These ideas run consistent when we consider the ongoing buildup to the global force majeure of World War 3.
I normally do not include any economic and financial analysis that Joel Skousen brings with his World Affairs Brief, but in this instance, I will. He brings up an interesting theory regarding the inflation of the money supply.
The crux of his analysis is that the FED is not only monetizing debt, but actually literally printing money, hiding it, and handing it out directly. This is what nations like Venezuela are doing.
If any of this is remotely true, which I’m beginning to believe it is, because inflation seems to be persistent, the average person on the street is going to continue to be wiped out financially over the next several years. The federal government and the Federal Reserve will not let asset prices and thus tax revenues be destroyed like many are contemplating.
Keep in mind of the trillions of dollars in spending that the governments need to incur in order to prepare the world for World War 3. This is the real reason why China is incurring the wrath of government lockdowns. Xi and the CCP are preparing their citizens. It has nothing to do with covid.
My theory is that the average citizenry will demand a new currency if the current system is hyperinflationary. A deflationary set of circumstances is not going to cut it. Hyperinflation and war have always been the tag team used to get people to submit to circumstances they normally would not accept.
This seems to be coinciding with the loss of faith in the current monetary system and in fiat currencies in general. I noticed the concerted effort of the mainstream press to begin emphasizing the weaknesses of fiat currencies. When inflation is caused by a loss of confidence, the outcomes will be very dire. I suspect that the central banks are literally printing money at this point and hiding it from official statistics in order to facilitate the nation-state buildups to World War 3 and wealth consolidation prior to the Great Reset. By the time the average citizen on the street realizes any of this, which I doubt the vast majority will ever discover, it will be way too late for them to act.
The reason why I include this particular analysis is that Mr. Skousen is an expert in military affairs, and this is bleeding over as none of this runs independently of one another anymore.
HIGH INFLATION IS HERE TO STAY
Inflation rates are the highest in decades, even according to the official “Consumer Price Index” which is manipulated downward by excluding the fastest rising prices, even though we all feel the pinch of higher prices everywhere. This is bad news for the incumbent Democrats because high inflation is the number one complaint of voters heading into this year’s mid-term elections, and there are signs inflation will continue to be a major issue well into 2024 as well. It may seem contradictory to still have rising prices when all the economic indicators point to a recession, driven in large part by rising interest rates currently at 7%. But interest rates don’t tell the whole story. High interest rates only kill demand in those parts of the economy that depend on debt—consumer credit card debt, mortgages on housing, and business interest for growth and expansion. The recession is hitting in those areas right now, but actual inflation of the money supply by the FED is NOT stopping as only part of the new debt is being monetized. Increasingly, the FED is using secret back channels to create money by stealth and feed it to its favored banks here and abroad. So, for the first time in economic history we are facing stagflation for the middle and lower income people (who curtail spending as their ability to buy at higher prices diminishes) and continued price increases in consumer goods driven by those with deep pockets who can still afford to pay, and for those still on the receiving end of the FED’s new money (Wall Street insider brokers, speculators, and military contractors, and all those downwind of their spending). Even though housing sales and new starts are declining rapidly, high housing prices are only leveling off and declining slowly. In fact, I think real affordable housing will not happen again until there is a major recession or war comes and wipes out people’s money to buy big-budget items.
Stagflation is the normal result of high inflation (10-20%) because the majority of people lessen their spending and the economy deflates. That’s what keeps hyperinflation at bay, because people’s fixed incomes and salaries can’t keep pace with high inflation.
You only get hyperinflation when the government mandates (or allows) that everyone’s income and salary be indexed to inflation. That way even though salaries and pensions lag behind slightly, they rise quickly enough to keep pace with inflation. And that indexing pace accelerates the higher inflation gets. As everyone’s income rises, there is no longer as much resistance to price increases and thus, both prices and wages keep rising—hyperinflating.
