Column #376 November 11, 2022
When I started this column the election was yesterday and tonight hurricane Nicole is expected to make a direct hit between Stuart and Vero Beach, Florida—the area where I live. It will be the latest calendar year hurricane to make landfall along the east coast of Florida on record. Thank goodness our little meat store in Powderly, Texas is having balmy weather. That’s a good thing because November is exceptionally busy with folks preparing for Thanksgiving which means turkeys are “flying” out the door.
Sometimes it seems that picking a topic beyond “buy our meats” is a challenge. This week, with a hurricane bearing down, it’s exceptionally challenging because there’s so much going on it’s difficult to focus. Naturally, I must complete the column ahead of the publication date no matter what else is going on. And, for those of you who have experienced what it takes to prepare for a hurricane, you know that getting prepared is a handful. Thankfully, Nicole will be a baby hurricane compared to Ian which devastated Fort Meyers directly west of us on Florida’s west coast on September 28, 2020. In spite of being a baby, the wind is certainly howling as I write and the tides are much higher than normal.
To minimize the need for research, this column will be my reaction to yesterday’s election. I can dispense with research because I’ll be writing about a topic I’ve studied for decades—which is economics and the history of money.
Like all my mornings this one started by listening to NPR radio. I listen to it because I want to hear the government’s propaganda to see what the deep state is peddling. This time Steve Inskeep had someone on that I didn’t recognize. But they were talking as if they were the ultimate authority on inflation and that caught my attention.
The “expert” made several points. They were that inflation was occurring in many countries around the world and in many it was worse than in the United States, inflation was primarily caused by the increase in oil and food, and those two sectors had increased in price because Russia invaded Ukraine. Therefore it’s not our government’s fault that prices are rising.
Well, that’s a total crock of you-know-what.
I’ll use a really simple example to explain how this works. Assume that in the world’s marketplace there’s a million dollars in circulation and a million different goods available for purchase. Everything is priced at one dollar. For some reason the coffee bean crop falls 20% short causing a run on coffee beans. In response, the price of beans doubles. As the coffee beans get more expensive consumption of beans drops 20%. Even with the drop in consumption, more dollars are being allocated to coffee beans then before. Since the quantity of money in the marketplace is the same, there is less money for all other goods which causes them to fall slightly in price—to let’s say $0.99. In an honest money system, when the prices of one or more things increase that is actually deflationary for all other goods.
It’s the same way with an individual’s budget. When a person has only so much money to spend and one necessity goes up in price, that person will spend less on others things that are not as necessary. What this means is if the price of food and oil jump in price, in a static (honest) money system, the prices of other things will go down.
But let’s dump in a bunch of helicopter money. In our example above if we print and distribute an additional one million dollars, there will be twice as many dollars chasing the same quantity of goods. But let’s say at the same time, Russia invades Ukraine and oil and food commodities jump in price by 20%. In this case, there is still a huge quantity of dollars left to chase after all other goods in the marketplace. In fact, there are enough dollars to quickly double the average price of all goods to $2.00.
When prices for all goods and services are increasing that is a SYMPTOM of inflation. The word “inflation” describes an event where the money supply is expanding faster than the expansion of goods. An inflationary environment is when the government is borrowing and spending and/or the banking industry is creating dollars by lending them to borrowers so they can increase their consumption of goods and services. This “currency” creation process (printing) is how the money supply can expand faster than the inventory of goods and services in the marketplace.
Our central bank, the Federal Reserve Bank (Fed), has a goal of reducing price inflation to 2% per year. This means it wants to water down our currency’s purchasing power by 2% per year as a policy. This goal is not only corrupt but it’s destructive. It has occurred hundreds if not thousands of times over many thousands of years. How it happens and its long-term consequences are well known. Our government has been persistent in this debasement goal of destroying the purchasing power of our currency since 1932 under the watchful eyes of Democrats and Republicans alike.
