I can’t say enough. Inflation starts with inflation of the money supply. There, excessive money and credit chase consumer prices higher. Likewise, it inflates both stock and real estate market bubbles.
Then, the price increase has a wide-ranging effect. Asset owners become richer as the nominal price of the goods they own increases. It also reduces the relative debt burden of the borrowings used to purchase the assets.
Workers are becoming poor, with nothing to sell but their labor. The price of consumer goods rises far outpacing wages. Even retirees on fixed incomes are being torn apart by the lack of monthly allowances.
Consumer debt is becoming increasingly difficult to repay. As more of our paychecks are spent on food and housing, there is less money left to repay our debt. For some, debt piles up each month as additional debt is used to make up for the difference between wage income and rising prices.
Inflation also drives the wealth gap in society to extremes. While wealthy asset owners see their wealth multiply, the value of workers’ labor is destroyed. For example, in the third quarter of 2023, 66.6% Total wealth In the United States, the top 10 percent of earners own state-owned enterprises, while the bottom 50 percent own just 2.6 percent.
The massive wave of inflation that has hit the U.S. is the result of the reckless management of the Treasury and the Federal Reserve during the coronavirus fiasco. And it’s not going away anytime soon. And the consequences will be felt for centuries to come.
At this point, many people are already behind.
Death and Destruction
In 40 backyards across America, where weeds grow tall and prairie dogs dig deep, there is a world of despair. According to the Centers for Disease Control and Prevention, 1,500 About one American dies every week from an overdose of fentanyl or other opioids.
That’s about 80,000 overdose deaths per year. For perspective, that’s more than the capacity of many NFL stadiums.
Addictive painkillers, poor job prospects and rising consumer prices have destroyed people’s hopes and dreams. They give up, seek relief in the next pill, and lose their lives in the process.
Unfortunately, this is not a trend that can be easily reversed. A quarter or two quarters of GDP growth or a few interest rate cuts won’t save people. This is something that has to happen.
And when government intervenes, sometimes with good intentions, the unintended consequences can be devastating. For example, a new state law goes into effect in California on April 1 that will raise the wages of fast-food workers to $20 an hour.
This law is undoubtedly a textbook example of how to destroy jobs and make life more expensive. Anyone with a little imagination can foresee what will happen next. In fact, the logical chain of events has already begun.
In preparation, many companies have already laid off employees, while others are suspending hiring and reducing workers’ hours to cut costs.
Franchisees of Pizza Hut and Round Table Pizza have announced plans to lay off workers. 1,280 Delivery drivers this year. They plan to outsource their delivery services to apps like DoorDash. But some unlucky workers have already received a pink note.
government interference
Take Michael Ojeda from Ontario, California, who was coming to a dead end after eight years of work as a Pizza Hut deliveryman in December when he received a notice from his employer that his last day would be in February.
Ojeda, 29, also had an insulting carrot dangled in his face: a $400 severance package if he stayed on the job until the day he was fired. Naturally, he turned down the money and took unemployment benefits.
“Pizza Hut was my job for almost 10 years, but it disappeared with little or no recognition.” Ojeda said. Sadly, Sacramento’s benevolent policies will see many more fast-food workers in California suffer a similar fate.
Jack in the Box is currently piloting fryer robots to reduce labor demand, and El Pollo Loco recently told investors it is automating salsa production. Many restaurants will raise their menu prices, exacerbating the cost of living problem that was supposed to be alleviated by wage increases.
At the same time, fast-food restaurant owners are turning down the opportunity to open new stores in California, instead considering expanding in other states. This, of course, is why government intervention makes prices higher and jobs scarce.
For Ojeda and his colleagues, that could be the best thing that could happen. Maybe it will motivate him to learn a new, higher-paying skill. Or maybe he will leave the Golden State for a more worker-friendly area, where he can live for a lot less and without all the government nonsense. You never know.
Is corporate greed causing inflation?
As expected, California’s unemployment rate is currently the highest in the nation. 5.3 percent In February, job growth in the state slowed significantly.
According to government data, California added 300,000 jobs between September 2022 and September 2023. Upon closer inspection, that number was recently revised to 50,000, which is just over 4,000 jobs per month. For a state with a population of over 39 million (more than Canada), 4,000 jobs per month (0.01% of the population) is virtually nothing.
Who knows what the state legislature will try next? Maybe more regulation will be needed. That’s all they can do. They can’t help themselves.
The causes and consequences of more regulation are now well understood. There are countless examples of businesses being pressured to the point of closing up shop. Here are some: One example Since last week:
“State Farm announced on March 20 that it would cut 72,000 home and apartment policies in California due to inflation, regulatory costs, and increased risks from disasters. This decision is a major blow to California property owners who are already struggling with high premiums or inadequate coverage.”
California’s regulatory environment can be extreme, but don’t think you’re protected just because you don’t live there. Even if state and local governments take a light-touch regulatory approach, the federal government rewards them handsomely.
Government regulation and government inflation are a vicious combination: rising prices, fewer choices, fewer job opportunities, and a widening wealth gap.
The next time you hear President Biden blame corporate greed for rising prices, remember this. That’s a lie. Inflation is caused by massive government deficits and easy money from the Fed. And there’s a lot more inflation coming.
The recently passed $1.2 trillion spending package, filled with more than 1,000 pages of regulations and bribes, ensures this.
[Editor’s note: It really is amazing how just a few simple contrary decisions can lead to life-changing wealth. And right now, at this very moment, I’m preparing to make a contrary decision once again. >> And I’d like to show you how you can too.]
thank you,
MN Gordon
For Economic Prism
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