YOUGHAL, IRELAND – It’s inflate or die.

And if anyone gets in the way of inflation… the “active shooters” – in both the private sector and the public sector – start gunning for them.

Last week, Treasury Secretary Janet Yellen came under fire for saying she might have to raise interest rates.

Then, her boss, Joe Biden, said he wouldn’t want to go ahead with his spending programs if it meant bigger deficits. The Washington Times reports:

President Biden on Wednesday issued a forceful defense of his plans to increase taxes on corporations and the wealthy in order to fund his $4 trillion-plus economic agenda, saying he’s open to compromise on corporate taxes but that he’s not going to add to a sea of red ink.

“I’m open to compromising, yes – it doesn’t have to be exactly what I say,” Mr. Biden told reporters at the White House. “But I’m not willing to not pay for what we’re talking about. I’m not willing to deficit spend.”

That thought sank into the Democrat trenches like poison gas… and then vanished with the wind.

Ipso Facto Inflation

Democrats are finally getting a chance to enact all the crackpot redistribution programs they’ve been dreaming of for decades.

There is no real chance that the Biden team will let deficits stand in the way. They’re just going to rename them “investments.”

Besides, after Friday’s jobs report, which reported far fewer new jobs than expected, even Joe Biden is likely to get the message: Deficits are a good thing.

The flagging economy will need “fiscal stimulus,” the experts will say.

And that means money-printing.

And money-printing means inflation.

Already, inflation sightings are on the rise. Dear Reader Alan C. wrote with an example from Michigan:

…we are all going to get screwed. Even the families that are going to get the child care funny money will blow through it and then wonder how they will pay for their groceries that have gone up 20%, 30%, 40%, 50%, or more. Gas in Michigan just went up to $2.99 a gallon from $2.59 on Friday. Welcome to America!

Even Warren Buffett sees it. Here’s CNBC:

Warren Buffett is seeing inflation among Berkshire Hathaway’s collection of businesses as the economic recovery from the Covid pandemic kicks into high gear.

“We are seeing very substantial inflation,” the Berkshire chairman and CEO said at the conglomerate’s annual shareholder meeting Saturday. “It’s very interesting. We are raising prices. People are raising prices to us and it’s being accepted.”

“We’ve got nine homebuilders in addition to our manufacture housing and operation, which is the largest in the country. So we really do a lot of housing. The costs are just up, up, up. Steel costs, you know, just every day they’re going up,” the legendary investor added.

Here’s a table that we showed our Bonner-Denning Letter subscribers recently. [Paid-up subscribers can catch up here. If you would like to find out more about how to join, just click here.]


Source: Charlie Bilello of Compound Capital Advisors

[Click here to view larger image]

Prices are going up. And the reasons are so obvious, you’d need a PhD in economics not to see them.

Zero Return

Let’s just glance at that supply/demand balance.

On the supply side, governments all over the world tried to stop the spread of the COVID-19 virus by preventing people from getting together.

People get together at work – where goods and services are created – so shops, factories, and offices were closed.

People also congregate for fun, at bars, theatres, and restaurants, so those were closed, too.

Then, the feds tried to offset the economic damage (wages and sales lost, output reduced, profits missed) by handing out money in various forms.

But people who are paid not to produce become very good at it. With the federal government’s supplemental unemployment payments, millions of people found that it was more profitable to stay home than go back to work.

That is why the unemployment rate remains over 6%, even as employers report that they can’t find anyone willing to work for them. Again, output suffers.

As noted in the Diary more than once, the free money from the Federal Reserve also depresses supplies of goods and services by drawing capital away from worthwhile projects in the real economy and directing it towards pranks and cons in the fantasy economy – such as Dogecoin, fractionalized sneakers, NFTs, MicroStrategy (MSTR), and so on.

The real economic return on these “investments” is probably close to zero.

Wasted Resources

The waste of resources is even greater in the public sector. Not only are the sums larger, but the “investments” usually produce rates of return that are deeply negative.

Just to keep it simple, the federal government dragoons trillions in real time, energy, skills, and raw materials – and squanders them.

And while the feds have been wasting resources for generations, the rate of loss has recently gone much higher than usual.

In the 1970s, Washington reliably frittered away about 27% of GDP. Now, it’s over 40%. That doesn’t count the trillions in private waste and malinvestment caused by the proliferation of regulations and edicts, not included as federal spending.

All together, directly and indirectly, half of U.S. GDP is probably misallocated… or misspent.

And as of the end of the first quarter of 2021, the federales had increased spending, at an annual rate, by $3.3 trillion – an amount equal to the entire budget in 2015.

All of these things suppress the supply of goods and services.

Paper Millionaires

Meanwhile, the demand (in terms of the money available to buy them) has gone “to the mooon.”

Thanks to the feds, U.S. households have never had so much money to spend. Here’s NBC News:

Personal income jumped by more than $4 trillion last month, a record 21.1 percent increase, the Bureau of Economic Analysis reported on Friday. Economists had been predicting a spike as stimulus payments reached people’s bank accounts and the improving economic picture pulled more displaced workers off the sidelines, but the increase exceeded even their optimistic projections.

The Fed has increased America’s monetary footings (its balance sheet) by some $7 trillion so far this century… with about $3 trillion of that added just during the last 14 months.

Even now, with prices rising and the COVID-19 crisis making its way into the history books, the Fed is still adding new money at a rate of almost $30 billion per week.

A lot of this monetary stimulus goes where it is intended to go – into the pockets of the elite.

But some of it leaks into the consumer economy. Even the Robinhood traders are showing big, spendable gains – thanks to the Fed’s money-printing.

Many young people – still in school or waiting to begin careers – have been made paper millionaires overnight from their crypto “investments.”

Of course, much of this “money” can disappear as quickly as it came. Easy come, easy go.

But what about inflation? Has it just dropped by? Or is it here for a long stay?

Tune in tomorrow.




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