It is the first week of the month, meaning we can expect a new ADP jobs report on Wednesday and the foolishly much-anticipated BLS jobs report on Friday. Based upon whether jobs created in March based on the report beats or misses expectations, President Biden will either gloat about the results or talk about something else.
Biden is certainly not unique in this respect. Every president since the report was created has tried to take credit for the jobs created during his administration. In most cases, pronouncements on this subject are carefully worded to read literally that “XXX jobs were created during my administration,” acknowledging that perhaps some other factors contributed to the supposed new jobs than the dear leader’s will and mighty actions alone.
So, at least we have that.
Nevertheless, the tweet we can expect from the president on Friday, BLS willing and the creek don’t rise, will imply heavily that it was his policies that are directly responsible for the hundreds of thousands of new jobs the report says were created the previous month.
There are several problems with this whole scenario, the most serious among them being that the Federal Reserve considers this report (or an alternative report based on the same methodology) in deciding how to conduct monetary policy going forward. Voters also take these reports seriously, to the extent they remember them on election day, and certainly the pronouncements of the incumbent president on the total number of jobs created during his previous term.
The first thing people should understand is the jobs report is largely fiction. It is not a literal tabulation of the total number of jobs created minus those lost. No one knows that information. Rather, the BLS conducts a phone survey, applies some formulas, and largely guesses how many jobs were created. It’s not as if there is nothing to it, but it is a very imprecise tool. That’s why it is common for the BLS to significantly adjust its findings for previous months while reporting the latest findings. And even the adjustments are based largely on voodoo.
Think climate change models. Or Covid mortality projections from March 2020. The BLS jobs report may or may not be quite that bad. But as the great Vincent Vega would say, “It’s the same ballpark.”
But while poking holes in the methodology of the jobs report is good fun for nonbelievers in the government religion, it misses the main point: trying to ‘create jobs’ in the first place is dumb. It is economically counterproductive. It’s the opposite of what any for-profit business should be trying to do.
Whether bringing a new product to market or simply trying to remain competitive in an existing market, businesses are constantly trying to produce more products at lower cost. The most significant costs for most businesses are labor costs. Therefore, businesses are constantly trying to produce more output with less employees.
2024 is a presidential election year which means both major political parties will be telling their fairy tales about how they have in the past and will again in the future, if you will only elect their man, “save America.” It’s important to remember that both political parties are “progressive” parties, however one of them may object to that appellation. The Republicans merely embody the original progressive profile: fervently Christian, Republican, and corporatist.
The only difference in the Democratic Party is the Christian part. They are equally as religious but have replaced Jesus Christ with “Gaia” or more commonly “the environment.” But otherwise, they’re essentially the same.
We will hear much this year about the supposed gulf in ideology between the two parties. One claims to champion free markets, individual liberty, and limited government, while the other claims to look out for the little guy, protect the earth for and from future generations of humans, and pursue a more “equitable” distribution of wealth.
But once in power, either party will essentially do the same thing with only slight differences in emphasis. They will both govern as progressives have governed for the past one hundred plus years. And it is important to realize that, once the sales pitch about “progress” is set aside, progressivism boils down to one, giant rip-off. Military adventurism, business regulation, fighting climate change, and even “diversity, equity, and inclusion” are all part of it.
Certainly, there are people who genuinely believe in these things, just as there were during the early progressive movement. But they are the true “useful idiots.” The people who will actually make any of the latest progressive initiatives reality are all crony capitalists in bed with the government, just like a century ago.
Before the progressive era, the traditional way for governments to rip off their citizens was military spending. The highwater mark was war. A war that would cost $150 billion in today’s dollars was made to cost $500 billion instead, with the “profits” flowing to contractors, politicians, and other parasitical fauna. So, every government that thinks it can win is on the lookout to gin up a nice, juicy little war.
But even outside of war, military spending has been and remains a scam. The United States fought a 20-year war in Afghanistan, accompanied by several other military adventures in the Middle East including the large one in Iraq. When the last of these was supposedly ended in 2021 – and before the war in Ukraine began – military spending was still scheduled to increase in 2022.
