Inflation in all its’ wondrous glory! (and side effects therefrom)
I know all about inflation. I’ve been studying it since I heard the word (about 60 years ago).
Mr. Milton Friedmanns’ definition that all inflation stems from printing to much money is absolutely correct except that with new skill and dexterity, our Federal Fools and the Banks that own them now include DEBT at part of the money supply. Debt (i.e. money NOW, spend it NOW and pay it back NEVER) is the exact same thing as printing dollar bills.
The sad part is that the rest of the world is still stupid enough to keep holding part of the debt! Even China has almost a $trillion bucks of Treasury debt they can threaten us with anytime they wish to. (Like now – when the U.S. Government Fools start thinking out loud about tariffs and such on Chinese junk)..
In our U.S.A., the Treasury issues debt, the banks buy it, using money (created from thin air) from the Fed, redeposit it to the Treasury while issuing “money” credit for the Treasury to spend and the Banks collect interest on the deposits – which they paid nothing to obtain! Such a racket and PONZI SCHEME of magnificent proportion. This is oversimplified a bit but research it and you will find that’s what they are doing. GAG A MAGGOT! Sure fire way to destruction and poverty – and the Ponzi will collapse – sooner than later.
This segment of “printing too much money” (growing Government and Private debt) continues to expand at ever increasing rates and the many and biting results of that are almost too numerous to illustrate.
One result that is visible to anyone who eats (which, at last check, includes everyone I know, anyhow) is that when you used to spend $60 at the grocery store for bread and beans, you now spend over $100. And that’s usually without buying anything resembling meat either.
Then, when you get your plastic grocery bags home, you find there are fewer of them than you remembered and the contents thereof seem to take up less space on the pantry shelf than they used to as well.
Let me clue you in…….. They take up less room on the pantry shelf because each package – while likely being the same size as before and the same price – contains from 10% to 40% less product than it did when you purchased it a while ago.
Take potato chips, for example. I like a few chips with my lunch sandwich and I find that while the price on my favorite Kettle Cooked chips has risen 15%, the content of the bag has been reduced by 30% (by checking the net weight on the bag).. This has happened over the past 6-8 months. Total inflation of the chips? roughly 45%. Higher price (considerable) and less product (a lot!)..
Doesn’t that give you a warm fuzzy feeling knowing you can still get what you want and enjoy – just less of it for a higher price? I suspect that if the Federal Fools that run the Federal Reserve (i.e.Banks) continue to maintain the interest rates at z-e-r-o or even n-e-g-a-t-i-v-e rates, we will continue to enjoy less food for more and more cost. After all, the chip maker must make his profits regardless of the consumer ability to pay and since it will likely boil down to two potato chips in a bag for $3.99 (buy another one for half price!) they don’t give a flying fuck…
Me? I suspect I’ll give up my chips with my sandwich very soon now and then they’ll cut the size of my bread down, put fewer slices in the bag and charge more for that as well and soon I’ll be without lunch at all. What a wonderful way to solve the obesity epidemic now sweeping the used-to-be-great U.S.A.
Another example of the results of inflation are medical and dental bills. I have no dental insurance so I pay cash for any work within what’s left of my mouth (which – for my age, is damn good – I still have most of my teeth and intend to die with them in place!).
I had two tiny pits, one in a lower tooth, one in an upper, both on the right side side of my mouth. No rush to fix them, but I thought, better now than later when they are not so tiny any more.
So I went to my dentist (who I’ve been seeing for 15 years). He numbed the right side of my head (my right eye even drooped) , fixed both teeth and finished up in – oh, say 30 minutes maximum. When I bid him farewell, went to the front desk to pay, it cost me $400 (and that “included” a 20% professional discount – otherwise the bill would have been $500). A year ago, it would have cost $200 ($100 per filling) and now it has more than doubled.
Inflation according to the Federal Fools? 1% maybe if you strain at it. I call BullShit on all the Federal Fools Figures (including the Bureau of Lies and Scams and other congressional horse-pucky data generators). Our Government either has two set of books (one with true data and the other with the garbage they publish) or they are making decisions with bad data. Garbage in Garbage out – which seems to be the rule these days!.
Friends of TBP, you and I are being eaten alive by our own Government. No other way to put it. We are all be cannibalized, a finger here, a foot there, an arm now and a leg later by their insatiable lust for printed money and/or debt issuance to keep the phantom wealth machine and status quo running and the Elites and PTB fed in their accustomed comfort, huge houses with maids, cooks and waiters, classic cars, boats, jet aircraft, private clubs and other accoutrements of the rich and crooked who produce jack-shit and consume off the backs of citizens who try to find work to earn enough for just a living.
