How blessed we were! It’s been four decades since we had to deal with rampaging inflation. Even those who lived through the last one in the late 1970s have tried to forget the pain. Since then, we’ve happily lived with 2 and 3 percent annual rates, and those seemed tolerable.
So this new bout, three years and counting, has struck people in remarkable ways. An entire generation is figuring out that when ravages of inflation come along, no one and nothing is spared. And it doesn’t go away easily. It permanently and deeply wounds the standard of living for everyone.
On Monday, the newest Consumer Price Index (CPI) will be released. It will likely show no improvement over last month. The headline will again report that inflation has stabilized or is evening out or gradually improving or some other nonsense designed to keep the public calm and stupid.
Still the reality is unavoidable. The dollar has lost an astonishing 20 cents of its value (domestically, in terms of its exchange ratio with goods and services) from three years ago. And it will continue to decline. No coincidence here: there is a direct correlation with expansion of the money stock.
And finally we see mainline venues trying to figure out what it all means.
Still I gave the article a fair reading. As I read it, it is not as stupid as it sounds. The writer is making an honest point. But for an entire generation it is a bit of a shock. The shock is this: even if inflation falls to stay at zero percent, prices themselves will not fall. An inflation rate of zero does not mean that we go back to 2019 prices. It means that existing prices are the new normal.
In this way, the article is valuable. It’s a revelation to many that there will be no deflation back to where we were. We are permanently worse off. Even if inflation is “conquered” we are still stuck with what we have. If this is obvious to you, you are very much in a minority. It’s just now dawning on vast numbers of people.
For most of 2021 and 2022, the Biden administration strongly implied that the plight of people under inflation was temporary. Actually the word they used was “transitory,” which sounds like temporary but it is not. Transitory means to transition to something. We were transitioning to a lower standard of living in a great reset. They just didn’t say it this way.
Our Vox writer grabbles with this scary reality.
“I don’t pretend to have all the answers here, but I think one thing is quite clear: People really do not like paying more for stuff than they used to. That doesn’t mean American consumers aren’t still spending — they are — but they’re mad about it. In June 2022, consumer prices were up by 9.1 percent from the year before, hitting a 40-year high that summer. In September 2023, they were up by 3.7 percent over the previous 12 months. (The Federal Reserve’s inflation target is 2 percent over the long term.) In other words, prices aren’t going up nearly as fast as they were before, but the cost landscape still stings.”
It’s rather remarkable that this is even news. But when you consider all the gaslighting we’ve endured, we have to spell it out.
Try out this analogy. While you are away from home, someone steals the living room television. But Janet Yellen shows up. She explains that this was merely transitory and that you should not worry. Every night, the family gathers on the sofa and waits for the TV to return. One day, the washing machine goes missing, and Yellen shows up again to assure you that all is well, that the stealing will soon end.
After two years, someone in the household finally breaks the bad news: these items are gone forever. It comes as a blow because you thought you heard otherwise, and believed. Now you are furious at what has happened. The local police assure you that they are getting crime under control so you should calm down.
Still, you are suddenly aware that you have to buy a new TV and washing machine and that justice will never arrive.
That is where we are today. We’ve been robbed in one of the greatest head fakes in history: the stimulus payments have been paid for with a dramatically lower standard of living. They made you fake rich before making you authentically poor. This is just about the most rotten thing a government can do to people’s personal finances.
Back to our friend at Vox. She makes two astounding errors.
First, she says that an actual deflation would be worse. That’s utter rubbish. That’s exactly what we need. Will that lead to a generalized downturn? Maybe not, even if it might harm specific sectors that need to go anyway. The greatest rates of growth ever seen in U.S. history during the Gilded Age occurred in a time of rising valuation for the dollar.
Second, she says that the inflation is compensated by higher incomes. That’s simply not true. The higher incomes are a symptom of the inflation and they buy no more than they did four years ago. They have only adjusted to the new normal.
Nowhere in the article does the writer name the culprit: the Federal Reserve. There is no way that Congress could have authorized some $8 trillion in spending if the Fed had not volunteered to buy the new debt. They did so with freshly printed bills, thus watering down the value of everything else.
Then the Fed added insult to injury by pretending to fix the problem it created. The result is another inflation, this time to interest rates. Now millions of Americans are trapped as prisoners in their own homes, fearing a sell because they cannot afford the rates on a new mortgage. Meanwhile, the credit card companies are getting ever richer.
This is the kind of chaos that inflation has caused. The damage is done. There is no fixing this.
As our writer concludes: “The rate of inflation really is slowing (and, if all goes well, will continue to do so), and the disorienting nature of what’s happened in the economy over the past few years will likely fade. Post-pandemic prices will eventually feel normal, and post-pandemic wages should make those prices more feasible — or at least not significantly less feasible than they were before. Sooner or later, sticker shock will feel a little less shocking.”
Which is to say: they pillaged you. Don’t forget. Don’t forgive.
