THE BIG I: INFLATION MUGGER IS ON THE LOOSE!

THE BIG I: INFLATION MUGGER IS ON THE LOOSE!

                Congratulations! You got robbed last week. And the week before. All last year! How much? Well, it depends where you live, but basically, you took a 7% pay cut last year. How so? Well, the US inflation rate for last year was about 7%. https://www.wsj.com/articles/us-inflation-consumer-price-index-december-2021-11641940760

                Every dollar you made was worth 7% less than the year before. Every single dollar you’ve saved is now 93 cents. Someone snuck into your house and your bank and your savings and took 7% out of there. A mugger grabbed you and lifted 7% from your paycheck. Who was that thief? Your Federal government. You got robbed!

                I’m not talking taxes. This is before taxes. It’s what’s called ‘inflation.’ The Big I. Definition: the erosion of value of money. Prices go up, your money is worth less in terms of what it can buy.

This chart starts out with steak—maybe to blunt the impact. But look at gasoline. That’s the basic input for producing almost everything else.

Meat, poultry, fish and eggs basically up 6%. In other words, food is more expensive. As a “tax” this inflation is what’s called ‘regressive’ because it affects poorer people disproportionately. More affluent folks can deal with the cost hikes in furniture, laundry equipment, and sporting goods. But everybody’s got to eat—and stretching scarce dollars crushes poor families.

So the mugger is loose. Once out of the bottle, the Inflation Genie is tough to re-cork. What we called in the 1970s ‘inflation psychology’ starts to take hold and it turns into a runaway train. ‘Buy it today, it will cost more tomorrow’ becomes the rule. I remember my early 20s on very strict budgets in the inflation-ridden 1970s, trying to figure a week’s worth of meals at the grocer’s.

So how do you deal with a steadily shrinking paycheck? Folks with clout buy immunity. You start hearing the word ‘COLA’ which isn’t a soft drink. ‘Cost Of Living Allowance’ is a built-in raise baked into contracts to protect a dollar won at the bargaining table from being 73 cents within the year. Of course, employers do the same with their prices. Price hike = wage hike = price hike in an inexorably upward cycle. Down, down, down goes the purchasing power, down the endless drain.  Who gets killed? People on fixed incomes and people with assets that can’t be inflated, like savers.

A dollar—a currency–is basically two things: one is a medium of exchange. I want a pint of milk, the grocer wants to sell it to me. What do I give him for the milk? Petosky stones? A chicken? A promise to rake his leaves? Nope, we exchange little pieces of paper which we can give to other people in exchange for other things. That’s why the dollar is called a “medium of exchange.”

The second use of currency is a storehouse of value. I earn money, and I don’t want to spend it all. I want to save some of it for the future. How do I take some of the value I’ve earned and choose not to consume immediately and keep it somewhere safe? Do I put grain in a silo? Nope, I take my earnings—which are expressed in dollars, and I deposit them, generally in a bank. The bank has my saved money and keeps it safe from robbers-all except the Inflation Thief. If my saved money has lost 7% value in one year—which it has!—then the dollar has failed to store my value. Others like different stores—GOLD!_SILVER! say gold bugs, but gold’s value isn’t stable either. (Please, gold bugs save your arguments for elsewhere.) The rise of Bitcoin is an attempt to find a stable storehouse of value.

So who’s to blame for letting the Inflation Thief out? Your friendly US Federal government. The various ‘stimulus’ spending programs have simply printed more money—more dollars—more pieces of paper, and flooded them into the economy. This is called ‘monetary policy,’ and its means printing more money so people will have more to spend, demand stays high, and we won’t have a recession. It’s downside: inflation.

Our underlying productivity hasn’t increased proportionately, so you have the phenomenon of too  many dollars chasing too few goods, so the prices go up, INFLATION! The government deals with it by printing more money, and on it goes. In the end you have worthless currency, like this Zairean bill. One hundred trillion dollars!

In post WW 1 Germany, it led to this:

                Which wiped out the savings of everybody, destroyed the economy, and led to this:

Nope!

Which we all know we don’t want.

                So: face facts: the current policy of the Federal Government and the Biden Administration is inflationary. The mugger is loose, the genie is out of the bottle, the train is gaining speed. The time to face this fact is now, demand answers, don’t be put off by doubletalking bullshit (‘we’re doing what we’ve always done which is doing what needs to be done when we do it.”) distraction (“Look over there!”) or intimidation (“racist!!”) It’s here, and the longer it goes on, the worse it gets, and the tougher the medicine needed to stop it. 1970s inflation was followed by 1980s recessions and money-tightening.

                The Big I Inflation mugger is loose. Demand your Federal Government stop robbing you.

Leave a Reply

Your email address will not be published.