Yesterday, we received the unsettling news that inflation was 9.1% in June,its biggest increase since November 1981. President Joe Biden has attempted to temper this bad news by pointing to a recent drop in energy prices. Unfortunately, he's wrong. Inflation will stay with us for some time, even if the Federal Reserve continues raising interest rates.
Clear Value Tax, a vlog authored by a CPA, explains. In the '60s, inflation was very low, with annual figures like 1.1 and 1.3%. This changed when Richard Nixon was elected President. Inflation began to rise dramatically, probably as a result if spending related to the Vietnam War. At first,Nixon was willing to suffer some inflation if it meant more people would be working. The opposite happened. Stagflation. And when he imposed a 90-day freeze on prices and wages, we went into recession. To make matters worse, he abandoned the gold standard to prevent foreign counties from buying up gold with our dollars.
Inflation in the '70s ran from a low of 3.3% in 1972 (Nixon's second term begins) to 11.1% in 1974 to 11.4% in 1979. Unemployment was 6%. That's when Jimmy Carter was elected.
Everyone blames him for inflation, but he actually inherited it.
At this time, Paul Volckert was appointed to the Federal Reserve. He needed t restrict the money supply and did so by letting interest rates reach as high as 20%. This certainly reduced the supply of money, but unemployment soared even higher. So did inflation. It was 13.5% in 1980 and 10.3% in 1981.
Jimmy Carter, who appointed Volckert, was a one-term President.
Fortunately, Volckert's draconian measures did pay off. By 1983, inflation dropped to 3.2% and became far more manageable in subsequent years.It took about three years with much higher interest rates.
These days, we proportionately pay far less for food and energy than we did in the '70s. So we are not feeling the crunch as badly. But we had far less debt.
Inflation existed at the end of WWII as well, with supply chain disruptions and massive spending. But it was brought to a stop in about two years.
Like Jimmy Carter, Joe Biden will be a one-term President.
Must get rid of Biden, Harris, and the liberal cabinet in January in # months things will improve big time.
ReplyDeleteGreat! Inflation going up, prices going up and my 401K portfolio is going down like a rock. Seriously, what the Hell is going on?
ReplyDelete9.1% last month. This is very hard on working class families. Non working folks like me , retired —it eats up things but at least we don’t have to drive 38 miles to work someplace. This is partly because there was too much free stuff handed out under Corona and it’s still happening. My personal defense against inflation is STOP BuYIng Stuff. .Stop eating dinner - Now I would say this , huge sales by major retailers are about to happen , I mean furniture ,house hold goods ,shortly. Wayfarer,and Target stores ,it’s coming. Before I close ,I want to say something about stupid drivers, they push ,they tailgate then ride the breaks into stop signs , what ever economy was built into their vehicles is defeated by the operator as result. This cost somebody that pays for their fuel unnecessarily,like school bus drivers same thing they need a class and get 10% more , look up Hypermiler on google , we’ll that me ,with $5.00 a gallon. I’ve learned.
ReplyDeleteSo the alternative should be low inflation, high unemployment and lower economic production?
ReplyDeleteBig business is gouging the consumer simply because they can get away with it.
As you stated, by 1983 there was a tolerable inflation rate of about 3.2% and became more manageable. What you didn't mention, is that we were enjoying some much needed R & R.
ReplyDeleteNo, not rest and recreation. Reagan and Republicanism.
It's just here in the US, it's world wide.
ReplyDeleteI was very young, but can remember the energy crisis well. Going to the gas station on our designated days and wearing a sweater, rather than my parents adjusting the thermostat are two vivid memories. Fast forward to today and my concern is that we are not We the people of the US, but rather “me.” Despite COVID, we don’t know sacrifice (remember the toilet paper hoarders?). In the 1970s, Americans took things in stride, probably because The Greatest Generation knew true sacrifice, but today’s society is too entitled, too self-centered, to tighten the belt and ride out the storm. Joe Biden will be a one-termer and that is fine by me, as long as that doesn’t mean the door opens for another four years of Donald Trump. Biden was out-of-his league from the start and a decent Republican would have devoured him. Joe has always been a dim mess, but he has just been lucky to attach his cart to the right horse.
ReplyDeleteYou forgot Gerald Ford and his campaign “whip inflation now”. I still have my WIN button. It was a voluntary program to increase personal savings and control spending. Ford suggested carpooling, turning down thermostats and having vegetable gardens. It didn’t work. Greenspan,who supported the program, later said it was unbelievably stupid. Ford lost the 1976 election to “stop talking and start walking” Jimmy Carter. Inflation killed Carter and will no doubt take Biden as a victim.
ReplyDeleteIt should be noted that the last balanced budget was 1969 and a policy of deficit spending has remained no matter who is the president. That $325,000 house sold for around $25,000 in 1972 a car cost under $3,000. they did not go up in value, but the value of the U.S. dollar has deteriorated due to these policies.
ReplyDeletetoday's inflation cycle started with a combination of excess stimulus spending and a consiece attempt to diminish fossil fuel production. Higher energy costs have now begun a vicious cycle that indeed will last for some time, and likely end in a severe recession.
