Exposed: The Lies of Biden’s Tax Policy

As President Joe Biden’s tax policy discussions start heating up, some familiar lies have made their way back into the political parlance. There are four specific lies upon which I’ll focus here:

  1. The rich need to pay their “fair share”
  2. The Trump tax cuts only went to the wealthiest Americans
  3. Nobody making less than $400k will see their taxes increase under the Biden plan
  4. The wealthy pay less taxes than their secretaries

Progressives generally classify the “rich” as the top 1%, those evil “millionaires and billionaires,” as Senator Bernie Sanders used to say (until he became a millionaire; now he just says the “billionaires”). Even a cursory scan of IRS tax data shows the 1% has been paying more than their share for decades. For the record, from 1913 until about 1940, the top 2% of income earners in the United States paid 100% of the federal income tax burden. This means their “fair share” was all of it.

Source: IRS, Statistics of Income, Individual Income Rates and Tax Shares

Now let’s compare the top 1% burden to the bottom 50%.

What does top 1% and bottom 50% really mean? Many people don’t understand the rhetoric, but nod their heads in agreement anyway. If the IRS receives 100 million tax returns, then top 1% means one million of those returns had adjusted gross incomes (AGI) above a set dollar amount while bottom 50% means there were 50 million returns below a specific AGI. These numbers change every year. More importantly, what is the income level one must achieve to become an evil rich person? If you listen to the progressive caterwauling, you would think it was at least a million dollars or more. Here is a look at what these cut-off figures were for each year 1980-2019.

This chart shows in 1980, any tax return with an adjusted gross income of $80,580 was considered the top 1% of returns filed. Single, married, head of household, or married filing separately is irrelevant. By 2019, you had to have an AGI of $546,434 to make the top 1%. These figures are strictly based on returns filed. In this next chart we see the income ceiling to be in the bottom 50% (the floor would be $0).

By 2001, the federal government started separating the “super rich” into their own category which is the top 0.1%. This means out of 100 million tax returns, the Top 0.1% would be only 100,000 of those returns.

Let’s look at the total federal income taxes paid as a percentage for these “super-rich” taxpayers.

These graphs disprove the progressives’ lies quite vividly. If I place the highlights into a single table, the message is even clearer.

Percentage of Tax Share Paid per Group Total Tax Returns Filed per Group
Tax Year Top 0.1% Top 1% Bottom 50%   Top 0.1% Top 1% Bottom 50%
1980 n/a 19.05% 7.05% n/a            946,000            47,293,000
1990 n/a 25.13% 5.81% n/a         1,128,000            56,406,000
2001 15.68% 33.22% 4.90% 119,379         1,193,710            59,685,000
2019 18.87% 38.77% 3.06% 148,246         1,482,460            74,123,000


This shows you in 2001 there were 1,193,710 tax returns filed by the top 1% and they paid 33.22% of the total federal tax burden compared to the 59,685,000 bottom 50% of tax returns who paid only 4.9% of the total federal tax burden. Then by 2019, the third year of the Trump tax cuts show 74,123,000 bottom 50% of the tax returns paid even less of the burden at 3.06%, despite having 14,438,000 more tax returns filed than in 2001! While simultaneously, the top 1% went on to pay even more tax burden at 38.77%. Fair share argument, by definition, is now laid to rest. If the progressives want to return to pre-1940 where 100% of the tax burden is paid by the “rich,” they should be honest and say so, because claiming the rich need to pay their fair share is a blatant misuse of the phrase. The rich do pay their “fair share.”

The easiest way to prove the Tax Cuts and Jobs Act (the Trump tax cuts) were not just for the rich is to compare Barack Obama’s marginal tax rates and income levels to Donald Trump’s.

Tax Brackets for Ordinary Income Comparison Between President Obama and President Trump Tax Policies (Tax Year 2018)
2013-2017 (Obama) 2017-current (Trump)
10% $0-19,050 10% $0-19,050
15% $19,050-$77,400 12% $19,050-$77,400
25% $77,400-$156,150 22% $77,400-$156,150
28% $156,150-$237,950 24% $165,000-$315,000
33% $237,950-$424,950 32% $315,000-400,000
35% $424,950-$480,050 35% $400,000-$600,000
39.60% $480,050+ 37% $600,000+


Another important aspect of President Trump’s tax plan was his increase of the standard deductions from $6,500 single filer (Obama) to $12,000 (Trump), and married increased from $13,000 to $24,000. This means if you just take the standard deduction (no itemization) you get to write off the first $12,000-$24,000 of your income before any taxes are applied under President Trump’s policy, compared to only $13,000 under President Obama’s. This is quite significant. How significant? Well, according to the Tax Policy Center because of the Trump tax cuts a full 44% of the American taxpayers paid zero federal income taxes at all. This was a 2% increase from 2017 before the Trump tax cuts were implemented. The actual number of households not paying federal income taxes grew in every quintile in 2018 except for the top 20% of wage earners. Yes, because of Trump’s tax cuts, fewer Americans/families had to pay federal income tax; roughly 2 million fewer people.

How about this progressive lie: nobody making less than $400,000 will see their taxes increase under the Biden plan. Keep in mind, 46-47% of people already pay no federal income taxes, and President Biden claims just increasing the top 37% rate back to 39.6% and increasing multiple business taxes, capital gains taxes, and various wealth tax ideas will “pay for” his new budget. There is no way his $5.8 trillion budget can be paid for by just taxing the >$400,000 crowd an extra 2.6%. The math doesn’t work. Biden sounds a lot like Bill Clinton who told Americans on October 31, 1992 he was going to raise the top tax rate from 31% to 36% on families over $200,000 income and singles over $150,000 and give “middle class” families under $80,000 small tax breaks. The $80,000-200,000 people would see no changes in their tax burden. Clinton’s lie is easily demonstrable if you look at the chart taken from my book on page 307.

Figure 15.13 Total Federal Income Taxes Paid by Income Group, 1993-1996

Every single income group showed an increase in their tax burden after Clinton’s tax policies were implemented. In a New York Times article written by R.W. Apple on February 18, 1993, roughly six weeks after Clinton became president and addressed a joint session of Congress, “Mr. Clinton outlined a series of new taxes that would fall most heavily on business and on relatively wealthy individuals, both active and retired. But families earning as little as $20,000 a year—members of the “forgotten middle class” whose taxes he promised during his campaign to cut—will also be asked to send more dollars to Washington under the President’s plan.” He lied in October 1992 and tried to blame the reasons on “the previous administration.” Sound familiar?

Given the predictable rhetoric from President Biden, which echoes the same sentiments as Bill Clinton, it is safe to say those who he claims will be given tax breaks will not see such reductions. You cannot give federal tax breaks to people who already do not pay any federal income taxes. But you can increase their tax burden, in order to “build back better.”

The fourth lie is as easily disproven as the previous three; actually, even easier. A simple review of effective tax rate data shows the actual percentage each income group pays, on average, every year.

It’s simple to see the “secretary of the CEO” is paying less in income tax rates than her boss. Progressives like President Biden try to mix tax rates when they make this claim. They are looking at CEO capital gains tax rates and comparing those to the secretaries’ effective income tax rates. This is apples to oranges comparisons, and these politicians know it, but choose to mislead (aka, lie) to the public.

Finally, here is a second source on this topic from the Tax Foundation. This graph also lays bare the second lie because it compares effective tax rates before the Trump tax cuts and after. Notice again, everyone’s effective tax rates went down.

