Commentary: Inflation Has Arrived

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by Bob Luddy

 

Wildly excessive federal spending is causing major inflation and shortages, which may lead to a recession and perhaps a financial crisis. Despite the evidence of inflation, Congress is proposing to spend $3.5 trillion on top of the $1.9 trillion COVID relief bill passed earlier this year and the intended $1.2 trillion infrastructure bill. For comparison, federal revenue is only expected to be $3.8 trillion this year.

Evidently, the Democratic Party and President Joe Biden have adopted Modern Monetary Theory (MMT) to the peril of every American citizen. MMT, which is similar to Keynesian economics, says that the U.S. should not be constrained by revenues in federal government spending since the government is the monopoly issuer of the U.S. dollar. MMT is a destructive myth that provides cover for excessive government spending. And it’s not modern, since reckless government spending has been around for thousands of years.

Embracing MMT is similar to providing whiskey and car keys to teenage boys. We know the outcomes will not be good.

Some readers may remember that when Nixon closed the gold window and turned the dollar into a fiat currency in August 1971, inflation followed.

According to David Lopez, a former senior research associate at the Federal Reserve Bank of St. Louis, the two lessons we learned from the Great Inflation of the 1970s is that “price stability is paramount for a strong and growing economy” and “the public must be confident in the Fed’s ability to lessen inflationary pressures.”

Yet Congress and the Federal Reserve are entirely ignoring those lessons.

Federal Reserve Chairman Jerome Powell continues to state that inflation will soon ease, even while government data continues to prove him wrong. In June, inflation accelerated, resulting in a consumer price index 5.4 percent higher than one year ago. (The Fed aims for 2 percent inflation.)

And for some products, including gasoline and cars, the price increases are even worse. The energy index rose 24.5 percent in the past 12 months, and the index for used cars and trucks increased 10.5 percent in June.

Home prices are also reaching record highs, forcing average families to live in apartments, which undermines the American dream. It’s more evidence that inflation created by President Biden and Congress robs working-class citizens.

Apart from reckless spending, other government interventions are keeping our economy down. Federal unemployment benefits that pay out an extra $300 a week are contributing to a major worker shortage. This shortage is made worse by excessive student loans, which encourage people to enroll in unnecessary graduate school programs. Tariffs and trade restrictions also have reduced the supply of semiconductors, resulting in the production of fewer cars.

Government spending is ballooning our national debt, which already exceeds $28 trillion. The federal government has collected on average 17.4 percent of GDP in taxes over the past 50 years, including 16.3 percent of GDP in 2019, but it is currently spending well in excess of that, including 36 percent of GDP in 2019 and 44 percent of GDP in 2020. This spending is a massive misallocation of American resources and will only fuel inflation.

Never before have we had federal government spending exceeding 44 percent of GDP, near-zero interest rates, and money printed by the trillions. American political leaders need to demand a stop to this reckless abuse of congressional and executive power.

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Recognizing the demand for a quality manufacturer of commercial kitchen ventilation equipment, Bob Luddy purchased a sheet metal shop in 1981 and transformed it into CaptiveAire Systems. Today, CaptiveAire employs over 1,400 individuals, with 90 sales offices and six manufacturing facilities nationwide, and sales over $500 million in 2019. A strong advocate of excellent education, Bob establishes schools that help youth develop good character and reasoning skills. In 1998, Bob established Franklin Academy, a public charter school in Wake Forest, which now serves over 1,600 K-12 students. In 2001, Bob founded St. Thomas More Academy, a classical, college preparatory high school in Raleigh. In 2007, Bob opened Thales Academy, a network of private schools offering a high quality Pre-K-12 education at an affordable tuition. The Luddy Schools are quickly growing, with over 5,000 students enrolled throughout North Carolina, Tennessee, and Virginia. Bob is an avid supporter of entrepreneurs and the free market system, and published his book, “Entrepreneurial Life: The Path from Startup to Market Leader,” in 2018.
 

 

 

 

 

 


Appeared at and reprinted from The American Spectator

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3 Thoughts to “Commentary: Inflation Has Arrived”

  1. Moosy

    Blaming Lee and republicans for not doing enough is a distraction from the real corruption and deceit by democrats and other evil stakeholders

    Suggested reading on what is going on (and in comment section) see
    https://wolfstreet.com/2021/07/17/too-much-money-chasing-too-few-goods-and-services/

    Other articles here are very informative as well. It’s not political just pure easy to understand analysis.

    Other websites with useful articles are http://www.zerohedge.com and http://www.thesoundingline.com

  2. Ms Independent

    Yep, all the numbers going wrong way. Republicans had their chance and blew it. mr lee has no idea how to run Tennessee either:

    https://www.thecentersquare.com/tennessee/new-unemployment-claims-jump-42-in-tennessee/article_98d15a22-e63b-11eb-8007-efb3abc9891c.html

    1. John Bumpus

      Republicans had their chance and ‘blew it’—give me a ‘break’ Ms. Independent!

      The Coopers (either one of them) are no better than anyone else whom the Dems might nominate for Governor to run against Governor Lee. Do you want one of them as your next Governor? Well, do you? Not me!

      Who could the Republicans nominate that would perform better than Governor Lee? I myself supported Mae Beavers in the last election, but she didn’t have the resources to continue in the race. And Mae Beavers, after she left the race, endorsed Bill Lee.

      You seem to want ‘perfection,’ but it is not an ideal world—never has been and never will be! Can Governor Lee do better? Everyone can always do better. And you know, Tennessee can elect another Governor who would be doing much, much worse than our present Governor! IMO, Tennessee had a couple of those candidates, or three, in the last gubernatorial election. I think that had any one of them been elected, you would be ‘singing the same tune’ that you are now, only much ‘louder.’

      Come on, Ms. ‘Independent,’ get ‘real.’

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