We don’t have indexing in the US except for Social Security (SS), but even that Cost of Living Allowance (COLA) of SS is kept low by tying it to the downward manipulated Consumer Price Index (CPI). We do have an informal system of dealing with the kind of moderate inflation (7-9% annually for the last 20 years—the real rate) through labor supply and demand wherein workers begin to demand higher wages the worse inflation gets—but that always lags way behind inflation, as any salaried worker knows—especially when the government hides the real rate by a manipulated CPI. Even the new de-facto minimum wage of $15/hour now hardly seems to make a difference with today’s high prices.
Pensioners and retirees with no inflation rider to their monthly payments are being hurt the worst right now—especially when the government keeps creating money which flows first to favored Wall Street banks, and government contractors. All that money trickles down as it is spent into the economy. Those that get the first, second or third use of fiat money get to buy before prices rise. Later users, especially those on fixed income, face rising prices and suffer the loss of buying power.
The biggest indicator of stagflation is the steep decline in inventories among retail firms as well as the slump in shipping and trucking business, owing to fewer demand for consumer products. The Fall time period creates a peak demand for shipping as retailers stock up for the Holiday sales. But that peak is flat this year as most retailers are planning on selling off a lot of inventory and stocking up on less. Zerohedge.com covered this drop in demand for ocean shipping and trucking in detail here.
Inflation, Rising Interest Rates and the National Debt
In the fiscal year 2021 total interest expense of the federal government on the national debt and social security was $413 billion, with a low average interest expense of about 1.5%, against total federal income of $4 trillion. That equates to about 10.3 percent of federal income spent on debt.
I can remember when it was calculated about a decade ago that at the then current rate of deficit growth, the federal interest on debt owed would exceed total revenues by about 2030. That would mean technical bankruptcy. But that was assuming a total budget that was not growing exponentially like it is today. The 2021 budget was a whopping $6T with only $4T in revenue—creating a deficit of $2T which had to be made up with government debt.
Apologists for the debt used to say, “the federal debt is no problem, we just owe it to ourselves.” But that is fallacious on two counts: First, very few of us own Treasury Bills, Notes or Bonds. We owed it to those who did. Second, foreigners own almost 50% of the federal debt today so those interest payments are flowing out of the country.
The bottom line is, I don’t believe we will ever reach the point where the interest on the debt absorbs all federal income—because inflation continues to cause Americans to pay more in taxes as their rising income slowly rises and two, because each successive administration continues to raise their total budget even faster than the rising interest on the debt.
That is precisely why the FED can’t stop inflating the money supply—lest the interest on the debt catch up with revenues and force a US debt default. But that only works, as I’ll explain shortly, if the FED doesn’t monetize all debt—but increases part of the money supply secretly without debt.
Monetizing debt is about to get more problematic with higher interest rates. That’s why the FED artificially kept rates low for so many years despite 7-9% real inflation—to avoid paying high rates for T-bills, notes and bonds. Notice that the FY budget of 2021 interest debt was based on a rate of 1.5%. Now the Fed is having to pay twice that much in interest (2-4%) and that’s going to double interest payments to over $800B in the 2023 budget. But it still won’t ever catch up with government total income or spending which is rising even faster. Notice this analysis by establishment firm of Pete Peterson:
The United States has borrowed nearly $6 trillion in the past two years, in large part because of the pandemic and the response to it. The cost of that debt, as paid in interest, has actually declined during that period because maturing debt has often rolled over at lower interest rates.
Actually, it wasn’t $6T but over $13T that the government created (that we know about). Only $6T was monetized as debt. The other was created and given away secretly to Wall Street and foreign banks, to bail out the sagging markets or European problem banks. Even the $6T publicly admitted to was highly inflationary as much of that was given directly to people to spend as a Covid payment, but the other $7T is still working its way into the economy, adding to price inflation.
However, as interest rates creep up, interest costs will eventually rise. CBO [Congressional Budget Office] projects that interest costs will grow from $331 billion this year to $910 billion in 2031 — a nearly threefold increase.
That’s grossly understated. Total national interest payments could reach $800B next year!
Over the next 10 years, without any changes in current policies, [a big “if”] CBO estimates that net interest will total $5.4 trillion (over 10 years) and become the fastest growing component of the federal budget. In 2031, interest costs would account for 12 percent of the entire federal budget.
