But it is the economy that we live in, not the economy of cooked-numbers that mesmerize the policy makers.
Typically, inflation monkey-hammers folks on fixed incomes. That would be most people on pensions.
This Bidinflation is a little different. It is also hammering people just starting out in their careers with the cost of housing taking a HUGE bite out of their income.
Historically, policy makers got their arms around inflation (too much money chasing too few goods) by destroying money via feathering the interest-rates upward. That cooled demand and the stars would come back into alignment.
Think of "borrowing" as spending money you haven't earned yet. Raising the interest rates reduces the amount of money people can borrow and that limits demand.
This time around inflation seems very resistant to raising interest rates, like a patient with Type I Diabetes suddenly becoming resistant to injected insulin and now is both a Type I and Type II Diabetic.
Just to throw a few items out there:
The Biden Administration continues to squander resources on wind and solar farms, gobbling up large amounts of raw materials.
The Biden Administration allowed somewhere between five-million and ten-million people across the border in the 2.5 years he has been in office. I am sure most of them are fine people BUT how does Biden propose that they can become productive workers? Or are they doomed to be leaches...shrinking the supply of goods that productive people could be buying.
This is the leading example of stupid policy destroying per-capita-supply every bit as quickly (or perhaps more quickly) than rising interest rates is shrinking the money supply.
Housing: The cost of regulations adds over $90,000 to the cost of the average new house (Source). Since many of those costs are "fixed" there is relentless pressure for builders to make larger and more expensive houses to recoup those costs. That totally excludes most people under the age of 30 from home ownership. The non-value-added costs also shrinks the supply of housing coming onto the market.
The Biden Administration has been picking winners-and-losers. Keystone Pipeline: Loser. Burlington Northern Railroad and Warren Buffet (bigtime Biden donor): Winners. People who buy gasoline and truckers who buy diesel: Losers. "The Market" is awesome for efficiently allocating resources but Biden's team of social engineers insist on putting their thumbs on the scale.
Education: Human capital being squandered by diversion into horrible majors that will never be productive. DEA initiatives that take the educator's eye off the ball of teaching basic skills like reading and arithmetic and science.
Even though it is as plain as the nose on Biden's face, they cannot see it. They are too giddy playing God. I doubt that He is amused.
The fender on my trailer hooked a 16ft tube gate and wadded it up.
ReplyDeleteI bought it at TSC in 2019 for $198. Now they are $322! Up 63% in four short years.
Raising interest only reins in spending by us little people. This time it's the Fed Gov doing the borrowing and spending. They don't feel the pain from inflation therefore they keep borrowing and spending. It ends in economic collapse. It has too.
ReplyDeleteYou are missing the point...this is all by design, not accidental.
ReplyDeleteERJ, I made the startling but not unmerited realization that I likely my income only declines from this point forward. Even if I make it to Social Security (and even if it is there), it will never be as much.
ReplyDeleteTo your point, imagine you are just starting out and you realize you will never make enough money to actually live the way even your parents did (especially if they were middle class). How disincentivizing that would be.
Our recent immigration surge and recent college graduates with non-marketable degrees have the same issue: there really is no mass employment solutions for either. And as the cost of labor goes up, the drive to automate will increase (labor always being the highest overhead cost).