The middle class has been and is being gutted. The poor are simply getting poorer with more and more entitlements and freebies to keep them from rioting, killing and looting. Pretty soon – and I mean real soon now – the used-to-be middle class will, from desperation and despair, begin some of the lower class’ more violent forms of obtaining food and shelter for what used to be a comfortable – if not luxurious living standard.
Interest rates need to raised to 10-12%, bad investments liquidated, unemployment pops to 20%, the freebies to the FSA needs to have a WORK REQUIREMENT attached to it and let the economy will straighten itself out as it did in 1974-1976. Hard times? Sure – but only for a little while. Not this slow strangulation of what it means to be an American and all that America stood for, which is happening as I type this Muck’s Minute!
This is a quote original from Ol’ Muck: “Civilization is thousands of miles wide and three meals thick.”
Believe it.
End..
Great job, muck. And the quote ar the end is a keeper.
Too much money, chasing not enough goods.
It’s a shame the new format doesn’t allow correction of a posted article! I just found two typos in the above.. Oh, well. Anyone who’s been reading the Minute is already acquainted with typos.. And I proofed it 3 times!! Sorry about that..
Muck.
Inflation is simply another facet of Keynesian Socialist central planning.
“Full employment can be reached only if you have inflation. Cheat the workers.” ~J.M. Keynes
“If one devalues the currency and the workers are not clever enough to realize it, they will not offer resistance against a drop in real wage rates, as long as nominal wage rates remain the same.” ~ Keynes
“The paradox of “planning” is that it cannot plan, because of the absence of economic calculation. What is called a planned economy is no economy at all. It is just a system of groping about in the dark.” ~Ludwig von Mises in Human Action
good read, thanks. only common sense in my view, yet a base 5% interest rate insures risk is wisely issued and savings rewarded. the world had two choices, mises or keynes, went to the theory that rewarded fraud and created despair only to lead to war. certainly is nice to know we have such honourable men and women at the helm.
We are like a hot dog being eaten from both ends. One end is inflation the other zero interest rates on money. Good read Muck.
@Chris: I like the hot dawg analogy. The pity of it is that the majority of society simply doesn’t know or understand the quad-edged sword of inflation or the signs thereof.. They just know _something_ is wrong but do not know what. So they tend to strike out at the closest irritant – being other people instead of who they should be going after.. As long as we have ZIRP or less, you can be sure that the economy is slowly being gutted to the advantage of TPTB and the Elite that run the joint..
Muck
Zirp is a zero sum end game that will eventually destroy all productive capital. I understand the theory however flawed that policy wonks are trying to pull off. They are injecting money via debt to jump start spending but it is doomed to fail. Cheap money only puts more cash in pockets of FSA. It also encourages carry trades and stock buy backs which don’t help Main Street.
Worst of all it punishes those who save. The ones who are creating real wealth that can be used to invest in expanding businesses and creating jobs. Rational people when viewing options should realize that paying down debt is only logical choice.
So the Imprudent have hit the debt wall.
The Savers have quit playing the Game.
The FSA is marching in grabbing everything not nailed to ground.
And the TBTF are using free money for Big Screens in Hamptons.
It cannot last much longer this show. But before the sequel the handlers know intuitively that the guns need to be removed from the equations and charts. Otherwise the only shortage in five years or so will be boiled rope.
The desperation being displayed to try and takeaway the guns is easy to see and something to behold. This latest attempt more pathetic than last. In the aftermath of Orlando some were asking for restraint from Trump out of respect for the victims. Yet Obama since tragedy has engaged in one pathetic deflection after another to push his agenda. He says he cares yet each week in his home town of Chicago scores of young men who could be his sons are killed and maimed.
His term can’t end soon enough.
Rob, you supplemented my Post perfectly. Savers’ and those who normally generate capital are getting screwed right and left which lead to capital formation out of debt. That is “temporary” capital and in todays’ topsy-turvy world, it is a short term route to complete penury. It is idiocy and madness and one would expect better from Doctors of Economics, however misguided they may be.
Thanks for the backup..
