Friday, April 15, 2022

"This Is Getting Serious"

"This Is Getting Serious"
by Jeffrey Tucker

"Today is Tax Day, April 15. But in reality, every day is tax day. Government is constantly trying to rob us through the inflationary tax, which is a hidden tax. Yet some inflationary indices are more telling than others. Let’s break it down…

The Producer Price Index is a far more important number than the Consumer Price Index because it shows what’s coming in the future. What hits producers now later hits consumers. And here, at last, even the official numbers have crossed into the dreaded category of double digits. Year over year, March to March, the PPI shows a 11.2% increase, the largest on record, and that likely means in 250 years in the US.

Calculating the latest increases against one year ago actually understates the CPI (the three-month change is actually 25%). But with the PPI, matters are different. Producer prices started their dramatic rise one year ago, so this 12-month increase is pretty accurate. Except for one thing: it keeps getting worse month after month. March was the worst ever. So unless there is a dramatic push in the opposite direction (hahahaha) the PPI likely headed to 15% and then 20%.

A Grim Picture: Let’s look at this visually, choosing 1913 (the date of the Fed’s founding) as the baseline 100.
It’s a grim picture of the reality of what’s happened to us. In a remarkably short period of time.

Let’s take another look starting with 2010, expressed as a percent change from one year ago.
This Is Getting Serious: This is no longer about just prices. It’s about economic health and social stability. These kinds of increases are capable of wiping out a million small businesses, under even the slightest recessionary conditions. It wasn’t enough that hundreds of thousands were destroyed during lockdowns. The inflation of our times is a mortal threat to the rest.

What’s more, absolutely no one has a viable strategy on how to deal with it. The Biden administration’s attempt to blame Putin is transparently ridiculous, and so are its solutions of browbeating business and shoving more corn into our gas tanks. The only real solution is for the Fed to enact dramatic increases in the federal funds rate, thus stopping the machinery of inflation, or at least that would be the hope. It might not work but it would certainly plunge the US economy into a deep recession. To watch all the experts out there flailing around right now is truly painful. I’ve yet to read a public article that tells the truth about the problems and the solutions.

How Bad Can It Get? Do you remember how the New York Times was first out with its demand that we “go medieval” on Covid? That was more than two years ago. Now they see the carnage they inspired, and its become even too much for them to watch the horrors of Shanghai today. A writer on the op-ed page presents this picture: "Wang Lixiong, the author of the apocalyptic novel “China Tidal Wave,” which ended with a great famine in the aftermath of a nuclear winter, believes that a man-made crisis like the one in Shanghai is inevitable under China’s authoritarian system. In recent years, he said in an interview, the risk increased after Beijing clamped down on nearly every aspect of civil society.

After moving into a friend’s vacant apartment in Shanghai last winter, he stocked up on rice, noodles, canned food and whiskey to sustain him for a few months in case of a crisis. But many residents in the luxury apartment complex, with units valued at more than $3 million, weren’t as prepared when the lockdown started. He saw his neighbors, who dashed around in designer suits a month ago, venture into the complex’s lush garden to dig up bamboo shoots for a meal.

The worst nightmare for many Shanghai residents is testing positive and being sent to centralized quarantine facilities. The conditions of some facilities are so appalling that they’re called “refugee camps” and “concentration camps” on social media.

Many people shared packing lists “ and tips for quarantine. Take earplugs and eye masks because it’s usually a giant place like the convention center and the lights are on day and night; pack lots of disposable underwear because there’s no shower facility; and bring large amounts of toilet paper. Some quarantine camps were so poorly prepared that people had to fight for food, water and bedding."

Coca-Cola Is Hard Currency: And here’s the sentence that truly made my blood run cold, and yet I know it is true: “The policy still enjoys strong public support. Many people on social media said that Shanghai wasn’t strict enough in its lockdowns and quarantines.” The author notes in passing that “Neighbors resorted to a barter system to exchange, say, a cabbage for a bottle of soy sauce. Coca-Cola is hard currency.”

What’s going on here? People are preferring the immediacy of food and other goods over what was previously used as money. That’s civilization itself devolving to the most primitive level, as in jail. Which makes sense: one of the world’s most wonderful and prosperous cities has been turned into a giant prison for 26M people.

As a result, Coke has become a form of money, which is to say a good that one acquires, not to consume, but rather to trade for something else. Clearly the writer does not understand the implications of this. The only time when such a thing happens is when there are no other options. When you have to price your bamboo shoots in terms of bottles of coke, there is a major problem.

The Essence of Barter: I really don’t want to become apocalyptic here but there is a point to learning barter skills now in case we should ever get to this point, either in our communities or the country or the globe.

When I was in college and paying my own way, I discovered a little secret of getting by. I had a skill. I could bake bread. It did this all Sunday afternoon, the only day I had. I would make a dozen loaves. Then throughout the week, I would distribute them to my dry cleaner, my tailor, the guy who fixed my car, the grocer across the street, the doctor, the dentist, or anyone with whom I did business. I would just take it in and present it and leave.

What I found was that my gifts netted huge returns. Free dry cleaning. Car checkups at no cost. I was first in line at the doctor. The grocer gave me free stuff constantly. The more I gave, the more I got. This is a form of barter. It worked. I spent pennies on ingredients and made back the difference a thousand fold in goods and services returned.

I will conclude with a practical suggestion. Figure out something you can do and do it for others in your immediate community. Sow good will. Become a benefactor to merchants. They will be there for you in a crisis. As we see in Shanghai, this can be a matter of life and death."

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