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The Worst Economy in 80 Years: The ‘Inflationary Wave’ Edition
Remembering last November:
There is quite a storm a-brewin’. In case you aren’t getting the picture: despite what the Biden fluffers at CNBC and the Yahoo Finance page put out to cheerlead the market every weekday morning, we are heading full steam into the worst economy in 80 years. Most common people are already feeling (and clearly seeing) the effects of the first wave. …
While there is not much any of us can to about it, next April or so when we are waist deep in this abyss, remember the appropriate November 2021 headlines of “THE WORST ECONOMY IN EIGHTY YEARS” that didn’t happen. Acknowledgement and recognition of that fact now would be bad for the progressive agenda…and, more importantly, the investment portfolio’s of our beltway class.
Well, it is now “next April” and I suspect that – even though the additional trillions of debt spending that seemed to be in the offing back then didn’t materialize – the above outlook from five months ago was a bit too rosy given our overwhelmingly incompetent and corrupt ruling class. The best possible spin for our current situation was provided by Instapundit a few days ago:
RIGHT NOW THE ONLY THING KEEPING US ALOFT IS THAT THE REST OF THE WORLD IS EVEN MORE F*[***]D
But, if you dig down through the links, even that little spark of optimism dies rather quickly:
…It has been over forty years since the West has seen this sort of inflation. That assumes the official numbers are accurate, which is unlikely. In the United States, official inflation is 7 percent, but that is using the new math. If we were using the same math we did in the 1970s, then the real number would be close to double. …
[Emphasis added]
For the record, a source for that “math we did in the 1970s” is not provided. I do, however, tend to believe the assertion…and will do so until evidence is provided to the contrary. More…
… Since the invention of the petrodollar, America has been able to print as much money as it needs. The dollar is the default currency of the world, so those extra dollars always had a place to go. They would be spent on trade and then get reinvested by foreigners, usually foreign governments, back into U.S. Treasuries, which props up the massive spending by Washington. …
Since the Louvre accords in the 1980s, Washington has been able to swap securities for newly printed banknotes by the Federal Reserve. This would normally impose an inflation tax on the public, but the dollar being the reserve currency of the world spread this tax over the global economy. Inflation rates in the United States remained low, as long as global growth remained high and the world was willing to tolerate this system.
Those last two items are why inflation will not be abating anytime soon. … …the rest of the world is losing interest in the system that profits Washington at their expense.
[Emphasis added]
Just to point out the obvious, that specifically does not say “the system that profits the United States” but is limited to that special class within our ruling beltway. (The astute reader will notice that a complimentary statement would reflect much of what I have scribbled here at R> for quite some time: …the rest of the country is losing interest in the system that profits Washington at their expense. But I digress.) Now the frightening conclusion:
What this means as a practical matter is that the West is about to get much poorer and do so in a highly disorganized way. Not only will the standard of living decline due to inflation, but government spending will have to be radically reduced. The great welfare states and the American military machine were only possible when the cost of these things was subsidized by the world. The world is no longer willing to do that.
Western people are about to learn that those bits of metal and paper we think of as money are more than just a way to buy stuff. They are a store of value, and that value is the cultural strength of the society that issues them. The West has been in decline for a long time, but it was covered over by financial legerdemain. The free-money era concealed the great cultural looting of the West. That era is now over, and Western people will soon have to pay the price for it.
[Emphasis added]
The outlook is not good. But at least we have a top-notch team on the case. Right? Surely they are clear-headed and honest about the issues facing us and willing to make the hard decisions to lead us out of this. Well…
Biden’s lying about inflation — and workers know it
Nothing paints Joe Biden and fellow Democrats so out of touch as their lame rhetoric about inflation being “Putin’s price hike.” While the recent global effects have had an impact, rapid inflation began a year ago…
“Out of touch” may be manageable, but the laser-like focus of modern progressive ignorance is not:
…Joe Biden and his team are in total denial about economic reality and have no plans that will address the inflationary wave in any direction except to make it worse. That all but guarantees that the Fed will have to create a recession to counter inflation and stop a wage-price spiral that could otherwise set us up for years of stagnation. But even that will only go so far to address the corrosive impact of Biden’s spending impulses and economic incoherence.