Another day, another set of classified documents found in President Joe Biden’s possession. Just in case anyone missed the first two times that this is an inside job by the Democratic Party to ensure somebody besides Biden heads the party’s presidential ticket in 2024, a third cache of documents was revealed on Saturday.
They’re so committed to making this an ongoing news story they’re even working weekends. It’s a old but effective trick to make one event that happened years in the past seem like multiple events recurring in the present. “Breaking! Five more classified documents discovered! Gasp! Red alert!”
The most important thing to remember about all of these classified documents scandals is what they are not. And that is they are not any real concern for the public. The media and interested political operatives would have you believe these documents contain information so sensitive that their falling into the wrong hands could result in us all speaking Russian or Chinese. They don’t.
The truth is there are very few secrets national governments try to keep that allies and adversaries alike haven’t stolen. The government likes to portray itself as secretly protecting the public from all sorts of unseen danger, both state-sponsored and otherwise. “If you only knew what goes on behind the scenes, you’d be terrified,” they’d like you to think. Many of the bureaucratic rank and file believe this themselves.
In reality, most of what even the national security state does is cooked up nonsense to justify legions of government drones and billions per year in wasted spending. The histrionics over the discovery of compromised classified material is usually just political posturing. If it weren’t, then we’d have seen some significant consequences by now from the classified documents stored on Hillary Clinton’s infamous private server, which even podunk governments in Eastern Europe and Africa probably have their hands on by now. We haven’t and we won’t.
When the alarm over mishandling of classified documents is genuine, it isn’t for fear of any danger to the public. Everyone should realize that’s the last thing these people are concerned about. What they are concerned about is the real reason most of these documents get classified in the first place: the embarrassing to themselves or potentially incriminating information the documents may contain.
A month ago, Europe was facing a prospective humanitarian disaster. Having no substantial natural energy resources of its own and having virtually eliminated its nuclear power capabilities, its loss of Russian energy imports threatened to leave hundreds of millions in the freezing cold.
The good news is Europe does have a plan to muddle through this winter. They have stockpiled enough reserves to avoid disaster this year, as long as it is not abnormally cold, and Russia doesn’t cut off what gas it is still exporting to Europe before the weather breaks.
The bad news is Europe has a plan to muddle through this winter. That they will be able to avoid catastrophe means there is no reason the war can’t continue through next summer. Even war cheerleader CNN admits there may be a much bigger problem next winter, but for now Ukrainians and Russians will continue to die before their time.
And while Europe won’t have an historic calamity on its hands, things will still be bad there, especially for the most vulnerable. Just as with Covid lockdowns, the laptop and latte class will repeat vapid slogans like “We’re all in this together” while people on the margins struggle with choices the former can’t even fathom, like between energy and food, or medicine.
So, in addition to the deaths on the battlefield and collateral civilian deaths, many will die of cold in Europe this winter who wouldn’t have otherwise.
The Biden administration continues to support Ukrainian President Zelensky’s position to fight the Russians until they relinquish all former Ukrainian territory, including Crimea. Western media continues to bolster this departure from reality. Last week, Newsweek described Biden’s statement that Putin “could just flat leave, and still probably hold his position together in Russia,” as “an off-ramp” for Putin, but one he probably would not take.
The last part is true. Putin isn’t going anywhere. Neither is the Russian army suffering major losses of territory. As Colonel Douglas Macgregor said during his appearance on Tom Mullen Talks Freedom, Russia controls a “banana-shaped” band of territory from the Luhansk Oblast (roughly “province”) to Kherson, north of Crimea, and down to the sea along that line. 95 percent of Ukraine’s GDP is produced in this Russian-controlled territory.
Anyone inclined to question their federal and state governments, the national media, and corporate America – aka, “the establishment” – wonders how much longer the American public can possibly go on believing what they’re told. The long-suspected “liberal bias” of the media has morphed into outright falsehoods told the public about Covid-19, Ukraine, “climate change,” and a host of other issues.
