Sixty years ago when I was an economics student at St. Benedict’s College in Atchison, Kan. – now Benedictine College – we were taught that there were two kinds of inflation: cost-push and demand-pull.
A great example of cost-push inflation is the price hikes we are seeing brought about because of Joe Biden’s energy policies. We had an energy surplus before Biden took office, and resulting low prices. Then on his first day in office good old Joe canceled the Keystone Pipeline and thereby told the world that oil shortages would soon become commonplace and that oil prices would go up…a lot. That has happened in just over a year. When oil prices go up, the price of almost everything goes up. Cost-push.
The demand-pull inflation is caused by excess demand, usually because governments print money and there is more money than the available supply of goods and services. We are witnessing a classic, textbook example of this type of inflation. Washington has been running the printing presses around the clock and the effects are showing themselves primarily through the dizzying prices people are paying for real estate. Those in the upper income brackets have the money and they are running up the price of real estate. Demand-pull.
The problem we face is that both kinds of inflation are eating at us. It didn’t have to be that way. In an amazingly short period of time, the Biden folks have got a lot of people in trouble.
Average Americans, the folks Democrats claim to care about, are getting crushed. Their food, rent, fuel, utilities – the everyday necessities – are rapidly going beyond their reach. Many talk-show hosts – long-time friends of the Democrats – are making fun of people’s misery.
As more and more people are seeing through the smoke screen, Democrats realize they are making trouble for themselves. Last week House Speaker Nancy Pelosi – one of the most vile and disgusting people to ever serve in public office – started blaming Putin for inflation and soaring oil prices. Global inflation “starts with Putin,” she said, and added that record gas prices in the U.S. are the result of “Putin’s tax” and “Putin’s gas hike.”
Make no mistake about it, inflation and high energy prices are caused by Biden and the Democrats. People may not fully understand how deficit spending causes inflation, but they do understand that not drilling for oil and not constructing pipelines are causing energy prices to skyrocket.
Where will inflation end? I don’t even want to guess, but I suspect it’s going to get nasty. Currently, we are told, inflation grew 7.9 percent between February 2021 and February 2022. The government figures the inflation rate. With agencies like the Department of Justice, FBI and IRS performing the way they have in recent years, why should we believe the Bureau of Labor Statistics is going to give us the straight skivvy on inflation.
I’m old enough to remember the last time inflation really got ugly. In the late 1970s under President Jimmy Carter – a Democrat I might add – inflation and interest rates went nuts. The classic tool used to fight inflation is high interest rates. Inflation under Carter exceeded 14 percent, while interest rates climbed above 21 percent People that had loans that started with rates of 6-8 percent, saw those rates go to 18-21 percent, and some even higher. With rate hikes like that, many farmers went broke, banks with too many farm loans went broke, lots of folks went broke. How many operations today could handle 8 percent interest, much less 18-21 percent?
But if the government doesn’t do something about inflation besides blaming Putin, how high will inflation go? I don’t expect the Federal Reserve to hike interest rates much. That means inflation will probably soar. I could be wrong. Let’s see what happens.
In the last century we’ve seen some horrific inflation. In Europe last century we saw hyperinflation in a number of countries. In 1923 in Germany, inflation hit a rate of 29,500 percent per month. That figure doesn’t mean much. Let’s look at the cost of a loaf of bread, which from Jan. 1, 1923, went from 250 marks to 200 million marks by the end of the year.
In Hungary in 1945, inflation was even worse, with prices doubling every 16 hours.
Much more recently, about 15 years go in Zimbabwe, hyperinflation wrecked the economy. What I recall about Zimabwe’s inflation is the human cost. Life expectancy during that period dropped to about half of what it had been.
What should we do? Wish I had an answer. In my 80 years I’ve never seen anything like it. The most demoralizing thing for me is that this didn’t have to happen. Biden didn’t get the most votes. And even if he got the votes, he didn’t have to do the insane things he’s done. If I didn’t have a wonderful wife and family and bunch of cows that demanded a lot of my time, I’d probably go crazy. One thing I have concluded: I don’t expect a politician to come along and save us. Alcoholics rely on a higher power to pull their chestnuts out of the fire. We’re going to have to rely on that same higher power.
If you need some motivation to get down on your knees, remember that Joe Biden is going to be our president for almost three more years.
