As in Executive Order 11110 kind of daring, more or less

 

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What Causes Inflation?

From a discussion in Hitler’s Table Talks, we have an alternative viewpoint:

Inflation is not caused by increasing the fiduciary circulation. It begins on the day when the purchaser is obliged to pay, for the same goods, a higher sum than that asked the day before. At that point, one must intervene. Even to [finance minister Hjalmar] Schacht, I had to begin by explaining this elementary truth: that the essential cause of the stability of our currency was to be sought for in our concentration camps. The currency remains stable when the speculators are put under lock and key. I also had to make Schacht understand that excess profits must be removed from economic circulation.

Ooh—no more Mr. Nice Guy! (Further into the discussion, the former German chancellor had some choice words about the usual type of clever economists whose shtick is “to pour out ideas in complicated meanderings and to use terms of Sibylline incomprehensibility.” That seems like a fair description of postmodernism, doesn’t it?) Back in the good old days, Germany set up a bureau that regulated prices and wages to prevent a return of the notorious Weimar-era hyperinflation. It’s still in effect, and changes require careful negotiations. The system still works to hold inflation in line, though they’re not giving much credit to the guy who mandated it.

Aside from exorbitant markups and profiteering that Literally Hitler discussed, as well as increases in fuel and raw materials that I discussed, the more conventional viewpoint about inflation is that money itself is subject to the laws of supply and demand. There certainly is something to it. Scarcity is what makes money valuable. The kings of old were well aware of what happens when a country debases its currency. Still, that didn’t stop quite a few of them from coining funny money to cover budget deficits.

If vast quantities of money can be produced out of thin air—quite easy these days—then this reduces the value, creating a strong inflationary pressure. Think of fiat currency as fairy dust that holds value because people believe it has value. Cryptocurrency isn’t the answer; it’s fairy dust too, and a lot more powdery than dollars. These days, it’s quite easy to crank out paper money. (By far, the greater part is numbers in a computer; no need for printing presses to go brrrr, brrrr, brrrr.) Don’t try this at home, kids—when private citizens produce greenbacks on their laser printers, it’s called counterfeiting, and the government hates competition!

No discussion of inflation would be complete without the role of coin-clipping banksters. To make a long story short, fractional reserve banking is when money from depositors is lent out at interest. Banks must retain a certain percent in reserve for the sake of liquidity. (The original 1863 rate was 25%, more recently it was 10%, and now it’s zilch.) Interest rates change over the years, but presently you get chump change from an ordinary savings account, 7% on a new mortgage, 8% on your car note, and 22% on credit card balances—and a lot worse if you have bad credit. I’ll add that the banksters get a piece of the action on transaction fees, yet another coin-clipping trick. (It’s typically 2.87%-4.35% per transaction—surely this adds up to an impressive heap of lettuce!) Lately, costs are passed onto consumers, since businesses no longer may write it off on taxes.

Needless to say, interest payments for plebeians like us is like feeding money into a paper shredder, but the banksters see things entirely differently. What a racket! That’s some nice vigorish from funds that don’t even belong to them! It’s OPM, as they say in the biz—other people’s money. Of course, when an astronomical pile of moolah effectively gets doubled up like this, then this increases the money supply and reduces the value of cash in circulation, and suddenly your greenbacks now buy less. It’s all about the supply and demand, right?

The Top of the Pyramid

In the USA, the prime interest rate is set by the Federal Reserve. Although it sounds like a government institution, it’s really a private banking consortium which usually rakes in tens of billions of vigorish from its own operations. The plan was devised in late 1910 at a meeting on Jekyll Island—a rather portentous name. The attendees deciding America’s economic future in this private shindig were Senator Nelson Aldrich and banksters A. Piatt Andrew, Henry Davison, Arthur Shelton, Frank Vanderlip, and Paul Warburg yes those Warburgs.

In 1913, Congress passed the Federal Reserve Act, effectively delegating to them its authority to “coin money and regulate the value thereof” under Article 1, Section 8, Clause 5 of the Constitution. (This was, of course, right in time for funding the vast military expenditures of America’s century of forever wars—which unfortunately seems about to go into extended overtime.) It would be hard to imagine the voodoo economy without this massive edifice looming in the background.

Reducing the prime interest rate serves as an economic stimulus during the business cycle’s hard times. For one thing, it makes it easier for businesses to borrow money to expand their operations. Consumers will be incentivized a little further to shop ’till they drop on their credit cards, ultimately boosting corporate balance sheets. If inflation gets too high, the Federal Reserve chairman will pop a Viagra and crank up the big dial. To control inflation, higher rates begin to reduce the amount of doubled-up money lent at interest when loans become less affordable. Of course, this produces a massive headache for the public when their credit card rates get even more punishing, housing and car notes get more expensive, and so forth.

As it is, the Federal Reserve system is a blunt tool, but it stabilizes the boom-to-bust business cycle to a certain degree. (I’ll spare you the details about the ripple effects of interest rate changes on the bond markets and private equities.) The disadvantage is that it gives a small group of unelected figures control over an important economic input. Anyone who has metric tons of leverage, and—ahem—a magic crystal ball that predicts what the Fed is about to do, can profit tremendously. That would be quite difficult to prove after the fact, but all that is another discussion entirely.