One after another, previous narratives enforced by de-platforming dissenters has crumbled, although the establishment seeks to cling to as much of the previous narrative as minimally plausible.
For example, natural immunity to Covid was at first ignored as if it didn’t exist at all. Then, it was reported as waning faster than vaccine immunity. Once it was undeniable that natural immunity was broader, more robust, and more durable than vaccine immunity, the focus was shifted to the superiority of vaccine immunity and natural immunity together over merely natural immunity.
Why at that point were people with only natural immunity excluded from participating in large swaths of civil society while those with only the inferior vaccine immunity not excluded? A few people screamed about it; most did not. The dissenters were censored or simply drowned out by establishment information.
A particularly egregious lie perpetrated throughout 2020 and 2021 was that immunity to previous infection no longer existed after antibodies were no longer detected in the blood. Forty years after my last biology course, I knew this had to be wrong. Doesn’t the body remember previous infection even after antibodies disappear from the blood?
Of course it does. It’s called T-cell and B-cell immunity. B-cells produce new antibodies upon new exposure to the same virus and T-cells kill infected cells directly. This is not new or controversial information. But even now, people seem to operate on the assumption that immunity from previous infection ends once antibodies are no longer detected in the blood. The establishment does everything it can to encourage this false belief.
Then, there are the “safe and effective” vaccines themselves. Americans were told by no less than the president himself, in addition to presumably more reliable sources, that the vaccines would keep them from getting infected with and spreading Covid. When that untruth was no longer defensible, the establishment tried to tell us they had never said any such thing, that the vaccines would only prevent serious illness from infection.
This begged the question of why, if they did not prevent infection and transmission, the vaccines would be mandated for employment and/or admission into publicly accessible spaces. If the risk to others is the same with or without the vaccines, what is the justification for the mandates?
Again, a few people asked; most did not.
Now, evidence is mounting that the vaccine is not only ineffective, but not as safe as previously advertised. Certainly, it is important to question all claims about the vaccines, positive and negative. The theory that Covid vaccines are a plot to depopulate the earth don’t seem to jibe with reality. But neither does the claim they are completely safe.
Alex Berenson was recently reinstated on Twitter following settlement of his lawsuit for de-platforming based on his reporting on all the lies of the Covid Regime, including the exaggerated danger of the disease itself, the ineffectiveness of the nonpharmaceutical interventions (lockdowns, mask mandates, etc.), and the ineffectiveness and danger of the Covid vaccines. Had the company been able to definitively disprove any of his reporting, no settlement would have been made.
“Promoter of misinformation” Steve Kirsch is willing to pay any “doctor, professor of medicine, epidemiologist, or public health official anywhere in the world” $50,000 to demonstrate on camera where his information on vaccine deaths is incorrect. There have been no takers.
Kirsch recently presented evidence from multiple sources of massive spikes in daily deaths five months after significant vaccine rollouts.
President Biden’s student loan forgiveness plan has inspired criticism from both sides of the political spectrum. The right decries the unfairness to those who either paid off their student loans or worked their way through college without them. The left says the $10,000 ($20,000 for those who received Pell grants) is not enough to make a significant difference for most people struggling with paying back the loans.
But the one-time, lump sum forgiveness is only the tip of the iceberg on what Biden’s plan will do. The changes to the income-based loan repayment policies are much more significant and will create far more perverse incentives. Peter Schiff did an excellent analysis of this on a recent podcast.
The Obama era reorganization of student loans under government control set limits to the percentage of discretionary income one would have to pay. Borrowers were capped at a payment of 10 percent of all income over 150 percent of the poverty level. Any remaining principle after 20 years of those payments was forgiven.
Biden’s plan makes the following changes:
Discretionary income is redefined at income over 225 percent of poverty level
The percentage cap over this level is reduced from 10 percent to 5 percent
The maximum repayment term is reduced from 20 years to 10 years.
An example given on the White House’s fact sheet says, “A typical single public school teacher with an undergraduate degree (making $44,000 a year) would pay only $56 a month on their loans.” That translates to just $6,720 over the entire ten years the schoolteacher would be liable to make payments.