I made no comment in this post on guns.. But on that subject, the horse is already out of the barn and 5 miles away. There are more guns at large than the population of the country and if the PTB think they will control and register them all, they are as deluded with that as they are with their economic policies! What they must count on are law abiding citizens using firearms only for what they are meant to be used for – hunting, target practice and SELF-DEFENSE. To facilitate this, there should be NO GUN FREE zones (such as schools, bars and Government offices) to allow law abiding citizens to at least try and protect people in those places when crazies and IS wannabe’s attack. As it is, schools, bars and Govt. offices are free fire zones as attackers KNOW there will be no armed people in there.
Keep on keeping on, friend.. The more we inform, the better off we are..
Muck
I, too, know all about inflation. I discovered the disastrous effect of inflation as a kid, 60 years ago, too.
I was filling my bicycle tire at the neighborhood ‘oil station’ and the air gauge on the hose must have been faulty. I continued filling the tire as the gauge didn’t read the 30 psi that I wanted.
Suddenly, the tire exploded almost blowing the damn tire off the f**king rim. I talked like that as a kid. But, I talk differently now after having been introduced to women folk.
I cursed that station for years after that. You know how much a new tube costs? 75 f**king cents.
BUT…I suspect, Muck About, you’re talking about a different kind of inflation although the basic principle applies–an expansion.
Some of what you say has ‘truthiness’ to it and some of what you say doesn’t quite hit the mark.
Let talk about debt. How many times have we heard that We Have To Much Debt? And…that’s our problem. 19 trillion dollars in debt, you say. Oh! Lordy, Lordy!
I say to you , Muck About, that debt is a wonderful thing, the more the better. All the money you want to spend on the things you don’t need. How can that be bad? It’s helping the economy sez the FED and all those ‘high falutin’ Haavvvard Keynesian Phds.
Heck, I want to help the economy. I’m a good American, well, maybe semi-good. Load me up, I say. Although, I’ve wondered about the paradox of debt. That debt is bad and consumer debt is good. hmmm Taking your bent, Muck About, that too much debt is bad, you’re putting the cart before the horse. I say that’s not the problem at all. The problem is there’s too much credit. Yup!
Too much credit is a bad thing.
We don’t think of someone giving us credit (giving us money) as a bad thing. We only think of paying it back plus interest a bad thing. Something that helps us, is a good thing. Something that hurts us, is a bad thing.
Credit and debt are two sides of the same coin, can’t have one without the other. Credit is the banker’s life blood, so why would they want to curtail it. By design, a credit based economy must continually expand credit so that there is money in which to pay the interest on the incurred debt.
You can see where this leads. It’s a snake eating its own tail. This expansion is like my bike tire, only on steroids, which is why it grabs everyone’s attention. We have no money today. We only have credit. I know what you’re thinking–“Hold your horses, Homer, I have a 10 dollar bill I just pulled out of my wallet.” First, it’s not a dollar and second, it’s a note (FRN) and truthfully it’s not even a note. It use to be a ‘promissory note’. But government promises aren’t worth much and never were, just ask the American Indians.
I know what you’re going to say, “Does any of this easy, expansive credit have any consequences. Heck, I can just default and not pay it back.” Damn right it does, Vern. That credit has already been spent, you may not pay the consequences but, rest assured, someone WILL pay.
Well, Mr. Know it all, Homer, how is it paid? Through ‘price inflation’, always and only through ‘price inflation’, no matter how it’s done. Muck About gave some realistic examples of how it’s done, some sneaky ways too. It is soooo important for the government to keep you ignorant of the ‘price inflation’ happening to you which the government in collusion with the FED have created. They want the manufactures to hide it, larger boxes-smaller contents. The Feds and the FED lie in producing skewed statistics on the state of the economy. They lie on COLAs. All the while indirectly taking your wealth from you through Inflation.
Why do they do this, Homer? Simple, to reduce the value of the dollars in terms of what a dollar will buy so that they can pay back their creditors with dollars of lessor value. Frans Pick said, “Never has the government ever paid off a bond with the same quality of money as when it was purchased.”
All your working life you bought a bond called Social Security, Medicare, FDIC, etc., etc. Do you really think that you are going to get paid with money having the same value (quality) as you paid in. NO, HELL NO! That’s what Inflation is all about. You’re lucky to get the value of your principle back.
One last thing before I quit. This is a lot to digest at one sitting and I have a lot more to say on this, supply and demand, money, so I will leave you with this parting thought.
Why are people so stoopid as to hold our bonds (debt) denominated in dollars which are decreasing in value? First they are not, countries are getting out of our paper, trying to get something of tangible value for them. Smaller countries are being pressured by the US and the Swift system to keep dollars (bonds) in their treasuries. But is is like this old saw.
