The Federal Reserve and Treasury have been saying that consumer price inflation has been falling all year. That means it will soon be within the Fed’s arbitrary 2% target. The soaring inflation of the past few years has been nothing more than a pothole in the path to greater prosperity.
On September 18, the Federal Reserve cut the federal funds rate for the first time since March 16, 2020, confident it had stamped out inflation. Moreover, the Fed has achieved great results. It was cut by 50bp.
The stock market made hay in the weeks that followed. Since September 18, the S&P 500 has risen more than 220 points, hitting a new all-time high in the process.
This has resulted in extreme valuations for the stock. The Buffett Index, the ratio of total market capitalization to gross domestic product (GDP), is now over 200%. A fair market valuation is a ratio between 107 and 131%. Anything above 155% is considered significantly overvalued.
The Fed’s interest rate cut may be exciting for stock market investors at the moment, but it’s terrible for American workers struggling to make ends meet. Actually last week CPI report It showed that the Fed may have jumped the gun.
September’s headline CPI increased 2.4% on an annualized basis. However, the core index excluding food and energy increased by 3.3%. This number is well above the 2% target arbitrarily set by the Federal Reserve. Moreover, as long as the inflation rate is positive, prices rise and consumers end up paying more at the checkout.
This is nothing new. The Federal Reserve has a long history of misjudgment when it comes to consumer price inflation. Prejudice about artificially low interest rates clouds judgment and action. Sometimes presidents have to step in to divert public attention from the real culprit.
public enemy number one
By the end of 1974, consumer prices were rising at an annual rate of 11.1%. The unemployment rate was 7.2%. The combined unhappiness index was 18.3%. Workers, savers and unemployed were being crushed.
In a speech to Congress on October 8, 1974, President Gerald Ford declared inflation. “Public Enemy No. 1.” The title of the speech is, “Flash inflation now.”Private citizens have come forward with a variety of proposals to get involved and do their part to arrest the enemies of inflation.
The solutions Ford offered American citizens were carpooling, lowering the thermostat in the winter, and growing vegetable gardens. Supporters were encouraged to wear Whip Inflation Now (WIN) buttons to show team spirit in the fight against inflation.
All you had to do to get your WIN button was fill out a special one-page direct response enlistment form and send it to President Ford. that form read:
“Dear President Ford, I enlist as an inflation fighter and energy conservation soldier. “I will do my best for America.”
It is unclear why energy savings are capitalized and inflation fighters are not. However, below this statement were several lines where the sender could enter his or her name and address. The form was mailed to the president and the sender would receive a WIN button via mail order.
This is undoubtedly a shining example of government creativity and ingenuity. But Ford’s advice on frugal living may not have been all bad.
Spending less than you earn, controlling your spending, and working toward greater self-sufficiency are all worthy goals. But the government-backed WIN campaign is totally patronizing when the government is rapidly devaluing its currency because it cannot take action on its own.
do as i say
Remember that consumer price inflation begins with inflation in the money supply. Deficit spending is the main means by which governments inflate the money supply. By 1974, consumer price inflation had soared during a decade of guns and butter spending to finance the Vietnam War abroad and the Great Society at home.
During this period, Washington made every effort to deal with the chaotic production process. In 1965, the United States Mint removed silver from the coinage for the first time since 1796. Then, in 1971, Nixon played a soft hand, closing the gold window and halting the international convertibility of dollars into gold.
These deceptive actions could have been avoided if Washington had done its job and operated within a balanced budget. Ford’s recommended means and methods of how citizens engaged as inflation fighters and energy savers could fight inflation amounted to nothing more than a demand to ‘do as I say, not as I say.’
Politicians like to pretend that the causes of consumer price inflation are a huge mystery. This is to divert the public’s attention away from their work. It’s actually really very simple. Consumer price inflation begins and ends with deficit spending. The Fed’s monetary policy simply accommodates large debt and deficits.
If the federal government were really interested in whipping inflation now, they would have balanced the budget a long time ago. But the government is not interested in balancing the budget. Instead, Congress pursues welfare and war spending while also devaluing the dollar to pay for it.
Bullwhip inflation is definitely not
Politicians use self-created consumer price inflation to score political points with the public. Instead of solving real problems and balancing budgets, we blame greedy corporations.
It is politically impossible to cut spending at this point in America’s decline. Over the years, interference from various federal, state, and local agencies has piled up like filth on a kitchen window. The oil shines and smells like rotting fish. Layers of government filth are also seeping through every crack and crevice of the economy.
gas price. feed. Reliable energy. Medical Billing. Mortgage interest rates. Currency depreciation. DEI Initiative. computer chip. Excessive taxation. welfare. war. Ridiculous bike path. Lobbyist. FEMA relief. electric car. Open your borders. Your child’s classroom. Retirement anxiety. Bombs exploded in Baghdad and everywhere else. And much, much, more.
The government expansion that is wreaking havoc on the world around you is feeding back into massive deficit spending. This is the same thing that ultimately causes the dollar to fall and consumer prices to rise.
According to the Congressional Budget Office, the federal budget deficit is: $1.8 trillion This is the third-largest deficit on record, following the crazy coronavirus spending mess of 2020 and 2021. Additionally, net spending on interest on public debt increased by $240 billion, reaching a total of $950 billion.
As you can see, interest on Treasury debt is blowing up the budget deficit. At the same time, deficit spending is a major cause of consumer price inflation. So drastic spending cuts are needed to balance the budget. Paying down the debt will require deeper spending cuts.
Of course, Whip Inflation Now was never Washington’s goal. If that were the case, the political class would have stopped spending a long time ago and nipped in the bud.
Conversely, members of the political class perpetuate inflation because their lifestyles depend on it. Inflation has been very good to them. Mansion houses, exotic vacations, paying for your kids’ Ivy League tuition.
Whip Inflation Never is their true mantra. It’s always been like that. Because inflation is their way of life. And they would rather destroy their country than give it up.
[Editor’s note: Have you ever heard of Henry Ford’s dream city of the South? Chances are you haven’t. That’s why I’ve recently published an important special report called, “Utility Payment Wealth – Profit from Henry Ford’s Dream City Business Model.” If discovering how this little-known aspect of American history can make you rich is of interest to you, then I encourage you to pick up a copy. It will cost you less than a penny.]
thank you,
minnesota gordon
for economic prism
From bullwhip inflation never returns to the economic prism