$6,720 is a mere 11 percent of the maximum total loan ($57,500) allowed to obtain a bachelor’s degree. The schoolteacher would be forgiven 89 percent of the principle and all of the interest under those circumstances.
For those who choose to pursue a graduate degree, the total loan amount allowed rises to $138,500. While it’s unlikely a graduate with a master’s or doctorate would earn that little, it is certainly not unheard of these days. In that case, the borrower would end up paying a mere 4.8 percent of the principle and none of the interest over the ten years.
The White House fact sheet provides a more likely scenario for those with advanced degrees. “A typical nurse (making $77,000 a year) who is married with two kids would pay only $61 a month on their undergraduate loans.” $77,000 is also a decent estimate for the average assistant professor or education administrator during the first ten years after graduation. That graduate would pay back just $7,320 or 5.2 percent of the principle and none of the interest over ten years.
As Schiff points out, not only does this incentivize people to max out the amount they borrow to go to college, it actually incentivizes people to pursue degrees with lower returns on investment (ROI) since that is where the maximum loan forgiveness occurs. Those who obtain STEM degrees equipping them to earn much higher incomes will pay a much larger percentage of the debt they incur.
Schiff’s analysis concentrates on the atrocious economics of the plan. But there is also a political element no one is talking about.
In another especially interesting podcast, Ryan McMaken and Tho Bishop discussed the “awakening” of the right to the fact the state is not necessarily their friend, not even those institutions within the state (law enforcement, intelligence, the military) they have typically revered.
To paraphrase part of their discussion, the 20th century myth that elections are a time when all Americans “come together” to make important decisions is giving way to what they described as the more realistic, 19th century perception: that politics and elections are about seizing power and using that power to help one’s friends and hurt one’s enemies. The Biden student loan plan couldn’t fit this framework better.
Obviously, no one who has the desire and ability to get into medical or engineering school will opt to pursue a degree with lower ROI simply because they will have to pay less of their loan principle. But the reverse is definitely true. Someone who might otherwise forego an advanced degree in sociology, education, or the much-maligned gender studies will now have a virtually irresistible incentive to enroll.
Guaranteed student loans themselves have grossly expanded academia and inflated the cost of higher education, even before the government took over and removed what little market discipline remained. The ratio of administrators to teachers and students has also exploded, providing jobs for the otherwise useless advanced degrees in education administration.
Biden’s plan will allow tuitions to make another leg up in price, underwriting another explosion in professors, administrators, and students who otherwise might be forced to do something more productive. And the political views and loyalties of that combined population is close to uniformly leftist. Economics departments were once exceptions to the rule. Increasingly, that is no longer true.
While it is virtually impossible to complete a university degree in any major without being exposed to a certain amount of leftist indoctrination, it is most intense in precisely the fields of study most likely to grow the fastest under Biden’s new plan. It will not only reward his friends but grow their ranks exponentially.
The Republican Party remains viable in American politics solely because of the federal system. Were decisions made based purely on a simple national majority, all decisions would be made by the Democratic Party. President Biden’s student loan plan has the potential to produce enough left-leaning voters to overcome those federal constraints. If Republicans want to remain politically relevant, they need to dismantle this monster at their earliest opportunity.
President Biden today announced he would forgive up to $20,000 in student loans for people making less than $125,000 per year, with several other qualifications determining the amount each applicant is eligible for.
Biden’s political opponents have raised very reasonable objections to this politically motivated favoritism just over two months before the mid-term elections. What about people who paid off their loans? Why only student loans and not others arguably taken to underwrite more productive efforts than women’s studies or French poetry?
Why does someone who borrowed money to start a profitable business that employs people have to pay back its loans when someone who works a tax-subsidized job does not?
While calling out such blatant vote-purchasing for its violation of equal justice under the law and other statist dogma is perfectly valid, let’s not forget the economic law demonstrated by this bailout: the government cannot “invest.”
Politicians love to use that word for its wealth transfer schemes. “Invest in infrastructure,” “invest in working families” (which families don’t work?), and, in this case, “invest in education.”
