Timothy Birdnow

The Federalist Patriot has an editorial arguing that government intervention is the primary driver of inflation rather than an "overheated economy" and that if the government truly wanted to Whip Inflation Now it would stop sticking it's enormous snout into the free market rather than manipulate interest rates to slow growth.

I concur.

From the article:

"Much of the recent volatility in the stock market can be attributed to growing fears over the Federal Reserve enacting interest-rate hikes due to concerns over increasing inflation. On the subject of inflation, however, it is the government’s meddling in the market that tends to be the greatest contributor. Economist Mark Perry, who has tracked changing prices for over two decades, has noticed a common trend with the price of various goods and services — costs have increased over the inflation level for those goods and services that have lacked competition. This should be no surprise to conservatives."

End excerpt.

An "overheated" economy may see minor inflation of certain items since the demand rises above the supply temporarily. But in a thriving economy you would see supply rise to meet the demand, since that is money in the bank for businesses and they are losing money by failing to provide it. Higher prices are not the goal of most businesses - greater market share is. The notion that greater demand means higher prices is predicated on an economic model of a neo-fascist variety, where businesses are static things in partnership with the government. It ignores the role of competition.
In a competitive market, there may indeed be temporary inflation when the economy is hot, but that is more akin tot he burn one feels when exercising, a good pain. It spurs competition. Look, take the American auto industry as an example. The big three dominated the auto industry and were happy to produce subpar quality vehicles for excessive amounts of money. During the 10970's American cars went to pot because they owned the world market. Not only that, but they were in the era of ascendant Keynsian economic theory, and government prevented competition by bad monetary and tax policy as well as heavy regulation. So the auto makers didn't need to make better products or make them more cheaply. The end result was that the Japanese roared into the market with good, inexpensive products. Much was made about why they could do it more cheaply, but in the end it was because our industry had become complacent, and that was because of bad government policy and a near monopoly. The Japanese weren't bound by any of this.

So what's the point? Inflationary pressures from economic growth are a good thing, a growing pain, and a temporary one since as soon as the market shows staying power somebody else will get in to compete. You only have "overheating" as a result of economic stagnation, of an ossified system. It is the very essence of what should go, the "creative destruction" of capitalism.

Look at it this way; the "inflation" is not going to the government so much as it is into private profit (which is why the liberals hate it so much) and thus providing a windfall for business. But most businesses don't horde that profit, but rather pour it back into their business and eventually produce better products more cheaply. It's a win/win for just about everyone. But governments don't like it because businesses are the ones that make the profit, not government. And businesses generally pour profits back into the production, making more for cheaper as a result. Governments like a stagnant economic system.

During the eight years of Obama we had stagnant economic growth and that was by design; it's called "sustainability" and the idea is to have a knife edge balance with no growth but no shrinkage. Obama and his people actively worked for this. There are great benefits to government and to the Establishment in maintaining such a system; it ossifies and freezes everyone in place. It also allows poor nations to catch up with us - the dream of social justice warriors everywhere. And with no grwoth then redistribution of wealth is absolutely necessary or you can rightly say we have an unjust social order. Under a capitalist system the poor are often rightly accused of bad work habits or whatnot, but if the economy isn't growing then there is justification to take from those who have and give it to those who don't. No growth is the policy of redistribution.

Inflation if primarily driven by monetary policy anyway. Print more money and it has less value, meaning things cost more. During the Obama era we were digitizing money, simply creating it by adding zeroes to a computer. It was done sneakily, balanced against the modest economic growth so that there was no apparent inflation and Obama could claim he was fixing the economy, but the reality is it was stagnating. That was Janet Yellen's policy at the Fed, I might add. Interest rates were kept low to make lending unprofitable, and America's natural recovery fizzled.

Trump is undoing that, and the Left is going nuts because they know what he's doing will work. They've worked this plan out in detail, a way to drive what they want for America and thw world, and he's derailing it. So the Fed is driving up interest rates (not a terrible idea but the timing is designed to damage Trump and not jumpstart business.) They are doing this to "keep the economy from overheating" and "driving inflations" but they know they are the inflaters-in-chifs and this does nothing but tamp down growth at a time when it is needed, to hurt the Trump presidency.

Every time we've followed Keynsian economic theory we've had bad economies and a weak America in general. Woodrow Wilson was a proto-Keynsian, and his neo-fascist economics gave us two nasty depressions, in 1919 and 1921. Harding and Coolige cut taxes and reduced regulations and the end result was the roaring twenties, a golden age that ended with "the wonder boy" (as Coolige called him) Herbert Hoover pushing big tax increases, government spending, and regulations leading to the Great Depression. Hoover's policies were continued despite an obvious lack of success by Roosevelt, who managed to sustain the Great Depression far longer than any economic downturn in history. The war ended the depression and the death of Roosevelt; Truman was not a Keynsian and he was stuck with a Republican Congress that forced an end to the New Deal. When the economy began faltering again, John Kennedy called for tax cuts and reduced regulations. Ronald Reagan got us out of the Carter depression the same way, and Bill Clinton rode the success of the Reagan era (despite the tiny hiccup that allowed Clinton to sneak in) to glory. We had an economic boom under George W. Bush for the same reasons (a boom that ended because of profligate spending and over-regulation.) Now we are facing a Trump boom, and the Left knows it.

This stuff isn't rocket science. But economists have muddied the waters out of a desire to reshape the economic system rather than to understand it. Liberalism is about denying reality, and liberal economists are no different.

So don't believe it when they tell you a good economy causes inflation. Economic growth is ultimately the public spending money and buying stuff. That can only cause long-term inflation in an economy that does not grow, that remains stagnant and cannot produce more goods or services to cover demand. That is a Keynsian system, the kind of system used by the Fascists in Italy or the Nazi Party. It works fine for the Establishment. They want to keep it.

Perhaps the best way to "drain the swamp" is to make these people compete. Just as a one-party nation is generally hopelessly corrupt, so too is a one business industry or a cartel. Competition is freedom's best friend. The Fed knows that - and doesn't like it one bit.

Posted by: Timothy Birdnow at 08:10 AM | No Comments | Add Comment
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