The Right’s Inflation Boogey-Man Is Fake

One of the most interesting “boogey-men” used by the far right is inflation. We are constantly bombarded by the fear of inflation if we don’t stop all this “runaway spending on the poor and elderly”. What a crock.

As is their modus operandi, The Tea Party and its propaganda arm, FOX Noise, is constantly fear-mongering about what “is going to happen”. It’s not only convenient in that it’s impossible to prove or disprove, it’s always easy to scare people apparently, and as all grifters and con men know, if you say something long enough and somewhere along the line it actually comes true, you can claim “See, I told you”. It’s the classic method used to scare low information citizens into doing something they normally wouldn’t do, whether it’s voting a particular way, or just tuning in so that big numbers can be presented to advertisers in order to garner income.

They use this tactic for selling guns and ammo, voting against what is clearly in their own best interest, to stoke fear of black helicopters and FEMA trailers, etc. I won’t mention by name the big whale who blubbers and bloviates over the free A.M. band airwaves to listeners cowering in fear of women, gay people and the elderly so much that they need enough armor, ammo and canned peas to wait out the coming horde of wheelchair wranglers, and would -be canned-pea-thieves for at least ten years, but the over-stuffed burrito’s first name rhymes with “lush”…as in addict, not beautiful greenery.

If a Soothsayer Predicts a Sufficient Number of Things Long Enough, One of Them is Bound to Come True

Ah yes, Inflation. The “boogey-man” from the 1970s. Oddly enough, the Gold Standard, which is so popular among purveyors of economics based on bright shiny objects rather than sound mathematic principles, has always been itself a major player in “bad” runaway inflation due to it’s inflexibility as a basis for currency valuation. Rather like the GOP themselves, the Gold Standard causes a problem that they then can pin on whomever they want.

To this day, no one has ever told me what gives gold its inherent value. If you had all the gold in the world and I had all the water, which one of us would be in the better position? I believe that would be me. Have fun living off of that vault full of gold as your body withers and dies.

But in the real world of the 21st century, the Bureau of Labor Statistics released last week, its monthly inflation report. The statistics came in at 1.7 percent a year for all items. When excluding the always-volatile food and energy, it was 1.9 percent.

That’s a 50-year low, or thereabout.  Only 1986 (1.1 percent), 1998 and 2001 (1.6 percent), 2008 (0.1 percent) and 2010 (1.5 percent) have come in lower, and a few years in the mid-2000s registered the same.

The vanishing of inflation over the past 20 years, however, has barely been noted. And the pervasive belief that inflation remains one of the greatest threats to economic stability remains one of the favorite foreboding premonitions of the always good-for-a-laugh fear-mongers. After all, bansksters, stealing our pensions and life’s savings (and receiving millions in bonuses for doing so) is nothing to fear, it’s inflation that we should teach our children to dread. 

 These beliefs persevere in spite of all substantiation to the contrary: Hyper-Inflation is nowhere in sight. For the fear-mongers, of course, that is just proof that we are living in a calm-before-the-storm. An ominous warning that our way of living is soon to be disrupted when that venerable enemy resurfaces and inflicts chaos and $15 bread. Even if prices do suddenly spiral out of control, it will be some calamitous tragedy that will cause a scarcity, not monetary policy.

At the Federal Reserve , our legally delegated custodian of price stability and the folks actually answerable for monitoring and containing inflation, the president of the Richmond Fed, Jeffrey Lacker, has been warning that the existing policy of very low interest rates and increase of the balance sheet is a virtual lock to trigger inflation in the near future. Inflation? Yes. Hyper, runaway, out-of-control inflation? No.

Holding Fast While European Depression Sets In

In Europe, those views are even more deeply entrenched. The German Bundesbank, apparently still nursing its wounds from memories of hyperinflation in the 1920s! and the collapse of political order that in some ways enabled the  rise of Hitler, is staunchly, albeit anachronistically, cautious. Its president, Jens Weidman, is strongly opposed to many of the recent sovereign bailouts to preserve the euro on the grounds that good money chasing bad will light that dreaded fuse of hyperinflation.

Instead, they allow the implementation of drastic austerity measures ostensibly to pay down their debt. But even if inflation took hold, which it wouldn’t, could it be worse than the 25% unemployment in Spain? The 20% unemployment in Italy? The 18% unemployment in Greece? No, I think not. The UK made the exact same mistake when electing Prime Minister David Cameron, who immediately made the same conservative error, implemented the same inexplicable austerity measures, and promptly sent the recovering economy of England back into a double-dip recession.

These officials tend to be fixed, or possibly fixated, in their concern. In the U.S., the U.S. Tea Party is fueled not just by debt animosity but by an entrenched belief that “real” inflation is much higher than what the government reports (ah yes, the “black helicopters and FEMA trailers crowd”), and it insists that the spending habits of the government will end in the total collapse of the dollar, hyperinflation and the government’s stealing from hard-working Americans’ money… to all intents and purposes. (Ummm, would that be like George W. Bush stealing funds from the Social Security Trust Fund to finance the only two unfunded wars in U.S. history…including the Revolutionary War?)  

That is the same verbalization of gold mongers, despite rich and explicit history showing the opposite.

