Finance / Government Watch / Politics

Eight Economic Truths – In 700 Words

inflation
President Joe Biden delivers remarks on COVID-19 and the economy in the East Room of the White House.

Ok, bear with me. In 700 words, here are eight economic truths.

First, Inflation is at a 40-year high nationally, 8.5 percent in April, and is projected to stay high. Some sectors are getting shellacked. Inflation for used cars and trucks was 22 percent, gasoline 44 percent, and fuel oil 80 percent.

Second, high inflation has two big causes. The first is the Biden team’s hostility to fossil fuels, slowly crippling the U.S. energy sector, imagining fast renewable energy. Federal regulations, penalties, shutting down pipelines, fracking, drilling, licenses, and production ended U.S. energy independence – despite enormous fuel resources. Second, massive federal overspending drives inflation. 

Third, U.S. growth seems high – but is low. As we shed low growth from COVID lockdowns, the perception is that we are gaining. That is only half the story. Moving from .001 to .002 is a 100 percent jump, but hardly four percent growth (as under Trump). We may even face two-quarters of negative growth.

Why does this matter? Why do high inflation, the two real causes, and deceptively low growth – described as high growth – matter? Because of a fourth major truth.

Fourth, the Federal Reserve aims to reduce inflation by presuming we have an “overheated economy.” They will do this by raising interest rates. The idea is that when we have high growth when everyone is trying to buy things and production lags, then prices rise, and the Fed tamps those down by reducing runaway demand. Higher rates mean a higher cost of borrowing – so people borrow less, and things slow.

But wait a minute. What do we know? Is this a time of booming demand, an “overheated” economy? No. THIS inflation is caused instead by cuts in fossil fuel production and massive federal overspending.

Raising interest rates – apparently another 1.5 percent this year, already at five percent – will not fix the emasculated energy sector or fiscal irresponsibility. With all deference, higher rates will just slow the economy further, causing higher job losses.

Fifth, watch unemployment. As prices rise, unions will argue for higher wages. This always happens, creating a cycle of wage inflation, pushing added price inflation, etc. Ironically, wages are already a problem since federal giveaways and COVID money dried up the worker pool, elevating wages.

So, think about it. If hiring people is already expensive and higher interest rates brings down borrowing, investing, spending, and hiring, what will happen? Growth will slow, and unemployment will rise. Firms will hire fewer people because doing so is more expensive, and demand for what they make is falling.

Sixth, the Federal Government will, of course, report on all this – they must. Politicians sympathize with the unemployed consumer, blame each other, blame Russia, blame the weather, blame the private sector, and give away more free money, which is never free and will only drive inflation higher.

They call this cycle “stagflation” – like stagnation and inflation – which happened under Jimmy Carter. With unending Democrat actions, we could see double-digit inflation and double-digit unemployment.  That would be, well, rather bad.

But seventh – there is a hopeful truth. NONE of this bad news is permanent; it is all reversible. It is all fixable. Needed, as you know, are just serious leaders who will cut federal overspending, bringing debt, deficits, and entitlements under control, ending federal giveaways, restoring fiscal responsibility.

Maybe in a year, we could restart our energy sector, push toward 20 million barrels a day, restore U.S. energy independence – lower prices for everything, gas, food, heating oil, and raise employment again.

Calling a-spade-a-spade, we could lower interest rates, causing every sector to rally, re-igniting the stock market to keep returns, pensions, and savings up. This would trigger investment and spending.

Here is a real secret. While Biden pushes high inflation, high unemployment, and low growth, this can all be fixed. Restoring stability, jobs, and consumption restarts the economy. Recovery can follow in November 2022 if Republicans regain control. In 2024, we can introduce Biden’s misguided team to a concept – unemployment, up close and personal. Call that the eighth economic truth. What do you say?


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Gil
21 days ago

Sounds good but if the Republicans take control of congress and senate and we have two more years of recovery, many of the uneducated voters will think it has to do with Biden and vote for him again. We must stay vigilant and be ready to do something if this happens.

Richard Mineti
30 days ago

Sounds good – they all have to go in this year!

JEFFREY JONES
1 month ago

Arrest the whole biden administration for treason!!!!

Anthony
1 month ago

I think your absolutely correct and read David Bahnsen’s new book “250 Economic Truths”. We also need another Donald Trump in the Whitehouse to guide the process.

Drue
1 month ago

Not even Carter was as economically dense as Biden. All Joe has to do is reintroduce the Trump policies that were in place when he took office. But that won’t happen as Obama, Soros and their far left cronies are pulling Biden’s strings. God willing, even the most dense voters will see the light and clean out both houses of congress in November. If not, it does not look good for America’s future.

