Creeping Normality

Younger voters tend to think inflation is "not all that bad". Their temporal yard-stick is not long enough to see curvature, or if they can they don't understand the implications.

Another issue is that many younger voters think they are high enough above the river to never have to worry about flooding. "Oh, I make $50k a year and my S.O. makes $80k, so we will be fine." or perhaps "I make $150k and my S.O. makes $180k..." Younger voters cannot grasp the ever-increasing, nonlinear nature of inflation, and how it will impact them, because it is outside of the realm of their experience.

Consider the story of the lily-pads and the lake. Scientists discover an infestation of an exotic lily-pad in a small lake. Based on historic data, they know that the lily-pads' footprint will double every day. Based on the current size of the infestation, they determine that the lake will be completely covered with lily-pads in 20 days.

Pop quiz:

1: On what day will the lake have half of its surface covered with lily-pads?

2: Assuming the lake is 1000 acres in area (1.6 square miles), how much of the lake is covered with lily-pads today and will be covered tomorrow?

Answers below the fold

1: Since the lily-pads double every day, then it will go from half-covering the lake to completely covering the lake from Day 19 to Day 20. The answer to the question "On what day will the lake have half of its surface covered with lily-pads?" is Day 19

2: 10 doublings is 1024. For the sake of simplicity, let's round it to 1000. 20 doublings is approximately a-thousand-times-a-thousand or one million. Using our "rounding", on Day 10 the pond will have 1/1000th of its area covered or one acre. On Day 1, it will have 1/1000 of one acre covered or approximately 43 square feet...a little bit bigger than a standard sheet of plywood. On day two it will cover 86 square-feet and so on. If you live on a 1000 acre lake, it is easy to ignore a problem that seems to be growing so slowly.

A quick trip to the Wiemar Republic and Zimbabwe

One of the root-causes of the hyper-inflation (rapidly accelerating inflation) seen in the Wiemar Republic in the early 1920s was due to the "reparations" Germany was forced to pay France and Britain. Those reparations were not negotiable and there were no feedback mechanisms to automatically adjust to the relative strengths of each country's economy. 

Reparations sucked the wealth out of Germany, destroyed the value of pay-checks (regardless of size) and crippled industry's ability to purchase resources needed to manufacture goods. People starved and froze to death in a country with very good agriculture and abundant coal simply because the economy locked-up.

Zimbabwe is a slightly different story. The Marxist government used identity-politics and racial-envy to kick land-owners off their farms. Farmers who objected were executed by mobs. Productive farmland was turned over to people with NO expertise in farming. Cattle died for lack of vaccinations and trace minerals. Crops failed for lack of fertilizer or knowledge about how deep to plant the seeds and the distance to space the seeds within the rows. The death-spiral of the real-economy was paralleled by the country's leaders skimming vast amounts of foreign aid and squirreling it away in anonymous bank-accounts.

What do those two stories have to do with the United States?

The United States government runs on borrowed money. We don't take in enough taxes to come anywhere near to paying for the services we demand.

Since there isn't enough tax money to run the government, there is never any surplus to "pay down" the money the government borrowed over the last several decades. They simply "roll the loan over" when it comes due. That works great as long as the interest rates stay low and tax revenues are growing but is devastating when the interest rates rise or economic growth falters.

Guess what. The interest rates in loans denominated in US dollars has been rising and our inflation-adjusted Gross Domestic Product has been stagnate or sinking. Unles there are  drastic changes then we will see an inflection-point where the government will have no choice. They will be FORCED to curtail services like Social Security, Medicaid/Medicare, Food-stamps, Rent subsidies, Foreign aid, overseas Military bases and so on. The economy will collapse, further reducing tax revenues and it will get very, very ugly.

The second parallel is that People Who Get Stuff Done are being replaced by People With Feelings. Right now, it is a remake of the Zimbabwe experiment but it is being done in slow-motion. Competent people being kicked to the curb and are being replaced by incompetent people.

The window for avoiding hyper-inflation is shrinking daily. Perhaps it is already too late.

The ERJ prescription

Remove the parasitic, regulation-centered culture that is strangling our real-economy. We need to grow our real-economy faster than the debt obligations of the past are consuming it.

Start removing the incentives and subsidies for failed experiments. Giving stupid, young-adults college educations is a failed experiment. The welfare-state is a failed experiment. Using the education industry as a factory for "remaking" society is a failed experiment.

Have a plan to identify productive illegal aliens and deport illegal aliens who are not working. There are 10 million unfilled jobs in the US right now. If they cannot show reported annual income of 1600-hours-times-Federal-Minimum-Wage then they are not working. Start by deporting the ones who have been here the longest without reporting any income. Deport illegal aliens who have been convicted or plea-bargained Criminal-Sexual-Conduct crimes (yes, even misdemeanors...plea-bargains and all that) and violent crimes.