Good link - I enjoy economic podcast.
ReplyDeleteAlthough the sting of higher prices as a percentage is lower in some segments today than the 70's keep in mind the consumer debt level is multiples higher. I read somewhere that the average person cannot come up with $400 in an emergency.
The global reserve currency is the US Dollar - which has been very beneficial for the US, I fear this is going to change since we have weaponized it against all of our adversaries. The final straw was booting Russia out of the SWIFT system. All currencies are dropping against the dollar except the Ruble. Why is that? This was an error, but politicians are not economist or business minded. Also, most debt worldwide is denominated in US dollars, as the dollar strengthens small countries have a harder time meeting their debt obligations. One resource to consider is Brent Johnson's "Dollar Milkshake Theory".
If we wanted to punish Russia, the administration should have stated that they would do everything in its power to help the western countries ramp up its oil and gas production. This would have crashed the oil price and brought Russia into line and would have helped, not cure inflation. The amount of liquidity the FED injected is going to take about 2 years or less to wash thru the system.
Unfortunately, one side of the aisle is captured by the cult of the green movement. Germany is finding out the hard way right now.
Anyway my 2 cents or in 1980's terms my 7 cents. - Cicero's Cat
Bernie, have you been taking some of the spin classes at the federal penitentiary indicted mayor is giving? Some of your articles are so out a wack maybe you too are suffering mental decline like our fine president.
ReplyDeleteAmerica doesn't sell there war time petrol reserves to the enemy.
Carter calls Biden weekly and thanks him for making Jimmy look good
ReplyDelete"This changed when Richard Nixon was elected President."
ReplyDeleteHuh?
https://www.usinflationcalculator.com/inflation/historical-inflation-rates/
Those rates started to go up well before Nixon became president. The last time they were below 1.5% was in 1965. They were 4-5% with a significant amount of momentum by the time he was sworn in. I know he was a bum, but you can't keep using him forever to make "your" bum look less bad.
If I spend beyond my means I'll create a huge problem for myself. Most sane people know this to be the case in their personal lives. The bender is over. The reckoning has begun. It was predicted by so many that it's hard to think this pain wasn't planned.
ReplyDeleteExplain to my 77 year old mother who is barely surviving month to month that her bender fueled reckoning is upon her.
Delete" What you didn't mention, is that we were enjoying some much needed R & R.
ReplyDeleteNo, not rest and recreation. Reagan and Republicanism."
Under Reaganomics, our GDP doubled, inflation increased slowly and unemployment decreased slowly. Whether his policies were effective is debatable, but the economy improved. https://www.thebalance.com/what-is-reaganomics-3305568
Yeah, and he paid for it by starting taxing social security
DeleteBiden does not have real businesspeople advising him most are Government workers and professors. Look at the results - must clean house or it is going to get mworse.
ReplyDeleteI had an economics class in college with a professor who was not the typical. In the class he taught that Inflation is what the government runs on. They borrow money years ago and float it through bonds and other means. Then they pay it back over time. As inflation increases over time it is the margin which the government then gets to utilize to pay down the previous debts. And as another view as pay increases and prices increases the only group that really benefits by it is the government because they are raking in tax revenue on the higher values.
ReplyDeleteAnd this is why the government try's so hard to manage inflation. Yes it is a perception thing for the people who elect them, but more importantly it is their continued economic source and viability. It is a game of that they manipulate.
I know I am not explaining this nearly as good as it needs to be but I wanted to get the thought out there for people to consider.
People are all in a panic because of the Consumer Price index and inflation going crazy. It is well understood and expected however people need to start looking at the Producers price index as it is a indicator of future inflation. Normally the PPI proceeds the CPI by about 4 to 6 months and because the PPI gets diluted by production volumes the CPI is on average half the PPI. The PPI was around 18 percent earlier this year. So it makes sense that the CPI is around 9 percent now (5 months later). And the cause of the elevated PPI was an accumulations of the previous 1 to 4 years depending on the product category. Cars can take 4 or 5 years to show cumulative price increases while apparel can change in months. Length in duration of supply chains impacts this unless prices are artificially manipulated like in the gas and petroleum industry.
ReplyDelete@ 6:56 to your point inflation is world wide and what goes on over there impacts what goes on here. Very few want to realize that because the world has become so connected and integrated in product manufacturing that what happens in another country often has substantial economic impacts on other countries. We blame our government on inflation year and YES they should get some of the blame however some it is not directly correlated to them. How much crap have you bought from China or India recently/ Do you really think the passing through of goods from a port to a distribution center to a retailer means that the price sky rocketed there or do you think the price when it procured from an overseas vender sets the escalated base price which then of course all the others in the process add their percentage too? Today's inflation is a global sourced problem that goes deeper and further.
ReplyDeleteFirst off, economics is a pseudo-science with too many moving pieces for their formulas to work reliably....always the chaos factor. Its why we there are soooo many factors driving inflation right now, too many variables. Then, let's not forget that inflation has been historically low since 2010 until the pandemic. Lastly, the last time we had a balanced budget was under Clinton with a surplus, for 4 years in his second term. Baby Bush inherited a surplus and cranked up the deficit with his neo-con wars. Obama then cut the deficit in half during his terms. If you want to debate economics, come with the facts.
