Although reluctantly, current central bank governors and respected economists have ramped up their warnings that inflation is here to stay. However, while it took officials a considerable period of time to admit the inflationary threat, despite the signs and warnings, they are failing to name its root causes. Inevitably, and anew, a wrong diagnosis will lead to repeated erroneous remedies, which will continue the self-destructive, complacent vicious cycle our Western economies have entered.
The consensus among officials seems to be that this unexpected inflation is solely due to economies being forced to shut down and then reopen, causing disruptions in the supply chains in the process. These disruptions may push the prices of certain products upward. Yet we are seeing an increase in the overall level of prices, in all economies, which should not have happened if there is monetary stability. So, while broken chains may explain in part the price hikes, we must look elsewhere for the true reasons of overall inflation, namely damaging monetary policies and damaging fiscal signals and programs.
Why Price Inflation Didn’t Arrive until Now
Politicians and central bank officials for the better part of the last two decades have agreed that the only way to confront a financial or economic crisis is through interest rate cuts, massive borrowing, and spending, even though there is ample proof that debt accumulation and huge government spending have little effect on economic recovery and gross domestic product (GDP) growth.
The problems arise when, after the crisis has passed, such ineffective programs do not stop. Debt goes up considerably during an emergency, but no effort is made to lower it afterward. Thus, rates were lowered after the subprime mortgage crisis and then the debt crisis in Europe, and they currently remain either at very low positive levels in the US or in negative territory in the eurozone.
After a decade of uninterrupted money printing and deficit spending, the eurozone economies were merely surviving on borrowed time. On the other side of the Atlantic, the same policies were being implemented until 2016. Afterward, deregulation gave some needed breathing room to the American private sector and individuals.
It is true that the Federal Reserve continued its quantitative easing program even during the Trump administration. However, this did not lead directly to price inflation due to the dollar’s status as the reserve currency. That is, the demand for dollars remains quite high even when monetary inflation exists. In fact, until 2020, demand for dollars was higher than the supply of dollars. At the end of 2019, there was a $17 trillion shortage for the dollar.
As Production Declined, Inflation Gained Steam
Nevertheless, during the pandemic, governments shut down their respective economies, sharply reducing activity on the supply side. As a result, production fell considerably in almost all Western countries, including the US. Yet, the Fed, similarly to its counterparts, printed money uninterruptedly to finance the government’s massive spending and to keep rates low. The money supply growth reached an all-time high of 27.1 percent in February 2021, compared to an average of around 6 percent in the previous years. For comparison, the demand for dollars has been growing at about 8 percent on average.
So, for the better part of last year, money was created out of thin air, unbacked by actual physical goods, as production was falling. Naturally, by having an enormous quantity of money circulating in the economy, going to each household in the form of helicopter money, the dollar’s value would be substantially lowered, giving rise to inflation.
Just as the economy was showing signs of improvement, President Joe Biden and the Democrat-run Congress approved trillions of dollars more in spending, much of which was channeled toward zombie companies or unproductive programs. This can be paid either with higher taxes for all individuals or considerable debt increases, and certainly with higher inflation, as the Fed is continuing its money printing to finance government deficits.
Currently, after more than $6 trillion dollars and counting spent, a budget deficit of 12.4 percent of GDP according to the Congressional Budget Office, and $80 million monthly asset purchases by the Fed, the result is a stagnant participation rate of 61.6 percent in the workforce, disappointing monthly job gains, annualized third-quarter GDP growth of 2.0 percent, and just 1.6 percent consumption growth, an average GDP forecast of 1.7 percent for the next decade by the Congressional Budget Office, an expected average unemployment rate of 4.8 percent, and high inflation—currently at a thirty-nine-year high of 6.8 percent.
The situation in the eurozone is even worse, since there have never been any true supply-side measures to boost production, enhance hiring and push up wages, as occurred in the US after 2017. Instead, there was deeper government centralization of the economies, reckless spending, and deficit financing through money printing.
Presently, the base euro area interest rate is zero, while deposit rates are in negative territory—unthinkable a decade ago. The European Central Bank shows no sign of interrupting the bond purchasing, and its governor persists in her refusal to acknowledge dangerous inflationary signs. To make matters worse, nobody even admits that the process of economic zombification in the eurozone is well underway. Centralization of the economy has never worked in human history and is failing once again. Unfortunately for the West, the United States is now surely on the same path as the euro area countries, yet maybe just in time to correct course.
Furthermore, financial repression (by keeping yields artificially low) and central bank interference in markets are unnatural and causing massive deformities in financial and other markets. For example, yields in a stable, healthier country such as Germany are not much different than those in countries with massive debt levels and weaker economic parameters. Central banks have become active market participants, straying far away from their original purposes.
That is why a free market—in essence a most democratic institution—driven by the actions of a considerable number of individuals and reflecting the needs and wants of society is necessary. Only when market participants are left to act and compete freely, are they able to allocate capital in a way that reflects societal requirements and need for innovation. The government, as every monopoly in existence, can never be a substitute for that, leading to unproductive capital allocation and debt accumulation.
