A couple of random observations, since there isn’t a lot of CV-19 research to report on today. First, we are the only developed, supposedly democratic country that does not require IDs to vote and allows other voting nonsense. Other countries are concerned about citizens having faith in the outcomes of elections. Ours has one party that wants to be able to engage in fraud and chicanery and apparently is fine with most citizens distrusting the outcome of elections, and polls show, the majority of people do think there are significant problems with our elections.
A second connected observation is that we don’t have a free-market economy; we have an economy dominated by a few large corporations that overcharge consumers for lousy products and services. They get away with that because most of our industries are oligopolies. The government has failed to use the antitrust laws to maintain true competition in markets. So now we get a pathetic cycle of corporations with enormous power which buy off politicians to keep their market power in place, and which in turn spew whatever ideological garbage the party in power wants them to promote to keep their market power. Let’s take two examples.
Delta Airlines has done everything it can to suppress competition. It prevents rivals from getting gates in its hubs. It then charges the highest prices in the industry for service that is often abysmal. It doesn’t have to worry, though, because it buys off politicians to keep them from investigating their abuses. So why would we be surprised when they go “woke” to curry favor with politicians? Somehow, of course, Delta has no problem doing business in China, and going along with the party line there as well, including humans rights abuses. And Delta doesn’t seem to have a problem with the much stricter voting laws in all the other countries it flies to. Ed Bastien is a cowardly weasel. What should happen is that no airline should be permitted to have more than 30% of the landing slots and gates at an airport. Period. Airlines who have more than that should be forced to give, not sell, them to other airlines. That way we might have some actual competition.
Kenneth Frazier, the former CEO at Merck? Another hypocritical moron. Also willing to tolerate any level of human rights abuses and lack of democracy in a country as long as he can sell drugs, and conduct shady clinical trials, anywhere he wants to. He prices drugs at an outrageous level that deprives many Americans of the ability to afford needed care. He abuses patent-granted monopoly positions in drugs by suppressing competition and constantly raising prices with no justification. In my book, he is a scumbag, regardless of the color of his skin. But he also gets away with it because the drug companies have always been among the top campaign contributors, so we never get effective regulation of their abusive practices either. The solution here is to strip drug makers of their patent protection if their initial price generates a return over a certain level and if they raise prices.
It all starts with money in politics, and despite the fact that there are concerns with it as well, this is why I strongly support government financing of elections, with no contributions allowed by anyone other than individuals and then only at a very low level, to equalize the playing field. Once the mutual cycle of bribery and extortion between politicians and corporations and unions is broken, we might get reasonable policy, and politicians could focus on doing something instead of raising money.
On to inflation and why you should be very worried about the flood of spending washing over the country. Everything has a price. Real goods, services, hard assets like land and buildings and equipment, financial assets like stocks and bonds. And money itself has a price. Those prices theoretically in a free-market economy are set by the agreement of buyers and sellers, but we don’t really live in a free-market. Aggregate demand and supply does play a role in intermediating prices between buyers and sellers. In some areas the government attempts to influence prices. Sellers, or less frequently, buyers, with large market shares can override normal supply and demand price-setting. Inflation is merely the increase in price for something, and deflation is a decrease in price. The government “measures” inflation in several categories. You can read the somewhat unbelievable formulas used for measuring inflation at the US Department of Labor website or by googling. These inflation indices, of which CPI or the consumer price index is the most commonly referenced, are manipulated by the government because they are used for things like Social Security payment increases. True inflation in the total basket of things the average consumer buys is a very different thing and likely is much higher.
While in the last decade the price of many common products has been pretty stable, service prices have risen more rapidly. Real property inflation has been substantial. But what has really soared has been the price of financial assets–stocks in particular. If you want to invest, the price you pay for what you are investing in is a key determinant of the returns or value you get from that financial asset you invested in. The more you pay for a stock for example, the lower the dividend yield and the less you can expect in the way of price growth. (Absent the kind of manipulation that occurs regularly in our financial markets by large fund companies, which have every incentive to juice prices to make their supposed returns look better.) If everything costs more, you need more and more income just to be able to buy the same amount of a good or service. (I am not going to go into the effect of productivity or supposed quality effects which can affect the value received, but they are important concepts.) This can itself lead to people raising prices for goods or services or other items they sell, so that they can generate more income to offset the additional sums they must lay out for what they want to buy. You can see the feedback effects if people perceive that prices are rising.
And a most important price is the price of money. If you want to borrow money, you have to pay a price, typically referred to as interest, to borrow or “buy” that money. If you want to lend or sell money to someone, you want something more than just getting your money back. You have to be compensated for the risk that you don’t get the money back and you make some assumption about inflation in the prices of everything else over the course of the time you are lending the money, because you don’t want to end up with less purchasing power than you started with. Interest rates or the price to buy money have an enormous effect on the economy because today borrowed money is the source of funds for so much of what businesses and individuals buy. When interest rates start to rise, that is itself a form of inflation, it is an increased cost to those who are borrowing the money. That increase gets factored into the prices for whatever goods or services are being sold by the borrower. So when interest rates are rising, like they are now, there will be an inflationary effect from that alone. Eventually the rates get high enough that they dampen demand, since I don’t believe the basic laws of economics have been or can be repealed. And that dampening will lessen growth. And then we end up in the nirvana known as stagflation, where prices are rising but growth is limited. Individual expectations play a role, but the sheer supply of debt being dumped on the market by the federal government and businesses is overwhelming demand, and to get the debt sold, the price has to be raised, i.e., the borrower has to pay more interest. And that is where we are now. Unless it is immediately reined in, even reversed, we are in for a world of hurt no matter what the Federal Reserve or the Treasury Department says. And we are giving enormous power to foreign buyers, like China, who we increasingly will need to sop up all that debt.