by Scott Dittrich
Americans have a sense that our country is on the wrong path. A tidal wave of rising prices has led to financial pain and fear. Financial experts like Jaimie Diamond warn that we are sinking into a deep recession.
Some of the unhappiness results from woke social policies that offend those with traditional values or have strong religious beliefs, though it is the failure of the administration’s experiment that has caused the mess we are in.
Just prior to Biden taking office, GDP was growing at 6-1/2 percent annually, and inflation hovered near one percent. The incoming administration then instituted Modern Monetary Theory (MMT) which, on the spending side, is repackaged socialism coming out of academia. Simply put, MMT postulates that the money supply is close to irrelevant, the government can print as much currency as it wants, and interest rates should remain be close to zero – all without causing inflation. Rejecting comparisons to Venezuela, Argentina, and the German Weimar Republic, the FED kept interest rates near zero and the Biden administration injected over 6 trillion dollars into the economy. Much of this has yet to filter through our economy.
Trump had already spent three trillion in pandemic stimulus programs, much going to those working at home, earning their same salary, and to businesses who were doing fine. Lockdowns caused production curtailments and resulted in supply chain issues. With the virus mutating and becoming less deadly, pent-up demand with fewer goods kicked off inflation. Then four trillion more stimulus spending bills passed in Congress, creating an imbalance that quickly turned into the inflationary cycle we see now. This was exacerbated by the FED, who kept interest rates near zero for far too long. Even now with a 30-year mortgage nearing seven percent, real interest rates are negative given the true rate of inflation is on the order of 15 percent.
Higher interest rates are causing a slowing in the housing market and curtailing business growth. Stagflation- lingering inflation with little economic growth – will result, other things being equal (no war with China and no nuclear escalation by Russia).
The impact of this failed MMT policy falls on different economic strata in very unequal ways. Low-interest rates encouraged investors, and the stock market exploded. Housing went through the roof. This, of course, went mostly to the one percent. For those on fixed incomes and working families, however, MMT has been a disaster. Median household income has dropped while costs for the typical working family have increased by over 20 per cent in two years, led by gasoline prices due to Biden’s war on fossil fuels. If you eat at the French Laundry and pay $500 for a bottle of Bordeaux, you don’t notice the price of bacon and eggs doubling at your local market. Forgiving $20K of student debt doesn’t benefit folks working at Walmart, instead going to children of the affluent. Working class American must choose between hamburger and filing their gas tanks, resorting to credit cards to make up the difference between income and increasing prices. But with increasing interest rates banks take a larger share of their income.
For the last fifty years, economic textbooks have warned that rising interest rates mean an ever-increasing share of GDP will be devoted to paying the national debt. Consequentially, less is available for defense or roads. Hand higher taxes leave less for private enterprise to invest in the truly innovative ideas that grow our economy.
As the failure of MMT hits most Americans, the administration has turned to bribes to maintain power. Canceling student debt, taping the emergency oil reserve to lower prices at the pump, and even Biden’s begging the Saudis to postpone a cut in oil production until after the November midterms sound much more like Argentina than the United States.
The damage, however, is now climbing to the upper economic quartiles. The stock market is down 20 percent this year, affecting middle-class retirement accounts. All of us feel the pain at the pump and at the market. Experts warn of an additional 20 percent drop as the higher interest rates required to combat all the MMT spending will crush Wall Street. Others say a 20 percent decline underestimates the severity.
If the economy falters, the government will resort to more lies and intimidation aimed at those who speak out. Those questioning covid pronouncements (It’s a pandemic of the unvaccinated/You can’t catch or transmit the virus if you’re vaccinated) were canceled on Twitter and Facebook under government pressure. However, a key Pfizer executive just admitted the vaccine was never tested for preventing transmission. We were told inflation is transitory and that it is only 2 percent. Are the very public raids made by the FBI on political opponents featuring swarms of gun-toting agents a harbinger of things to come? These are hallmarks of totalitarianism witnessed in 1932 in Germany before Hitler consolidated power. As MMT sinks our economy, Free Speech, Religious Freedom, and Democracy itself will be trampled.