ReplyDeleteAgree with parts of some of the postings here that talk about what an entitled, spoiled society we have become. Gas-guzzling SUV's have been the biggest selling vehicles for some years now while gas was cheap. How often do I see people sitting, idling in them with the air on for 10 minutes or more. We are also consumer whores. How many times do I see multiple vehicles parked in the drive because the garage is full of stuff? We wonder why warehouses are everywhere causing numerous headaches? The shopping channels, Amazon, etc. Too much stuff! Natural resources are finite, but hell, as long as it doesn't affect me for now, why should I care. Time to pay the piper folks...strap in!
ReplyDeleteVerily verily I say unto thee, get right with thy God! The end is narily nigh!
DeleteThis is what the American people voted for.
ReplyDeleteEnjoy the suffering.
I suppose the only silver lining is the degree of lawlessness sweeping the country and unobstructed illegal immigration at our southern border.
But, but doesn't EVERYTHING have to be Biden's fault? Even when the same problems are worse in other Western countries?
ReplyDeleteShame on you!
As I’ve commented here before, whatever it is that “ails” this nation, and America is “ill” in many different ways right now, is a product of decisions made by POLITICIANS. We can NOT expect significant improvements by keeping the same decision-makers in positions of power!
ReplyDeleteOur representatives in government, both State and Federal, are FAILING. Both major political parties are to blame.
Like adding “Shock” to a swimming pool to clean out the decay, a strong message needs to be sent. Politicians need to lose their positions. No one can feel secure. We need a huge rejection of Incumbents. Start this November! A big turnover in politicians will go a long way on the path to repair.
There's nothing pseudo-scientific about spending above your means and running out of money. Most have learned this by about age 10 or 11. As we ran past $16 trillion, then $18 trillion, then $24 trillion, and $30 trillion, did anyone really think we could sustain this madness? Outside of the woke flank of the Biden administration, nobody did. As for the poor 77-year old soul, she's being treated rather cruelly by the gang who said they cared more about the elderly. Can she stomach cat food? Bought wisely and prepared carefully, it's a more economical option to tuna. The remaining. Biden years will require sacrifice - even and especially from those who've enjoyed the fruits of our country for 77 long years. She can save money by riding a bike or buying an electric vehicle. The answers are all around us.
ReplyDeleteWhere do I start?
ReplyDeleteYes, there has been inflation in the past, but previously our government at least tried to slow or stop it. The current administration is causing it because they are over-regulating the energy sector and trying to drive up the cost of energy to force their bogus green agenda on us. That's a recipe for economic collapse.
One member of the administration recently said that we have to endure higher gas prices to ensure the survival of the "liberal world order". That proves that democrat ideology is more important to this Administration than the suffering of the American people. It's not Putin's fault, it's the direct result of failed Democrat policies. It doesn't matter if Biden is president, or Pelosi, or AOC. Democrat policies hurt America. Period.
To the person who made the comment about the CPI, and tried to minimize the current level of inflation, remember this: If the Biden Administration were using the same formula to calculate inflation that they were using in the 1980's, our current inflation rate would be DOUBLE the amount they're telling us it is.
To the comment about how "spoiled" we are, I would say what people spend THEIR MONEY on is none of your business. If they want to buy an SUV, I'll trust them more than the government to determine if they need it. As to the gas they use, I'm sure they understand that an SUV gets less mileage than a glorified golf cart. What they likely don't understand is why this administration is interfering in the energy market to make life worse for its own citizens.
Well said !!!!
DeleteBernie your boy Biden just gave 1 billion to Iran---This guy is a mad man.
ReplyDelete"Bernie your boy Biden just gave 1 billion to Iran---This guy is a mad man"
ReplyDeleteFirst, you are off topic. Does this topic make your head hurt. Second, Biden is not giving $1 billion to Iran. He is considering unfreezing $1 billion of Iran's money so it can feed its own people.
Or build a nuclear weapon to blow us all up
DeleteTrump didn't and won't tax you bike Bernie lol
ReplyDelete12:49 Inflation is an economic principal so utilizing your pseudo-science and applying it to inflation should we dispose of the concept of inflation as well. I agree with you that there are so many variables impacting inflation it is mind boggling.
ReplyDeleteAs a Democrat, I'll only vote on the party line in 2024 if our candidate is a younger, smarter more moderate candidate then Biden, Clinton, Sanders, Warren etc.. I can unenthusiastically vote for Susan Wild and Josh Shapiro this Fall because I don't like their opponents, but I'll cross over in 2024 if the Republicans put forth a quality candidate who can address the economy and energy prices. It's time for a change in direction.
ReplyDeleteYes, Inflation will be for years if we keep Biden and his left-wing people in positions of power.
ReplyDelete1:43 PM
ReplyDeleteAgreed. This is what happens when you vote in the orange idiot TRUMP.
I hope your happy he screwed up the economy and now we are paying for his administration’s incompetencies.