Inflation. Today’s inflammatory word of the day. Apparently, I’m permitted to share critical thought in this regard since I majored in Finance and Econ in college, correct?
I haven’t written anything on today’s other hot topic, Ukraine. With 13 years of military intelligence experience apparently, I might be permitted to posses and share a thought there as well. Scott Horton has done, as always, a wonderful job in this regard so what more is there to say really? My quick take; there are no good guys in this story. None.
Side A: Joe Biden is the worst!
Side B: Greedy capitalist pigs are the worst!
Which of these is true?
Also though, neither.
Monetary policy and global economics are extraordinarily complex. Whenever talking heads are attempting to reduce a complex, multi-variate issue down to one inflammatory meme, rest assured, you are being exposed to propaganda. Period.
So perhaps which is true is the wrong question and perhaps you would rather know which of these two is “MORE” true so you can still rest comfortably with your chosen memes.
Inflation is extremely misunderstood. Often even by those responsible for modeling policy to manage it. It’s a shame really. Humans have well over 2,000 years of written history of monetary policy and strategies. One would think that to be more than enough to understand how this might play out.
Let’s play a game. Perhaps if we do, you’ll see much more clearly why prices are skyrocketing.
Imagine we have 6 players sitting around a dining room table. In the middle of the table, we have 20 trinkets of varying shapes, designs, weights and colors. Each player is handed an identical amount of game currency. 20 single notes.
The rules of the game are simple. If you run out of notes completely you are bankrupt and ruled out of the game. Any trinkets you hold will return to the barter pot in the middle. Trinkets can be purchased from the barter pot for 1 single note. To win the game you must possess the maximum number of trinkets, obviously having avoided going completely broke.
With each turn you can elect to buy a single trinket from the middle (if any remain) or you may make an offer to another player to purchase a single or multiple trinkets from them at a price negotiated between the two of you.
If this game sounds kinda boring, it’s because it’s abstractly parallel to just living life. Every day life can be kinda boring.
Now, there are two primary drivers that will place upward pressure on the price of trinkets.
First, we can reduce the number of trinkets but leave the amount of circulating currency static. Now, you still have the same number of units of currency chasing a smaller number of trinkets. This will force players to value each trinket more greatly as the number of monetary units now outweighs the previous amount of goods available in the market.
Or, second, we can leave the amount of goods static in the game and double each player’s stock of cash. Or just increase in general, doesn’t have to double. Same phenomenon takes place. Now, players have twice as much capital, but the goods in the economy are the same and thus, players within the game will start to naturally bid up the price of trinkets because they value the goods more greatly than the currency.
The reason inflation in the global economy is so noticeable in 2022 is because you are witnessing both examples 1 and 2 above take place at the exact same time.
The globally adopted governmental response to COVID manufactured an environment of tremendous fear and millions of people literally vanished from society and even the labor force. The labor force participation rate in the US has begun to trickle upward the past few months, but from data published by FRED, there are still some 2,200,000 fewer people working today as compared to two years ago just within the US. 11,000,000 fewer working today as compared to 2000, the start of our War on Terror.
With 2.2M fewer people working just in the last 24 months, it is not difficult to recognize that fewer and fewer goods and services are being produced, in aggregate, across the broader economy. So, what happens when dollars are now competing for fewer goods? Right, prices rise.
In addition to that very unfortunate observation, we have what’s referred to as Quantitative Easing. What Joe Biden is just “SO ANGRY” about people believing that government spending leads to inflation.
This might shock some people, but it’s true regardless. About 80% of ALL US dollars circulating throughout the economy, dollar bills that exist in reality, were created and introduced into the economy just within the last 22 months. No kidding.
That should alarm even people that haven’t studied Economics. What happens in our game when you have more and more dollars chasing the same amount of goods? Right, prices rise.
Now, here we sit in 2022 and what do we have? We have A LOT more dollars circulating through the economy chasing even FEWER goods than previously existed.
Right there, in the short of it, is what you’re witnessing in real time.
I’m extremely confident that the political elite in this world are not stupid people. I’m extremely confident that they understand what they are doing and day by day, it’s becoming clearer to me what it is they are attempting to pull off.
I believe the political elite have understood that the US Dollar was destined for collapse as far back as the 1980’s, perhaps even the 1970’s.
With the advent and invention of digital currency I believe those in charge of monetary policy, those who own the Federal Reserve, are now making their strategic play. I believe they are moving to collapse the Dollar intentionally. The timing has never been better. Creating the appropriate market chaos and panic to come to everyone’s rescue with a government issued digital currency of their own.
GovCoin, FedCoin. Whatever it might be called. Rest assured too, it will trackable. Every last Bit.
Its acceptance as payment will also be mandated at the barrel of a rifle, just like the Dollar has always been.
I don’t think this is all going to play out quite the way they want. There are simply far too many avenues of transparency in this revolutionary Golden Age of technology. But that surely won’t stop them from trying. In a way, faced with the loss of historic control, they actually have no other choice other than to attempt to make this happen and retain their grip on authority.
The Arc has always bent towards Freedom. While it’s not a steady or consistent bend, it bends that way regardless and ultimately, each individual will eventually rise to the greatest degree of autonomy possible with a general continuation of global decentralization.
Sadly though, I don’t think this next phase of Revolution and Counter Revolution will shake out without a fight. There’s that part of me that’s defined by Eternal Hope that imagines that fight won’t have to be violent.