Merriam-Webster dictionary provides two relevant definitions for the word “invest.” Government-guaranteed student loans doesn’t meet either of them:
1: to commit (money) in order to earn a financial return
2: to make use of for future benefits or advantages
Had the government’s “investments” in student loans met the definition of the word, there would be no need for a bailout. The money spent on tuition would be paid back out of the additional earnings students realized over and above what they would have earned without going to college.
That they not only aren’t in the black based on additional earnings to what they would have earned with a high school diploma, but can’t pay the loans back at all, should end once and for all the ability for politicians to claim they are “investing” in anything.
This excludes all the student loan borrowers who can pay back their loans but now will shift some of that burden onto others. Doctors, lawyers, university professors, and other affluent debtors will force plumbers, taxicab drivers, and construction workers – not to mention other doctors, lawyers, etc. who worked their way through school without student loans or who already paid them back – to pay their debts.
The grand experiment with government “investing” in higher education has produced two returns: people who can’t earn enough to pay back the loans and people who can but choose to force somebody else to do so.
All the same arguments against student loan bailouts can be made against public education in general. Why are homeowners forced to pay for public schools whether they use them or not, while wealthy renters pay nothing? Why is the service called “education” Sovietized in the first place? Is there something special about education that makes the government owning its means of production successful?
Of course not. Just look at the results. The more the government has “invested” in education, the less literate and numerate graduating students have become. Like every government-provided service, the cost keeps going up and the quality keeps going down.
Education, healthcare, infrastructure, transportation, the military – they are all the focus of massive government “investment.” And those investments all continue to produce the same returns: skyrocketing prices and plummeting quality.
Everything the government does is Afghanistan.
Investors in the private sector aren’t better people. They merely work under different incentives. When private sector actors invest, they stand to lose their own money. This powerful incentive doesn’t produce perfect results, but it produces infinitely better results than government spending. And when private sector investments go bad, no one else is forced to pay for their mistakes.
That is, unless one is on the Christmas list of the ultimate government investor, the Federal Reserve System. Its “investments” in stimulating the economy are the most damaging of all, producing steadily rising prices, artificial booms, disastrous busts, and more and bigger bailouts over time.
We have no choice but to pay for Biden’s latest vote buy. But let’s not let him or any other politician continue to call their loot distribution “investment.” Doing so should be tried in The Hague as a crime against veracity.
The Biden administration says two straight quarters of negative GDP is much ado about nothing. Like accusations of Hero’s lost chastity in Shakespeare’s play, Biden’s economy is falsely accused of being in recession, the president’s spokespeople say.
Biden’s defenders in the media concur. The Hill informs us that two straight quarters of negative GDP defines a recession in many countries but, contrary to public opinion, not in the United States. Here, there is no recession until the National Bureau of Economic Research’s (NBER) Business Cycle Dating Committee – the “experts” – declare one.
The committee looks at a broad range of economic indicators to determine whether the economy is in recession. While declining GDP is one factor, it is not the only factor. And the chief reason the NBER has not declared a recession, according to the Biden administration and others, is the “red hot jobs market.”
Nobel Laureate Paul Krugman helpfully tweeted a chart showing the relative number of jobs “added” to the economy during the presidencies of Presidents Trump and Biden.
It is true that unemployment is near historic, pre-pandemic lows at 3.6%. And although that doesn’t count the vast number of people who have left the workforce due to retirement or discouragement, the administration can still point to over 2.7 million jobs created in 2022, according to the BLS jobs report.
But arguing there is no recession because new jobs are being created rather misses the point.
Jobs are not an end in itself. The purpose of creating jobs is to produce products. One would only want to create more jobs if it would lead to producing more products. Creating more jobs to produce the same or less products wastes scarce resources.
Just imagine a manager triumphantly reporting to the owner of a company that, although production decreased in the last two quarters, the lower output was accompanied by higher payroll costs. He’d be fired immediately; perhaps referred for a mental health evaluation.
What makes a company profitable is to satisfy demand for its product with as few employees and other costs as possible. The wealth of an economy is no different. As fewer employees are needed to produce each product, more are available to produce others.