Anthony
1 month ago
Reply to  Drue

Drue I could not agree more

Lynn
1 month ago
Reply to  Drue

Drue you’re right…Biden is dense but his puppet masters are not. And the Biden crime family, many of our leaders (I’m being kind) and corporations are so beholden to Chinese interests and new world order types I say they are traitors. I can’t see how our side will ever win another election when there is so much in fighting in our own ranks and most of the press are quislings.

PIDL
1 month ago

I just posted a couple of items that “Awaiting Approval”. The first I cannot determine why they would have to approve it. The second has some quotes from Wikipedia about CFR members. I can se why they would not want that information out there.

Gerhard Usinger
1 month ago

There is hope that we can reverse this. Starting with the next election. It really is simple to just reverse the damage that Biden has done.

Jerold
1 month ago

And let’s go Brandon!!!

Patriot Will
1 month ago

Biden is swiftly destroying our economy. Even if we just focus on Biden’s hostility for fossil fuels and his overspending and printing money like the US is part of a monstrous ponzi scheme, there is no real attempt to save our country from fiscal ruin. It’s so ironic that there still are about 30% of Americans who believe that Biden is doing a good job.

PIDL
1 month ago
Reply to  Patriot Will

By printing more money they can reduce the value of the borrowed money. This is why they are doing this. They are trying to reduce the amount owed to China.

PaulE
1 month ago

Here’s how I sum up everything you’ve laid out so eloquently:

ELECTIONS HAVE CONSEQUENCES! Whether legitimate or not, elections matter.

When the office of the President is turned over to a lifelong career politician, who was never the brightest bulb in the room and who has all the symptoms of early to mid-stage dementia, the outlook is never going to anything to boast about. One would expect a disaster and that is what has been delivered. When you add in the fact that everyone should have known Biden would be surrounded and controlled by an administration formed almost entirely of Obama-era people, failed “progressive” academics with no track record of success, the fire alarm bells should have all been going off non-stop before election day 2020.

The fact that the Democrats were also brazen enough to spell out in plain language exactly what they would do, if they regained total power of the WH and Congress, was the cherry on top of the dog poop sundae they were offering up should have set off air raid sirens across the country. Yet everyone in Washington seems content to ignore all this and instead pretend everything coming out of the Biden administration and Democrats in Washington is either a surprise or the result of incompetence. Until you’re willing to address the reality of the situation, you can’t formulate a proper corrective response.

As for your expectation that the midterms will drastically alter most of the issues you’ve laid out, you of course know that almost every one of the items you’ve listed are controlled or influenced by the President. Congress can’t make the Federal Reserve do anything. Congress can’t tell the individual departments and agencies of the federal government to reverse the destructive policies of the Biden administration. All Congress can do is withhold budgetary funding for the various parts of government. In regards to the Federal Reserve, it is self sustaining entity that actually generates a surplus at the end of each fiscal year, so budgetary threats in that direction would fall flat.

Since it is plain that the leaders of a GOP controlled House and Senate would be McCarthy and McConnell, both men terrified of ever standing up in this fashion, that card is off the table. Potential relief will have to wait until the next Presidential election in 2024, if the country can survive the balance of Biden’s term in office.

Max
1 month ago
Reply to  PaulE

GOOD SUMMATION, Paul E.

PaulE
1 month ago
Reply to  Max

Is everyone else getting just a little bit tired of these “everything will be magically fine after the midterms” articles? Especially when they are NOT based on any implied or actual promises or commitments from most GOP members running for Congress. It’s almost the end of May and we still have NOT seen anything like a plan from 99.99 percent of Republican politicians running for Congress. I mean blowing smoke only goes so far and at some point, they have to commit to something.

Max
1 month ago
Reply to  PaulE

Onboard with you.

PIDL
1 month ago
Reply to  PaulE

Too many skeletons in the closet of all these politicians. The people that have all of the dirt are the ones in control.

Rik
1 month ago
Reply to  PaulE

As usual, you’re right on PaulE!

PaulE
1 month ago
Reply to  Rik

There is way too much rose-colored glasses in a lot of these articles. Name just 3 things that all Republicans running for Congress have committed to doing, if they get elected? You can’t, because they all haven’t even agreed to one thing that they will do if elected.

Bill on the Hill
1 month ago
Reply to  PaulE

Paul, your comment brings to mind Perdue, running for Georgia’s next governor, attempting to oust the incumbent gov. Kemp, ain’t gonna happen…
Both Perdue & Kelly Loeffler when running for the Senate, struck me as weaklings, I see nothing different this time around with Perdue once again running for office, this time for governor, he projects weakness to me, the people of Georgia will not vote for him in enough numbers to clinch the win or to put it another way, the political machine ( cronies ) in Georgia will adjust the numbers accordingly, just like the senatorial runoffs, I predict more of the same from that crooked state…
Bill… :~)

Kim
30 days ago

Looks like Kemp will be running against that horrible woman, Stacey Abrams. She recently declared that GA is the worst state to live in! Now, that’s a winning platform!!

