Inflation is much worse this time

Wednesday, September 21, 2022 9:59 AM
The last time we had inflation at these levels was the late 1970s. But, for the government ( meaning all of us ), it is much worse now. Back then, Paul Volker hiked the lending rate to reduce demand Which lowered inflation. After a couple years of recession caused by higher rates, inflation was under control and the economy rebounded. When Volcker hiked interest rates in 1980, the total amount of U.S. government debt was only $907 billion, or about 30 percent the size of the total U.S. economy. Today, the U.S. debt stands at $28 trillion, or about 125 percent of the total U.S. economy, meaning that our debt is worth about 25 percent more than our economic output each year. The government has to pay interest on all this debt it has accumulated. As interest rates rise, the cost of paying that debt also rises. Which increases the size of the annual deficit. Which increases our debt. And so on. It’s a death spiral and we may be beyond a point where it can be stopped. The total gross interest costs to the U.S. government were basically flat in recent years as the Fed held rates near zero, hovering at about $550 billion. That figure will hit $1.2 trillion within the next 18 months, which will amount to more than the government spends on either the Department of Defense or Medicare. This means that the Fed’s tightening will push the United States closer to a dilemma that cheap debt has allowed it to avoid for years. The government will have to either raise taxes or cut spending to avoid more and more of its budget to simply paying interest costs. Raising taxes would put a drag on the economy at a time when we are already entering a recession. Cutting government spending is unlikely with the current politicians ( Republican and Democrat ) in office. They are in bed with all the groups that benefit from government largesse.