Not only does this contribute to greater wealth for the economy as a whole, but it also represents higher worker productivity and thereby higher wages.
This is why tax incentives to corporations tied to the number of jobs they’ll create is economically idiotic. While in most cases, companies will take the tax breaks and only create the jobs they need, leaving the politicians and their constituents to complain the jobs never materialized, it is really the complaining that is erroneous. Had the company created more jobs than necessary to produce its products, it would by definition be wasting resources and thereby making the population poorer in the aggregate.
It is also important to remember that what is produced matters as much as how much. A population does not become wealthier merely because the total amount of goods produced rises. It only becomes wealthier if more of what consumers value is produced.
Value can only be determined if consumers are free to refuse to purchase the increased output. Only by freely choosing whether to purchase at all and at what maximum price can the value of the new output can be determined.
This is why output resulting from government spending is at best of unknown and often of no value whatsoever. Since taxpayers have neither the opportunity to decline to purchase nor to set their own maximum price, there is no mechanism to determine the value of this output.
That government spending, currently at massive levels, is counted in GDP and GDP is still declining accentuates the fact that Americans are getting poorer in the aggregate. Not only are they producing less, but a significant percentage of what they are producing – like missiles sent to Ukraine – provide no value to American consumers.
Government bureaucrats can arbitrarily define the word “recession” any way they wish. But creating less wealth by any other name would smell as foul.
In 2020, candidate Joe Biden made it as clear as Joe Biden can make anything that the days of looking past the atrocities committed by the Saudi Arabian government would be over should he be elected. An October 2, 2020 post on his campaign website read,
“Under a Biden-Harris administration, we will reassess our relationship with the Kingdom, end U.S. support for Saudi Arabia’s war in Yemen, and make sure America does not check its values at the door to sell arms or buy oil.”
Less than two years later, President Biden is scheduled to visit Saudi Arabia in hopes of persuading the kingdom he disparaged as a candidate to increase oil production. Biden is suffering the worst approval ratings of any president in recent memory due to runaway inflation, in part the result of his own energy policies.
The trip follows Biden’s attempt to bully U.S. oil producers into boosting production, something they rightly pointed out is being strangled by the president’s own policies in the short term and economically unviable in the long term given a sitting U.S. president who has vowed to put them out of business.
Meanwhile, the president’s supporters are demanding Biden try to keep his campaign promises regarding Saudi Arabia. In an article in Foreign Policy, U.S. Senator Chris Murphy demands Biden procure real concessions from the kingdom on human rights abuses. His screed is emblematic of the departure from reality that pervades Washington on all issues, foreign and domestic.
Remember, Biden is not traveling to Saudi to offer the kingdom help. He is asking for help from them. What leverage does Murphy believe the president holds over a government that not long ago wouldn’t even answer his phone calls?
Murphy claims, “Over and over again, the Saudi government acts in ways that are directly contrary to U.S. security interests.” But he gives no examples of legitimate security interests that have anything to do with Saudi Arabia. The bulk of the complaints against the kingdom relate to its human rights abuses, which, however deserving of condemnation, do not threaten the security of American citizens in any way.
Equities markets are slightly up today while gold and oil are down as investors digest news of progress in peace talks between Ukraine and Russia. While a deal between the countries would most importantly end the bloodshed and, secondarily, ease the immediate economic pressure the war is causing, it would not end the economic war I wrote about last week.
That war was declared by the United States when it banished Russia from its SWIFT system, seized its FOREX assets, and demanded the whole world boycott Russian exports (something even many NATO allies were unable to do).
Russia’s first response was to announce it would only accept rubles in payment for its natural gas exports to “unfriendly countries.” Over the weekend, it made another move. It put the ruble back on the gold standard domestically, allowing its central bank to buy gold at a fixed price of 5,000 rubles per gram (approximately 155,550 per troy ounce).
This immediately strengthened the ruble against the U.S. dollar. On Friday, RUB/USD was over 102. As of this writing, it had dropped to just under 88.
