Yesterday, we made it sound so simple…so easy to understand.
The Fed increases the money supply, and prices go up. The Fed cuts back…prices fall.
But there’s always more to the story, isn’t there?
The half-word ‘cluster’ comes to mind. It describes the motley crew of incompetent jackasses and interlaced calamities coming our way. Clever readers will notice that the word ‘cluster’ is usually joined with another word that begins with an ‘f’. But the use of the f-word is just another, minor part of the phenomenon. And the coarsening of vernacular speech is connected — like a sewer line to a septic tank — to the degeneration of the whole cluster complex.
Yes, speech patterns evolve along with everything else. The meaning of ‘don’t fight the Fed’, for example, has morphed. From 1982–21, it was instruction on how to make money. Now it is a warning — about how not to lose it. Prices are no longer rising on a tide of the Fed’s easy money. Now, the money supply ebbs…and prices fall.
But there are other, more important things going on. We can begin to explore them by looking at the painful and sometimes comic election of Kevin McCarthy as Speaker of the House. What a spectacle. But it is part of a larger phenomenon — a general weakening and corruption of the US’s most important institutions. We have two major political parties. Neither of them has a coherent program or sensible philosophy. Republicans couldn’t agree on Mr McCarthy because they didn’t know what he stood for…or what they stand for…or whether they were on their feet at all.
We used to rely on Republican (and Democratic) ‘conservatives’ to block the growth of government and hold down spending. But then, in the 21st century, the need disappeared. Why limit spending when money is practically free? The Fed pushed down interest rates so much that Congress could add 500% to federal debt and only increase its debt service payments by 50%.
And so now, Republicans wander aimlessly…with no map…no purpose…no creed…and no plan — which is why they are so easily bamboozled by TV stars like Zelenskyy and Trump. They put on a good show.
And just look at the nation’s politicians. Santos, Biden, McConnell, Pelosi, AOC — they are hacks or frauds…often both. We were not around in the 19th century or the first half of the 20th, but it is hard to believe that the politicos of the period were as dim and dishonest.
Those political leaders are the ones most responsible for much of the cluster. Not necessarily for what they did, but what they didn’t do. They didn’t do their jobs. They didn’t protect the public.
Five Major Trends
In addition to the market correction, we see five major trends that come together in a cluster of awful:
- The continued exploitation of the middle class by the elite, which is why the correction will not be allowed to complete its work.
- The decline of the American Empire, beginning about 1999.
- Abandoning the rules, principles and ideas that made the US so successful.
- A fanatical fear of global warming and a belief that the Earth’s climate can be and must be controlled.
- The unchallenged political power of what Eisenhower called the ‘military, industrial complex’.
Members of Congress could have stopped it. They might, for example, have insisted on balanced budgets. They could have just said ‘no’ to the boondoggles and ‘earmarks’…to war and sanctions abroad…and to runaway claptrap at home. Instead, they not only didn’t balance the budget…they didn’t even pass a budget at all. Instead, they financed the country with ‘continuing resolutions’ and ‘omnibus’ budgets that no human being actually reads.
With no deficits to finance, the Fed would have had no compelling reason to manipulate interest rates. Federal debt, if left where it was when Bill Clinton moved out of the White House, would be about five and a half trillion, not US$31 trillion.
The ‘conservatives’ could have nixed the idea of bailing out Wall Street in 2009…(where would they get the money?)…and opposed lockdowns in the COVID Hysteria of 2020. Instead, the go-along, get-along politicos went along with everything, including Trump’s record US$3.1 trillion deficit. This caused the Fed to add nearly US$5 trillion in new money to keep up, which is the proximate cause of today’s inflation.
(Even China — the world’s top COVID-fighter — eventually realised that détente with the germ was a better policy than active combat.)
But fish gotta swim. Birds gotta fly. And late, degenerate empires gotta get out of the way to make room for the next act. How? In the usual ways — inflation, war, corruption, and delusion, broadly playing out in those five trends we listed above. Together, they will destroy the wealth, power and prestige of the US and its citizens.
But it will be one heckuva cluster show.
For The Daily Reckoning Australia