There are so many additional examples I could have placed in this article, but space is limited. My book is 493 pages of data and proof, and I merely scratched the surface of the lies from both political parties being told to the American people. Please, do your own homework and never accept political spin at face value; neither party cares about you no matter what they might say. The only two problems your political figures desire to fix are winning the current election and the next one.

TGIF: Glenn Loury’s Collectivist Immigration Policy

Glenn Loury, the economist at Brown University, often has interesting things to say. His YouTube Glenn Show episodes with linguist and social commentator John McWhorter feature valuable insights and eye-opening data about race, woke “anti-racism,” and related matters.

Loury is a neoclassical economist who is generally pro-market. He harbors some doubt about government solutions to social problems. But judging by what he says about immigration, his political theory is appallingly collectivist. This is alarmingly clear from his most recent video with McWhorter. (The transcript is here.)

Loury wants to separate the case for tight border control from the polarizing right-wing TV personalities like Tucker Carlson who constantly bang on about it. Loury’s purpose is to show that a perfectly nonracist case can be made for the government controlling “the border.” (The U.S, has more than one border, but Loury uses the singular form.) He says, in the typical alarmist right-wing manner:

Is it good for the country that we don’t have control of the border and that people come in the thousands and tens of thousands and ultimately in the millions without authorization?

So here’s an argument that I don’t think is a “swarthy hoard” argument. I am an American citizen. That’s a very special endowment which I have inherited in virtue of my birth. This is my country. There are 330 million or so of us. We should get to decide what the future of the composition of our polity is going to be through legitimate democratic deliberation. That’s what we elect representatives for. That’s the purpose of law.

He goes on to say that the American people should decide democratically, that is, collectively, who will and won’t “add[] positive value to the collective enterprise of the country.” It sounds more like he’s talking about a member-owned country club than about a (theoretically) free country.

I see three problems here. First, political decision-making in a representative democracy doesn’t work in the pollyannish way that Loury seems to imagine. Second, voters, politicians, and bureaucrats couldn’t acquire the information needed to ascertain who will and won’t “add[] positive value to the collective enterprise of the country.” And third, Loury’s approach runs roughshod over individual liberty, private property, and the pursuit of happiness. Aren’t those values our actual very special endowment inherited in virtue of our birth?

James Buchanan said that he helped found the Public Choice school of economics to achieve a “politics without romance.” By that he meant that if we are to understand the political realm, we must drop the civic-books fairy tales about well-informed voters and public-spirited politicians and bureaucrats. Instead, we must take people involved in politics as they really are. Politicians and bureaucrats do not become saints when they leave the private sector for government jobs. Even when they are not simply corrupt, they still have career ambitions and other self-interested motivations, like those outside the government.

A related point comes from the Austrian school of economics, specifically Ludwig von Mises and F. A Hayek, who showed beginning a century ago that central planners can’t possibly know all that they would have to know to guide a society’s commercial activities. It’s called “the knowledge problem,” and it’s why socialism and communism fail. The point also applies to governments that presume to plan immigration according to who will be productive and who will be parasitical. That “data” simply is not on deposit anywhere for the bureaucrats’ taking. Remember that we’re talking about human beings and a future that has yet to unfold.

Moreover, voter decision-making is distorted by perverse incentives inherent in the democratic system. As Bryan Caplan shows in The Myth of the Rational Voter: Why Democracies Choose Bad Policies, voters tend to indulge their unexamined irrational biases rather than spend their free time studying which positions and candidates would be best for their communities. But why would they indulge their irrational biases? They do so because it is costless to each of them: since no single vote is likely to be decisive, why would busy people trade time with family and friends for pointless research that will have zero impact on an election? One of those irrational biases is the bias against foreigners. (Caplan explains his data-rich thesis here. See my review of Caplan’s book.)

The point of all this is to show that Loury’s idealized democratic vision — in which well-informed voters with a birdseye view of the social landscape elect wise and altruistic representatives guided only by the general welfare who will deliberate on an immigration policy aimed solely at creating the scientifically determined optimal population for America, a policy that will then be administered by humane bureaucrats in the executive branch under the guiding hand of an enlightened president — is a chimera. Rather, the political arena is a sausage factory full of largely unaccountable career-, prestige-, and power-seekers; special interests; and voters, each of whom pays only a tiny bit of the full price of their foolish choices.

Lastly, Loury overlooks the neglected cost of a collectivist approach to immigration. What cost? The cost to individual Americans who would sell or rent to, buy from, hire, work for, and socialize with immigrants. (The terrible cost to those locked out is obvious). Don’t those Americans have rights? Why should their freedom to engage in voluntary relationships with non-Americans require government permission, even if that system is given a democratic gloss? As Chandran Kukathas emphasizes in his book Immigration and Freedom, restrictions on actual and would-be immigrants necessarily are restrictions on American citizens too. It is impossible to enact the former without enacting the latter.

Watch Loury in action:

If we don’t have control, and we simply allow anyone who has the resources to get themselves to the Mexican side of that border and wade across that river into the country, we will look up in 20 years, in 50 years and find that we are a different country than we had been in ways over which we did not exert the legitimate discretion that is our inheritance as citizens of the country. [Emphasis added.]

That’s a social engineer speaking.

Loury thinks he’s accomplished his goal: since blacks, he alleges, suffer disproportionately from “uncontrolled immigration” (as if we have that) “through the labor market or through competition for public resources,” border control could hardly be racially motivated. Does he not see the problem here? Border control might still be motivated by animus toward Mexicans, Latinos generally, or brown people, rather than black people, although I accuse Loury of none of that.

As for his concern about the labor market and public resources, that is, tax revenue, Loury should know better. Immigration experts associated with the Cato Institute and elsewhere have shown repeatedly over many years that immigrants hugely benefit Americans generally on net and in fact the whole world. Immigrants are producers as well as consumers, and their crime rates and consumption of tax-funded benefits are relatively low. If Loury is worried about new arrivals’ going on the dole or lowering the wages of the high-school dropouts, he could propose, as second-best solutions, relevant welfare restrictions on new arrivals (they exist for the most part already) or assistance to the small number of low-skilled workers adversely affected in the job market. He could also propose that the government abolish myriad obstacles to creating businesses and housing. Instead, he proposes to keep people he deems unproductive out of the country, people who desperately want to make better lives for themselves and their families in America. Shame on him.

Again citing Caplan, significant wealth creation is to be expected from even the poorest immigrants in America because their productivity vastly increases when they move from capital-poor to capital-rich environments. Machines magnify the power of human labor. Moreover, the more people in a productive environment, the more minds there are to contribute new ideas that will combine with other ideas to become even better ideas. The result is a rising living standard for all. As Julian Simon put it, human ingenuity is the “ultimate resource.”

Thus, as Caplan says, an open-border policy is the most effective antipoverty program imaginable. Keeping poor people locked in undeveloped countries is simply cruel. (See Caplan’s graphic novel, Open Borders.)

Loury doesn’t mention culture in his case against freedom of movement, but it’s hard to believe that he doesn’t also have that in mind. Suffice it to say here that asking politicians to conserve “the culture” seems, to say the least, ill-advised — even if it were possible.

I’ll close with one more quote from Loury:

So who I don’t want to come? Anybody who doesn’t have my permission to come. Beyond that, if you were to ask me, and there are more people who want to come than there are “places” for them to come, and we have to decide how many places we want to make available for people to come, I would say, people who are going to come and be a dependent on the rest of us for their support are less desirable than people who want to come and who are going to start businesses or bring skills or things of this kind.