[Emphasis added]
“Incoherence” is a bit charitable here. While it is doubtful that holding that seat at the top of the world economic food chain was going to last forever, maybe that position has been much more fragile than most of us wanted to admit for quite some time now. But the current demise…in the form of this steep nosedive we are now in…was a choice, all but guaranteed within the first 9 hours of the Biden administration. Moreover, in case you haven’t been paying attention, this departure from the slow, managed decline of much of the last century is the realization of the “fundamental transformation” barely hidden in undefined “hope and change.” Again, in handing the levers of power to the overt forces of Anti-Americanism nearly a decade and a half ago, We the People chose this demise. Biden is just the clownish puppet chosen to finish it off.
For the record, I would argue that “inflationary wave” is also a bit of unwarranted optimism for what is going to feel more like a tsunami to us in the middle class and below. Good times, good times.
There are now 1,011 looonnnnggg days left in the Constitutionally mandated Biden-Harris administration. May America get every one of those to the fullest…and emerge on the other side certainly bruised and battered but also wiser. (In the meantime, the ‘cabal’ that bragged of foisting Joe Biden on us must answer for his failed presidency.)
Into the abyss…
___ ___ ___
EXTENDED ASIDE
I hope you do take the time to go back and review the November 13, 2021, post titled The Worst Economy in Eighty Years referenced at the beginning of this offering. The key history review in the first half of it is summarized here:
…the 1991 recession. For those unfamiliar, that was a rather average 8-month recession that lasted from July 1990 to March 1991. (Note that the end of it was more than 18 months before the 1992 presidential election.) Interestingly, the official outlet for such things (i.e. the National Bureau of Economic Research) did not announce the end of that recession until December 22, 1992. (Note that the announcement came several weeks after the 1992 presidential election.) If you were politically aware of things back then, you will remember the Clinton Campaign, aided by the reliably Leftist media including the trusted nightly news anchors of the day and their near monopoly on dictating the narrative, took full advantage of this to hammer home the mantra “THE WORST ECONOMY IN 50 YEARS” for many, many months. Also, for the historically ill-informed out there, that reference timeframe meant something for a key voting demographic that tended to get more conservative at their age. You do the math.
The larger point beyond that was that the same media clowns that pushed that “WORST ECONOMY IN 50 YEARS” mantra then are now and will continue to be either silent (or much less “panicked”) about the modern economy that is justifiably now the worst in 80 years…and still charging full steam ahead in exactly the wrong direction.
Yet another example of the selective reportage by those charged with dispensing “approved-narrative journalism” only. It is not a new phenomenon. This is the kind of stuff that is useful in calibrating (or periodically recalibrating) your “fake news” filter.
You’re welcome.
Published in General
It’s how levered (debt to whatever ratio) and how pumped up assets are. I’m talking about right now, basically. The other thing is CPI inflation and asset inflation creates rivers of cash flow, particularly through government that the high debt to GDP etc. requires.
I’m not making a general observation about the past. Having said that, you just can’t keep rescuing everything with the Fed. That’s how it starts.
I’m going to go a little bit out of my depth here. Grant Williams, in the podcast I referenced, just said that the negative yielding bonds on the planet went from 21,000,000,000,000 to 3,000,000,000,000 in the last six weeks. Six freaking weeks. This is because there is so much inflation. First of all, why should you have negative yielding bonds–ever? It’s artificially created by… central bank inflationism.
Now look at this. All of the financial parasites are blowing up from it.
PRINT PRINT PRINT…
Central planning begets more central planning until everything collapses.
She worked at the Fed with Richard Fisher.
Perfect.
