Inflation and the Magic Printing Press

In the end they will lay their freedom at our feet and say to us, Make Us Your Slaves, But Feed Us.  Fyodor Dostoevsky

The United States is $28 trillion in debt.  We have no savings – There is no emergency fund – We have already spent the taxes on future earnings of our grandchildren and great grandchildren.

But if you believe America’s leaders, everything will be fine because none of that matters as long as you embrace the left’s Modern Monetary Theory, a theory that claims debt and deficits actually stimulate the economy.  There is no need to pay back any money we borrowed because the FED has a magic printing press that creates money out of thin air – at the push of a button.

Is it possible to borrow and spent without any consequences?  Can we really print money out of thin air without destroying its value?  Hang on to your britches cause we’re going to find out – the hard way.

Since the onset of the lockdown the FED has increased the nation’s money supply to record levels. Over the past 12 months, the M2 money supply, which includes cash, checking, savings and other easily spent money, has ballooned by more than 27%! Put another way – 1 out of every 5 dollars in existence since the founding of our nation was created over the last 12 months and the FED used most of that to buy trillions of government bonds, treasuries and mortgages.

In context, with the first trillion printed though out U.S. history, we defeated the British, bought Alaska and the Louisiana Purchase, defeated fascism, ended the Great Depression, built the Interstate Highway system and went to the moon.

On Monday June 14, the Deutsche Bank, one of the largest foreign-based employers in New York City and the only investment bank physically located on Wall Street, released a report that further confirms a portent of doom for the U.S. economy and Democrats led by Biden.  

While many economists and policymakers claim that the recent uptick in inflation is only temporary, the Deutsche Bank warned that Biden’s profligate spending, the Federal Reserve’s low interest rates, and global economic trends threaten to unleash persistent inflation, which amounts to an insidious tax on the poor and middle class that benefits the government.

In other words, the economic laws of supply and demand are asserting themselves.  The increased supply of money, due to the FED’s magic printing press, government spending and handouts is chasing a constant shrinking supply of goods due to the lockdown resulting in an increase in cost to consumers. The law of economics is not to be conned.

The Consumer Price Index (CPI), a measure of U.S. economic inflation, hit 5% in May.  It was the largest 12 month increase since a 5.4% increase for the period ending August 2008, according to the Department of Labor.  Core inflation, which excludes food and energy prices, was up 3.8% over the past year, the largest gain in 28 years.  Inflation basically determines the value of a dollar.

Notice the price of lumber lately? Average lumber prices have surged close to 200% over the past year. Why? Because of supply shortages due to government-mandated factory lockdowns and soaring demand due to people with government handouts remodeling their homes.

Nationwide prices of gasoline now average around $2.87 a gallon even before the summer driving season.  Corn is up 67%, wheat is up 24%, milk is up 9% and climbing.  The cost of copper has risen 82%, silver 62%, and concrete 60%.

Prices for used cars and trucks jumped 7.3% just in May following a 10% increase in April, as global semiconductor shortages continue to affect new car production.  Airfares were also up 7% and rental car prices jumped another 12% in May.  Agricultural commodity prices surged about 60% over the past year, reaching a decade high.  

Jim Puplava at Financial Sense Wealth Management says that in two years “we will be at $40 trillion in debt, and in two years after that,” if we continue this spending spree, “we are going to be at $50 trillion.” This debt level is unsustainable.

If you are spending $6 to $7 trillion per year to stimulate an economy that the left claims is already recovering, what do you do when you get into a recession? 

Source:  What Does Free Money Cost?  By Robert Morley, the Trumpet

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