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100 Year Inflation May be Upon Us

By Charles Stampul

It takes about a decade for inflation to reach its apex.  In August of 1971 President Nixon closed the gold window, putting an end to Bretton Woods agreement.  CPI and interest rates peaked ten years later.

The current inflation seems to echo the 1970s.  But look back 100 years and the similarities are more alarming.

An international gold standard was first upset with the creation of fractional reserve banking under the US Federal Reserve in 1913. In 1914 Germany suspended convertibility of paper money into gold.  Ensuing trade imbalances came to head with World War I.

The Treaty of Versailles forced Germany to was pay the costs for the war in gold over a 42 year period.  German debt rose from 38.6 billion in January, 1919, to 176.6 billion in May, 1921.  As the government borrowed to make reparations, the value of the Mark eroded.  By 1922 Germany could no longer make any payments.  Their debt grew from 52 billion in January 1922 to 150 billion just three months later, and 1000 billion by the end of the year.

Monetary policy is always downstream from fiscal policy.  It was the Great Society spending programs of 1965 that led to the crisis facing Nixon in 1971.  The current crisis was pushed forth by the federal government, starting with it’s bailout of large American banks in 2008.

But the monetary response to the financial crisis of 2008 pales in comparison to what we have seen since March 2020.  This year, the Federal Reserve has announced that it will decrease it’s rate of debt monetization and many economists and market watchers expect that interest rate hikes will follow.  Higher inflation, they believe, will force the Fed to tighten policy.

To do this, however, Congress would have to commit to austerity.  They would have to accept whatever social unrest comes with reigning in spending.  As long as Congress is spending, the Federal Reserve must accommodate.  It’s more likely that a brief period of tapering will lead to even greater monetization (a.k.a., quantitative easing) immediately after.

But since most market participants believe the unlikely, maybe more out of hope than analysis, the dollar has been strengthening, just as the German Mark strengthened just before it’s collapse in 1923.

9 thoughts on “100 Year Inflation May be Upon Us

  1. Progressive Democrats are to blame for massive inflation. Simply put they are not fiscally responsible. They tax and spend without regard to logic.
    Their mantra is if you disagree with them on anything (voting security, fiscal policy, protection of private property, what children learn in school, law enforcement) you are a racist. Most intelligent people see through this racist hogwash. But there are those who refuse to see through it.
    Communism begins when one party seeks to eliminate all people who disagree with them. It’s rapidly coming to the USA courtesy of the progressive Democrats and they are beginning to employ federal sources to squash any opposition. Think Germany before WW2, Communist China, Cuba.
    If you vote for them you are contributing to the demise of our country.

  2. Paul Mulshine is one of the last old time reporters at the STAR LETCHER.

    He did an opinion piece on Goldman Sachs “alumni” today

    “Like our prior Goldman Sachs governor, the current one’s personal wealth is his only discernible political skill; but unlike Jon Corzine, Phil Murphy is trying to win re-election with other people’s money”

    Unfortunately, the rest of the piece is behind a subscriber paywall.

    I guess they must have a few subscribers……………………

  3. American people are to blame for inflation. Inflation is merely a basis between value produced by individuals in the economy and consumption by the same group. We have half the country not working at all and the bulk of those that do barely produce anything (e.g. sales ppl, waiters, gov’t clerks, etc.) Even with Chinese slaves working for us, there are more consumers than producers.

    The politicians, and big business interests behind them, understand that reality. But they know well that giving ppl what they want is a lot easier than giving what ppl need. Trump attempted to do what’s right and got screwed, by everyone. Including very ppl he helped.

    I’m very fine with $3.5t spending by our degenerate elite. It will expedite economic collapse. The only thing that will wake Americans out of their slumber. However long it will take. 5 or 10 years.

    I’ve lived through collapse of the Soviet Union, when potatoes and bread disappeared from grocery stores. It’s not that scary. Unless you’re a spoiled American millennial. Or worse – a retiree whose life savings evaporate with no ability to re-build the nest egg.

  4. From this very funny analysis of “woke” economics:

    we put power grids in the hands of sociology majors who believe everything they read in green energy brochures. we killed pipelines for nat gas, functionally ended nuclear, banned coal, and did everything we could to impede drilling.

    they never even imagined that energy delivery could cease.

    we replaced it with wind and solar, neither of which is a real source of baseline power and both of which tend to fail and render whole grids unstable when they do.

    then, as we saw in texas and california and the EU last year and will again soon, the grids failed. the lights and heat and AC went out.

    today, gasoline prices surge to levels not seen since the last time joe biden worked in the white house.

    and then the people who made this mess look around like there was no way to see this coming and that it’s some wild fluke that systems and technologies that have been so reliable and functional for 70 years that we all took them totally for granted and never even noticed them are all failing at once. “whatever could it be?”

  5. So far President Biden is not doing too well is he. Just like President Obama told him to his face and that was recorded Obama told Biden don’t fuck this up. In plain English google it for yourself. There’s no way he’s going to make another 3 1/2 years mentally and physically, and you know it was going to step in his sidekick,

  6. Suddenly Biden and most in his party of sly hucksters are saying they will compromise on the $3.5 trillion (in wasteful spending).
    They will find ways to push this through “compromise”. But compromise is a sham. Compromise is supposed make us think that they are fair and righteous. Read the bill. It’s for their political base to gain so they can remain one party in power forever.

    Compromise? All evil begins in compromise.

  7. Keeping interest rates at zero is a recipe for inflation.
    The Federal Reserve has been stoking inflation for years.

  8. As most of us think this president so far has hurt this country if not the world in under a year. Listen I did not vote for Biden but I don’t want him to fail because if he fails our country fails and then all of us suffer. Remember the 70s were Jimmy Carter please what a pushover.

  9. Sleepy Joe does F up everything he touches.Totally incompetent, how could anyone not see this coming.
    What a mess and NO end in site.

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