Here we see Loury falling back on the discredited fixed-pie model of society. More people than places for them? Immigrants in a free market create their own places. We also see Loury the soothsayer, for he apparently knows who will be dependent and who will be productive, who will start businesses and who won’t. Wouldn’t it be nice if the rest of us could see the future so clearly?

TGIF: True Liberals Are Not Conservatives

The relevance of F. A. Hayek’s essay “Why I Am Not a Conservative,” the postscript to his important 1960 book, The Constitution of Liberty, is demonstrated at once by the opening quote from Lord Acton:

At all times sincere friends of freedom have been rare, and its triumphs have been due to minorities, that have prevailed by associating themselves with auxiliaries whose objects often differed from their own; and this association, which is always dangerous, has sometimes been disastrous, by giving to opponents just grounds of opposition. [Emphasis added.]

Who among true liberal advocates of individual liberty and free social evolution — aka libertarians — would deny the truth of that observation?

Hayek had European conservatism in mind when he wrote his essay, and for years, American conservatives, who still had affection for true liberalism, hastened to point this out. As Hayek wrote:

Conservatism proper is a legitimate, probably necessary, and certainly widespread attitude of opposition to drastic change. It has, since the French Revolution, for a century and a half played an important role in European politics. Until the rise of socialism its opposite was liberalism. There is nothing corresponding to this conflict in the history of the United States, because what in Europe was called “liberalism” was here the common tradition on which the American polity had been built: thus the defender of the American tradition was a liberal in the European sense.

Later in his essay, he elaborated that “in the United States it is still possible to defend individual liberty by defending long-established institutions. To the liberal they are valuable not mainly because they are long established or because they are American but because they correspond to the ideals which he cherishes.”

But he noted that “This already existing confusion [over labels] was made worse by the recent attempt to transplant to America the European type of conservatism, which, being alien to the American tradition, has acquired a somewhat odd character.” The confusion was compounded, Hayek wrote, when socialists began to call themselves liberals.

Many still suffer from this confusion today. But change has been afoot because the illiberals of the left and right increasingly want no part of true liberalism or the label — and in a way, that’s good. Those on the left who call themselves progressives or socialists don’t like the label liberal (or neo-liberal) because they associate it with the current permanent bipartisan prowar regime beholden to special corporate interests (so we liberals still have work to do), and virtually all conservatives eschew the label because they don’t want to be mistaken for libertarians. That’s also good.

So Hayek’s essay has new relevance for America. Would Hayek have been surprised? He would have distinguished national conservatism from neoconservatism because of the latter’s cosmopolitanism. But how could he embrace as bonafide allies people who view imperialist war as a way to create “national greatness” and social solidarity, as the neocons do? Hayek would have agreed with Abraham Bishop who said in 1800 that “a nation which makes greatness its polestar can never be free; beneath national greatness sink individual greatness, honor, wealth and freedom.”

Let’s look at Hayek’s problem with conservatism. For him, the “decisive objection” is that “by its nature,” conservatism can do no more than slow down the change that progressives have initiated. That’s not good enough: “What the liberal must ask, first of all, is not how fast or how far we should move, but where we should move.” He acknowledged that although the liberal’s differences with the “collectivist radical” are greater than his differences with the conservative, the latter “generally holds merely a mild and moderate version of the prejudices of his time.” Thus “the liberal today must more positively oppose some of the basic conceptions which most conservatives share with the socialists.”

Explicitly illiberal American conservatives would take issue with Hayek here, but I think Hayek was right. To the extent that conservatives want to use the state to impose their values — through censorship, immigration and trade restrictions, vice prohibitions, antitrust law, cultural protectionism, and the like — they indeed share conceptions with their enemies on the left. The ends may differ, but the means bear an uneasy resemblance. (The late Leonard Liggio used to say that the original socialism arose as a middle way that promised to use conservative means, that is, the state, to achieve liberal ends, that is, industrial progress and widespread wealth. Later a “new left” turned against industrial progress and disparaged the goal of material abundance for all.)

“The main point about liberalism,” Hayek wrote, “is that it wants to go elsewhere, not to stand still.” My sense is that in the last few years, elements of the right have come to appreciate Hayek’s point. They became fed up with mere holding actions and have resolved to push a “positive” program. Unfortunately, it’s a state-saturated program that ought to make genuine liberals sick.

The exception appears to be foreign policy. Right-wing nonintervention seems to have two justifications: first, that the U.S. government is wrong to think it can design the cultures of other nation-states, and second, that the trillions of dollars the government spends on the military and foreign populations could be better used for domestic matters, including “border security.” So even in foreign policy the liberal and conservative bedfellows ought to be uncomfortable.

The liberal’s wish not to stand still is the crux of the matter.

There has never been a time when liberal ideals were fully realized and when liberalism did not look forward to further improvement of institutions. Liberalism is not averse to evolution and change; and where spontaneous change has been smothered by government control, it wants a great deal of change of policy. So far as much of current governmental action is concerned, there is in the present world very little reason for the liberal to wish to preserve things as they are. It would seem to the liberal, indeed, that what is most urgently needed in most parts of the world is a thorough sweeping away of the obstacles to free growth. [Emphasis added.]

Hayek’s embrace of a social order that guarantees change may seem to conflict with other things Hayek wrote that seem more conservative. But I think that may be mistaken. I take him to say that although the new is not necessarily the good, people must be free to try new ways to flourish. It is one thing to personally default to tried and true until something new proves itself worthy (because a tradition’s value may not be immediately apparent), but quite another to empower the state to impede innovation and entrepreneurship, which is disruptive insofar as it is constructive. (Hence I would change Schumpeter’s creative destruction to creative disruption.)

Hayek proceeded to enumerate several differences between liberal and conservative attitudes. The first, as already suggested, is that “one of the fundamental traits of the conservative attitude is a fear of change, a timid distrust of the new as such, while the liberal position is based on courage and confidence, on a preparedness to let change run its course even if we cannot predict where it will lead.” This for Hayek explained the liberal enthusiasm for the free market’s generation of spontaneous if unpredictable order, and the conservative lack of enthusiasm for such.

Relatedly, unlike liberalism, conservatism displays “its fondness for authority and its lack of understanding of economic forces. Since it distrusts both abstract theories and general principles, it neither understands those spontaneous forces on which a policy of freedom relies nor possesses a basis for formulating principles of policy.” For Hayek, the conservative’s “complacency … toward … established authority … is difficult to reconcile with the preservation of liberty.”

Hayek could have been describing Sen. Josh Hawley and the thinkers behind national conservatism when he wrote: “In general, it can probably be said that the conservative does not object to coercion or arbitrary power so long as it is used for what he regards as the right purposes. He believes that if government is in the hands of decent men, it ought not to be too much restricted by rigid rules.”

Hayek faulted the conservative for lacking — indeed, for disparaging — abstract political principles, which are the key to peaceful coexistence among people within a society who have different moral visions:

What I mean is that he has no political principles which enable him to work with people whose moral values differ from his own for a political order in which both can obey their convictions. It is the recognition of such principles that permits the coexistence of different sets of values that makes it possible to build a peaceful society with a minimum of force.

And this point of Hayek’s is especially pertinent:

Connected with the conservative distrust of the new and the strange is its hostility to internationalism and its proneness to a strident nationalism. Here is another source of its weakness in the struggle of ideas. It cannot alter the fact that the ideas which are changing our civilization respect no boundaries…. It is no real argument to say that an idea is un-American, or un-German, nor is a mistaken or vicious ideal better for having been conceived by one of our compatriots.