The only people that are happier to have a job than to have their savings protected are those that have little or no savings. Otherwise, people damn-well want the fruits of their labor kept safe.
Not so sure, if all you had was savings, it’s going to run out eventually.
Especially when your savings are your retirement, which means planning to not having a job anymore.
See what Flicker said.
I would like a bunch of things if I could. My ricochet page has been screwed up for days.
Retiring on your own savings is so 1950s. Even without any new shenanigans, without basically society turning more towards what Rufus mentions from time to time, you lose value over time. And that turn doesn’t seem likely any time soon.
Seems like they have it fixed, unless you’re using Brave or something else that maybe the fix isn’t quite right for.
I guess I’m an economic Luddite.
You could never have a society where you didn’t get two points over inflation on almost the whole bond curve without government and central banks screwing everything up. On purpose probably because:
Government Is How We Steal From Each Other™
You can’t run a civilization this way. You need vehicles that are safe to manage the risks of life and long-term investing. It’s called the investment frontier. If you don’t have one, which we don’t, you basically learn to speculate or otherwise you run out of money.
It’s been a while since I’ve seen this, but I think a lot of the answers are in here. It’s really detailed and weird but I think the guy is right.
The problem there is, it doesn’t matter if you’re a Luddite, unless you have your “savings” in assets or gold or something, any kind of “money” is going to lose value in the modern world/economy, whether you like it or not. (And in the event of serious problems or even a “collapse,” such “money” could quickly become worth very little or even nothing.) They’re running the economy for the benefit of other people, and especially themselves. They don’t care about you and me.
Money in the bank represents freedom. What do leftists hate the most? Why do they want you broke/financially destitute? The rest is left as an exercise for the student ;-)
But what if they fool you into putting your money in the bank, and then devalue it over time until eventually it may be worth nothing?
Even if Elon Musk’s $250 billion were to be devalued 90%, that still leaves him with $2.5 billion. The rest of us don’t fare so well.
It feels like a bit of a plus that I’m paying each month’s fixed-rate mortgage payment with money that is worth less and less, while my payment amount stays the same. But aside from that, I tend to convert the rest of my income – meager as it is – into some kind of asset as quickly as possible, before the price rises again. Even if it’s just a box of taquitos, that’s something I can eat, and I don’t “save” money by not buying them until the price goes up more.
It’s a gamble either way. I can take the money and buy a hard asset — for now –, but I can’t take the hard asset to the grocer and exchange it for food.
Well I get hard assets that I’m going to use eventually. If I wait, the hard asset won’t be any bigger or better, it will just be more expensive. Even if that money is also worth less, the prices go up faster than my income.
I’m also stocking up on food, and long-lasting prescriptions.
And spare eyeglasses, etc.
There’s a lot of other things that don’t cost much, don’t go bad, and may become rare and/or expensive in the future. Even stuff like plastic wrap and aluminum foil, have you checked the packages? All the ones I look at, came from China.
Plus the good old standby of toilet paper, and I’ve been putting away extra paper towels too. Fortunately I have the space for that now, and then some: 4,500 sq ft. I’d like to get some spare kitchen appliances too, if I could afford them. The space to put them would not be a problem.
I intend to (against all my planning) live off of social security.
Assuming I had any savings, I have considered the best way to save value. Gold (and silver for everyday purchases) would have been normally the way to go. But even then supply of gas and food is an on-going variable that doesn’t look good.
Banks are susceptible to both inflation and bank bail-ins. Any money that is invested is frankly in other people’s hands; and if I recall even the highest level of bond-holders have gotten legally (or actually illegally) screwed in the past (in 2008, I think with the government bail-out). Land is only as good as you can keep it and make it produce for you, or make money or bartered goods off of renting it out.
What little cash I have, I keep in a mason jar, inside of a coffee can, inside of a tupperware buried somewhere on our side lot just in case the ATMs run out of cash.
I’ve probably said too much.
