Mr. Biden’s Wild Ride
Central planning should be…planned, at least in some cohesive way, based on a rational basis. We are not suggesting we are a fan of “coordinated” central planning either since it can’t ever be done correctly by bureaucratic agencies that override the price signals, which are the actual guide to what is real about supply and demand. However, some central planning is more coordinated than others.
But what the Biden Administration is doing is truly monumental. It is attempting command and control type economics with a totally confused and contradictory set of instructions. It is a little like driving a car by pressing the accelerator pedal, while at the same time jamming the brakes, steering the vehicle with the radio, while looking in the rear-view mirror, all while drunk as a skunk.
Even with the “best” central planning, politicians make decisions without the real information being generated by prices. They have no profit and loss statement to guide them in their journey, so bad policies can persist for a long time. There is no information feedback loop nor any economic incentive to change course. Politicians are always playing with other people’s money and other people’s lives, not their money or their lives.
Their guide is what they believe is public opinion, the ‘radio’ – the MSM, social media, the actual radio. But they both shape and react to, what they hear on the ‘radio’. In many cases, they hear from people that are simply repeating what they were told by the media which is largely compliant with Democrat goals and objectives. It is living in an intellectual echo chamber.
Biden and crew are driven by visions of a neo-Marxist utopia of equal outcomes for all people, regardless of the natural differences in effort and intelligence, and deep hatred for white heterosexual male Americans. It is not a happy channel to listen to but for Biden and crew, it is the only channel to which they will listen. It informs them where to drive and hence is their steering wheel.
The gas pedal is, of course, a massive fiscal stimulus. Rather than let the economy recover from the medically ineffective but economically destructive lockdown policies, Biden and his Democrat acolytes have put perhaps upward of $4 trillion in stimulus into the economy (Federal spending), all while the economy was naturally recovering from the artificial shutdown. This has caused the economy to overheat badly, displaying the highest inflation rate in two generations.
The brakes, in this case, include labor shortages, new heavy regulations, higher taxes, and sharply higher interest rates. More gas, but even more brakes.
Insofar as labor shortages, changes in the unemployment insurance laws, which allow people to collect the benefit without having to even prove they are looking for work, have a lot of people gaming the system. In many industries, workers simply can’t be found as there has been a huge and persistent drop in labor participation numbers.
While the stimulus of spending gins up demand, higher taxes and regulations make it onerous to produce supply. What should have been short-term supply chain issues, have become long-term problems. In particular, their utopian visions of changing the climate of the earth have caused a drop in investment in traditional energy sources (which should be directed by the marketplace, not politicians), while not bringing the alternatives online in time. The results are shortages and high prices. Coupled with the Ukrainian war, and the fertilizer crisis, this is creating a dual food and fuel crisis.
Electricity and fuel prices were rising even before Putin decided to try to annex part of Ukraine. A good argument can be made that this energy shortage created by Democrats made it clear to Putin, that this was the time to strike because his energy weapon would be so much more effective during a period of rising demand for energy, and a drop in supply.
So, demand is rising, supply is falling, prices are rising, and the central banks of the world finally decided not to go along with the politicians and instead do their job, to wit, attempt some semblance of price stability. After 20 years of near-zero interest rates, capital was deployed as if it were free because it was. This made the whole structure of finance vulnerable to interest rate increases.
The central bank tool is to increase interest rates, which in turn, has burst multiple financial bubbles born of their previous obsequious accommodation to politicians spending desires. The result is a sharp drop in stocks, bonds, cryptocurrencies, and now housing prices. This has hurt badly the savings of working and retired citizens, causing them to become justifiably frightened. As consumers cut back consumption, recession looms. Consumption is 70% of GDP.
Thus, you can see, that it really is the case of mashing the gas pedal and jamming on the brakes.
Looking in the rear-view mirror, they think this is just another run-of-the-mill downturn in the economy which can be quickly eased by spending more money and adding even more deficits.
The problem is monetary and fiscal stimulus can create demand, but they can’t create supply.
This cycle is quite different as it is global in nature. Moreover, as the economy turns down, how can you add more stimulus when prices are soaring? Can central banks achieve a “soft landing” when debt levels and investor speculation have been this high? And how can central banks fight inflation when even with the increases we have seen, interest rates remain far below the inflation rate? Never mind, their eyes are fixed on the rearview mirror.
As the Democrats careen down the road, they drink heavily of intoxicating hubris. They are convinced they can change human nature, change the climate, and change you. They want to change what you drive, how you wash your clothes, your dishes, where you live, what you eat, how to farm, and what you think even about sex. They are literally drunk on power.
So, enjoy the wild ride with Biden economics. Press on the gas, jam on the brakes, be guided by the propaganda on the ‘radio’, keep your eyes fixed on what is behind you, and drink heavily the intoxicating sense of power. And be in a big hurry. Get as much done politically before a reversal at the polls.
Pride cometh before a crash. Buckle up your seatbelt. This vehicle is out of control.
As we move through 2023 and into the next election cycle, The Prickly Pear will resume Take Action recommendations and information.