Russian President Vladimir Putin single-handedly managed to hike the U.S. consumer price index to 9.1 percent annually in June, which is a half percentage point increase from May.
Yes, he struggles to conquer a neighboring country with a GDP smaller than Romania’s. But do not underestimate Putin’s power to micromanage the largest economy in the world from another hemisphere.
Okay. Okay. So “the companies running gas stations and setting prices at the pump,” as President Joe Biden explained in a tweet earlier this month, deserve blame, too. And don’t overlook “the greed of meat conglomerates,” to use the words the president’s wisely departed spokeswoman uttered more than two months prior to the invasion of Ukraine, in aiding Putin’s aim of rampant U.S. inflation.
So, it isn’t all Putin. But it isn’t at all Joe Biden, Jerome Powell, or anyone remotely connected to the U.S. establishment. Powerful people desperately want you to believe that.
Biden called the numbers “unacceptably high” on Wednesday while insisting they amounted to already “out-of-date” statistics.
“Inflation is our most pressing economic challenge,” the president affirmed in a statement. “It is hitting almost every country in the world. It is little comfort to Americans to know that inflation is also high in Europe, and higher in many countries there than in America. But it is a reminder that all major economies are battling this COVID-related challenge, made worse by Putin’s unconscionable aggression.”
Elsewhere on the planet, citizens hold leaders accountable for, and do not believe that circumstances beyond their control led to, currency depreciation.
In Sri Lanka, where outraged citizens held a protest/pool party in the president’s yard and burned down the home of the prime minister this past weekend, inflation reaches 55 percent. The country’s president on Wednesday fled on a flight with his family to the Maldives.
In Bolivia (1.4 percent inflation), Saudi Arabia (2.2 percent inflation), Switzerland (3.4 percent inflation), and Vietnam (3.4 percent inflation), leaders do not see hundreds of revelers swimming in their pools, storming their homes, or nudging them to board a flight to an island chain that the Intergovernmental Panel on Climate Change warns soon sits beneath the Indian Ocean.
If only Gotabaya Rajapaksa had convinced the people that Putin devalued the Sri Lankan currency, then he might today lounge by his pool instead of on the beaches of the Maldives.
Joe Biden wants Americans to believe that Sri Lanka (55 percent inflation) stands closer to the norm than the Maldives (2.5 percent inflation) because if everyone in the world endures rapidly rising prices then, well, one leader in one country certainly cannot deserve the blame (unless that leader’s name is Vladimir Putin).
Two domestic charts undermine this position already undermined by any examination of international inflation rates, which vary wildly because domestic policies vary wildly.
All 21 lines in the Bureau of Labor Statistics June consumer price index chart increased by more than a percentage point above the Federal Reserve’s two percent inflation target, ranging from medical care commodities at 3.2 percent to energy services at 98.5 percent. Food rose 10.4 percent, gasoline by 59.9 percent, and electricity by 13.7 percent. The across-the-board, universality of this within the United States shows that, rather than supply issues in this or that sector, supply issues in the one area — money — involved in every transaction pushed the price of all sectors upward.
The second chart — let’s call them chart 2 and 2A — shows the means by which central bankers trashed the dollar.
The Federal Reserve’s balance sheet (see chart) more than doubled during Jerome Powell’s chairmanship. In other words, the Fed created an enormous amount of dollars out of thin air. Powell pledged to reduce the balance sheet more than four months ago. But the balance sheet declined by less than a single percentage point in that time. Considering that it more than doubled under Powell’s stewardship in the 31 months from September 2019 to April 2022, the fact that the Fed calved under one percent of its assets — $8.965 trillion to $8.891 — since Powell discussed reducing the balance sheet in January and pledged to do so in March indicates a lack of seriousness. To make it easier for the central bankers to address the monetary policy imbalance, congressmen must address the fiscal policy imbalance. Fiscal recklessness leads to monetary recklessness.
The second chart from the Federal Reserve shows the shocking trajectory of M1, a complicated metric defined simplistically as currency in circulation plus assets easily liquidated into money. In September of 2019, M1 approached $4 trillion. It now exceeds $20 trillion.
The Federal Reserve rapidly creating money, coupled with the pandemic causing holders to liquidate assets into cash, quintupled the money supply in about two and a half years, as measured by M1.
What good quintuples in supply without its value plummeting? We did this to our money. We created tons of it not because productivity rapidly increased but because government greed did. The government wanted to send free money to Americans because governmental bodies limited their freedom to work, travel, evict deadbeat renters, and so much else. Washington imagined it could shut down, or at least severely handicap, the economy without repercussion.
We pay now for our free money.