If you owe the bank 10,000 dollars and can’t pay, you have a problem. But, if you owe the bank 1o million dollars and can’t pay, the bank has a problem. That’s how the Government can roll over it bonds (debt) and serve up to other counties, ‘Moose Turd Pie’.
The US government owes so much to the bond holders that the bond holders are worried that if they force the issue, the US will default and they will be left with pretty gilded toilet paper.
Rumor has it that the FED is buying all the US bonds (debt) which is what happen when you screw the goose giving you the golden eggs.
Two ways to deal with this excessive credit expansion. Default or Hyper Inflation. Default includes outright reneging on the debt, inflation, and devaluation. Inflation can lead to Hyper Inflation (uncontrolled expansion of credit) which leads to Hyper-Price Inflation. Both Default and Hyper Inflation involve the destruction of value of the currency.
Gee! This economic stuff is easy.
Everything that I ever needed to know about economics, I learned in Kindergarten.
I hope to tell you about why the economy is like a teeter-totter.
@Homer: Someday, I’ll read your comments again and try to make sense out of them. Then I’ll try and comment on them. This time however, sorry, you jumped from one subject to another with such abandon that I really slipped cogs and fell off the track a paragraph in..
Muck
Ya! I do have a tendency to move pretty fast. I’m old and am running out of time. I have to say it really fast. I do think, tho, that one does have to have some knowledge in which to understand what I am saying. For over 50 years of studying this stuff, economic news letters, online news letters, economic seminars, books and blogs, I have some understanding of what the authors are talking about and an understanding of how some of this works. But to be frank, sometimes I am befuddled at the knowledge before me. Partly because I don’t have the knowledge base in which to make a good judgement and I am hampered by my belief system, too.
It is kinda like trying to understand Quantum Mechanics. I would need to go back to beginning Algebra and work my way up from there to do it and even then, I might not be successful.
Economics, the way it is presented, is difficult to understand because the terms that they use are meant to confuse everyone except another member of the brotherhood. Try reading Keynes. Three chapters into “Treatise on Money” you’d be ready for the ‘rubber room’. If you’re this obtuse and nobody really understands you, you are hailed either as an idiot or a genius. Unfortunately for the world and fortunately for Keynes it was the latter.
Muck About, there are different ways to describe things. There is the trite way which stymies further investigation and review, after all, we are led to believe we know all there is to know about it and further inquiry isn’t necessary, then, there is the novel way, thinking outside the bun, so to speak.
When I speak of Credit and you speak of Debt, both are correct. But speaking of debt is trite. It’s been run into the ground and a dead end as far as thinking goes, whereas thinking in terms of credit opens new avenues of thinking. It focuses your thinking, not on you, the debtor, but on the bankers, the creditors. If you don’t understand the problem, I guarantee you are not going to find a solution.
The banker and the government are trying their darnest to keep you from understanding the problem. I wonder why???
Ever hear of ‘The World Market Perspective’, ‘The Dine’s Letter’, “Ruff Times’, Harry Browne, etc.
I was a subscriber to The Dine’s Letter, when Jim was dating his high school sweetheart.
I’m sorry, sometimes, I do speak in soliloquies.
Homer: I think we’re really on the same side, saying the same thing in two different ways. I’ve read Jim Dines back in the early 70’s, know Harry Browne personally and we have nothing to disagree about except semantics.
Credit – let’s say pseudo-credit – enable real debt and the bankers profit both ways. They loan money that costs them nothing and collect interest and principal on earned money from productive work.
It is a one-way street, from the productive member of society (what’s left of it) to the pockets of the banks, PTB and Elites who run the media, the banks, the revolving door between government positions and hedge funds and way down at the bottom is the ordinary man, paid off with just sufficient dribbles of funds to keep him from starving and keep him quiet.
The Elite of this country are walking a razor edged line now and one wee slip will draw blood from not only from the hoi palloi but from the Elite as well. I was trying to illustrate one simple way that inflation makes itself felt to the masses (including Ol’ Muck) that are not readily recognizable unless you pay attention.
So, Homer, we talk the same language, came from the same teachers, believe the same thing and from now on, let’s be on the same side. You point out what I miss or screw up and I’ll do the same for you.
By the way – don’t talk to me about limited time and being old. I’ll be into my 80th year January 1st and while I intend to live to at least 110 just to see what happens to our used to be great country but if something fails with the body they can’t fix, I may have to reconsider an earlier exit – but I’m a fighter and will go kicking and screaming and dragging my heels!
Best to you and yours, Homer..
Muck