As Tom Luongo explains, this effectively sets up an opportunity for Russia to sell oil, natural gas, and its myriad other natural resource exports at a discount for gold. This will eventually bring the ruble back to its pre-war value in USD of 75.
Washington obtusely seeks to prevent Russia from selling its gold while Russia has no plans to do so. It is buying gold at a discount based on the demand for its exports.
Even if a treaty is secured and the U.S. offers to readmit Russia to SWIFT, releases its frozen assets, and end the boycotts, it’s hard to imagine Russia accepting the offer. Why put itself in the same position again when it is holding all the cards as an exporter of vital resources with a positive trade balance?
Not only Russia but every country in the world is now on notice that any reserves it has in dollars could be rendered worthless at the whim of the U.S. government. This provides tremendous incentive for most of the world to find a store of wealth and medium of exchange other than the U.S. dollar.
Americans are not ready for the reality that will be imposed if the dollar loses its world reserve currency status.
This isn’t immediately apparent to them because they believe they have the world’s most productive economy, based on having the largest GDP. It is true that U.S. GDP priced in dollars was the largest in the world at approximately $22 trillion in 2021. China was second at $16 trillion.
The problem with GDP is it merely measures total money spent in the economy. It does not measure the value of things that were produced. Since value is subjective, it is a matter of how much an economy produces for which people would truly be willing to give up something of value in return. This willingness depends upon what is produced having what economists call “utility,” a product’s usefulness in fulfilling some purpose for the consumer, whether a need like food or a luxury like a fancy car.
A large percentage of what the U.S. economy produces has no real market value.
Rising prices are not the only negative consequence of monetary inflation. Inflation also misdirects capital towards nonproductive use. That is why at the end of a business cycle, when the economy crashes, there is high unemployment. All of the people misdirected into unprofitable enterprises must be let go and redirected towards productive work – towards producing products whose value to others exceeds their cost of production.
The U.S. dollar’s status as the world’s reserve currency has allowed its central bank to inflate the currency far beyond what it would be able to get away with otherwise. This has caused huge distortions in the U.S. economy. In other words, it has directed capital towards producing products whose value does not exceed their cost of production.
What value have Americans received in return for spending more on their military establishment than the next ten countries combined? How were they better off for the military spending 20 years and trillions of dollars in Afghanistan? How do they benefit from maintaining a global standing army that will never be used against a nuclear power, as was just confirmed after Russia invaded Ukraine?
What additional value have they received for paying the highest prices in the world for healthcare and education?
What these and other malinvestments have in common is they are not funded voluntarily. The military is 100 percent tax funded. Half of all healthcare spending is government spending. College education is largely underwritten by government-guaranteed loans, meaning taxpayers guarantee them whether they want to or not.
Even outside of government-funded enterprises, capital is misdirected towards nonprofitable use by monetary inflation. Houses and automobiles, for example, are bid up beyond their true market value because of the artificially low interest rates of the loans that make their inflated prices affordable.
Like taxation, monetary inflation transfers purchasing power involuntarily from holders of dollars to those receiving the loans. That means there is no market discipline acting upon the borrowers and lenders. No one was asked to voluntarily give up something of value to underwrite the loan. Therefore, capital is much more likely to be invested unprofitably.
Yes, all countries in the world have fiat currencies that they inflate, but no other country has been able to do it on the scale and with the impunity the U.S. has while enjoying reserve currency status. This has directed huge amounts of people and resources towards unproductive ends.
Foreigners have paid Americans to waste resources and collect salaries for non-value producing jobs in government, health care and education bureaucracies, finance, and other bubble industries by accepting American exports of dollars in return for imports of valuable products.
Removing this privilege will cause an enormous deflation of some economic sectors and the complete disappearance of others. Millions of people employed unproductively, as well as millions of others who sell to them, will be devastated. The result will be a sharp reduction in living standards for virtually all Americans outside of the very wealthiest strata.
While this cleansing of waste in the economy might be beneficial at some point in the future, it will be unimaginably painful for most Americans in the present. For a country already near a political boiling point, the economic reality on its way could blow the lid.
