Poor Man Survival
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A Digest of Urban
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What
Does Free Money Cost?
Economists think paying
back what we owe is a relic of history. Are they nuts?
If you
don’t save for the future, you will starve. This is a truth that people learned
from early in human history. It is obvious to all who farm, hunt and preserve
food, and who watch the weather and climate. It is an ancient principle put
into practice long before the creation of money, credit and just-in-time
inventory management. Saving for the future is what people everywhere used to
believe in.
Today, the United States is $28 trillion in debt. We have no
savings. There is no emergency fund. We have already spent the taxes on future
earnings of our grandchildren—and their children.
But if you believe America’s leaders, everything will be fine
because none of that matters anymore.
Leaders in Washington, Wall Street and even Main Street believe
in a new economic theory. Politicians love it, because it makes saving for the
future obsolete. It theorizes that deficits and debts are actually good because
their main effect is to stimulate the economy. It theorizes that we won’t
ever really have
to pay back borrowed money because our central bank can create unlimited
numbers of dollars out of nothing—at the push of a button. The theory has a
name: Modern Monetary Theory. Believers view it as a modern monetary miracle, a
way to push economic problems into the future forever.
These theorists think they have transcended the basic laws of
economics.
Can you borrow money and spend it without ever having to pay it
back? Can you print massive amounts of money out of thin air without destroying
its value and making everything more expensive?
We are going to find out.
Print and Spend
Since the onset of the covid-19 lockdown and resulting economic fallout,
the Federal Reserve has increased the nation’s money supply to record levels.
Over the past 12 months, the M2 money supply—which includes cash, checking
accounts and other easily spent money—has ballooned by more than 27 percent!
In other words, one out of every five dollars of
all the easily spendable money in existence since the founding of this nation
was created over the past 12 months. And the Federal Reserve has used much of
that money to buy trillions of dollars of government bonds, treasuries and even
people’s mortgages.
This is how it works: The U.S. Treasury prints a bond, which is
basically just a promise to pay back borrowed money with interest. It sells it
to the Federal Reserve in exchange for dollars that the U.S. government then
spends. Where does the Federal Reserve get dollars to buy bonds? This is where
the modern monetary miracle comes in. The Fed doesn’t earn dollars by providing
goods or services or anything else, or even by collecting taxes. It creates
dollars out of thin air. It has the ability to add as many zeros to its bank
account as Washington wants. With the push of a keyboard button, it can expand
its dollar supply to approach infinity.
But according to the Federal Reserve, there is nothing of
concern here. In March, it quietly announced that it will no longer publish
weekly data showing the number of dollars coming into existence.
“They are trying to hide something,” said Steve Hanke, professor
of applied economics of Johns Hopkins University. “They don’t want people paying
attention to money supply growth.” As Hanke pointed out, “[Federal Reserve]
Chairman [Jerome] Powell has very explicitly claimed that money doesn’t matter
in recent testimony. He’s basically said that money and the measurement of
money doesn’t really matter because it’s unrelated to inflation.”
Hopefully Mr. Powell is right, because the U.S. government is
spending a lot of it. Consider the scope of the “stimulus” bills over just the
past 12 months:
$2.2 trillion for the Coronavirus Aid, Relief and Economic
Security Act of 2020.
$2.3 trillion for the Consolidated Appropriations Act of 2021.
$1.9 trillion for the American Rescue Plan Act of 2021
$6.4 trillion! Where did all that money come from?
Some of it was borrowed and will have to be paid back with interest.
But an incredible $3.6 trillion worth was created with the stroke of a pen and
a push of a button.
Pantera Capital gives some context. With the first trillion
dollars the United States printed throughout its history, “We defeated British
imperialists, bought Alaska and the Louisiana Purchase, defeated fascism, ended
the Great Depression, built the Interstate Highway System, and went to the
moon.”
What did we accomplish this past year with $6.4 trillion?
Initially, the government distributed money to businesses and
individuals, many of whom had lost income because the government shut down much
of the economy. This was one of the first times in American history that the
government gave direct cash handouts to individuals. The government also
increased unemployment benefits and issued grants to businesses. But much of
the money went to other uses.
Now more than a year has passed since the first covid lockdowns.
Official unemployment has dropped back down to just over 6 percent, gasoline
demand is approaching pre-covid levels.
Housing prices are setting records all over the nation. And the stock market is
reaching record highs.
Yet the stimulus spending plans are not even close to over.
Looming Inflation
The Biden administration is currently working on a $2.3 billion
infrastructure bill in addition to another $2 trillion American Families Plan
infrastructure bill. “Together, the ideas inside these plans aim to redefine
what infrastructure is, by bolstering ‘human infrastructure’ along with
everything else,” writes Slate. “[It’s]a
new kind of American populism.” More accurately, it’s American socialism.
This spending comes in addition to the regular $1 trillion
budget deficits the government was running before it began shutting down the
economy.
And contrary to Fed Chairman Powell’s claims, the economic laws
of supply and demand are asserting themselves. More money (due to money
printing, government spending and government handouts) chasing a constant or
shrinking supply of goods (due to the global lockdown) means the same goods and
services cost more dollars.