The Federal Reserve also acts as the government’s big credit card. Unlike you, Congress can raise its own credit limit to whatever it wants. (This is usually accompanied by much heated budgetary debate.) As we’re surely well aware, America’s federal finances are out of balance—very much so. To get things back in balance, one way is to raise taxes. This could be political suicide. After Bush the Elder broke his “Read my lips—no new taxes” pledge after getting backed into a corner economically, it was a major factor that cost him the reelection. After him, Cupcake and her sidekick Chubby Bubba took a lot of heat for “tax and spend” policies. Still, until the Second Wargasm, the budget was balanced and the national debt millstone was starting to get chipped down for the first time since the Spanish-American War.

The other way to take on the deficit is to cut programs; this too is often greatly unpopular. For one example, military expenditures make up a very large chunk of the budget. This will continue so long as America is getting into wars for our Israeli buddies and otherwise playing Globocop. Then there are lots of big-ticket entitlement programs. (Work harder—tens of millions of slackers are counting on you!) Social Security is another very large chunk of the budget, and nobody wants to short-sheet Grandma, especially after she paid into the system for many years. While it was making a profit, the surplus was gobbled up by the federal budget since the LBJ administration, if I recall correctly. It worked when the large Baby Boomer population was in the workforce, but the figures started slipping after they began retiring. Then the party was over in 2021, when Social Security payments started exceeding intake from taxes. By 2033, the Social Security reserves will be depleted, and unless something changes before then, Grandma is due to take a 20% haircut—and you too, if you’re as ancient as I am.

No matter what the clever economists say, and of course the sneaky globalists, the answer does not involve mass migration to pump up revenue. Spain found out the hard way that the “pension payers” the government imported, promising an economic miracle, were an overall drain on the national budget, as well as more trouble than they’re worth. One study in Germany following about a million of Mama Merkel’s Syrian refugees (most of which were neither) found that only eleven of them got jobs, including just one in the private sector. The welfare tourists haven’t gone home yet, of course. In fact, there’s not a single country that benefited from admitting hordes of cardiovascular surgeons, quantum physicists, and aerospace engineers floating across the Mediterranean on rubber dinghies. Japan’s government at last began letting in migrants in the effort to prop up the economy to support their aging population. (They’re not pulling their own weight, of course, and are otherwise up to their usual cultural enrichment. Although I’m not the least bit Asian, I certainly hate to see their nice country taking the path to ruin.) The USA added close to 100 million non-whites to the population since 1965; yet another 100 million won’t produce better results.

American politicians, being the creatures they are, instead make up the budget deficit by hitting the Federal Reserve credit card. Rather than making hard and politically risky decisions, politicians punt the ball to future generations. The Federal Reserve facilitates the production of treasury bills. Effectively these are bonds which eventually have to be paid back with interest. The Clintonian “tax and spend” policies became “borrow and spend” under Bush the Younger. Thanks to improvident politicians—who all too often can’t handle their own finances, as the Congressional check kiting scandal of long ago demonstrated—this has created a yawning chasm of T-bills which will come due. At the time of writing, the American national debt adds up to $38.7 trillion and change. Now that’s a lot of lettuce!

The Effects of Runaway Spending

What happens from lending out such an astronomical amount to prop up the budget, effectively creating money out of thin air? The end result, of course, is quite similar to what happened when kings started substituting silver-plated copper coins for the real thing. This effectively creates a hidden inflation tax, picking the public’s pockets. Could a future government default on the debt? Technically, it’s possible, but the economic ripple effects would be tremendous. Just for beginners, it would blow up lots of stable mutual funds, gutting retirement accounts. As for trying to borrow more sovereign debt after that, we’d be in the same position as Greece in 2009, forced to accept loans at exorbitant rates to float their sinking ship of state. There would be much more to the economic apocalypse after that.
Now open your Form 1040 instructions, and on the page before the index, you’ll see some helpful pie charts telling you where it all goes. In FY 2025, 13% went into net interest on the debt. Then after that:

In fiscal year 2024 (which began on October 1, 2023, and ended on September 30, 2024, federal income was $4.920 trillion and outlays were $6.751 trillion, leaving a deficit of $1.831 trillion.

The astronomical numbers involved can seem rather unfathomable. Everyone knows a million is a pretty nice chunk of change, but eyes often glaze over when zillions are reckoned. So let’s move the decimal point seven places to the left and put this in terms of a household budget. Your annual income as of October 2024 was $492K—hey, congratulations, rich guy! Before you go shopping for another Lamborghini, note that you spent $183K more than you earned then. You fed $88K of interest into the paper shredder, despite having the very best rate in the country. As of today, your credit card balance is $3.87 million. Perhaps you’ve got a cash flow problem there, rich guy!

Now Riddle Me This

Why can’t the government write mortgages with reasonable terms for carefully selected buyers as an alternative track for bank financing? It already guarantees loans. Instead of just assuming risk with no reward, the government could be making profits that would help the federal balance sheet without raising taxes, cutting spending, or stiffing Grandma. I understand that Italy began such a program intending to boost their steeply declining native fertility rate by making housing affordable for young couples. It’ll be interesting to see where it goes.

Now I’ll get more daring—as in Executive Order 11110 kind of daring, more or less. We haven’t been on the gold standard since I was a kid, and it was effectively a dead letter long before then. Therefore, there’s no need to borrow from massive banks with a dragon’s hoard of bullion in their vaults. Why can’t Congress just float its own bonds under its legitimate Constitutional authority instead of going through the Federal Reserve? Heck if I know. I’m not a Klugscheißer economist; I’m just a dumb blond from Flyover Country.

Beau Albrecht
From: Inflation and Other Dysfunctions of the Voodoo Economy

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