Hayek continued that “it is this nationalistic bias which frequently provides the bridge from conservatism to collectivism: to think in terms of ‘our’ industry or resource is only a short step away from demanding that these national assets be directed in the national interest….”

As he closed his essay Hayek confessed that since the word liberal had been corrupted, thanks to the French Revolution and other forces, by “overrationalis[m], nationalis[m]” and socialis[m],” it had ceased to a good label for his political outlook, which he shared with Tocqueville and Acton: “What I should want is a word which describes the party of life, the party that favors free growth and spontaneous evolution. But I have racked my brain unsuccessfully to find a descriptive term which commends itself.” (He found libertarian “singularly unattractive” and “manufactured.”)

I could go on quoting Hayek’s essay — which is not to say I agree with all of it — but I fear that would unduly impose on the reader. So I recommend that the entire essay by the self-described “unrepentant Old Whig” be devoured forthwith.

Trade Restrictions Are Depriving Our Infants of Formula

For parents who rely on baby formula—whether by choice or due to medical necessity—the nationwide baby formula shortage has become increasingly difficult to ignore. According to the Wall Street Journal, Walgreens, Target, CVS, and Kroger have all begun rationing supplies of formula.

Covid lockdowns, combined with a product recall by formula manufacturer Abbott Nutrition has created a very real shortage in a product that is key for proper nutrition in many children.

With the shortage has come the usual half-baked bromides about “evil corporations” and how baby formula companies are supposedly not regulated enough. Throw in a few references to “late-stage capitalism” and you’ll get a good taste of the usual “blame capitalism” narrative that accompanies every bout of shortages or rising prices.

Formula Is Heavily Regulated and Subsidized

In reality, federal government intervention in the formula market is rampant. Thanks to the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), formula companies are heavily subsidized by voucher programs which mean that the U.S. government is “provid[ing] more than half of the formula that is used in the U.S.

Within this voucher programs, funds are funneled to select corporations through programs that grant a formula company “the exclusive right to have its formula provided to WIC participants in the State.” In practice, this means the largest companies with the most lobbyists are able to dominate the subsidized portion of the market. Since the subsidized portion of the market is so huge, that usually means those companies dominate the market overall. This makes it harder for newcomers to break into the market and offer any real competition. This means the marketplace becomes reliant on a small number of large firms.

The anticompetitive nature of federal WIC policy is just one aspect of how little the formula market has to do with anything we might call “the free market.”

Protectionism Prevents Access to Foreign Formula

Another major and important factor is the restriction on foreign imports enforced by federal law.

The U.S. regime overall is very protectionist when it comes to dairy products in general, and formula is certainly no exception. As one pediatric medical journal states flatly “Infant formula in the United States is highly regulated.” This can be seen clearly in protectionist trade law imposed on formula in the guise of protecting consumers.

As Derek Thompson at The Atlantic notes, Food and Drug Administration “regulation of formula is so stringent that most of the stuff that comes out of Europe is illegal to buy here due to technicalities like labeling requirements.”

These bureaucratic requirements fall under “nontariff barriers,” which in many cases present even greater barriers than tariffs.

But tariff barriers are significant as well. Thompson also notes that

U.S. policy also restricts the importation of formula that does meet FDA requirements. At high volumes, the tax on formula imports can exceed 17 percent. And under President Donald Trump, the U.S. entered into a new North American trade agreement that actively discourages formula imports from our largest trading partner, Canada.

However, those products that jump through all those hoops face further restrictions. The FDA mandates that even qualifying formula manufacturers must wait ninety days before marketing any new formula.

As a result, not surprisingly, 98 percent of all formula consumed in the United States is produced domestically. Moreover, if that supply is ever endangered—as it has been by lockdown-induced logistical problems and corporate recalls, American consumers have few other options.

Trade restrictions function to prevent reliable lines of importation of foreign formula. Thanks to that ninety-day delay on marketing, foreign suppliers can’t introduce new products to the market quickly, either.

So, if you have adopted children, a double mastectomy, or some other reason for needing formula for your baby, you can thank advocates of tariffs and other trade restrictions for shortages.

Protectionists and Their Excuses

Naturally, the baby formula protectionists have plenty of excuses for why their preferred form of central planning and big-government intervention in the marketplace is “necessary.” They’ll insist that FDA regulations are necessary to protect children—as if European baby formula is not already heavily regulated. European infant mortality also tends to be lower than U.S. infant mortality, so the claim that protectionism is “for the children” is clearly baseless.

These facts, however, don’t prevent Trump-style protectionists from claiming government regulations are good “because China.”

Secondly, the protectionists are likely to claim that government control of formula—and all other dairy-based imports—are important because they “protects jobs.” What protectionists are really saying is that you and your family must just do without essential goods in order to protect a small number of corporations that dominate the formula marketplace thanks to U.S. regulations.

Protectionism Means Punishing Entrepreneurs

Finally, there is little doubt that if the federal government actually allowed some true degree of freedom in the formula marketplace that entrepreneurs would step in to import formula to meet the need quickly.

This, of course, can’t happen because these entrepreneurs don’t want to be jailed, sued, and otherwise destroyed by federal bureaucrats. After all, protectionism must be enforced by federal police and federal courts, and that means fining and jailing any importers who run afoul of the law. Protectionism is fundamentally about using violence against Americans who try to bring goods to market in ways that the protectionists don’t like.

Once again, the anticapitalist “fair trade” advocates and advocates of WIC corporatism who caused these shortages will likely escape unscathed. Formula industry lobbyists will deploy and ensure nothing is done to endanger the protection-induced profits at the dominant firms. Welfare-state leftists will ensure that the federal government continues to subsidize these corporations as well. Rightwing protectionists will continue to insist that foreign goods must be kept out to make America great.

Somehow, this is all capitalism’s fault.

This article is originally featured at the Ludwig von Mises Institute and is republished with permission.

Joe Biden Blames Everyone for Inflation (Except Himself)

Speaking at the Eisenhower Executive Office Building, President Joe Biden on Tuesday morning declared inflation to be his top “domestic priority” and insisted that inflation would not be a problem were it not for covid and the war in Ukraine. There was little room, however, for any sound economics in a speech that was little more than a campaign speech for the ruling Democratic Party in an election year in which the party looks to take a beating at the ballot box.

In truth, it is the U.S. regime itself—and the regime’s central bank—that is the real cause of today’s galloping inflation. And even worse, neither the central bank nor the White House will admit its role or reverse course. Last week it was clear that Fed chairman Jerome Powell refuses to admit any role in today’s price inflation, and he apparently has no clue about what to do about it. This week, Biden insists his own government is blameless all while further pursuing regulation and taxes that will only make inflation worse.

It’s Putin’s Fault!

With inflation at forty-year highs, and with wages falling behind, Biden was careful Tuesday morning to spin inflation as the fault of anything and everything except the U.S. government and the Federal Reserve.

Specifically, Biden placed the blame of price inflation on COVID-19 and on “Mr. Putin” for the war in Ukraine. Biden claimed the covid disease itself—i.e., not the forced government lockdowns—has been to blame for logistical problems and shortages that have contributed to rising prices. Moreover, Biden blamed the war in Ukraine for increasing prices given Ukraine’s role as a grain-exporting nation and the current difficulty of exporting from war-torn regions.

Biden is correct in that these events have a role in raising some prices, but it is a straight-up lie to imply or state that logistics and grain-export problems are the main reasons for price inflation in the United States today.

The real cause of price inflation is monetary inflation, and monetary inflation has been on overdrive for more than a decade. Over the past two years, moreover, monetary inflation has accelerated to even more remarkably high levels.

Since 2009, the Federal Reserve, the U.S. regime’s central bank, has printed more than $8.9 trillion to buy up mortgage securities and government debt. This increased after 2020 as the Fed again accelerated purchases of government bonds in order to keep interest rates low on a national debt exploding upward.

In addition to that $8 trillion created out of thin air, the Fed also set the target federal funds rate to historic lows to add liquidity into the banking system. This encouraged commercial banks to further accelerate monetary inflation through the mechanisms of fractional reserve banking.

Today, $12 trillion of the existing $21 trillion was created after 2009. That means 60 percent of today’s entire M2 money supply was created in only the past fourteen years.

This wave of monetary creation has grown so immense that even International Monetary Fund economists can no longer deny the role of central banks in surging prices. IMF director Kristalina Georgieva last month admitted central banks globally “printed too much money and didn’t think of unintended consequences.”:

I think we are not paying sufficient attention to the law of unintended consequences. We take decisions with an objective in mind and rarely think through what may happen that is not our objective. And then we wrestle with the impact of it.

Take any decision that is a massive decision, like the decision that we need to spend to support the economy. At that time, we did recognize that maybe too much money in circulation and too few goods, but didn’t really quite think through the consequence in a way that upfront would have informed better what we do.

Without all this new money creation, the inflation we’re witnessing today would be impossible. This isn’t to say that we wouldn’t see some rising prices considering wars and China’s ongoing lockdowns. Those events certainly do drive up some prices.

But in an environment without constant monetary inflation perpetrated by central banks, inflation would not be general in the way it is now. Some prices would increase, but other prices would decline, as would make sense when the money supply is limited. There would only be so much money to go around so price inflation in some areas would be balanced by price deflation in others. But with monetary inflation running rampant, price inflation can do the same throughout the entire economy: more money is chasing goods and services.

Biden Is Making Price Inflation Worse by Hobbling Production

But even in time periods when monetary inflation is rampant, the effect on price inflation can be tempered by increased production and increased worker productivity. Specifically, improved technology, innovation, and international trade are all disinflationary forces that can make price inflation less bad.

The Biden administration, however, is currently waging war on innovation, productivity, and trade, and thus making price inflation even worse. In his Tuesday speech, Biden called for even more regulation on businesses and higher taxes. He wants more power to coerce businesses into higher fuel economy, and to mandate more electric vehicles. He wants to increase fees on oil and gas producers. He wants higher taxes on employers.

This will all only serve to cripple production and thus will put further upward pressure on price inflation.

As far as foreign production goes, the Biden administration has largely preserved the Trump administration’s antitrade innovations. Biden’s anti-Russia policies have also only served to further cripple international trade by imposing economic sanctions on nations—including those that have friendly relations with the U.S.—who consume critical Russian goods. This will be most disastrous for the poorest countries of the world, but American consumers will be impacted as well. (Gas prices in the US on Tuesday hit a new high.) As a result, the US has done much to raise energy and food prices worldwide while taking no steps at all to seek a diplomatic solution to the end of the war in Ukraine.

Americans now have the misfortune of living under a regime that relentlessly inflates the money supply while working to cripple production. This is a recipe for ongoing inflation in both assets and consumer goods.

But you won’t hear anything about this from the White House. Last year, the inflation culprit was “greed,” which supposedly prompted corporations to raise prices. (Why inflation-casing greed suddenly became far worse in 2021 is never explained.) Now, Putin provides a convenient scapegoat. For the past six months, the regime has repeatedly groped around for whatever bogeyman could be blamed—so long as the central bank remains blameless.

This article was originally featured at The Free Thought Project and is republished with permission.

Europe Is Trapping Itself Through Monetary Manipulation

There’s a lot of news flying around about the changes happening in global currency trading.

From “Gas for Rubles” to “What the Hell is Going on With the Yen?” there are a lot of questions and very few answers as to what it all means and whose on which side of the divide.

The Fed just hiked 50 basis points for the first time since 2000 and will be running off its balance sheet forcing the Treasury to stop issuing new debt at stupid rates. The European Union unveiled a sixth sanctions package against Russia which calls for a complete embargo of all Russian oil.

Further to this the EU is now aping what the Trump Administration tried to do to Iran in 2018, sanctioning all services, including insurance, to all shippers of oil from doing any business with Russia and sanctioned Russian banks.

The bloc is proposing to ban European vessels and companies from providing services — including insurance — linked to the transportation of Russian oil and products globally as part of its new sanctions package, according to officials and a draft document seen by Bloomberg.

While member states are still wrangling over the terms, it’s a potentially powerful tool because 95% of the world’s tanker liability cover is arranged through a London-based insurance organization called the International Group of P&I Clubs that has to heed European law.

These sanctions, effectively politicizing every aspect of international business and trade, are ultimately nothing more than short-term annoyances for Russia or anyone else.

It betrays a mindset that cares nothing for the downstream effects of these actions and, if anything, betray the desperation felt in Brussels today about its position in the global market.

I’ve spilled hundreds of column inches trying to explain to the world that it is the EU’s totalitarian mindset based on their psychological imbalance and ideological need to be seen as the champions of humanity, that drives all of their decisions.

The U.S. is not so driven. We’re far easier to understand. We like power but only so long as it nets us a profit.

This sanctions package is prima facie evidence of their insanity and what happens when, like a cornered animal, they are faced with an existential choice. The EU is built on a foundation of insulating its leadership from the vicissitudes of public opinion.

Populism is a four-letter word in the Eurocrat’s vocabulary.

The consequences of this policy which was conceived of by the fart-sniffing buffoons at the World Economic Forum, The Davos Crowd, are irrelevant to them in the short-term. Yes, Europeans will suffer tremendously high inflation because, if successful at taking a majority of Russian oil off the global markets, will only ensure that prices go ballistic.

Do you think the same people who have a stated depopulation agenda who mandated a 12% effective Pfizer vaccine and wasn’t tested at all on pregnant women lest they be barred from partaking of European society care one whit about the people they govern?

Of course not.

I guess this is what they mean when they invoke “European values.”

So, keep that firmly in mind when you play through the following scenarios and what is really at stake for them and for us going forward. These are people who are only in power because they control the political process handed to them via a corrupt monetary system which institutionalizes the Cantillion effect of money printing to grant them unearned advantages in the market place.

As I’ve pointed out in previous articles, one of the strongest weapons Russia has in their arsenal is the world’s need for the commodities they produce and their ability now, with the global financial system teetering on the brink of collapse, to set the terms of payment for them.

Ronan Manly at Bullion Star recently wrote a great article which is, I believe, the foundational one for what’s going on in Russia. In it Manly goes over the steps being taken by the Russians to move away from a purely debt-based currency regime to a commodity-based one. This idea is promulgated by Sergei Glazyev, who is heading up the creation of a kind-of SDR for the Eurasian Economic Union (EAEU).

These moves are staunchly opposed by the Bank of Russia. I was asked by a Patron to elaborate on this dichotomy.

It looks to me like Glazyev’s plan for the new EAEU currency isn’t to make the ruble exchangeable for gold, like the old gold-backed USD, but to value it against the price of gold and 19 or so other commodities, plus the member countries’ currencies. The basket, including gold, will be a measure of value, a yardstick by which to compare the value of member currencies. The basket won’t be traded, its global value will just be tracked.