A rising inflation environment would require rates to increase and this pace of money printing to stop. Will politicians allow rate hikes, considering their plans for more spending and higher debt? What would the fiscal implications of such a move be? Unavoidably, tapering would reveal structural imbalances that have been hidden in most of the Western economies. That is why, perhaps, central bank officials have been reluctant to stop their quantitative easing programs. Such an action would certainly need to be followed by huge spending cuts, deregulation, and tax reductions to boost productivity—moves that require a political will not present in any Western government.
A desperate need for deep structural changes in Western economies toward higher economic liberty, free and fair markets, more limited government, and fiscal responsibility is evident. However, in the end, all Western governments will be faced with the consequences of their misguided policies and the imbalances they have created.
There needs to be a serious discussion in the economic and financial community, independent of political interference and government lobbying, if we truly want to save Western economies and restore sanity in policy making.
About Nikola Kedhi:
Nikola Kedhi is a Senior Financial Advisor at Deloitte and contributor to various media outlets in the US and Europe, including Fox News, The American Conservative, The European Conservative, Il Giornale, The Federalist, and many others. The article reflects solely the views of the author.
Big Pharma’s Five Major Minions that Everyone, Vaxxed or Unvaxxed, Must Oppose
This is not an “anti-vaxxer” article, per se. It’s a call for everyone to wake up to the nefarious motives behind vaccine mandates, booster shots, and condemnation of freedom.
The worst kept secret in world history SHOULD be that the unquenchable push for universal vaccinations against Covid-19 has little if anything to do with healthcare and everything to do with Big Pharma’s influence over the narrative. Unfortunately, that secret has stayed firmly hidden from the vast majority of people because of the five major minions working on behalf of Big Pharma.
What’s even worse is the fact that Big Pharma’s greed is merely a smokescreen to hide an even darker secret. We’ll tackle that later. First, let’s look at the public-facing ringleaders behind the vaccine push, namely Big Pharma. But before we get into their five major minions, it’s important to understand one thing. This is NOT just an article that speaks to the unvaccinated. Even those who believe in the safety and effectiveness of the vaccines must be made aware of agenda that’s at play.
Let’s start with some facts. The unvaccinated do NOT spread Covid-19 more rampantly than the vaccinated. Even Anthony Fauci acknowledged the viral load present in vaccinated people is just as high as in the unvaccinated. This fact alone should demolish the vaccine mandates as it demonstrates they have absolutely no effect on the spread of the disease. But wait! There’s definitely more.
This unhinged push to vaccinate everyone defies science. Those with natural immunity may actually have their stronger defenses against Covid-19 hampered by the introduction of the injections which fool the body into creating less-effective antibodies. Moreover, the push to vaccinate young people is completely bonkers. The recovery rate for those under the age of 20 is astronomical. Children neither contract, spread, nor succumb to Covid-19 in a statistically meaningful way. What they DO succumb to more often than Covid-19 are the adverse reactions to the vaccines, particularly boys.
All of this is known and accepted by the medical community, yet most Americans are still following the vaccinate-everybody script. It requires pure cognitive dissonance and an overabundant need for confirmation bias to make doctors and scientists willingly go along with the program. Yet, here we are and that should tell you something.
Before I get to the five major minions of of Big Pharma, I must make the plea for help. Between cancel culture, lockdowns, and diminishing ad revenue, we need financial assistance in order to continue to spread the truth. We ask all who have the means, please donate through our GivingFuel page or via PayPal. Your generosity is what keeps these sites running and allows us to expand our reach so the truth can get to the masses. We’ve had great success in growing but we know we can do more with your assistance.
Who does Big Pharma control? It starts with the obvious people, the ones who most Americans believe are actually behind this push. Our governments at all levels as well as governments around the world are not working with Big Pharma. They are working for Big Pharma. Some are proactive as direct recipients of cash. Others may oppose Big Pharma in spirit but would never speak out because they know anyone who does has no future in DC.
This may come as a shock to some, but it’s Big Pharma that drives the narrative and sets the agenda for the “experts” at the CDC, FDA, WHO, NIH, NIAID, and even non-medical government organizations.
Most believe it’s the other way around. They think that Big Pharma is beholden to the FDA for approval, but that’s not exactly the case. They need approval for a majority of their projects, but when it comes to the important ones such as the Covid injections, Big Pharma is calling the shots. They have the right people in the right places to push their machinations forward.
That’s not to say that everyone at the FDA is in on it. Big Pharma only needs a handful of friendlies planted in leadership in order to have their big wishes met. We have seen people quitting the FDA in recent weeks for this very reason. The same can be said about the other three- and five-letter agencies. Too many people in leadership have been bribed, bullied, or blackmailed into becoming occasional shills for the various Big Pharma corporations. Some have even been directly planted by Big Pharma. That’s the politics of healthcare and science that drives such things as Covid-19 “vaccines.”
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JD Rucker – EIC