Following the Leaders

Following the Leaders

What jolly insanity!

This report came last week, from Yahoo! Finance: ‘LA county, America’s largest, sees gas prices hit record high’:

Los Angeles County saw a new record in average gas prices on Tuesday as the price of crude oil remains over $100 a barrel, signaling the cost to fill up at the pump won’t be easing soon enough for drivers.

The average price for the largest U.S. county by population rose 2.3 cents to $6.011 — nearly 17 cents more expensive than it was a week ago, $1.224 higher than one month ago, and $2.085 greater than one year ago, according to figures from the American Automobile Association.

Highest Recorded Average Price

Regular Unleaded $5.866. 3/22/22

Diesel                      $6.297.   3/11/22

California is a leader. Its governor, Gavin Newsom, who — along with Chelsea Clinton and Transportation Secretary Pete Buttigieg — was formed by the World Economic Forum’s ‘School for Young Leaders’ (aka…the Davos Deciders), has a plan to deal with inflation:

“We are working on a proposal that helps Californians with rising gas prices and provides funding to public transit so they can provide direct relief for riders,” Newsom spokesperson Erin Mellon told the Los Angeles Times.

Get it? Spend more money!

And Mr Newsom is not alone in the dark night of economic ignorance. Along come three House Democrats with white canes. Yahoo! Finance:

Three House Democrats introduced a bill last week to provide Americans with monthly direct payments through 2022 — or, at least, while prices remain exceptionally high.

Reps. Mike Thompson of California, Lauren Underwood of Illinois, and John Larson of Connecticut unveiled the plan. It would provide $100 monthly checks to individuals and $200 to couples while the national gas price average is $4 a gallon or above. Households would also be able to claim another extra $100 for each dependent they claimed on their tax returns.

Tax, borrow, or print?

Let’s see. Where do they get the money? There are only three possible sources. Taxes. Borrowing. Or printing. By which of these are the people of the US better off? If the money is raised via taxation, it is simply taken from one citizen and given to another — both of whom suffer from rising prices. If it is borrowed, it must be paid back — with interest. By whom? How? When?

California cannot print money, but the US can. And since fewer and fewer people want to lend at today’s ultra-low (but rising!) rates, most likely, all future spending programs will be funded by the Fed’s printing presses.

In other words, attempts to salve the hurt caused by rising prices will result in even higher prices.

We used to rely on Canadians to be a little more prudent and dignified than those of us south of the 49th parallel. No more. The province of Quebec is already ahead of Newsom and the three looney Democrats. The government in Quebec City announced a new spending program that is supposed to ‘help Quebecers cope with the sharp increase in the cost of living that we have seen in recent months’, according to Finance Minister Eric Girard.

As many as six million Quebecers are supposed to receive a CA$500 stimmy/gimme cheque.

Mo’ money

And here, back in the good ol’ USA, is CNN with an even more bodacious proposal:

The administration should ask Congress to authorize a payment of $1,100 per household to pay for four months of higher prices going forward, and provide an option for the president to provide a second or even third check to low-and-moderate income families for an additional four months in the event that prices remain high. We don’t know when this crisis is going to end or when prices for essential goods and services will return to more affordable levels.

Sure. Whatever. There must be at least 80 million ‘low and moderate’ income families in the US. Giving them US$1,100 every four months would cost, in round numbers, about US$250 billion a year, with no plausible source of funds other than the printing press.

But wait. Why not tax oil company profits and distribute the money to consumers? Yes, that idea too — like a runaway trash barge — is floating around the media. It would ‘kill two birds with one stone’, say proponents, who seem to have it in for our feathered friends. It would help reduce reliance on the devil’s pitch…while alleviating the pain of rising gasoline prices.

What is the matter with these geniuses? Prices rise (inflation) when the supply of money goes up faster than the goods and services that it buys. Of course, there’s always more to the story. But if you’ve understood that much, you’ve got the important part. Taxing oil company profits would only discourage production…while handing out money would encourage consumption. Gasoline prices would rise faster than ever.

Don’t they teach these ‘young leaders’ anything in their WEF school? Don’t they learn how to control inflation? Or do they just show them how to use inflation to get what they want?

But what do they want?

More to come…


Dan Denning Signature

Bill Bonner,
For The Daily Reckoning Australia