BluIdSue
1 month ago
Reply to  PaulE

If you drink the Kool Aid…

“Ignorance is no excuse for not knowing the law.”

Same with voting you get what you vote for. Still waiting to hear from Trump Hotel’s what a lousy employer he is. He knows the hotel doesn’t survive if the rooms are dirty. Think about that. Biden has never had to worry about how things get done and who gets it done.

Rachel
1 month ago

I say that you nailed it. Thanks, now all we have to do is MAKE Mr. Biden read this article and tell him to do what it is stated. Good luck with that.

Demeter
1 month ago

If the RINOS gain control, it will be more of the same. Both parties need to grow a brain and a heart and some common sense. And all those legislators over 70 need to be fired, resign, or die.

edward
1 month ago
Reply to  Demeter

Correct, that is why the republican party needs to go the way of the whig party and a convention of states needs to implement not only term limits but limits on time “served” in politics.

PIDL
1 month ago
Reply to  edward

No one is required to follow the current constitution or laws. What makes you think changing them will make any difference at all.

Kim
30 days ago
Reply to  Demeter

Age is not a factor. Most RINO’s are still better than socialists in Congress, so please vote accordingly.

DEAN
1 month ago

TRUMP WON THE WHOLE WORLD KNOWS IT!

Art
1 month ago

Howdy RBC,– Miracles don’t just happen when it comes to our current and dangerously inept administration. Repairs and recovery will take time. So much damage has been done and there is more in the making because of these persons of questionable resolve. Is the public finally catching on or are the sheep grazing well?? Wait until the bills come due. Will they get it then? I wouldn’t bet on it. We are several years away from some balance but we have to throw the garbage overboard now. I am mature enough to have survived the early eighties. I just found a bank book for a CD that was paying 14%-15% interest in 1981 and 1982. . Huge rates today are at 1.5%. THIS TRAIN WRECK MUST BE STOPPED.

PIDL
1 month ago
Reply to  Art

Everything takes time! No one knows how much time it takes unless they are the ones doing the job. And they seem to assume everybody else’s jobs do not take any time. Businesses are real bad about this. And some things like this take a huge amount of time. I think of the old analogy about 2 battleships. They turn the ships to aim the guns rather than turn the guns! Politicians are even slower. They need to waste time and not do anything at all, except maybe impeach a president with false claims.

Kim
30 days ago
Reply to  Art

Some of those sheep are grazing fat and happy, although delusional, but I know several former dems who have moved on to greener pastures and will vote Republican. I, too, remember Carter’s inflation, and we bought our first house at that time, paying 17% interest on the mortgage.

Peter Semiraro
1 month ago

No, we have to raise the Fed funds rate a lot more to stop inflation. Volker had to induce a recession, so will Powell if he were courageous but he is so scared of causing a recession and destroying the Democrat party, he will not. He wants this slow growth, higher inflation economy, particularly with energy prices, so he forces the green, woke agenda on the country. This will fail and at some point we will have a serious recession if not worse. The longer he waits to really raise rates,the worse the pain will be.

Paul W
1 month ago

“What do you say?”
I say, well said RBC. The fix will require winning, first in ’22 and then in ’24. Easier said than done. The dims SHOULD get annihilated in November, but will they? They are the champs of voter fraud and election tampering in a myriad of ways. I expect lockdowns ahead of the election as well (See-Surrendering our medical sovereignty to w.h.o..). Second, in addition to winning, the “R”s have to seat not just quantity, but quality. There is currently very, VERY little quality on the right side of the aisle (none on the left…sorry I don’t consider manchin or sinema to be quality. They are occasionally reasonable…for political expediency no doubt) and more of the same won’t fix anything. I pray that it all comes together, as the fix in the article describes. If not…

PIDL
1 month ago
Reply to  Paul W

All of the politicians are afraid to do anything that will jeopardize their re-election, hence their income. Perception is the key. They spit out enough messages that indicate they are actually doing something and are on a certain side of an issue. But they never really do much. It is just like votes in congress. One side knows there is no way of getting a bill through, so some may jump ship to make it look like they believe a different way, knowing that their vote will not change the outcome.

Paul W
1 month ago
Reply to  PIDL

Exactly right. It’s nearly all kabuki theater and the VAST majority of people in Congress have FAR more in common with those on the opposite side of the aisle than they do with us lowly “peasants” that are paying their salaries…and are supposed to be REPRESENTING US!

