Authored by MN Gordon via EconomicPrism.com,
Donald Trump got impeached – again – this week. Big whoop!
We already knew the House of Representatives at the 117th Congress is the greatest collection of political crooks, lowlifes, and losers to ever assemble under one roof. We didn’t need a token impeachment vote to validate this.
More importantly, President-elect Biden’s proposed $1,400 “stimmy” checks (i.e. stimulus checks). The amount is a “topping up” of the $600 “stimmy” approved by Congress in December. Together, these total the $2,000 “stimmy” promised to voters.
Naturally, Biden’s fulfilling the dream of America’s central planners. You know the plan by now. Lockdown the economy, bankrupt small businesses, and then stimulate consumer demand with fake money. As easy as one, two, three, the central planners took control of the population, the economy, and financial markets.
The global pandemic, no doubt, provided the perfect cover to meddle in the lives of millions. Here in LA County, health officials are now advising people to wear masks at home. It’s part of a brand new plan (dated January 11, 2021): Los Angeles County Responds: Confronting COVID-19.
Over the years, there have been many bad ideas. The federal income tax, for instance. Or legal tender laws. But the real measurement of a bad idea is how much popular destruction it can bring.
Communism, for example, made an utter mess of the 20th century. Armed with all the smartest guys in the room, the Soviet Union’s state planning committee drafted up five-year plans for what it called the centralized development of the national economy.
The first five-year plan brought to realization the grand idea of collective farming. What could be more efficient than commanding what crops to plant and acreages by bureaucrats in Moscow? Regrettably, the planners soon discovered that collective farming doesn’t bring forth the fruits of collective abundance. Quite the opposite, they found. It brings forth the fallows of collective famine.
You’d think Mao would’ve learned from the Soviet Union’s failed roll out of centralized agriculture in the 1930s. But, alas, he was so enamored with the bad idea he included it in his Great Leap Forward some 30 year later. Predictably, Mao was greeted with the Great Chinese Famine.
State Sponsored Collapse
Currently in America, the central planners are hooked on progressivism. Under its regressive influence, no idea’s too damaging to pass up. Global warming. Gender neutral diktats. Reparation payments. Internet censorship. Hell in a bucket.
Of course, there’s the granddaddy bad idea of all. The bad idea that has reached a fever pitch. The one that has central planners zealously pursuing state sponsored collapse. You know the one…
The bad idea that central planners can create an endless supply of free money from thin air to support a growing class of dependents. According to the central planners, if one stimmy check is good…two is certainly better.
But what would really be great is Universal Basic Income (UBI) – also known as Unconditional Basic Income or Citizen’s Basic Income (CBI) or Guaranteed Basic Income (GBI). Under a program of UBI, monthly stimmy checks would be sent out ad infinitum.
The endless supply of free money, remember, is made possible by the tenets of Modern Monetary Theory (MMT). Indeed, when there’s limitless money there’s no limit to the bad ideas of progressives. But is there really limitless money?
Like collective farming, we suspect MMT is bound by natural limits. And in 2021, under the progressive guidance of Congress, we will likely start bumping up against these natural limits. In fact, we already are…
The yield on the 10-Year Treasury note has quietly doubled since August. What would happen if it doubled again? Agricultural commodities are at five-year highs. Industrial metals, like copper, are also at five-year highs.
A barrel of West Texas Intermediate crude is now over $53. Two months ago, WTI crude was about $40 a barrel. That’s a 32 percent increase in two months. Is this change seasonal? Is it geopolitical? Is the economy booming? Or is it something more?
Fruits Of Inflation Are Blossoming
According to the Bureau of Labor Statistics, the consumer price index increased by 1.4 percent over the last 12 months. Yet while prices are rising, the U.S. unemployment rate remains at 6.7 percent. That puts the misery index, which is the sum of the unemployment rate and the inflation rate, at 8.1 percent.
An 8.1 percent misery index may be nothing compared to the 19.72 percent notched when Jimmy Carter was in the White House. But a misery index above 10 percent will certainly bring much weeping and gnashing of teeth.
In good time, MMT and perpetual stimmy checks will prove to be an epic failure. Here’s why…
A bountiful harvest can always be demanded from the land. So, too, a bountiful supply of money can be demanded from the central bank. But remember, in an economy, like a harvest, you reap what you sow. What we mean is all money is not created equal.
There’s real money that’s earned through productive enterprise. And there’s fake money that’s created from thin air by central bankers pressing buttons on a key pad. The fake money is indistinguishable from the real money. But it has the lasting effect of cheapening the real money’s value.
“Cause and effect,” said Ralph Waldo Emerson, “are two sides of one fact. … Cause and effect, means and end, seed and fruit, cannot be severed; for the effect already blooms in the cause, the end preexists in the means, the fruit in the seed.”
It’s real simple, folks. The quality of money stems from its quantity. The seeds of free money have been sown. Fruits of inflation are blossoming.