The Free Lunch Is Over

For those who were thrilled at the stimulus checks they received during the covid pandemic, a good lesson is about to be shared.  Now we come to the point where all the “free” money comes home to roost.  Congress has pumped so much money into the economy that it has overstimulated demand and encouraged unemployment.  For the near future we can all expect prices for our everyday purchases continue to rise and far exceed any gain in your pay.

History’s economic fundamentals don’t change just because you want them to.  They are straightforward, understandable, and repetitive.  Too much money chasing too few goods is the historical and modern catalyst for inflation.  We are there; we can feel it every day; and it hurts those who can least afford it.

We are in an economic box of historical proportions.  To slow inflation, the FED must raise rates.  But raising rates will trigger a recession.  So, we are left with hopes pinned on Chairman Powell and his ability to engineer a “soft landing.”  Unfortunately, the FED has a 100% perfect record of never accurately anticipating a recession nor engineering a “soft landing.”  A spike in interest rates will make the interest on the national debt unsustainable, further weaken our currency, and perhaps strengthen China’s claim as the world reserve currency.

In the 1970’s the FED brought an abrupt halt to inflation through a bold move.  They intentionally drove up rates to shrink the economy by shutting down credit availability.  This was the shock needed to right the ship.  Do we have the tough leadership needed in Congress or the White House today?

This is not a Democratic versus Republican issue.  Successive administrations from both parties have been on a drunken spending spree started by President Johnson and continued uninterrupted to today.  But we have another major difference in the current economic times brought on by a polarized, poorly educated Congress, and a populous with little understanding of economics.

Say a little prayer for Chairman Powell and the Nation each night as you go to bed, he and we all need it.