“A little inflation feels
good at first, because wages are rising, and people feel richer,” investment
adviser Jared Dillian said. “But the laws of economics are not to be conned.
What Powell is doing is what I call central
bank populism. [T]here is inflation in the beginning. At the
end, there is revolution.”
Notice the price of lumber lately? A sheet of plywood at your
local hardware store now costs more than $65. A standard 2×4 costs $7. Average
lumber prices have surged close to 200 percent over the past year. Why? Because
of supply shortages due to government-mandated factory lockdowns and soaring
demand due to people with government handouts remodeling their homes.
Gasoline is also becoming more expensive, with prices nationwide
averaging $2.86 per gallon before the summer driving season has even hit. Corn
is up 67 percent year over year. Corn syrup is in just about everything. Wheat
is up 24 percent. Milk is up 9 percent.
This is not just happening in America. Governments worldwide are
printing money to spend. Prices for basic necessities like food are rising. The
United Nations Food and Agriculture Organization reports that food prices are
up 24 percent over the past year to the highest levels since 2013. Remember the
Arab Spring? Some say that, like so many revolutions before it, it began as a
hunger revolt.
Other commodities are costing more dollars this year too.
Copper: 82 percent more. Silver: 62 percent more. Texas oil: 28 percent more.
Concrete: 60 percent more.
Powell and the Fed assure us that the inflationary effects will
be moderate and temporary. His comments sound eerily similar to former Fed
Chair Ben Bernanke’s comments that the subprime mortgage bubble was contained.
That infamously led to the Great Recession of 2008.
One big difference between that crisis and this one is where the
Federal Reserve has directed its response. In 2008, the money it created
through quantitative easing was injected into the banking system. It caused
asset inflation in financial sectors like the stock market and the housing
market, but it kept the banks from collapsing and caused less inflation in
consumer goods than many people feared. This time, the cash is being sent
directly to individuals and businesses. When spending increases, the velocity
of money could send inflation soaring and the value of the dollar plummeting.
In other words, massive money printing did not fix the
fundamental economic problem in 2008, nor has it fixed the problem this year.
We temporarily papered over a volcanic economic upheaval, and it cost us
mountains of money to do it.
“Two years, we will be at $40 trillion in debt, and in two years
after that, if we continue this stimulus we are going to be at $50 trillion”
said Jim Puplava at Financial Sense Wealth Management. “At some [point], these
debt levels are unsustainable.”
The U.S. government was running trillion-dollar deficits under
presidents Barack Obama and Donald Trump. And that was in relatively good
times.
“If you are spending $6 to $7 trillion per year to stimulate the
economy now, when the economy is recovering, what do you do when you get into a
recession?” Puplava said. “How big will the stimulus have to be to get out of
the next recession or depression?”
How sad that we are even asking this question. America is the
wealthiest nation in world history. Yet its economy is doomed.
Why doesn’t America manage its resources better?
https://www.thetrumpet.com/23964-what-does-free-money-cost
NOTE:
America
was founded by rugged individuals who created a government to secure their
rights and leave them alone. Some Americans today want the government to
violate other people's rights, steal their stuff, and give it to people who
complain the most. Has
the home of the brave become the land of the freeloader?
Nothing
illustrates this point more than the latest bailout plan by Congress. The Nancy
Pelosi led progressive wing passed the “American Rescue Plan Act of 2021”. Unfortunately,
the only real “rescue” offered will be red carpet benefits for illegal
immigrants, pork-barrel Green New Deal projects and deficit-busting plans to
enact student loan forgiveness and a permanent unemployment check for those who
“don’t feel like” working.
SIDEBAR:
Vaseline is
an American brand of products made from petroleum jelly. Petroleum jelly has
its roots as a by-product of the oil refining industry in the 1800s. This
unique, jelly-like substance has many uses and a long shelf-life, making it
well-suited for homesteading and survival situations.
Vaseline makers suggest a 'best if used by' date of around three
years for a new container of Vaseline. However, anecdotal evidence shows people
may be using their jars for as long as 5 to 10 years. Given its long
shelf-life, you may want to stock up on Vaseline so you have it on hand for its
many homesteading and survival uses.
Keep reading to learn about the many survival uses for Vaseline...
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We Are
at the Top of the Bubble – Alasdair Macleod | Greg Hunter’s USAWatchdog
Useful stuff
Liberty
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Staying informed could be a matter
of life and death.
That’s why federal and state
agencies advise that every American home should have an emergency radio.
Don't
get caught off guard during a lengthy quarantine or natural disasters.
Preparation is, as usual, the absolute key...
https://www.bonanza.com/listings/Liberty-Band-Emergency-Solar-Radio/975136935
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2 comments:
UKs Thatcher once said socialism works until you run out of other people's money; this will happen here as idiot Biden et al spend america into oblivion.
Like you've suggested, I'd stock up on household goods NOW! Even leftist Bank of America told its stock holders that hyper-inflation is on its way [big corps don't care as they pass costs onto consumers]
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