Decision of the Century

Decision of the Century

We have nothing but good news today.

First, the US is in a good place, says White House press secretary Karine Jean-Pierre…a ‘good position to take on inflation’.

We’re coming up to the Decision of the Century. There are only two real choices. One way or another, this scam economy is going to blow up. So the question is whether the Fed blows it up by stopping inflation now…or it lets inflation rip, and the whole thing blows up later?

Either way, there’ll be hard times ahead — with crashing stocks, bonds, and real estate…and probably riots and maybe even revolution. But if the feds end the scam voluntarily, the wreck could be short and sweet, like ripping off a Band-Aid, with a crash followed by a depression, ending in a fairly quick recovery. If the pre-Fed depressions (before 1913) are anything to go on, the whole thing could be over in 18–24 months.

A money problem

If inflation is allowed to run wild, on the other hand, the disease will fester…and metastasise. These intentional, government-policy inflations last about 16 years on average. In the end, the economy is almost completely destroyed…and the nation’s political and social institutions are left as burnt-out hulks.

And there’s the second bit of good news: in neither case will it last forever. We may even live long enough to see the end of it.

And still more good news: inflation can be easily (but not painlessly) stopped. Like obesity or drug addiction, all it takes is willpower. If the feds wanted to, they could bring inflation to a halt in a few months. Easy-peasy. That’s because we don’t have a price problem. Prices are just information. What they tell us is that we have a money problem.

Let’s take a look at it more closely. Here’s The Washington Post: ‘Empty wallets, empty tanks: Surging gas prices leave drivers stranded’:

AAA fielded 50,787 out-of-gas calls in April, a 32 percent jump from the same month last year. More than 200,000 drivers have been similarly stranded this year, the automobile club said. And gas prices have risen precipitously since April.

People are running out of gas because they can’t afford to fill their tanks. The average gas tank holds about 26 gallons. At its low price 50 years ago, it cost about US$6.50 to fill it up. That was nearly two hours of work at the average wage at the time.

Today, it will cost about US$130 to fill the same tank. At an average wage of US$29, that’s four and half hours…more than twice as much time as it took half a century ago.

What happened? Did the oil industry forget how to pump the black goo? Did Vladimir Putin singlehandedly undermine the entire global energy business? Did COVID-19, which only appeared two years ago and killed so few people, the population of the world actually grew in 2020…undo half a century of economic progress?

Fantasy land

More likely, the feds lit the match 51 years ago. Now almost the whole world is on fire.

But if they wanted to do so, it would be an easy fire to put out.

Congress could begin by balancing the federal budget. Why should the feds spend more than ‘the people’ are willing to pay for? Why should they burden future generations with debt and inflation? Aren’t they just forms of ‘taxation without representation’?

The Fed could do its part too. It would only have to announce that it would no longer be backstopping the stock market or bailing out Wall Street. No more money printing. No more rigging interest rates. No more loans to member banks.

Better yet, it could announce its retirement. No more central bank to meddle in the world’s financial affairs and mislead investors and businesses with fake money lent out at phony rates!

In a matter of minutes, the whole grotesque abomination…the scam economy…would be history. No more zombie businesses. No more ‘negative’ real yields. No more inflation.

But wait…let’s take a deep breath and come back to Earth. Can you imagine Joe Biden, Jerome Powell, and the 435 members of Congress actually doing these things? Of all the possible future configurations, this one seems the least probable. It’s more likely that aliens from space will land on the White House lawn and take charge of US financial policies! And do a far better job, of course.

So, next week, let’s continue looking ahead…to what ought to happen.


Dan Denning Signature

Bill Bonner,
For The Daily Reckoning Australia