Politicians of the liberal bent are proving more and more that their worldview is almost worthy of a free trip to the funny farm. These individuals have become convinced that we can juice up entitlement program spending with no real consequences, after all, we have printing presses where we can just hit a button and out comes Monopoly money. It’s limitless cash, right?
Inflation seems to be a concept the left is incapable of grasping.
Meanwhile, you have President Joe Biden repeatedly lying right to our faces about how we have such a strong economy. The drop in the headline from the University of Michigan consumer sentiment index for this month begs to differ. It went from 76.9 to 76.5 and that was even worse than expected, according to a new report from Zero Hedge.
No, this is not a strong economy. The consumer confidence index, labor participation, and unemployment-to-population ratios, as well as real wage growth, remain significantly below the pre-pandemic level, and this after $6.3 trillion in new public debt that will likely reach $8 trillion by the end of 2024.
The manufacturing weakness of the United States is also a problem because this should be a period of high growth, considering the opportunities generated all over the world. Industrial output bounced 0.8 percent in February, but the January figure was revised to a larger 1.1 percent slump. If we factor in the decline in the Empire State survey, to -20.9 in March, it looks like the manufacturing decline will persist.
The shape of the U.S. economy also reflects the impossibility of the soft-landing narrative. Inflation remains well above target, and bond yields are reflecting the reality of persistent inflation. Furthermore, money supply growth stopped declining months ago.
If we continue to pour cash into the money supply and the government refuses to get a grip on its out of control spending, there’s no way the Federal Reserve will be able to reduce interest rates and the loss of purchasing power of the U.S. dollar will just keep marching on and on, making life a nightmare for more everyday Americans.
This is the problem of extraordinary monetary and fiscal experiments. Governments embrace massive spending and debt monetization under the premise that they will implement control policies if the warning signs appear, but when they do, they never stop spending. Economists close to the government said that the administration would reconsider and adjust its budget if inflation rose, and alarm bells rang. Now we have heard all the alarm bells, and the administration continues as if nothing happened. The Inflation Reduction Act became the Inflation Perpetuation Act; the rise in government borrowing is now evident in the 10- and 30-year curve; and the private sector is in an obvious contraction.
The government is a lot like a shop-a-holic. Once they get in the groove of spending fat stacks of cash, they just can’t help themselves. They go into a frenzy and within a short amount of time, they spend every penny plus a trillion we don’t have. Then they look to you, the person they essentially robbed through high taxes and misspending, and expect you to somehow come up with the cash to pay for the things they didn’t have the money to buy in the first place.
They will raise taxes, which leads to weaker growth for business owners who end up passing additional costs on to the consumer and on the process repeats.
All the figures in the U.S. economy scream “buy gold” because the government will always prefer to destroy the currency than to moderate the budget deficit and government size in the economy.