So this brings us to Tuesday’s election. The deep state consists of government employees. The goal of the deep state and the crooked, ignorant politicians are the same. They want a bigger government and financial security—for themselves. Over the years these leaches have learned that by giving people handouts they can control them. Once people are addicted to the handouts, they gladly exchange their freedoms for bondage which results in bigger government and security for the deep state.1
Helicopter money is a term made famous in a paper, “The Optimum Quantity of Money,” written by economist Milton Friedman in 1969. I can tell you the concept sounded absolutely insane to everyone back then. Yet it has become a policy of our government and many other governments around the world. And like all addicts, some money isn’t enough, the masses always need MOAR and printing money is a worldwide phenomenon.2
Our country had a real need for helicopter money during and following the 2008 credit crisis because it didn’t want to face the music of the collapse of an inflated credit system. Twelve years later the pandemic’s shutdown policies were implemented and that inspired MOAR helicopter money on an unprecedented scale. Dollars were literally handed out to people by the trillions while the production of goods stagnated. It took quite a few months before the marketplace eventually responded with prices of all goods and services spiking higher. But those recent past experiences of getting “free” money from the government was firmly established in the minds of the masses.
Now that people know they can get money from the Federal government, I’d say a significant percentage of the nation’s citizens will only vote for representatives who support borrowing and spending and welfare programs. Programs like the Inflation Reduction Act, the Buildback Better Act, the student loan cancellation decrees, and all the other programs that gift money, provide services and sometimes jobs, or reduce their indebtedness for the masses are lures for the people who do not understand economics and that many nations have failed in the past because of those policies.
Every democracy fails soon after voters discover they can vote themselves generous gifts from the public treasury. Once they learn that, just like trained pigeons seeking a free meal they will always vote for the candidates who promise the most benefits. This is how democracies eventually collapse and end up as dictatorships.
Yesterday it was announced that the consumer price index increased 0.4% for the month and 7.7% from a year ago. Both numbers were lower than expected as well as lower than reported in the prior two months. The masses celebrated! But this one-month’s statistic doesn’t even come close to solving the upward pressure on prices. In February 2020 the M2 money supply was $15,458.7 billion. In March 2022 it was $21,739.7 billion. That was an increase of 40% in two years.3
The Consumer Price Index in February 2020 was 258.678 and in October 2022 it was 298.012 for an increase of 15.2%. Since the money supply had increased 40% and prices have only increased 15% during the same period, optimism about price inflation being under control is premature. To stop the rising prices there are two things the Fed has to do. One is to raise interest rates in order to discourage borrowing by the private sector. The other is to sell its assets which takes money out of circulation.4
During the past 15 years the Fed expanded its asset holdings significantly. In August 2008 they held $900 billion worth of assets. In response to the 2008 recession, the Fed acquired more assets and by January 2015 they were up to $4.5 trillion. By February 2020 the assets had shrunk to $4.15 trillion. Then they jumped dramatically to $8.97 trillion by April 20, 2022. On November 2, 2022 they were only down to $8.68 trillion. Therefore, at this stage of the game, the Fed’s interest rates are still lower than the price inflation rate and it’s only started to shrunk its balance sheet. This means the Fed has only started to fight price inflation.5
Compounding the Fed’s problems with reducing the price inflation rate is the Federal government. It continues to borrow and spend like a drunken sailor. So while the Fed is still in the beginning states of implementing its plan, the government is still going in the opposite direction.
I don’t know exactly how all this will work out, but the deep state and the crooked politicians are going to play it to their upmost advantage. So far worker wages are way behind the price inflation curve which means the masses are starved for relief. We saw it in the midterm election. There’s a large segment of the population that wants MOAR. They were willing to be subjects in the unconstitutional lockdowns and vaccination mandates. Many gave up their freedoms without any complaints. Now they are literally begging to be subjects in a new system.
During the next year we may experience a wage-price upward spiral unless there is a recession and significant job loses. While we wait to see, study history and learn what you can about the history of money and credit. You’ll need that knowledge. In addition, build up your cash reserves and get prepared for a storm—one that will likely be worse than Ian.
To your health.
Ted Slanker has been reporting on the fundamentals of nutritional research in publications, television and radio appearances, and at conferences since 1999. He condenses complex studies into the basics required for health and well-being. His eBook, The Real Diet of Man, is available online.
Don't miss these links for additional reading:
1. The Deep State Is What Disables Democracy by Jeffrey A. Tucker from The Epoch Times
2. What Is Helicopter Money? by Tomas Hirst from World Economic Forum
3. M2 Money Supply Chart by FRED
5. Total Assets (Fed Holdings) by FRED