26 comments

In 1975 we did a senior year time capsule in high school. in 2025 we open it and those of us left alive will read the messages our young selves left for our older selves. Mine will state that I will be in a great relationship with a woman I consider my best friend, but we will be childless, because the world in 50 years will be so terrible, I cannot justify bringing anyone into that kind of world. My wife's comment: "You've been right one time in your whole life, and it had to be on this?"
skibum609
2 years ago
By the year 2032 Social Security, Medicare, Medicaid, government and military pensions added together will equal 100% of tax revenues. There will be nothing left for anything else. We are still going to have to pay interest on the national debt, which by then will be over forty trillion dollars. We can make some cuts in programs like Social Security but with the large Boomer generation all retired these cuts will have a limit. We will have to cut all nonessential programs. An argument is often made that a specific program doesn't cost much but if you add up all these programs it comes up to a lot of money. We won't have that money. Also, we definitely won't continue to spend $800 billion dollars a year on the military and will adopt a much less interventionist foreign policy.
docsavage
2 years ago
With the end of globalization, the US has the option to reduce its military spending. As a result, it will be the end of Pax Americana and regional wars will be common. When Social Security was established, life expectancy was 65. It was not intended as a 20 or 30 year pension. Similarly, when Medicare was established, average medical expenses were a fraction of what they are now. That’s in part because there was an expectation that it was natural for people to die of old age. Now, half of all medical expense are related to squeezing an additional year or two of life at the very end using extraordinary measures.
mark94
2 years ago
Mark, I hope the rest of your life is going well. You continue to show the dark side of things regarding politics, economics, and strip clubs. Maybe you’d write more positive things if life was treating you well. Here is an articulate that sheds some brighter light on inflation. Like I said, it has peaked and is coming back down, and food and energy costs are leveling off. Also, globalization isn’t ending, it’s just shifting. We will do business in and around the entire globe, but we will also shift away from Russia and China and those other countries will be happy to do friendly business with us. [view link]
Mate27
2 years ago
^ You might try reading real news because its gone back up, not down and the Fed is going to smash interest rates upward because of it. By friendly countries doing business with us do you mean NATO member Turkey joining China's economic group?
skibum609
2 years ago
Your tinfoil bs aside. Yeah inflation is only getting worse. The private sector is milking it for all it can and the gov let's it.
Icee Loco (asshole)
2 years ago
You guys’ recency bias is really showing your views in spite of new information you fail to recognize. I guess that’s why it couples with confirmation bias. Core CPI lags and strips out energy and food, therefore the increase we saw in core CPI august was due to the lag reporting of shelter costs, which those are dropping as well. Like I said, looking forward I will be proven correct in my assessment, but by then everyone will have forgotten my points considering all reports are rear view by 12-18 months. The reports you’re seeing have already happened last year and early part of this year. Since summer began, tye demand destruction begun and prices aren’t going up. I’ll say it now, I told you so, and the proof will be in the upcoming readings over the next 12 more nuts or so.
Mate27
2 years ago
August 2022 inflation was up. You're simply wrong.
skibum609
2 years ago
Energy costs have recently gone down because Biden has been taking oil out of the Strategic Petroleum Reserve. At the current rate of withdrawal, it will all be gone by 2023. Then prices will shoot back up and we will be paying more than five dollars for a gallon of gas. He doesn't care about that. He doesn't look any more into the future than the next election in November. We need to stop this short-term thinking and kicking the can down the road. We also need to stop playing games. Calling a government spending bill an "Inflation Reduction Act" won't mean it will reduce inflation. We have to reduce spending since we have been printing up money to pay for it. We printed up five trillion dollars between 2020 and 2022, a 40% increase in the money supply, to help pay for three giant stimulus bills totaling six trillion dollars. Powell said that wouldn't cause inflation. Then he said the inflation it was causing was "transitory". Now he finally admits he was wrong.
docsavage
2 years ago
Prices keep going up....
Icee Loco (asshole)
2 years ago
75 basis points today.
Tetradon
2 years ago
The fiat money system is a Ponzi (lolz). All fiat currency is issued as debt, which has to be repaid with interest. But where does the interest come from? New fiat currency (debt), of course! As many down-to-Earth, no bullshit economist like to point out on Twitter recently, our debt-to-GDP situation means it’s all going to shit, or they’re going to do a soft default on the debt by massively devaluing the currency that’s currently in existence (I.e. lots of prolonged high inflation). Just look at the data on the Fed’s website, as these economists like to post on Twitter: [view link]
FTS
2 years ago
Beginning to look eerily like the run up to WW1. Where is the archduke?
skibum609
2 years ago
The Federal Reserve Bank was established in 1913 with the backing of Wall Street titans. It was criticized at the time, and has been criticized since then, as a destructive force which uses its money printing power to devalue the dollar. The main beneficiary of this money printing is Wall Street. The main victim is Main Street and those work for a living. If the Fed didn’t exist, then the money supply would be stable and interest rates would be set by market forces. That would provide an automatic limitation on inflation and allow money to be invested in the enterprises that had the best returns.
mark94
2 years ago
If a recession keeps you up at night after what we went through with COVID consider yourself lucky. If you told me an asteroid was 2 weeks away I would still be planning my night at a club or a date. Life is short. Drink, be merry, and wear a trojan bareskin.
NJBalla
2 years ago
The economy doesn’t really worry me at all; it’s not my money that the Fed is devaluing!
FTS
2 years ago
"In 1975 we did a senior year time capsule in high school. in 2025 we open it and those of us left alive will read the messages our young selves left for our older selves. Mine will state that I will be in a great relationship with a woman I consider my best friend, but we will be childless, because the world in 50 years will be so terrible, I cannot justify bringing anyone into that kind of world. My wife's comment: "You've been right one time in your whole life, and it had to be on this?"" ^ what a loser. Skibum says how it was so great in the 70s and he was too weak to deal with life then. Oh and he makes fun of us young ones for having more difficulty than him and calls us soft. Wow! Just Wow! So pathetic
48-Cowboy
2 years ago
The Russian economy has actually moved out of recession. Russia, despite all the BS "sanctions," is better than ever. Europe and the US not so much. The "western" media will make up 101 excuses as to why. The truth is God is on Russia's side. Fact.
Dave_Anderson
2 years ago
^ Not a fact.
Call.Me.Ishmael
2 years ago
You are one dumb fuck and a traitor Dave. Go get fucked in the ass by Putin, after he fucks Trump and smears cum on Trump's face. Ya know what's really funny COWBOY? Boomers had long wealthy lives and your life, which sucks now, is going to get exponentially worse in 2023. Really, really bad lol. You can show us how tough you are from your apple stand on the corner.
skibum609
2 years ago
Is it going to be Argentina level stuff is my question
Muddy
2 years ago
How any American could ever support Putin is mind boggling.
skibum609
2 years ago
"the only loser here is you cowboy, that has no fucking balls, lost your dick years ago, has to use a fake profile and needs to be beat down like the little bitch you have been your entire life." Oh wow scrub! The seething hate is real... Lol. You should go get counseling for that. It my help you with your daddy issues too
48-Cowboy
2 years ago
@Mate27: You're ignoring forward-looking indicators, including a stunningly tight labor market and fossil fuel prices on the rise (natural gas at 14 year high and oil on its way back up). Many of us are getting whacked with huge energy bill increases even as we speak because utilities have become so heavily reliant on natural gas, which will be reflected in upcoming inflation measures. The reason we use a rolling 12 month measurement is that there will inevitably be month over month fluctuations. But the simple reality is that until we get demand for labor and fossil fuels under control, inflationary pressures are not going to abate to any significant degree. That's not going to happen while we timidly continue to support negative real interest rates (Fed funds rate minus inflation). As history has amply taught us, both here and in foreign countries, the way to tame inflation is to bring the benchmark interest rate above the inflation line.
rickdugan
2 years ago
God is on Russia's side? You got a transcript? Russia can't take a country a quarter its size. Sad.
Tetradon
2 years ago
Right now, the Democrat majority Congress is working on huge spending bills, the worst possible thing that can be done in an inflationary environment. But, they know this is their last chance to shower money on their Wall Street supporters before Republicans take over. Now, I don’t deny that Republicans might be just as corrupt and stupid, but I’m hoping they aren’t.
mark94
2 years ago
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