Fueling the fire are the views of former Representative Ron Paul and his son, Senator Rand Paul (R-Ky.), that the Fed is putting the United States in dire and inevitable “inflation jeopardy”. To be fair, there are many long-time investors and some economists who are likewise persuaded that the policies being employed by Ben Bernanke of near-zero interest rates and deficit spending are setting the U.S. up for a massive outbreak, if you will, of inflation.

So how can I square the contrary connection between inflation concerns and inflation realities?

Granted, low inflation in recent years has been put side by side with modest economic growth and wage sluggishness for most Americans. And given that opinions of economic health are eventually tied to disposable income, these forces have largely canceled each other out.

Yet even with the volatility of food and fuel prices over the past ten years, perceived inflation can be misleading. Food prices have risen periodically over the past few years in the face of global demand and droughts. That cements a perception of inflation. The newest method of eking out every possible penny of net profit from food items in particular, has been the manipulation of packaging so that prices remain static but the amount of actual product being purchased is less than before. And less product for the same money does indeed equal inflation, but as long as the market will bear the deception, is it truly inflation or is it simply well-executed maximization of the core principles of capitalism? 

One might be surprised to know that over the past few decades, food as an overall percent of income has gone down…dramatically. In 1960, the average American family spent 21 percent of their disposable income on food; today, that figure is 7.5 percent. The only shift has been in eating outside of their home. Predictably, Americans spend more in restaurants and less at home. Moreover, that has happened even as incomes have remained stubbornly stagnant.

Gasoline, which has wildly swung over the past twenty years, has maintained a steady share of disposable income for decades, at about 3.5 percent. That percentage is decreasing because of production from shale oil deposits and ever-more-efficient vehicles, but historically it is fairly static year-over-year.

Of course health care costs are in a class all their own. As long as we as a people allow hospitals to charge two dollars and fifty cents for an aspirin, that is going to be the source of inflations and our biggest problem. I certainly don’t have all the answers, but I’m reasonably damn sure that monetary policy is NOT going to be the culprit that causes the Tasmanian inflation devil to rear its ugly head.

One malignant platitude is that history repeats itself. Well, it doesn’t if we quit making the same mistakes. Laymen take snippets of history and extrapolate them into truisms that fit their beliefs, and network “news”, as I’ve said many times before, continues to add fuel to this fire for the sake of profit and entertainment while economists pile on with hypotheses based on a limited amount of history that they claim establishes “laws” of economics.

Balderdash.

The primary asset of these arguments is that they are neither provable nor disprovable. You can’t prove there isn’t a government conspiracy about “real” inflation, and you can’t prove that something isn’t about to happen. Hell, I can’t prove there aren’t black helicopters and FEMA trailers in our future either. What, then, is the shelf-life for the “boogey-man” inflation? How long must inflation remain very low before the risk of hyperinflation can be considered insignificant to the argument?

Sure, it’s possible that it could occur. Sure, past patterns could prove to have some validity. It would be downright irresponsible not to be wary about the prospect and the risk it would bring to the table. But an asteroid could strike the Earth and we could all go the way of the dinosaurs too.

But why ignore the weight of evidence about low inflation everywhere around the globe, not just for the past few years but over the past few decades for the sake of what “could” occur.

To lend too much credence to the possibility of hyper-inflation is to ignore the hierarchy of risks to today’s economy. It also means that if we base too many risk-reward calculations on the possibility of hyper-inflation, we are, by definition, illogically prioritizing our problems and likely missing possible solutions.

And if inflation is not the calamitous threat hand-wringers claim, then we should not be so anxious about government spending or monetary policy like quantitative easing.

What we should be focused on is stimulating our national economy to generate jobs instead of fretting over what might happen with our currency. Jobs create demand for goods and services and people to pay for them. Demand creates more jobs, and so on and so forth. Why is this so hard for people to understand?

Right now, so many are so fixated on inflation that these other challenges receive short shrift. If inflation revives, that fixation may be justified. If not, we will have squandered our time chasing echoes instead of meeting our present with eyes wide open to the possibilities of the future.

 Harvey A. Gold

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  1 comment for “The Right’s Inflation Boogey-Man Is Fake

  1. Patriot 1776
    January 30, 2013 at 9:58 am

    Harvey: I agree inflation is not a problem now and I do not see it as a problem in next 2-3 years. I use that number because I do not want to predict past that.

    It is important to note that the average income of a household in US has gone down about $5500 last 3 years. This is around 10% drop.

    This may not be inflation but the result is much the same. Add to that gas prices that are anywwhre from $3.25 to $3.85 versus just a few years ago when they were $1.85 a gallon. There is a crunch on the middle class indeed.

    We seem to be making progress but it is akin to a turtle walking from North Carolina to California. Painfully slow and measured in years and years.

    The deficit (even more than overall debt) will continue to plague us till we start a real path to a balanced budget. We raised taxes but that was almost nothing. $80 billion a year and then we spent $50 plus billion on Sandy relief right after that. even before the money came in.

    Yes – the Tea Party thinks the deficit is a real problem and we think it is hurting economic growth. There is more a reluctance to invest in and bring money into the US than I have seen in at least 20 years.

    Hopefully – we are all wrong – but I doubt it. Not only will time tell – but it appears to be telling now as we flounder along with record food stamp usage, lowest % of available people who can work, working, since we have tracked it. Down to 62%. That is probably the most frightening statistic of all.

    Maybe we need a bogey man to wake us up.

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