Inflation Is Always Bad News for a Democratic Government
YOUGHAL, IRELAND – On Friday morning, investors were tense. The inflation numbers were coming out… Was the fun coming to an end?
For the last two weeks, the Biden team had been trying to downplay rising prices. Here’s a Reuters’ report from Thursday:
But rising prices are a hard thing to keep under your hat. You can lie about a war in Afghanistan, for example, for 20 years. Who’s to know?
But rising prices? Consumers see them every day.
And economists were warning that the inflation numbers on Friday could be worse than those of last month. They could show prices rising at a rate not seen for 40 years.
Then, as expected, Friday’s report showed inflation at a 6.8% rate – the highest since 1982. TheFinancial Times reported:
Mainstream Media Awakens
Inflation is always bad news for a democratic government. They don’t necessarily understand the process, but voters feel ripped off… and they don’t like it. Typically, they show their displeasure at the ballot box.
That is why it’s hard to square inflation with democratic, consensual capitalism. Often, you get a coup d’état by the military… or an “emergency” that brings democracy to an end.
(Some argue that inflation is a policy tool of the elite, not only to enrich itself… but also, intended to undermine democracy. More on this tomorrow…)
Many times in these Diaries, we have given you our opinion. Push comes to shove, we said… the elite is going to push down hard on the inflation pump… and shove democracy down the stairs.
Maybe that’s what investors believe too – they bid up stocks to new record highs on Friday.
And a headline from Bloomberg over the weekend gives us a look at where this is going. In it, we see that the mainstream media has finally taken note of the “Inflate or Die” trap:
Hard Landing Ahead
To be clearer about it, the financial markets – and the economy itself – are the grotesque creatures of more than 12 years of absurd monetary policy by the Federal Reserve.
It has lent money below the rate of consumer price increases for almost all of that time. Of course, corporate debt increased – by almost 80%. And so did U.S. government debt – up more than $18 trillion (more than 180%) since 2008.
Now, the Fed can’t “normalize” policy without a “hard landing”… in which asset prices return to normal… over-leveraged businesses go bankrupt… millions of people lose their jobs… millions lose their homes… the elite gets about $30 trillion poorer (from lower asset prices)… and the economy goes through a very mean wringer.
Do Powell, Biden, et al have the backbone for it? Do they even understand what they are doing?
In any case, here’s our prediction: There will always be something more important than restraining inflation. Here’s a story from England this morning, again from Bloomberg, that gives us a hint:
The flu… the weather…
…and most importantly, a collapsing economy…
There will always be reasons not to change course. And when push comes to shove, they’ll find one of them.
Like what you’re reading? Send your thoughts to [email protected].
Send this article to a friend: