"Crooks and Cronies"
Joe Biden's dusty memory,
the giant debt iceberg and creeping ‘inflation normative'...
by Bill Bonner
Paris, France - "Last week brought more evidence that America’s captain is losing his mind. CBS Boston: When President Joe Biden's memory was called into question this week, it touched off a debate about whether an 81-year-old is mentally fit to run the country. "My memory is fine," said Biden, defending himself at a news conference Thursday. He went on to talk about tensions in Gaza and mistakenly referred to the leader of Egypt as the president of Mexico. No matter. The system is set up so that the chief executive can be a complete moron; it won’t make any difference. The ship stays on course. Unfortunately, it is on course for its own destruction. That is, it is headed to more inflation and debt.
Fortune: "Jamie Dimon says Washington is facing a global market "rebellion" because of the tab it is racking up, while Bank of America CEO Brian Moynihan believes it's time to stop admiring the problem and instead do something about it. Elsewhere "The Black Swan" author Nassim Taleb says the economy is in a "death spiral", while Fed chairman Jerome Powell says it's past time to have an "adult conversation" about fiscal responsibility. A debt crisis is the ‘most predictable crisis in US history.’ We all see it coming. And yet, according to former House Speaker Paul Ryan, it’s not “yet on top of the political agenda.”
Iceberg Ahead! Meanwhile, ‘The Hill,’ calls it the ‘biggest cause of America’s decline’: "Uncontrollable U.S. Debt: The U.S. Debt Clock displays the inevitability of American decline -a “ticking time bomb” of data and financial evidence - especially the following three. The U.S. government’s total unfunded liabilities - the combined amount of payments promised without funds to recipients of Social Security, Medicare, federal employee pensions, veterans’ benefits and federal debt held by the public - stand at $212 trillion, and are rapidly increasing. For context, that number was just $122 trillion as recently as 2019 and is projected by the Debt Clock to reach $288.9 trillion by 2028.
But how did the iceberg get so big? And why is it getting bigger? It is the most obvious danger in the North Atlantic; why are we heading straight for it? Let’s look more closely at ‘inflation.’ There, we may find an answer. There’s more than one cause. Here’s how they work:
Monetary inflation is simple. The feds ‘print’ up money to fund their boondoggles and reward their cronies. The extra cash and credit increase the money supply and raise prices. But the government doesn’t just hand out franklins and jacksons on the street corners. They borrow the money from the big banks, thereby increasing the nation’s debt.
Fiscal inflation is another way to increase prices. The politicians spend more than they raise in taxes. Again, the idea is to redistribute wealth, from the people who earned it to those groups favored by the political caste. The extra spending gives people cash to spend. Prices rise. And again, the government borrows money to cover the spending; debt goes up.
Crooks and Cronies: Many economists claim that government borrowing doesn’t actually cause inflation, because it merely takes ‘liquidity’ from savers and transfers it to spenders. The amount of ‘liquidity,’ remains the same. But what really happens is that while the amount of money may remain constant, the volume of useful goods and services goes down. Savers might otherwise support new factories and new businesses, thereby increasing output. Instead, the money goes to fund the feds’ fantasies and boondoggles, lowering real output. Prices rise.
And this is a good place to introduce a new concept, what the French call ‘inflation normative.’ There are ‘normes,’ regulations promulgated by the deciders in Paris or Brussels (home of the European Union bureaucracy.) These rules add up, year after year, benefiting specific groups, at the expense of everyone else. Some favored cronies and special interests get more of what they want. The rest of the population is hassled and hampered by pettifogging rules…and ultimately pays more for the goods and services it wants.
Give Up, Drop Out: For example, we are putting a wood stove in a little apartment that we are building in an outbuilding at the farm. Left to our own devices, we would connect it to an existing chimney. “You can’t do that…” says the plumber. “Why not?” “It’s not up to the ‘normes.’ All wood stoves need to be connected to a stainless steel tube in the center of the chimney.” “Well…okay…I’ll drop a tube down the chimney.” “No, you can’t do that. It has to be done by a licensed plumber.”
Just this week, a new rule increased the parking fees in Paris, for us, by 200%. We have an old, diesel-burning SUV. Henceforth, we will pay three times the regular parking fees – if it is allowed into the city at all. These are minor things – for us. For others, the inflation of regulations makes life not only more expensive, but almost impossible. The old give up and retire. The young drop out.
Complying with government ‘normes’ – like government spending itself – is counted in GDP. And people who apply them and enforce them are counted as gainfully employed. But ‘inflation normative’ gives us a false picture; real output goes down…and the debt becomes harder than ever to pay. More to come…"
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