Bank of Russia head Elvira Nabiullina is a dutiful IMF-trained midwit. She heads an organization that is not explicitly under Kremlin control, much like the Fed here. That said, Putin has more authority over the central bank because of the power of the Russian President and the reality that the Russian State is strong enough to dictate terms to its oligarchs, rather than the reverse here in the West.

But the Bank of Russia is still operationally run with IMF thinking.

My reply:

Yes, Nabiullina is a good IMF lackey.  At the same time [Nikolai] Patruchev is saying the opposite.  The Security Council is more powerful than the Bank of Russia.  So, listen to Nabiullina the same way I listen to {US Treasury Sec. Janet] Yellen, as a mouthpiece for foreign powers.

Meamwhile [Jerome] Powell and the members of the Russian Sec. Council are telling you what’s going to happen…. A two-tiered ruble is coming in Russia and The Fed is pushing for fiscal discipline on Capitol Hill.  The Bank of Russia is being set up to fail and be nationalized.

The EAEU will setup a commodity-backed SDR and Russia’s domestic ruble will be convertible to gold, while the international RUB, say RBO (Ruble offshore) will circulate to allow people to pay for imports.

My point in this reply is that backing the ruble in gold for domestic purposes and the EAEU’s commodity backed SDR are two separate issues. One is Russian domestic policy, the other is a feature of a new pan-Asian trade and foreign policy.

Conflating these issues I think is a mistake. An easy mistake to make, mind you, but a mistake nonetheless.

Do You Think You’re Being Treated Unfairly?

So, with that in mind we can now look at the current goals of Russia as it pertains to its current situation: How to break EU support for the war in Ukraine. That is, categorically, the most important issue for Russia going forward.

By setting up Gazprombank as a kind of Russian Ex-Im Bank for dealing with assholes, Russia now has a vehicle to ensure that they get whatever they want for their exports.

The 1st order effect is that the FX volatility cost is pushed onto the buyer of the export. They now have to plan for how to get rubles and at whatever price is available to them. Without much of an international market for the ruble to date, that means Gazprombank going onto the Moscow exchange and buying rubles to sell to a German gas importer, for example.

This is, right now, the main reason why the ruble is strengthening dramatically versus all ‘unfriendly’ currencies. The scheme to date has been so successful, in the face of a nascent U.S. dollar bull market, only it and the Brazilian Real have risen versus the dollar in the past year:

Given the international need for the ruble which is now critical to a functional global trade in base commodities, all of a sudden the prospect of a Russian ruble forward curve that isn’t a complete joke looks pretty good.

That, in and of itself, is a massive change to the global financial system. But,wait…there’s moar!

If these ‘Unfriendly’ countries are not run by complete retards—a bad assumption I know—then they will begin setting up an offshore ruble futures market… eurorubles?…to deal with their future Russian commodity needs.

Now you can understand why EU Commission President Cruella der Leyen is so adamant about trying to embargo Russian commodities. Davos needs to maintain control over the terms of trade.

They need to exert what power they still have in an environment where they are becoming increasingly irrelevant to global trade. Europe is run by people who do not believe in growth. They are the poster children for Climate Change and the anti-unlimited growth movement.

Davos has gaslit two entire generations of westerners in the Malthusian talking point that you can’t have infinite growth in a finite world. All of their economic dogma is predicated on this.

It doesn’t matter that this talking point is predicated on an inane premise, truth is, after all treason, at this point in the economic and cultural cycle. But, to try and explain quickly for the slow-witted. GDP growth is not necessarily real growth. It’s just spending. It says nothing for the quality of the spending or whether, in real terms, the people spending the money are materially better off than they were at a previous point in time.

What isn’t measured by GDP is value. Value is what we crave, the ability to plan further into the future, using our ingenuity to find better mousetraps to build and more efficient, and yes sustainable, ways of deploying scarce capital and time.

When you have a monetary system and regulatory regime designed to thwart that to stop growth then you have the world we live in today. That infinite growth is a subjective, not objective, measure…not in GDP terms but in the ‘alleviation of human misery’ terms.

Davos absolutely doesn’t want this because a world where everyone gets maximal value for their time is a world without our need for them.

Got it? Good. Now you know why the EU sucks the sweat off a dead man’s balls and whose ideas should be rejected wholly and in every conceivable way.

Monopsony Money

As I’ve talked about in multiple previous articles, Davos and the EU engage in ever more Quixotic attempts to assert monopsony power over Russia’s exports.

Gazprombank will now sit on a pile of euros, dollars, yen, etc. which it has no intention of hedging the risk of.  It has no need to hedge that risk because it can’t really use those euros, dollars, yen, etc. for anything because those banks are barred from doing business with it.

So, Gazprombank will sell them to whoever wants them.

When I look around the world, now that the Fed is draining the world of U.S. dollars, who needs these ‘unfriendly’ currencies?

Those countries who took out trillions in loans denominated in those currencies, including Russia herself. So, Gazprombank can make loan payments to or even call in their outstanding loans in these currencies and take them off the books.

The other option is to turn them into currencies Russia still needs for settling trade. The most obvious one here is Turkey. Recently Zerohedge published an article about the latest twist to Erdonomics (the brainchild of President Recep Tayyip Erdogan), which the Tyler writing the article pooh-poohed as moronic.

Zerohedge reported:

Bloomberg reports that Turkey is working on a plan to attract inflows of hard currency by offering lira funding, free of interest and with a “guaranteed” 4% return in dollars, to foreign investors willing to park their money for at least two years. Needless to say, but any time Turkey “guarantees” anything, run.

Under the plan, the central bank would provide lira liquidity to foreigners for investment in local bonds with a maturity of at least two years, according to a person with direct knowledge of the deliberations. Besides extending zero-yield swaps, the monetary authority would also guarantee a 4% return in dollar terms when the securities mature, the person said.

Translation: please give us your dollars and we promise to take good care of them and even give you a much higher yield than you can earn (for now) in the US.

No.  Actually the real translation is this:

Gazprombank can launder euros and dollars into Turkey and get lira at 4% to help Turkey unwind its exposure to the USD and pay down its foreign capital deficits.

Here’s my tweet thread about it.  

It also creates a vehicle to adjust that payout rate based on changes in the market. Where else can you get 2-year dollars paying 4% right now? Certainly not in the blue-chip corporate debt or U.S. treasury markets.

And this way, Gazprombank makes sure Turkey stays solvent by parking some of its trade surplus offshore in a strategically important energy partner, who also happens to transport the gas to Europe which will help break the EU politically over paying for gas with rubles in the first place, i.e. Germany, Hungary, Austria, Bulgaria…!

It’s kinda beautiful when you think of it that way.

Again, this is why Cruella der Leyen is so furious and why the EU is trying to stop this from happening.

An SDR by Another Motherland

The EAEU SDR that Sergei Glazyev is proposing is then the regional currency to tie everyone together and build a new trading bloc.

Remember, the EAEU is what the EU was supposed to be, a simple union with fair trading rules between members. Unlike the euro which overlaid Germany’s credit rating onto the whole continent creating a kind of internal mercantilism to Germany’s benefit, Glazyev proposes using a basket of commodities as the exchange rate for the common currency.

This is far fairer and will allow commodity producers to get paid properly for their exports and value-added economies to pay their true costs of production.

Germany has had it in for the PIIGS countries and Greece in particular for years, strip mining the country as payment for its ‘needed’ debt restructuring. Does anyone think with an apologist for the German Wehrmacht under Rommel in charge of the EU Commission put there by another German of dubious heritage (Her Schwab) is going to materially change that policy now?