HOMER SIMPSON
1 month ago

NICE PEP TALK… however, you left out some minor details… “democrats’ corruption,” The Sun’s impact on the climate…, lawlessness in the streets, lawlessness in the corporate board rooms, lawlessness in the courtrooms, (activist judges and unethical lawyers/LIARS), lawlessness in the FBI, CIA, DOJ, DOD, etc etc etc… the butt sniffing in DC is so bad that it is now endemic and part of the federal structure… you have folks with access to top secret and sensitive information LIKE NATION SECURITY issues sleeping in the same bed with folks no ones are married because they retain their respective names! Journalists licking the tires of any politician for a lollipop or 5 seconds of fame! SCOTUS is compromised, JUDAS PRIEST! Law enforcement doing egregious selective enforcement allowing mobs to harass our last bastion of HOPE, Intimidation of a law abiding judge should be punishable by a felony charge, yet these folks maybe intimidating an activist judge so who cares? Trump figured all of this out yet, evil in the worst form rose up and smothered good! not everything is measured in DOLLARS$$$$$$$$$$! Without The RULE of LAW, there is no hope!

Bob Olden
1 month ago

For those who have never considered the Biblical prophecies of the end times, this economic madness makes no sense. But if God says there will be pestilence (world wide pandemic) and famine (food shortages which impact all countries), and wars and rumors of wars (nuclear powers getting ever closer to open conflict and actually happening in Ukraine), and lies and perversity getting worse and worse (as personified in the Democratic Party)— everything makes perfect sense. The message is this: “Get ready for the End! Repent and humbly ask God to forgive and save us! Our problem is not politics! It is SIN.” (See the book of Jonah in the Bible.)

Patrick Reilly
1 month ago
Reply to  Bob Olden

Whether I agree with you or not, this does not move the conversation forward about what we are going to do to help those in need. Washington, especially those in charge, does not feel the impact of any “flation” they inflict upon us peasants. We need to focus less on the end times, while still being excited by Jesus’ impending victory. People are hurting. We should give ourselves to impacting that problem for the good instead.

Tom Perkins
1 month ago
Reply to  Bob Olden

People read what you wrote about Jonah and think your wrong but the bottom line is your right.

James Jensen
1 month ago

I must have an electric pick up truck. Every time I put gasoline in it, I get SHOCKED.

PIDL
1 month ago
Reply to  James Jensen

LOL

Morbious
1 month ago

Theres a core problem here. The illustrious thomas sowell refers to it as a conflict of visions. We know bits and pieces of the leftist vision but a fuller view entails the logical consequences of their policies, none of which are blunders or accidental. Basically they dont like anything about how this country has developed since 1945. The suburban single family home, multiple cars, disposable income…they despise all of it. The reason is that they fear and hate independence in those who should be their subjects. The seven points are demolishing the economic powerhouse this country became, on purpose, by design. Theres a desolation at the center of these people and they wont stop until they’ve made everyone miserable. Fixing this will take more than reactionary spasms. A blueprint is needed to keep them minding their own business.

PaulE
1 month ago
Reply to  Morbious

Thomas Sowell states the issues so eloquently and concisely in comparison to all the political pundits grasping to try and plug overly simplistic solutions (the next election, send more donations to the NRC, etc.) being offered up as some sort of a magical panacea. Nothing the Biden administration or the Democrats are doing is unusual or unexpected given their ideological nature and the need to control and subjugate the masses to their will.

Socialists, by any name they choose to call themselves, all share the same core principles, means and objectives. We have a very straightforward problem that has metastasized in this country over a century, which unfortunately now necessitates a straightforward response to correct the situation. That is if we want the country to properly recover. We can continue of course to dance around the problem, if we choose to do so, but then the disease will only spread until the country finally dies from it. Frankly, I have my doubts that the vast majority of the American people have the will to do what is necessary for the long haul. Most Americans today seem fixated on looking for quick fixes, that always prove ineffectual.

Morbious
1 month ago
Reply to  PaulE

So far the will to do what would be needed is not there. Life goes on much as before. Conservatives are often afflicted with ‘niceness’. This manifests as a willingness to let leftists continue their destruction. Hey, they have their pov too is the motto. The will to cauterize this infected wound is as yet far in the future. More suffering comes first.

PIDL
1 month ago
Reply to  Morbious

Niceness is called “civility”. The problem is the Democrats are not “civil”. But they know that is what the Republicans will be. So they do not worry about it. Now Trump was not “civil”. That is why they hated him and anyone else not afraid to confront them. They will use any technique available to them to bring down their enemies. I pushed for term limits about fifty years ago and got the same response we are getting now. The President has term limits. Why should any other elected official in the federal government not have the same restrictions.

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