I am going to do something really stupid this morning and indulge myself in a couple of non-health care, non-epidemic commentaries. You may recall that last spring, as the Biden administration began rolling out its truly crazy spending, that I said interest rates and inflation were headed far higher, while growth would slow. It is always dangerous to try to predict even the short-term future and I was a little early on the interest rate rise. More than I thought it would, the Federal Reserve stupidly facilitated the massive growth in the money supply and forced interest rates to remain lower than the market would set them at. But once it became apparent that inflation was not temporary, other than on time scales appropriate to the lifespan of a bristlecone pine, even the Fed had to pause and think. So now the ten-year is over 2%, inflation is anything but temporary, and we have a national debt of over $30 trillion dollars, while we increased the money supply by over 40%.
We have a school of whacko economists who believe that we can print as much money as we want with no consequences. The consequences are about to hit us with a sledgehammer. More money means more dollars chasing a supply of goods and services that can’t keep up. The extra dollars aren’t going to producing more, they are going to paying more for the same or a much more slowly growing supply of goods and services. More debt means more of government spending goes just to servicing that debt, which so far has occurred at low interest rates. We are in a trap that there really is no escape from without really taking severe punishment. And the sooner we take it and get it over with, the less painful it will be in the long run.
We have to immediately end the deficits and begin reducing the debt load. That will mean a real effort to eliminate unnecessary and wasted spending, and there is a lot of that. We have to stop the nonsense about renewable energy, which is both unreliable and far more expensive when all costs are included, and which is imposing a huge burden on consumers and manufacturers. Want to see the future of green energy–look at Germany. We have to be a lot more serious about creating an economy that raises people’s standards of living, not one that traps them in a spiral of higher wages that can’t keep up with higher inflation which creates more pressure for higher wages, and so on. We can’t do anything significant in this country without 400 environmental studies, 300 DEI studies and so on. The comparison to a country like China, which has more modern infrastructure and manufacturing capability than we do, couldn’t be starker.
For the rest of this year, I think we are unquestionably going to see continued very high inflation, huge pressure for more pay increases, and slowing growth. The job numbers released last week were 100% due to once-in-a-decade seasonal adjustments and when the adjustments for all of 2021 were actually totalled up, not just the ones at the end of the year, the jobs added actually declined over prior estimates. We have created a sick, addicted to free money economy and the withdrawal is going to be very painful and damaging. Welcome to the progressive economy.