I invite you to look up the word naïve in the dictionary and then hold it up next to your face in the mirror.

No wonder Bloomberg ‘buried the lede‘ in their article about the new sanctions I linked to above, citing Greek and Cypriot opposition to this scheme to bankrupt shippers, where all of them operate out of:

Greece, Cyprus and Malta raised questions about the ban and whether it would help Europe achieve its aims without harming European businesses, according to two diplomats familiar with the matter. Greece and Cyprus have large shipping industries while Malta is a so-called flag state, where companies can register their vessels for ownership purposes.

It’s also why Slovakia and the Czech Republic joined Hungary and Bulgaria (who get gas from Turkstream 2) in opposing the ban on Russian oil. The Druzhba pipeline is the only way for them to import oil, as landlocked countries.

It’s also why the EU is pressuring Serbia so hard on going along with the Russian war propaganda because the rail line that serves those countries from the Greek port at Thessaloniki runs through Belgrade.

The EU is beyond committed to this plan of action, knowing full well what the potential effects are. When you put it all together they almost have no choice if they want to ‘win.’

As always, Germany leads its northern European partners in policy designed to bankrupt the smaller Warsaw Pact countries while further trying to isolate Greece, who is now a key import destination to those same countries.

Meet the new Reich, same as the old one, especially when you really dig into those Pfizer docs. Only this time it’s fueled by the U.S. war machine rather than opposed by it.

The EU leadership and Davos understand that its hold on those countries is tenuous, in the end. The people in many of them are the ones directly affected by their desired divorce from Russia. This is a policy and a plan designed to force them into submission and keep them down, thereby justifying to the core countries that they are just leachers and moochers off the glory of strongest countries.

This embargo against Russian energy is not just to punish Russia for having the temerity to defend its interests and sovereignty but also to destroy any potential escape routes through economic progress and cheap Russian energy for those countries they swore to Yeltsin they would never move one inch towards thirty years ago.

This article was originally featured at Tom Luongo’s blog Gold, Goats n’ Guns and is republished with permission.

When the Bubble Pops, Will You Be Ready?

The Government’s COVID-19 response was met with the obvious effects like the lockdowns that decimated the lives of millions to little to no effect on mitigating the spread, mask mandates, or even vaccination mandates. But underlying all of the obvious issues was that of economic destruction being laid down before the American people in the form of the Federal Reserve’s response to the economic collapse caused by lockdowns. The Federal Reserve has laid down a suicide path for the United States’ economy.

The money supply is created in part by the private banks making loans and the Federal Reserve monetizing the debt, as well as allowing banks to transfer funds between one another. During the shutdown of the country, the Federal Reserve took unprecedented steps to allow the easy flow of credit, in a sour attempt to prop up the bubble economy. Much like after the 2008 housing market crash, the Federal Reserve slashed the Federal Fund Interest Rate to near 0% in 2020. The Federal Funds Rate being the minimum interest rate that banks must charge in transactions of reserves between one another. This rate affects most consumer interest rates that will result in credit flowing to the economy. This allowed the economy to brace for its immediate collapse that followed the popped bubble. Furthermore, the Federal Reserve, in March of 2020, dropped Reserve requirements (the required percentage of deposits it is legally supposed to retain in reserve), to 0%. By dropping them to zero it allows banks to continually loan out the money deposited to them, retroactively increasing the monetary supply (as depositors work under the illusion that the money loaned out is still in their accounts).

These low interest rates and lack of reserve requirements laid the path for ruin, as banks have the ability to loan out mass amounts of credit and got the economy drunk on easy credit. As described in Austrian Business Cycle Theory, when mass amounts of easy credit floods into a market, malinvestment occurs alongside inflation. When the malinvestment is realized, because of project failures or the supply of credit being tapered, a crash occurs. Federal Reserve policies involving easy credit led to the Great Depression and the 2008 Housing Crash and subsequent Great Recession.

In 2020 the Federal Reserve expanded the monetary supply by exponentially increasing the balance sheet, and subsequently pumping that money into the economy.

img 0572The Fed slashed interest rates from 2.5% to a practical 0% in the process. They only were given 2500 basis points to cushion the crash of the economy, but the economy is in a worse state. According to the CPI inflation is 8.5%, the highest since the ‘80s when Paul Volker was forced to raise interest rates to nearly 20% to combat inflation. In reality, using the model from the ‘80s reveals much greater inflation.

img 0573To combat the inflation, the Federal Reserve has been forced to propose a series of rate hikes, but to combat inflation, rates need to be higher than the 0.25% that they have to combat inflation. In terms of interest rates, they are operating on negative 8.25% interest rates, because interest rates need to be higher than the inflation to combat inflation. The small basis point hike is already far too much for the economy, which was drunk on easy credit and 0% Federal Fund Rates. Proof is shown in the mortgage request rate dropping by 40% over a 25 basis point rate hike. The housing market is ready to crash off of inaccessibility to credit, only showing the fragility of the system.

In 2008, when the Federal Reserve slashed interest rates to deal with the recession, they had the ability to slash up 5% of the Federal Funds rate, and following the shutdown, only 2.5%. With the housing market being impacted by only a rise of 0.25%, the collapse will only come sooner than before, and much less rate slashing room is available to the FED. The fall to the bottom will hurt far more than in previous business cycles, and it will only be through self repair that the market would be allowed to repair itself.

In fact, in the bonds market, the yield curve inverted, with two-year bond yields topping ten-year bond yields. This is often a signal of a coming recession.

Ultimately, it is time for Americans to brace for an economic collapse. The Federal Reserve’s attempt to hike interest rates will pop the new bubble economy and lead to a collapse in every industry dependent on easy money. How will the Federal Reserve respond to the recession? Likely by slashing interest rates once more, but the dollar is unlikely to survive. Americans had better brace for the fall and little false help that the Government can try to provide.

Real Wages Continue to Fall as the Fed Scrambles

According to a new report released Wednesday by the US Bureau of Labor Statistics, the Consumer Price Index increased in March by 8.6 percent, measured year over year (YOY). This is the largest increase in more than forty years. To find a higher rate of CPI inflation, we have to go back to December 1981, when the year-over-year increase was 9.6 percent.

March’s surge in consumer price inflation is also the twelfth month in row during which the increase is well above the Federal Reserve’s arbitrary 2 percent inflation target. March’s CPI inflation rate was up from February’s rate of 7.9 percent. The month-over-month increase (seasonally adjusted) was 1.2 percent, which was the highest since September 2005.


The price inflation was driven largely by increases in energy prices (rising 32 percent, YOY) and by “food at home”—i.e., grocery prices—which were up 10 percent. Used cars also continued to show big price increases with a year-over-year jump of 35.3 percent.

Not surprisingly, we find that wages are not keeping up with price inflation. While the CPI rose by 8.6 percent, average hourly earnings only rose by 5.56 percent.


This was a gap of 3 percent between price inflation and earnings, and the largest gap since April 2021.


Not coincidentally, this price inflation comes after two years of rapid increases in the money supply. M2, for example, has risen by 40 percent since January of 2020. M2 inflation had risen rapidly during the decade following the 2008 financial crisis as well. Today, $12 trillion of the existing $21 trillion was created by the central bank after 2009. That means 60 percent of today’s entire M2 money supply was created in only the past fourteen years.

