Today’s topic is inflation, a popular subject recently. A higher trend in prices of goods and services has reemerged due to the flood of liquidity the Federal Reserve created to save us from the shut down of the world economy which was created to save us from Covid-19 which was probably created in the Wuhan lab with our own money provided by Anthony Fauci to save us from President Trump being re-elected in 2020. It worked out well for Fauci’s supporters, I would say.

It also solved the Federal Reserve’s claimed problem–that it could not ignite the 2 percent inflation the modern Fed says we must have in order for economic progress. It tried valiantly from 2008 onward to jack up our cost of everything, but never could get inflation over the hump until it printed new trillions and put them into the checking accounts of almost all of us.

Since once upon a time in the 1930’s our country suffered a world trade collapse caused by the Smoot-Hawley Tariff Act with a hoarding of dollars that we experienced drastic deflation, the economic experts in charge have done their best to make certain that prices go up and not down. (Good thing they have not paid attention to the price of computing power and televisions because the price of those just keeps dropping decade by decade in real terms.)

One publication continuously shining light on the unsoundness of our dollars is Grant’s Interest Rate Observer, founded by James Grant, a frequent guest on Lou Ruykeyser’s Wall Street Week program of PBS. At $1,425 per year, it is my most valuable subscription for its 24 issues. I grimace when I renew, but I cannot find its collective wisdom anywhere else in such compact form.

The February 2nd edition has its cover column entitled, The Inflation We Choose. Perspective and context are among the most important factors of wisdom and here is some for us. At the beginning of President Bush’s first term, our debt was about $5.5 Trillion. As a percentage of our Gross Domestic Product (GDP), it was only 55 percent.

As we elected President Obama in 2008, it was about $10T. At the end of his term, it totaled $19.98T and equaled 105% of GDP. Please recall the Fed had declared in 2009 that Zero Interest Rate Policy was absolutely necessary to resolve the mortgage mess and return us to economic health. (We experienced the slowest recovery in US history, but they learned nothing from that.)

President Trump is a real estate developer so he obviously did not ask for higher interest rates. Then our Covid-19 salvation cost us another $5T in 2020 alone!

By President Biden’s first year, we reached a new parabolic angle of increase. In the first 37 months of his term, we have added $6.4T and the total sums to $34.1T. The debt to GDP ratio is now firmly above 120 percent. Soon we may be talking about real money.

Jim Grant notes that it required 222 years of our republic to reach a $14T total, but only 7.1 to add another $14T to it. But what difference has this made to all of us?

The 1913 dollar created under the initial Federal Reserve Bank now requires $31.35 to buy the same product. This is described as 3,034.6 percent inflation. https://www.usinflationcalculator.com/) For most of its years, the Fed had one task—protect the value of the dollar. But they still have jobs making a lot of money. How is this possible? Mr. Grant suggests that we all must prefer inflation or we would rise up and demand Congress, the President, and the Fed to do better.

Pogo (of the eponymous cartoon) might have said, We have met the enemy and he is us!

(Grant’s Interest Rate Observer, Volume 42, No. 2, 2024, www.grantspub.com)