’s continuing to grow at a rapid, unstoppable pace.
The debt will keep piling up as the US government continues to pay for political promises. It’s virtually inevitable.
Below is a chart of the Congressional Budget Office’s deficit projections for the next decade. These estimates will almost certainly be too rosy, as they often are.
Even by the CBO’s optimistic projections, the US government will have a cumulative deficit of over $15 trillion for the next ten years.
Historically, there has been a vast foreign appetite for US federal debt, but not anymore.
In the wake of Russia’s invasion of Ukraine, the US government has launched its most aggressive sanctions campaign ever.
As part of this, the US government seized the US dollar reserves of the Russian central bank—the accumulated savings of the nation.
It was a stunning illustration of the dollar’s political risk. The US government can seize another sovereign country’s dollar reserves at the flip of a switch.
The Wall Street Journal, in an article titled “If Russian Currency Reserves Aren’t Really Money, the World Is in for a Shock,” noted:
“Sanctions have shown that currency reserves accumulated by central banks can be taken away. With China taking note, this may reshape geopolitics, economic management and even the international role of the U.S. dollar.”
China is one of the largest holders of US Treasuries, and it indeed took note of what happened to Russia. It’s probably why Beijing cut its Treasury holdings to a 12-year low.
Even US allies, like Japan, have also cut their Treasury holdings.
There are numerous other examples. But it’s clear the world isn’t hungry for more US debt right now.
So, who is going to finance these incomprehensible budget shortfalls? The only entity capable is the Fed’s printing presses.
In other words, the government has no choice but to finance itself through legalized counterfeiting and debasing the currency.
Allow me to simplify this fraud in three steps.
Step #1: Congress spends trillions more than the federal government takes in from taxes.
Step #2: The Treasury issues debt to cover the difference.
Step #3: The Federal Reserve creates US dollars out of thin air to buy the debt.
It’s also crucial to note that inflation is a big bonus to debtors. It allows you to borrow in dollars and repay in dimes.
And since the US government is the biggest debtor in the history of the world, it is the single largest beneficiary of inflation.
The US government can only finance itself with the Fed’s printing presses. It is also incentivized to debase the currency as it attempts to deal with its impossible debt burden.
When you put together the pieces, the big picture becomes clear.
I believe the US has entered an inflationary death spiral for three reasons:
Reason #1: A growing majority of voters who collect net benefits from the government is a built-in constituency to perpetuate policies financed by ever-increasing inflation.
Reason #2: Even if we presume the Fed has benign intentions—which it doesn’t—central planning is impossible, and failure is inevitable.
Reason #3: The US government cannot finance itself without the Fed’s printing presses. It is also incentivized to debase the currency as it attempts to deal with its impossible debt burden.
In short, it’s game over.
The US government is fast approaching the financial endgame.
They have no choice but to “reset” the system—that’s what governments do when they are trapped.
Think of it like this.
Imagine a spoiled child playing a board game, and rather than admit he is losing, he flips the board.
This is what governments will do now that they are financially checkmated. They can’t win, even in their own rigged game, and now they are left with the choice of losing power or flipping the board. Since power does not relinquish itself voluntarily, we should presume they’ll choose to flip the board.
I suspect it could all go down soon… and it won’t be pretty.
It could result in an enormous wealth transfer from you to the parasitical class—politicians, central bankers, and those connected to them.
Bfl
South Africa is on the verge of collapse just like Venezuela was. We are close to playing out what SA is going through right now.
The massive wealth transfer to Ukraine while starving our citizens is going to hasten it.
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Great article although I wish the author would have speculated on how the Fed will flip the board. CBDC? Just let the printing presses rip? WWIII?
Very interesting, and very depressing, article. It makes sense.
I just hope that some Freeper comes along to explain why this guy is wrong.
Anyone? Bueller?
Price of a loaf 🍞 of bread in your picture
BidenDepression 2023
Bidenflation
I am truly surprised the implosion hasn’t happened already.
It is frightening. The US is not Venezuela. When it happens here it is probably going to take the whole world’s economy with it.
It will not be peaceful. Society now is very different than when the Great Depression happened. It is heartbreaking to see a country as blessed as the US voluntarily...and eagerly...destroy itself.
(Bueller?)
I’m here!!!
(In other words, the US has already crossed the Rubicon. There’s no going back)
There will be no rescue from the coming financial collapse. Another reason I think there will be a world 🌎🌍 currency - certainly digital currency and the Mark of the Beast.
Lots of nations are in trouble.
So, why not damage the supply chain, cripple the food supply and go to war?
Oh, they are...
✝️🙏🛐
War with Russia, sanctions against China, claim that the war has devastated the world economy, necessitating a reset with the digital dollar... bail ins, etc.
A full loaf at breakfast, yes, but only a half loaf after you got out of work.
And wonder what the best way to be ready for it is? No debt, buy property? Gold? Silver? Or buy stocks at the crash?
I wonder how smart people position themselves. I wouldn’t know!
I have repeatedly told people we are following Argentina down the path of fiscal destruction. No one listens.
Part of the problem is the media (obviously). It’s their job to keep politicians in check, and to sound warning bells when necessary.
But as we all know, those guys are now just Democrat lapdogs. So a good half of the country has no idea about what’s going on. You can’t fight a threat if you don’t know there is a threat.
(Gold? Silver?)
During the Great Tribulaton - the last half of the 7 years of ‘Peace and Security’:
Ezekiel 7:19
New King James Version
19 ‘They will throw their silver into the streets,
And their gold will be like refuse;
Their silver and their gold will not be able to deliver them
In the day of the wrath of the Lord;
They will not satisfy their souls,
Nor fill their stomachs,
Because it became their stumbling block of iniquity.
https://www.biblegateway.com/passage/?search=Ezekiel%207%3A19&version=NKJV
They usually log on when it’s around 2am central time.
Ain’t Communism grand?
The only reason it hasn’t collapsed already is because the dollar is the world’s reserve currency, everybody else on the planet has a vested interest in it not collapsing. China holds so much of our debt that they’d go broke with us.
So much of thhe world either runs on dollars or stores wealth in them, I suspect the PTB can keep the balls in the air for the rest of my life, hopefully another 15-20 years. Or perhaps much shorter.
But, coupling the coming financial meltdown, however it happens, with the also enevitiable return of the world climate to Maunder Little Ice Age conditions - on other words, colder times of freezing and famine - billions are in for rough, even deadly, times over the next few decades.
Very enlightening.
This is really happening.
War has been the traditional method to get us out of depression.
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