Monday, November 20, 2023

Inflation and its growing threat to our stability


As I've said so often in these pages, the "official" rate of inflation bears little, if any, resemblance to reality.  Karl Denninger drives home the point - and reminds us why it's happening.  Emphasis in original except for orange highlighting, which is mine.

When I go to the grocery store the register tape -- and my Quicken -- says I'm spending a lot more money there.  Not a couple of percent over the last 12 months, an obscene increase.  Shelf prices are one thing, but actual paid prices are truth -- and those involve discounts, coupons, BOGOs and similar.  I, like most people, buy pretty much the same things to eat.  Spending over the last 12 months is in fact up more than 30%, not 2%.

Car insurance is claimed to be up about 20% -- and it is.  That's real, and everyone with a car has had to pay it.

But the government also claims that health insurance has been down in price by roughly 30%.  That's nonsense, and we all know it, but there it is.

. . .

The problem is that ... we "trained" Congress (and both political parties) that they can run 30% deficits and not have it show up as 8% inflation on a permanent basis.  That's flat-out false.

This in turn means that either we're going to absorb about 8% inflation (no matter what the government claims), [or] spending must come down by about 30% at the federal level and that is only to stabilize prices, not return them lower, or taxes must go up by about 40% which of course is another expense in the household and reduces disposable income.  The latter is politically impossible.

How does this resolve?

I don't have that answer -- but what I'm seeing on the ground is a profound decrease in consumer activity.  Yes, there are places where everything is "happy time" -- but that's not the country as a whole.

WalMart has noted it, and when it hits WalMart that's the people up to perhaps the top 10% of earners.

There's more at the link.

I can't argue with a word he says.  I agree that actual, boots-on-the-ground consumer inflation is presently at plus-or-minus 30% - I said the same thing last year.  I won't be surprised to learn that in some areas, it's closer to 50%.  We're perilously close to slipping into Weimar Republic-style hyperinflation.  Many will scoff at that assertion:  but they haven't studied history closely enough.  The parallels are real, and not hard to see for those with unblinkered economic eyes.

The biggest single problem, as I see it, is that too many Americans - corporate as well as individual citizens - have become accustomed to living off Uncle Sam's largesse.  Need money?  Turn to the federal government to provide it!  That's why more than half of America's families are receiving government benefits in one or more forms, and why many corporations are utterly dependent on government spending for their very existence.  Just how long would Lockheed Martin, or Archer Daniels Midland, or Halliburton, be able to continue to operate without the billions upon billions of dollars of government money they rake in every year?  How many industries are subsidized to the tune of billions more dollars because they spend millions on lobbying the government to do their bidding?  The US government is - and has been for a very long time - in bed with Big Business, and that's not going to change unless and until we throw out almost every Congressional representative and Senator and start over again.  If you think that's likely to happen, I have this bridge in Brooklyn, NYC I'd like to sell you.  It's a real bargain!  Cash only, please, and in small bills.

If we cut off this cornucopia of government largesse, we could solve our economic problems - and inflation - in short order.  However, to do so would involve short-term national pain that would make the Great Depression look like a minor economic hiccup.  That's why it's never going to happen voluntarily.  Nevertheless, if we get our own version of Weimar hyperinflation, it may be forced upon us, as the only way to get out of the economic hole we've dug for ourselves.  Not a happy thought.

That's one reason - and a big one - why I've built up our emergency reserves and supplies as best I can (not nearly as much as I'd like to, but as far as I can afford).  The time may come when that's all we can afford to eat.  Think I'm joking?  Go read the snippets I've posted from time to time about the reality, the lived experience, of Weimar hyperinflation, and think again.



Mind your own business said...

I'm reading "When Money Dies: The Nightmare of Deficit Spending, Devaluation, and Hyperinflation in Weimar Germany" by Adam Fergusson. It describes the relentless insolubility of the problem, and how little control anyone seemed to have.

We seem to be following the German blueprint, which is not a good sign. It would suggest that there is no solution; we are destined for a horrible existential collision with economic reality. We'll be lucky to survive what is coming.

Chris. said...

My automotive insurance is up roughly 30% over the past year.

Was about a 15% increase in July at our last renewal.
Just got our next renewal, which is another 15% over and above the previous increase.

Tree Mike said...

There will be population disruptions and violence. Don't forget, we have 28 million illegal aliens (not 11 mil.), A recent stat. is we have 50 million people(legal?) not born in the USA. Very bad times are coming.

Peteforester said...


The only way I see the United States' economy stabilizing is letting the chips fall and rebuilding from there... with a gold-based currency. It's gonna suck, but it's the only way...

...That, and using the entirety of the House, Senate, and White House as ballast in the next SpaceX Starship test...

Anonymous said...

Peter, what does it mean that we 'trained' Congress?

A personal experience: for decades I kept in regular contact with a large handful of elected politicians. Local, state, and federal, irrespective of party.
My correspondance consisted of letters, phone calls, and e-mails sent to district and D.C. offices. All contained a specific subject, my position on the subject, and my 'call to action' for them to align with my position.

Rare was a response. When there was a response, it was to lavishly welcome my effort and to repeat my position. The latter being completely opposite of my well articulated position! This became so usual that I wondered if they are toying with me. Either that or they have a serious defect in comprehension.

I'll cut to the end; when I signed on to a mass e-mail sent by organizations (such as USN Chaplai Klingenschmitt), the response from politicians were immediate and detailed. Mass e-mails from Judicial Watch and others showed the same response.

I thought my hand written (typed) would command a better response. Yet mass e-mails sent from an org, with no requirement that signees be from a particular district, were far more effective. At least by judging from the response.

My conclusion is that an individual constituent is outweighed by the perceived clout of a group though they may not reside in district (no-voting power).
In these cases, money was not involved. (quidpl pro quo)

BTW: I quit my campaign. I eventually became so discouraged by the repeated lack of respect if the constituency. I haven't stopped, I've merely changed gears. By their own hand, their reckoning will come.

Anonymous said...

"When money dies" was a good although tough read. I found it to be very high level economics and didn't provide much in the way of what to expect regarding how life might be for the everyday person in a hyperinflatioary environment. "Blockade: the dairy of an Austrian middle-class women" was an a sad eye opener into what may be waiting.

Anonymous said...

Call it what it is -- crony capitalism is fascism.

Michael said...

The Death of Money is a hard read.

I picked up on the benefit of being a food producer.

An extra sack of potatoes or firewood is often worth more than gold.

And betrayal is a real problem when the "Official Thieves" are out and about seeking "horded goods".

Looking too well fed or well clothed can indeed get you robbed and walking home in rags and barefoot as described.

Got trusted friends and a good garden?

Maniac said...

Called the company that handles my company's 401K and told them to stop putting money toward my account. I'm only 44 and there's no way this sham of an economy will last another two decades.

lynn said...

I sure do hope that we don't end up moving to a travel trailer in the country like Creekmore did in 2010 or so. He wrote a book about it: "The Dirt-Cheap Survival Retreat: One Man's Solution" by M.D. Creekmore

lynn said...

And my BCBS health insurance is going from $975/month to $1,075/month on Dec 1. No inflation there.