"Massacre on the Potomac"
Dems face a day of reckoning in November as inflation bites down hard.
by Bill Bonner
Youghal, Ireland - "The native-born Irish do not pronounce the “th” sound. So, our telephone service, named “Three,” is called “Tree” by the locals. This linguistic quirk led American friends of ours, visiting a restaurant in Dublin and enjoying a ‘tree” course meal, to the following exchange:
Waiter: “Are you finished your second course?”
Americans: “Yes, thank you.”
Waiter: “Then I’ll bring out the t….”
Americans: “Wait. Stop. Don’t say it. It will take away our appetite.”
Consumers hate the ‘inflation tax.’ And the voters go a little sour and threaten to throw out the bums who caused it. Joe Biden’s approval rate is dropping. TownHall: "A new ABC/Ipsos poll found that Biden’s approval rating is sinking faster than the Titanic. When it comes to inflation, only 28 percent of voters approve of Biden’s job, with 71 percent disapproving."
And polls show the Democrats could be facing an electoral massacre in November. The “New American:” "An internal poll conducted for the Democratic Congressional Campaign Committee (first reported by startup political newsletter Punchbowl News and confirmed by The Hill) revealed that Democrats running for reelection in November are in deeper trouble than they originally thought. In a generic matchup between Republicans and Democrats, the generic Republican is beating the generic Democrat by eight percentage points, 47-39."
A second poll, commissioned by the Republican super PAC Congressional Leadership Fund (CLF) focused on districts where Biden won in 2020 by more than eight percentage points. Biden is now underwater in those districts by eight points and is dragging down the reelection prospects of Democrats in those districts, from likely to questionable.
Won’t the Democrats try to save themselves by coming down hard on inflation? That is the question left untouched on Friday, like the ‘third’ course, that we take up today. It’s the ‘Decision of the Century.’ Will they or won’t they? Yes or no? Up or down? Now or never.
So Much at Stake: We remind readers that this decision will probably determine the course of public events for decades ahead. If the Fed halts inflation and lets things return to normal, it will mean a crash on Wall Street… business failures… defaults… unemployment… depression and bankruptcies. But the misery will probably be over in a couple years.
If the Fed lets inflation continue, on the other hand, the consequences will be ambiguous at first… and then catastrophic, stretched out over many years of war, revolution, hunger, poverty, destitution and chaos. With so much at stake… and for the benefit of readers who weren’t paying attention… it’s worth backtracking and looking more closely.
We’ve seen that this is no ordinary business cycle inflation. Nor is it an event-driven ‘inflation shock,’ such as when the price of plywood goes up as a hurricane approaches or gasoline goes up because the Saudis turn off the taps.
If you have that kind of “inflation,” you count yourself lucky, because it corrects itself – usually quickly and effortlessly. As prices rise consumers consume less and producers produce more; problem solved. Price increases are just information. If the price of bananas rises, for example, it may mean that banana growers suffered a drought or a pest. Or, it may mean that people want more bananas. And when prices for everything go up, it tells us that we have a money problem. Our money is losing value. And Friday’s CPI ‘print’ showed no sign of a peak. Bloomberg:
US inflation accelerated to a fresh 40-year high in May, a sign that price pressures are becoming entrenched in the economy. That will likely push the Federal Reserve to extend an aggressive series of interest-rate hikes and adds to political problems for the White House and Democrats.
The consumer price index increased 8.6% from a year earlier in a broad-based advance, Labor Department data showed Friday. The widely followed inflation gauge rose 1% from a month earlier, topping all estimates.
Understated: That 8.6% number is a huge understatement. Prices for food, shelter, and fuel are rising much faster. As we saw last week, it takes an average working man twice as many hours on the job to fill his tank today as it did a half century ago. That was not the result of an accident… nor of a sudden shock. It was a systematic rip-off. Intentional. Premeditated. It was public policy. And now, it’s getting much worse.
The Fed ‘printed’ $8 trillion new dollars since 1999 – 10 times as much as it had since it was created in 1913. And it forced interest rates below the running rate of price increases. This gave people an incentive to borrow, speculate, and spend – further increasing the ‘inflation’ pressure.
The motive was not hard to spot. This new money fell like manna from heaven. Nobody ever saved it. Or earned it. The feds didn’t have to ask the taxpayers for it. Nor did they have to borrow it from savers. There was no need to say ‘please’ or ‘thank you.’ And they could spend it, just as though it was real. On wars. Transfers. Giveaways. Whatever.
But what now? The voters are angry. Can the feds continue with their inflation policy; can they get away with it? What will happen? Stay tuned..."
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