June 21, 2022

These guys get inflation

According to the New York Times, the stimulus spending was $5 trillion for 2020 and 2021.  These gentlemen Bill Whittle, Scott Ott and Stephen Green, discuss the real source of inflation. Sorta. After watching, check out the graph below it to exacerbate the nightmare...


Yes they talked about a lot of the problem but I think their analysis of the problem and root cause understates dramatically what the Federal Reserve has done to the money supply in the United States, dwarfing the stimulus money (which is part of the chart below, but comparatively speaking, a minor part). Below is the graph of the M0 money supply in the United States. Since 2010 and   again even faster since 2020, the Federal Reserve has printed money on an epic (epically bad) scale.  

All of this new money in the economy with no new corresponding supply means many more dollars chasing the same goods.  That is the very definition of inflationary.  This is why I think this has a long way to go before it plays out and a lot worse to get.  This graph is scary on a Biblical scale.  The Fed has supposedly begun contracting the money supply, and that can be seen at the tail end of the graph.  But it has a dramatically long way to go to get back to sanity, and a short time to do it.  But the steeper the contraction the worse the recessionary pressure and resulting unemployment will be.  Not to mention mortgage foreclosures and credit card debt defaults and government ballooning interest payments on the trillions of dollars that it owes.  There is no soft landing for this.

I sound alarmist because I am highly alarmed.  I've tried in the past not to come off as a conspiracy kook but these are unprecedented times.  We should be alarmed if not panicked.  We should act rationally of course, but we should not kid ourselves that everything is anywhere near okay.  The time to discuss how to fix this is now.  The answer is not more stimulus or more taxes.  There really are no good answers.  There are tradeoffs.  But we are not even going to get a real conversation about this under this clueless administration and congress. That means it's likely to be exacerbated rather than mitigated, at least this year.

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