Previously, we’ve looked too at what the feds have to ‘push’ with — carrots and sticks — and the way the two political parties have come together to get more of them.
But the carrots are running out. The US has added US$27 trillion to its debt so far this century…US$1 trillion in the last five weeks. That’s money it spent…but didn’t have.
And now the Fed is trapped between ‘inflate’ or ‘die’. It must now continue to inflate its economy…or its bubble economy will die.
But wait…the headlines tell us that inflation is beaten.
CNN: ‘Inflation fever is finally breaking. The Fed’s soft landing may be in sight’:
‘If Fed Chair Jerome Powell were any less buttoned up, he’d be well within his rights to call a press conference, stride up to the lectern in a t-shirt and board shorts and say three words — “soft landing, jerks!” — before dropping the mic and walking out.
‘For context, a year ago the CPI peaked at 9.1% — the worst inflation in more than 40 years. [Now, it’s half that level.]
‘That is, to be clear, fan-freakin-tastic.
‘(For the record, the Fed has a 2% target for inflation. And while the CPI gets more headlines, central bank officials favour a different inflation gauge, the Personal Consumption Expenditures price index. The most recent core PCE index reading was 4.6% in May.)’
For the record, in other words, it isn’t so ‘fan-freakin-tastic’ after all.
Up, up and away…
Inflation is 130% above the Fed’s target. Prices are far higher than they were two years ago…and they’re still going up.
Inflation is always and everywhere a political phenomenon. And if the Feds continue to spend trillions of dollars more than they receive in taxes…they will have to get the money somewhere. Either borrowing or ‘printing.’ Borrowing pushes up interest rates and crimps the economy — leading to lower tax receipts and the need to borrow even more. That leaves only two real choices…cutting back on spending or inflating the currency.
But budget cuts run into the brick wall of the US’ late, degenerate political system. Everybody wants more. Nobody wants less. Republicans no longer oppose the carrots. Democrats no longer abhor the sticks. Instead, the elite of both parties want more of both.
So, inflation is not going away. The Feds will ‘print.’ And the money will lose value almost as fast as it is created. That is the lesson from countless experiments with overspending and printing press money. There is no reason to expect a different outcome this time.
The road to ruin
But it’s not just the money. There are two major ways to destroy a great nation — inflation and war. That’s where the sticks become deadly. And last week, the US showed up in Vilnius with a load of them, pushing the kind of ‘foreign entanglements’ that the US’ founders warned us against.
You used to be able to count on the Republicans to favour more military spending…and the Democrats to oppose it. Now, Pentagon budgets are rubber-stamped by both parties…and fattened with weapons programs that even the brass doesn’t really want.
Who complains? The peaceniks have been purged from the Democratic party…in their place are the Hillary Clinton/Victoria Nuland neocon warmongers.
But wait. What’s this? Are the Republicans now becoming the party of peace?
The Hill: ‘GOP passes amendments that threaten to doom defence bill’:
‘House adoption of conservative amendments to a defence bill has thrown the fate of the must-pass package into doubt, sparking widespread opposition from Democrats and putting new burdens on Speaker Kevin McCarthy (R-California) to rally enough Republican votes to pass it through the lower chamber.
‘The threat to the National Defence Authorisation Act (NDAA) is unusual for an annual legislative ritual that sets the budget for the nation’s armed forces — and routinely enjoys broad bipartisan support.
‘But this year, under pressure from hard-liners in his conference, McCarthy brought a series of controversial conservative amendments to the floor. Five of those measures — pertaining to explosive issues like abortion and transgender rights — were approved on largely partisan votes Thursday evening.
‘The most consequential of those is an amendment that would reverse the Pentagon’s policy to reimburse travel expenses for service members who get abortions…’
Rights and wrongs
Republicans did not oppose spending the money; they just wanted to use the defence bill to ride their favourite hobby horses.
This is the joke that Congress has become. No debate on whether the US really needs to spend so much money on pointy sticks. No debate on where the money will come from. No concerns about bankruptcy or money printing. Congress debates neither war nor inflation…
…but only transgender rights!
For The Daily Reckoning Australia