In some ways that does seem the smart move, especially if you’ve been able to stockpile other things and only use Soc Soc for regular/basic living expenses. Soc Sec goes up automatically every year, while work income may not, which is a plus even if it doesn’t increase quite as quickly as prices.
Having a stock of canned and/or freeze-dried vegetables etc seems smart too. The problem with some of that, for me, is that most of the “survival” food comes in packages that might be for 8 “servings” or more. So unless you have a family, you’re going to end up eating the same thing for several days, once opened, so it doesn’t go bad.
I’ve also been stockpiling canned roast beef with gravy, I’ve tried it and it’s very tasty. One of those cans and a package of instant taters is enough for 2 dinners. Something like a can of chunked chicken, plus a can or two of mixed vegetables and some rice or pasta, can make a pot of soup or stew for several meals. I’ve also found that the Southgate canned beef stew – available at Dollar Tree – is mostly just the meat for some reason, but if you add a can or two of mixed vegetables you get enough for 3 or more servings.
Even with storing other things, I have enough space that I could rent rooms to up to 6 or even 8 people if I needed to, for income or barter or whatever. I expect that if the “you will own nothing” stuff goes far enough, the government will start offering “stipends” for providing housing to other people. If it comes to that, I’m better situated than most.
Here’s hoping cash is worth more than its value as toilet paper, in the future.
Don’t forget a dozen 30,000 gal. buried LP tanks in your back yard (or at least one), to run your generator(s) and household heat.
Fairly moderate climate here. Very glad to be out of Phoenix after almost 30 years.
I’m thinking that, if anything, it’s more likely to be a situation of shortages and/or higher prices, not complete collapse. Which means electricity and probably natural gas too will be available, if perhaps somewhat limited especially for certain industrial purposes, but maybe at unimaginably high prices compared to today, but there will be “subsidies” (which I actually get already) such as for “the elderly”, and maybe food shortages too which is why I look at my stockpile as a supplement not a replacement. And it will last a lot longer that way too.
Thing is, if things really did collapse “bigly,” I don’t think anyone would last for very long, not even the “survivalists.” And so it seems rather pointless to try and “prepare” for it even if I could afford to do so.
Incisive and insightful. One thing that I would worry about is renting unless you really, really know the person. I have family that had a renter stay for a year without paying rent once, due to the covid economy.
Yes that could be a problem again/still, but I likely wouldn’t do it at all unless it became a survival thing, based on some kind of “guaranteed stipend” which would be about the same situation for corporate landlords if masses of people are going to “own nothing, and be happy.” Those big apartment complexes won’t be government-owned, they’ll be oligarch-owned, and the oligarchs gots to be paid. This is a small town, so I would be just a mini-oligarch.
That’s kind of where I am. Plus there’re two other things. One is, can I heat any food without the neighbors a quarter mile a way smelling it? Even rice alone. And second, could I eat and watch my neighbors turn to skin and bone? I think the answer is No to both.
You mean for a survivalist type, right? They all seem to put their “compounds” miles away from other people. But for shortages, I don’t think the neighbors will be starving, they just won’t be eating as well as me. :-)
Nice system, isn’t it?
They steal from everybody with government, stock options, lawyers, lobbyists, and inflation and then they compensate with entitlements and welfare. While the debt to GDP breaks everything.
Then the people that only have boiler plate policy in their heads because they don’t work at thinking about anything or they just want things to be the way they want, bitch about populism.
Remind yourself to Vote.
The real Fed funds rate right now is -6.5%.
2%iFlAtIoN mAKeS ouR lIveS bEtTer
This is what everybody needs to fix in their heads.
They have been running with too much money printing since the Long Term Capital Management crisis at least. Now there is a staggering debt to GDP ratio because of that. Money printing and low interest rates generate debt. You can’t do a Paul Volcker now. We are decades past that. Back then, debt deflation was pretty contained. He could choke off the bad inflation because on net that was better. Now they can’t do that. We are going to get a lot of inflation.
Real genius system.