Editor’s Commentary: Today’s episode of JD Rucker LIVE at 2pm Eastern on Red State Talk Radio as well as The Midnight Sentinel podcast focused on the article below by Vibhu Vikramaditya from Mises.
Prices of goods and services in the economy seem to be going through the roof, and both consumers and producers suffer from the falling value of their money. Unfortunately, the public turns to politicians in Washington and economists around the world for answers.
While president Joe Biden and his administration call it Putin’s price hike, the US Bureau of Labor Statistics reports that over the last twelve months, the all items index increased 7.9 percent before seasonal adjustment. The reported twelve-month increase has been steadily rising and is now the largest since the period ending January 1982. The all items less food and energy index rose 6.4 percent, the largest twelve-month change since the period ending August 1982. The energy index rose 25.6 percent over the last year, and the food index increased 7.9 percent, the largest twelve-month increase since the period ending July 1981.
Meanwhile, the government’s debt has exploded to $30 trillion, up from about $10 trillion at the start of the 2008 downturn and $5 trillion in the mid-1990s. While such startling evidence is directly in contradiction with the official narrative of the White House, political elites either ignore the problem altogether or blame the wrong people. Part of the root of this calamity is found in the foundation of economic beliefs of the Biden administration.
Even though Treasury secretary Janet Yellen has distanced herself from modern monetary theory (MMT), as a student of James Tobin, she continues to remain an inflationist who believes that government should play a more active role in the economy. For example, she supported the $1.9 trillion stimulus plan signed in March 2020 even though the money was created from thin air. While she does not officially endorse MMT, nonetheless her views of economics do not stray far from MMT orthodoxy.
Stephanie Kelton, author of The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy, also began doing regular interviews on the topic, becoming the de facto face of the MMT movement. She served as an economic adviser to Sen. Bernie Sanders during his presidential campaign and has since advised the Biden administration as well, going as far as to declare that Biden has adopted her principles.
What Is Modern Monetary Theory?
Modern monetary theory begins with the government budget constraint under a system of fiat money. According to William Mitchell, L. Randall Wray, and Martin Watts in Macroeconomics, the standard MMT approach, which relates the present value of tax revenue to the present value of government spending and the government debt, is misleading. Further,
the most important conclusion reached by MMT is that the issuer of a currency faces no financial constraints. Put simply, a country that issues its own currency can never run out and can never become insolvent in its currency. It can make all payments as they come due. (p. 13)
As a result, “For most governments, there is no default risk on government debt” (p. 15).
The most important implication of such a radical theory is that government enjoys potentially limitless power as an arbitrator in the economy. Based on this theory, Congress supposedly can use the printing press effectively via accumulation of debt, raising aggregate demand to the level of full employment. Inflation, according to MMT theorists, is a phenomenon borne out of the class conflicts between workers and capitalists as they jostle for higher shares of the national income (Macroeconomics, p. 255). According to them, moreover, virtually “all spending (private or public) is inflationary if it drives nominal aggregate demand above the real capacity of the economy to absorb it” (Macroeconomics, p. 127).
As is the case with most “crank” theories, the world that this theory describes can never come to life. Full employment is not a criterion that real prices wait for to increase as buyers and sellers compete for scarce resources in the market economy. The view that inflation is a purely monetary phenomenon and that inflation takes place that is beyond the economy’s absorbing capacity are both true to an extent, but both miss the vital picture of the interconnectedness of the market economy.
Inflation in the Structure of Production
The general increase in the price level, as the mainstream and MMT theorists want to believe, does not come directly from an increase in money supply or full employment (the “overheated” economy) but from an increase in the scarcity of goods and services whose ability to impact the prices of other goods and services is relatively higher and whose production takes substantial time. The full employment criterion of MMT is therefore not needed for prices to start increasing, as economists like Murray N. Rothbard have demonstrated when they refer to “stagflation,” the simultaneous increase of inflation and unemployment.
The structure of production in the economy starts with goods produced at the primary stages and ends with the final goods used by consumers. Goods used in the primary stages of the structure of production are created through agriculture, forestry, fishing, mining, oil extraction, and other natural resources. These inputs form the base of almost every other product or service provided to consumers. Due to their vital role as the base products of the economy, these products’ price changes due to changes in demand are the most inflationary to all other goods.
The second most effective influencers of prices of other goods are the semifinished goods and services used as inputs by producers during the middle stages to create final goods and services. Given their nongeneral nature, these goods, such as steel and plastic, are used by multiple producers for various next-stage goods. As demand for semifinished goods increases due to increased competition among producers of final goods, it exerts inflationary pressures directly on final-goods prices.
When additional money is introduced into the economy as a result of increased government spending, it leads consumers to increase their consumption of final goods due to their increased money balances. As demand for final goods increases, producers of final goods look to purchase more primary order goods and various other intermediate goods, whose scarcity then increases due to increased competition among producers, which leads to an increase in these goods’ prices.
This reorients prices of the entire structure of production, and the shift is then observed as a general increase in prices through various indexes. The severity of increases in prices depends upon the ability to meet the increased demand for base goods and intermediate goods.
We can understand that inflation is a phenomenon that takes place due to changes in scarcity as a result of increased competition between producers each pursuing their independent ends. While increases in prices are a part of the adaptive market process that guides production and consumption, soaring inflation levels or sudden general increases in prices require an additional generation of money in the economy that is more than the money created through consumer and producer credit in the natural course of the economy. Had the changes in money supply been internal to the economy, the adaptive market process would have worked to allocate goods efficiently.
When governments create artificial demand and try to increase their spending in an unchecked manner, they effectively create inflationary pressures in the structure of production. At the same time, they also destroy the allocating price mechanism of the markets, which gets worse the more they spend. While printing and digitally transferring money might take seconds, production and distribution takes much longer.
The Proper Role of Prices in the Market Process
As Congress armed with MMT attempts to dictate the course of the economy based on their political leanings, it leads to distortions of prices in the structure of production, but the rise in prices is not the problem per se. The rise in prices in a well-functioning market has a specific role; when an object of use becomes scarce in the market, it is a signal to consumers to economize on it. At the same time, price increases point in the direction of a more profitable employment of resources—production of the expensive good—until supernormal profits are exhausted. When prices rise artificially, however, this destroys the efficient allocation mechanism of markets and is a tax levied on consumers that reduces the purchasing power of their money, as well as their saved-up wealth.
Inflation-driven price increases act as signals that misdirect the employment of resources, leading producers to make inefficient choices and allocate factors erroneously. They undermine the trust in the price mechanism from all sides. Prices in this situation are like traffic signals that always misdirect traffic.
The only thing modern about MMT is the unprecedented amount of confidence in both its advocacy and application. The US economy already has experienced the Keynesian spending spree of the sixties, which ended in the stagflation of the seventies. When the government’s economic policies are based on the belief that the government can print unlimited amounts of money with little or no repercussions, we should not be surprised to find ourselves living under the most inflationary period in forty years.
About the Author
An economics and a libertarian scholar with research interests in capital theory, monetary theory, and business cycles, I write about events in the economy from a legal and economic standpoint with a proliberty outlook and believe that safeguarding the liberty and rights of each individual is the most important act toward peace, prosperity and growth. My other works can be found at the Austrian Economics Center, the Libertarian Institute, and beinglibetarian.com. I can be reached at [email protected] and on Twitter (@vibhu3333).
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