The Real Reasons the Economy Has Gotten So Bad

Conservative News DailyJune 17, 2022

Our economy has been a slow-motion train wreck this year and as someone who is neck-deep in cryptocurrency and saw this economic disaster coming a mile away, it has been fascinating to watch the spin.

It’s worth noting that when I did that, my fiduciary told me it was a bad idea. Most of the time, she would have been right because it really is extremely difficult to time the markets. However, the signs were so clear in this case that they were like Godzilla marching through the harbor into Tokyo. However, before we start getting into this year, let’s go back to 2020 when COVID hit.

There were three major economic problems that were related to the pandemic.

The first is that people were understandably terrified by it when it burst on the scene, and it curtailed a certain amount of economic activity. That was certainly a problem, especially for businesses like cruise ships, restaurants, comedy clubs, movie theaters, and anything that relied on large crowds for revenue. Without question, COVID was a brake on the economy.

However, the virus itself wasn’t nearly as big a problem as the political response to COVID. Remember 15 days to flatten the curve?

Well, very early on, some of us were pointing out that wouldn’t stop the virus but would cause major economic problems.

Here’s an excerpt from a piece I posted two days after the video above was released called, “There Is No Rational Case for a National Lockdown Over the Corona Virus”:

…You also have to consider that a national lockdown would have a cataclysmic impact on the economy. By some accounts, 69% of American workers have less than $1,000 in savings. What happens when those people can’t go to work for a month? Then what happens after that when the jobs they had no longer exist because large numbers of restaurants and other small businesses (along with some big corporations) couldn’t survive without any revenue? Do you think our government is going to be able to borrow enough money and target it well enough to fix that kind of damage? Not a chance, especially given that we are about to simultaneously run the largest deficit in human history, with a much smaller tax haul than normal during what’s sure to become a deep recession. That’s going to be the case even without the ruinous possibility of an economic lockdown. Add the crippling damage that would be done by a lockdown in and it’s impossible to say how many years it could take the country to economically recover.

In all fairness, red states generally handled this much better than blue states. They tried the shutdowns, quickly figured out that didn’t work, and moved on to other tactics while opening back up. Did that create economic damage? Absolutely, but it wasn’t crippling. On the other hand, many blue states needlessly shut down businesses for months. That took money out of people’s pockets. It drove small businesses under. It created supply chain issues and it also made no sense whatsoever. Remember when this was going on in a lot of places?

The third and most disastrous COVID-related mistake was the Fed’s decision to create an astronomical amount of new currency to pump into the economy and keep the party going despite all of these COVID-related problems. The amount of money they printed was sheer madness:

As the late, great Milton Friedman noted:

The Fed’s decision to massively inflate our money supply even as the government prevented people from working and producing more goods is the primary cause of the runaway inflation we’ve been experiencing. We have far too much money chasing far too few goods.

Those problems have been exacerbated by supply chain issues (making fewer goods available) caused by everything from the shutdowns here, to COVID-related shutdowns elsewhere, to the war between Russia and Ukraine which has dramatically impacted the worldwide supply of wheat, barley, fertilizer, oil, and rare metals among other things. Now add in rampant government spending since Biden was elected along with just plain old sending people money to spend in the mail and it’s easy to see the problem. Granted, if the government is going to force people not to work, it does make a certain kind of sense to send them checks to make up for it, but because the government had an insane way of handling a problem, it led to an insane “solution.”

This brings us back to 2022.

We were constantly told that inflation was “transitory,” but given the staggering amount of money that the Fed printed, there was no reason to think that. Furthermore, because the Fed dragged its feet for so long before raising interest rates, little was done early on to check inflation. Worse yet, because we have so much debt at this point, the Fed is extremely limited in what it is capable of doing to fight inflation.

When inflation got completely out of control, with Ronald Reagan’s support, Paul Volker raised interest rates up to 20% to slow the economy and beat it down. Because our economy is now addicted to cheap money and America is so deep in debt today, we’re not capable of doing that anymore. Raising rates as high as Volker did would increase our debt so much that would almost inevitably lead to default within a few years. In that sense, our debt-ridden economy is a little like a man’s health. The same sickness that would put him in bed for a day or two at 25 may kill him at 95 because his system no longer has the ability to absorb the shock.

That leaves us in an unfortunate position because as the Fed raises interest rates, the economy will slow and HOPEFULLY that will get inflation under control. However, since the Fed is incapable of raising interest rates as much as they probably should, there is another much grimmer possibility:

Could we have a situation where inflation is still running high AND the economy is stagnant? Absolutely. Stagflation could very well happen. Will it for sure? We don’t know. Of course, there is an outside possibility that things could get better sooner rather than later as well:

If you have to bet, bet on more pain, but cross your fingers and hope we don’t actually end up with stagflation for years to come.

Last but not least, it’s worth noting that while we’re taking this economic beating, you can be sure that the politicians in charge will try to focus the blame anywhere but on themselves. For example:

Really? Did the oil companies all just spontaneously decide to raise prices at the same time as everyone else? Is that why their profits are up a little bit over 1% since 2020 while gas prices are up almost 150%? Also, isn’t Joe Biden the guy who literally said, “I would transition from the oil industry, yes,” during the debates. He also said, “Number one, no more subsidies for fossil fuel industry. No more drilling on federal lands. No more drilling, including offshore. No ability for the oil industry to continue to drill, period, ends, number one.” He also added, “No new fracking” and killed the Keystone XL Pipeline. Meanwhile, oil companies are saying that there will probably never be another refinery built in the United States because of the policies of people like Joe Biden.

Then, when gas prices go up, Biden points at the oil companies and claims they are gouging and aren’t doing enough. Realistically, there’s not much they can do in the middle of a crisis, but if people like Biden would stop trying to undermine them at every turn to appease environmental wackos who want us to live in the Stone Age, they’d be in a much better position to handle it the next time a big crisis rolls around.

As anyone who goes to the supermarket, out to eat, or even to Home Depot can tell you, prices are going up across the board. No matter what politicians may tell you, that’s a downstream effect of a lot of dumb decisions they and the Fed made, not a bunch of business owners across every part of the economy spontaneously deciding to all raise their prices. Our economy is taking a beating and a lot of good people are getting hurt by it. Maybe we should be honest about why that is and what we can do to prevent it in the future rather than looking for scapegoats for Joe Biden and the Fed.