Throughout it all, central bankers actively attempted to boost price inflation. As late as February 2020, the Fed’s Lael Brainard was calling for new ways to boost price inflation. And New York Fed president John Williams in 2019 called low inflation “the problem of this era.” Jerome Powell in April 2019 called low inflation—by which he meant inflation under 2 percent—“one of the major challenges of our time.” In 2017, Janet Yellen said she wished she had managed to produce more price inflation during her time at the Fed.

Given this obsession with higher prices, central bankers were naturally unequipped to deal with reality when inflation began to surge above their arbitrary 2 percent standard. Powell and other Fed officials throughout 2021 insisted that inflation would be no problem. And then when levels got more worrisome, this was declared to be “transitory.” When price inflation continued to rise, the Fed then insisted it had a plan. No plan materialized, but the Fed said that it would at some point in 2022 begin doing something to rein in inflation.

Now we’re at the stage of indulging in a blame game. For example, in her interview with Nick Timiraos of the Wall Street Journal Wednesday morning, Brainard repeated a litany of talking points about how inflation was due to covid and to the Russian invasion of Ukraine. When asked what the Fed will do about it, Brainard said it is difficult to guess what to do because the models aren’t perfect. Then she used the common Fed tactic of buying time by saying the Fed will make a decision about what to do in the future. Specifically, she announced the Fed will make a decision about reducing the Fed’s balance sheet in May. And after talking about it in May, the Fed might actually do something to reduce the balance sheet “in June.”

The basic message was “We have things under control, and inflation is really Putin’s fault.”

However, attempting to blame rising prices on Russia or covid or logistical snags misses a key point. If rising prices were due to specific problems in the availability of certain commodities, this would not mean general, economy-wide increases in prices, as we see now. When price increases do not have their origins in monetary inflation—i.e., “printing money”—we can expect to see declining prices in goods and services as consumers prioritize and also begin to look toward goods and services less affected by those shortages and logistical problems. This is because there would be only so much money to go around, so some portions of the economy would experience price deflation. But when enormous amounts of new money have been created, we never see the expected deflation in some sectors. So, as we find in Wednesday’s CPI report, prices are once against rising across the board.

Meanwhile, the Biden administration and its friends in the media have tried to distract from falling real wages by pointing to “job growth” as evidence of an excellent economy.

Yet what they’re really pointing to is the current tight job market, which is itself a symptom of money inflation and price inflation. That is, it doesn’t necessarily make sense to portray job growth as a counterbalance to price inflation. Rather, the overheated job market we now see may simply be evidence of the fact we’re in the later stages of an inflationary cycle. As we’re already seeing, monetary inflation may bring rising wages, but it also brings rising prices for goods and services. And those increases are outpacing the wage increases.

This article was originally featured at the Ludwig von Mises Institute and is republished with permission.


News Roundup 6/22/2022

US News The Biden administration announced a change in US military policy that bans the use of anti-personnel land mines everywhere in the world, except for the Korean Peninsula. [Link] Almost 1,400 New York Army National Guard Soldiers are deploying to East Africa...

News Roundup 6/21/2022

US News President Joe Biden said he is considering a temporary gas tax holiday. The tax reduction would cut gas prices by 18.4 cents per gallon. [Link] Biden said rebate cards are also being considered. [Link] Miami police were offering $50 for handguns, $100 for...


Let’s Get ‘Defend the Guard’ on the Ballot in California!

"Resolved, That the Libertarian National Committee: Calls upon the State Legislatures to enact legislation to prohibit the States’ National Guard and any member thereof to be released from the state into active duty combat unless the U.S. Congress has declared war...

I Am Grateful For My Suffering

I am grateful for my suffering. I truly am. These are not words I utter in some halfhearted, feeble effort to brighten my mood or motivate my day. Fortunately for me, I am not battling depression. It’s been a challenging few years; Entrepreneurship. Battling Cancer....

The Scott Horton Show

6/17/22 Douglas Macgregor on the Lies Getting Ukrainians Killed

 Download Episode. Scott is joined by retired Col. Douglas Macgregor to discuss an article he wrote about the war in Ukraine. Macgregor points to the lies that got us into a situation earlier this year where a Russian invasion was inevitable and the lies that are...

6/3/22 Aisha Jumaan on How You can Help End the War Against Yemen

 Download Episode. Aisha Jumaan from the Yemen Relief and Reconstruction Foundation joined Scott on Antiwar Radio to discuss the war in Yemen. Despite little to no media coverage, which Jumaan recently wrote about, the war in Yemen as well as the consequences of that...

6/3/22 Hassan El-Tayyab: Some Good News on Yemen

 Download Episode. Hassan El-Tayyab came back on Antiwar Radio to give an update on the effort to end the war in Yemen. First, Scott and El-Tayyab discuss the last-minute extension of the two-month ceasefire. El-Tayyab reports that airstrikes have stopped completely...

6/3/22 Tom Secker on the Pentagon’s Control Over Top Gun: Maverick

 Download Episode. Scott interviewed British journalist Tom Secker about the Pentagon’s role in producing Top Gun: Maverick. The Department of Defense has an entire office set up to work with Hollywood. They give producers access to some military personnel as well as...

Conflicts of Interest

Don't Tread on Anyone

10 “Pro-Choice” Arguments – DEBUNKED (w/ Kristan Hawkins) The glory of the human race is the uniqueness of each individual, the fact that every person, though similar in many ways to others, possesses a completely individuated personality of his own. It is the fact of each person’s uniqueness —...

Economic Truths My Professor Lied About (w/ David Bahnsen) Defenders of free enterprise do not believe in a perfect administration under a market economy. Rather, we do not believe in the possibility of such. To the extent imperfect decision-making is accepted, we then seek to solve for who has...

‘What Is a Woman?’ – Six Things Conservatives Need to Know “Biological sex [is] binary. It’s been binary for like a hundred million years, longer than that. Temperament is not binary, temperament or personality… people who talk about the diversity in gender are actually talking about diversity in...

Liberty Weekly Podcast

On the Brink of Nuclear War ft. Connor Freeman Ep. 216 In this episode of the podcast, I speak with Connor Freeman about the dismal state of U.S./Russian relations. We discuss the spiraling escalation in Ukraine and U.S. policy decisions which signal that the unthinkable may be inevitable....

Addiction and COVID-19 ft. The Clean Libertarian Ep. 215 Much has been said about the excess rate of substance abuse during COVID-19. To try to understand some of these causes, I brought on my friend Drew Cook of the Clean Libertarian. Drew is a recovering addict who is now working to help other...

Press Censorship in Wartime Ep. 214 With the risk of kinetic war between the US and Russia becoming more and more likely each day, the United States is already marshalling its forces to silence domestic and international dissent to the conflict. In this episode, I examine...

How World Leaders Justify Mass Murder ft. Laurie Calhoun Ep. 212 Laurie Calhoun joins me to discuss her book "War and Delusion," where she details how world leaders have used Just War Theory to wage wars of aggression. Further, we pose the question: In the modern era, is a "just war" even possible? We...

Year Zero

The Network w/John Robb

John Robb joined me to talk about the network, its operations, where it fails, and why he thinks conspiracy theorists are wrong. Global Guerillas Substack Discord Libertarian Institute 19 Skills Pdf Autonomy Course Critical Thinking Course Donate Patreon...

America’s Response to the War in Ukraine w/Dave DeCamp

Dave DeCamp joined me to discuss the American reaction to the war in Ukraine. We discuss how the sanctions and information war seem to be targeting Americans rather than the Russian politicians. Is the Biden Administration utilizing propaganda to manufacture consent...

Our Books

6 libookslg
libetarian institute longsleeve shirt

Support via Amazon Smile

Pin It on Pinterest