The front-page headline in the Wall Street Journal on October 14 says it all, “Inflation Is Back at Highest in over a Decade.” The Labor Department reported that the Consumer Price Index (CPI) increased 5.4 percent from a year ago. This should not have been a surprise to Federal Reserve chairman Jerome Powell and his fellow board members nor to its hundreds of PhD economists who drill into the economic data to forecast the economy.
In 2020, when the US economy imploded under the lockdown orders of the federal government and state governors, the Federal Reserve’s balance sheet exploded from $4.17 trillion in February 2020 to $8.48 trillion in October 2021. In other words, the Federal Reserve bought more than $4 trillion in mortgage-backed securities and US Treasury debt in less than two years.
This increase in the Fed’s balance sheet in eighteen months is more than was purchased in the first hundred-plus years of its existence. This unprecedented “money printing” has had enormous consequences for the economy and the American people, not the least of which is accelerating price inflation.
As the new money created by the Fed diffuses throughout the economy prices rise in an uneven fashion. Economic sectors and geographic regions are affected differently depending on how the recipients of the newly received dollars spend them, an observation I identified forty years ago in my doctoral dissertation on the spread of inflation through the economy.
The broad measure of the money supply, M2, consists of cash, checking accounts, savings accounts, small denomination time deposits, and money market funds. M2 increased from $15.4 trillion in February 2020 to nearly $21 trillion dollars in September 2021—nearly a 33 percent increase in liquid assets that the American people have at their disposal to buy goods and services in the marketplace.
Any PhD economist should have been able to conclude that opening up the monetary spigot full blast to “stimulate” because of the lockdowns would raise prices down the road. We are now down that road. Price inflation will probably continue for at least two more years. Once price inflation accelerates as it did in the mid- to late 1960s and then again in the early and late 1970s and early 1980s, it takes “tight money” by the Fed to slay the price inflation dragon.
Forty years ago was the peak of the double-digit inflation that began in the mid-1970s, when the Federal Reserve inflated the money supply to boost the economy after the 1973–75 deep recession. In addition to the recession, double-digit inflation rocked the US economy. In 1979, to get inflation under control President Jimmy Carter appointed Paul Volcker Fed chairman, who continued his tight money policy after Ronald Reagan was elected in November 1980.
The fed funds rate (the rate at which banks borrow from each other overnight, controlled by the Fed) climbed to 22 percent in December 1980. Three-month Treasury bill rates topped out at 16.30 percent in May 1981, while the inflation rate was about 10.00 percent. In short, savers were getting a substantial real rate of return on their T-bills and their money market accounts.
Since the early 1980s the fed funds rate has been dropping, not in a straight line, but more like a staircase. Currently, the fed funds rate is a tad above 0 percent while the inflation rate has clearly accelerated in the past year to more than 5 percent. The interest rate on bank money market accounts is 0.02 percent at my bank. Inasmuch as I have a substantial amount of cash reserves—funds for the proverbial rainy day—I and tens of millions of Americans are losing hundreds of billions of dollars in interest due to the Federal Reserve’s super easy money policies.
To rectify this highway robbery I propose the Congress pass and President Biden sign the Savers’ Protection Act. The act would state that if the interest rate on savings accounts, money market funds, and other short-term instruments are less than the rate of inflation, savers will deduct the lost savings on their tax return. For example, if someone has $100,000 in a money market fund the account should pay at least the rate of inflation for the year. Today that would be about $5,000. I propose a tax credit of at least 50 percent of the lost interest, $2,500 or more.
If the federal government does not protect the American people from the Fed’s reckless monetary policies, which have caused prices to accelerate and have blown up another financial bubble, then the public “could go on strike” and withdraw their money until banks pay us a market rate of interest. As every undergraduate business student learns in a corporate finance course, the nominal rate of interest on a risk-free asset, such as a bank account, equals the real rate plus the inflation premium. The American people should earn 7 percent on their savings accounts. I would be content at this time to earn the inflation rate on my money market account.
Dr. Murray Sabrin retired on July 1, 2020 as Professor of Finance. On January 25th 2021, the Board of Trustees awarded Dr. Sabrin Emeritus status for his scholarship and professional contributions during his 35-year career. His book, Universal Medical Care: From Conception to End-of-Life: The Case for a Single Payer System, calls for the individual or family to be the single payer to restore the doctor-patient relationship. His latest book, Navigating the Boom/Bust Cycle: An Entrepreneur’s Survival Guide, was published in October 2021. Sabrin is the author of Tax Free 2000: The Rebirth of American Liberty, a blueprint on how to create a tax-free America in the 21stcentury, and Why the Federal Reserve Sucks: It Causes, Inflation, Recessions, Bubbles and Enriches the One Percent, which is available on Amazon.
Will America-First News Outlets Make it to 2023?
Things are looking grim for conservative and populist news sites.
There’s something happening behind the scenes at several popular conservative news outlets. 2021 was bad, but 2022 is proving to be disastrous for news sites that aren’t “playing ball” with the corporate media narrative. It’s being said that advertisers are cracking down, forcing some of the biggest ad networks like Google and Yahoo to pull their inventory from conservative outlets. This has had two major effects. First, it has cooled most conservative outlets from discussing “taboo” topics like Pandemic Panic Theater, voter fraud, or The Great Reset. Second, it has isolated those ad networks that aren’t playing ball.
Certain topics are anathema for most ad networks. Speaking out against vaccines or vaccine mandates is a certain path to being demonetized. Highlighting voter fraud in the 2020 and future elections is another instant advertising death penalty. Throw in truthful stories about climate change hysteria, Critical Race Theory, and the border crisis and it’s easy to understand how difficult it is for America-First news outlets to spread the facts, share conservative opinions, and still pay the bills.
Without naming names, I have been told of several news outlets who have been forced to either consolidate with larger organizations or who have backed down on covering certain topics out of fear of being “canceled” by the ad networks. I get it. This is a business for many of us and it’s not very profitable. Those of us who do this for a living are often barely squeaking by, so loss of additional revenue can often mean being forced to make cuts. That means not being able to cover the topics properly. Its a Catch-22: Tell the truth and lose the money necessary to keep telling the truth, or avoid the truth and make enough money to survive. Those who have chosen survival simply aren’t able to spread the truth properly.
We will never avoid the truth. The Lord will provide if it is His will. Our job is simply to share the facts, spread the Gospel, and educate as many Americans as possible while exposing the forces of evil.
To those who have the means, we ask that you please donate. We have options available now, but there is no telling when those options will cancel us. We just launched a new GiveSendGo page. We also have our GivingFuel page. There have been many who have been canceled by PayPal, but for now it’s still an option. Your generosity is what keeps these sites running and allows us to get the truth to the masses. We’ve had great success in growing but we know we can do more with your assistance.
Thank you, and God Bless!