Fighting Inflation

I listened to Peter Schiff's latest podcast while doing some ironing yesterday. I haven't listened to him in months, but thought it worth my while to listen to him again now. He might have picked up on something that I haven't seen myself.

I was soon reminded why I stopped listening to him. It's not that I disagree with him, but rather the opposite. We think so much alike that I no longer learn anything from his podcasts. He has taught me all that he knows, and now that I've put the pieces together, I'm seeing things pretty much exactly as he does. However, he did mention something interesting that neither he nor I have figured out yet.

The rhetorical question put out there by Peter Schiff was "how will the FED fight its own inflation going forward?" His answer, presumably off the top of his head, was that we'll see more lockdowns. However, my answer to his question would be war.

To understand how Schiff and I come to our conclusions, we have to step back in time to see how we came to where we are today. It started back in 1913, with a meeting of bankers on Jekyll Island. What followed was a series of wars, and a great expansion of western power, followed by gross imbalances between rich and poor that will in turn be followed by starvation and death if Bible prophesies are to be trusted. In any event, monetary inflation has been central in providing power to the elite at the expense of the middle class and the poor. However, monetary inflation cannot go on forever without serious consequences, and we have seen an absolute explosion in monetary inflation since September 2019, four months before the onset of the plague.

September 2019 is a very important month in monetary history, because that was the month when the FED declared defeat in its battle against the monetary inflation that it unleashed back in 2009 to save banks and financial institutions from going belly up. Up until September 2019, the FED expressed confidence in its ability to drain the liquidity that it had poured into the system in order to save it from collapse. However, the effort to do this blew up. Interest rates were suddenly taking off in a big way, and the FED had to restart their monetary inflation, now at a much greater pace. Otherwise, the whole financial house of cards would come crashing down.

Always eager to come across as being fully in control of the situation, the FED has now changed its rhetoric from "we will drain excess liquidity, and everything will be back to normal," to "deficits don't matter as long as prices on everyday household goods don't rise." The focus is now entirely on price inflation rather than monetary inflation, and the best way to manage this is to make sure people don't spend too much on goods and services. A lockdown of society was in this respect convenient. The plague came just in time to save the FED from having to fight price inflation in household goods.

With everybody locked down, people spent their time at home bidding up prices on all sorts of financial assets while cutting down on consumption. The result is what we have today. Financial assets are at all time highs while goods and services remain relatively flat. However, price inflation is starting to take off, as it must eventually do in the wake of monetary inflation, and this is where we arrive at Schiff's question. With monetary inflation now in overdrive, what will the elite come up with in order to suppress price inflation in everyday goods?

I don't think the public will take much more lockdowns, which leaves war as a realistic alternative. War is after all the health of the state. It cures whatever ills that befalls it. In further support of my thinking, we have an awful lot of sabre rattling both in the Black Sea region and off the coast of Taiwan. It's as if the US cannot wait to start another war, a little like Germany could hardly contain its urge to start a two front war right before the first world war. There's the sense that war has to come sooner rather than later. The opportunity must be seized so as to have a short and profitable war that will right whatever is wrong in the world, and conveniently double as an excuse for a reset of the financial markets. But this is no less insane than back in 1914. We're likely to end up with heaps of dead bodies and entire cities in ruin.

Mark Esper with Jens Stoltenberg

By U.S. Secretary of Defense - 200212-D-AP390-6107, CC BY 2.0, Link