But that’s only a modest percentage increase over the current interest payment of 10.3% of the federal budget, and that’s assuming a budget of between $7 and 8T. I’ll bet the total federal budget will at least double that by 2031. The CBO keeps downplaying the inflation of overall budgets into the future which skews their analysis:
Over the next 30 years, the sum of net interest payments is projected to total more than $60 trillion; by 2051, that budget category would take up nearly half of all federal revenues.
Of course, that’s assuming their modest estimates for overall budget growth. There is no way, given the current federal direction, that they are ever going to let interest rate payments get to half of total receipts. In order to stop interest payments from consuming half the budget, they have to inflate the currency without monetizing all of it, and that’s what I believe they are doing. Any economist who believes the FED money supply figures anymore is very naive.
Furthermore, the US isn’t the only one inflating. In fact, every other nation in the world economy welcomes US inflation because they get to hide their own inflation hoping that their currency values will stay on par with the declining dollar. Everybody appears to win when exchange rates are staying stable relative to the dollar. The trouble is other countries are inflating more than the US (as a percentage of their economic output) and thus their currencies are falling relative to the dollar.
Britain is in a financial crisis of high inflation and a declining value of the Pound, which is one of the reasons the government of Liz Truss failed so soon after coming to power. The Euro is also falling against the dollar. How can that be given the US is in the highest rate of monetary inflation ever? Simple: The Brits and the EU are inflating even faster relative to the ability of their economies to absorb new money.
So is Hungary which is in a currency crisis of falling values. Even behemoth China is in trouble from overspending in its desperation to get its military ready for war with the West. King World News has that insight:
Big Trouble In China: We just saw the largest annual depreciation in the Chinese yuan in 27 years. China is much closer to having a full-blown banking and currency crisis than winning a hegemonic war against the US.
Wrong. It’s not “either or” but both—because China is spending for both war preparations and domestic programs without much restraint.
Gregory Mannarino writing for the Trends Journal: If central banks do not find another mechanism to continue to inflate, IMMEDIATELY, the entire global financial system will melt down. The current central bank-run financial system is 100 percent debt based.
What this means is a debt based financial/economic system can only function if more debt is constantly added/borrowed into existence—and the moment this stops, the financial system in its entirety implodes.
That’s where he and others are wrong. Legally, the world expects Central Banks to monetize currency creation by issuing debt, but the “other mechanism” Mannarino demands is already being utilized —pure fiat money creation without debt, but done in secret (except that it shows up in even more inflation).
War, expanding wars, Congressional acts/policies, disease processes, warp speed vaccines, drugs, engineered crisis after crisis, etc. are all mechanisms pushed upon an unsuspecting public to pull debt relentlessly and exponentially into the system.
Yes, these crises, purposely created by the Deep State, do justify more debt but all this demand new money for “government to save us” also hides the secret fountains of monetary creation which are exacerbating inflation. Most of it goes to bailouts of Wall Street banks domestically, and bailouts of European banks externally, which are off the books.
Currently the world is being sold a lie, which is inflation is running rampant because rates are too low. The fact here is simple: raising rates is meant to KILL demand, [in certain sectors] not lower inflation [overall].
To lower inflation, [in all sectors] all the Federal Reserve or any central bank must do is contract the money supply. If in fact the Federal Reserve really wanted to lower inflation, they would increase the capital reserve requirement of the banks, which currently sits at zero, this would contract the money supply.
The last thing that ANY central bank, especially the Federal Reserve wants to do in this environment is to contract the money supply, in fact, they want to expand it/inflate it. [Because that would collapse the entire financial bubble we are living in]
The power of any central bank resides in ONE THING: its ability to inflate, period!
That is why inflation will keep rising, despite interest rate increases—which only dampen a portion of the economy. Even if Trump wins in 2024, he can’t control what the FED does in secret, even if he understood the mechanisms (which he does not) and will face continued complaints of high inflation. Of course, the coming world war will change all this for the worse, and give the globalists an excuse to wipe away national sovereignty and debts and start over with a new global system—or so they think.