Today’s discussion will focus on why inflation is at a 40-year high. There’s a very good reason, but I’m not sure many Americans understand it. But before we get into that discussion, I have some observations on the results of the midterm elections, although some of the final vote counts are not yet in. While all of the final tallies are not done, it is virtually certain the GOP flipped the House of Representatives, and Republican candidates for governor did very well.
Mid-Term Elections – Record Money Spent, Largest Turnout Ever
Keep in mind that my observations on the midterm elections are written on Wednesday, and the elections are still far from over, so things could change. However, my comments which follow are not likely to change the big picture.
The most important thing to happen in Tuesday’s elections was the GOP took control of the House of Representatives by a comfortable margin, as was widely expected. As of this writing, it looks like the Republicans have at least 222 House seats, giving them majority control. Again, this will change as the remaining states finish counting, but it seems clear the GOP has successfully flipped the House.
The Senate is currently neck-and-neck at 49-48, advantage GOP, with three states uncalled as this is written. Of those three, Nevada is likely to go GOP, and Arizona is likely to go Democrat. Whether the Republicans take control of the Senate could come down to Georgia, once again, where Herschel Walker and incumbent Senator Rafael Warnock face a runoff on December 6.
Next, the overall spending on the midterm elections was record large, currently estimated at $17.6 billion, shattering the previous record of $13.7 billion four years ago. Meanwhile, voter turnout at Tuesday’s midterm elections is also believed to have been record large. In the 2018 midterms, voter turnout was the highest in 40 years at 49% of eligible voters. Based on early voting, that number is almost certain to be even higher, setting a new record this time.
Next and perhaps most importantly, President Biden’s legislative agenda is now effectively dead. With the Republicans in control of the House, Mr. Biden will not be able to get any controversial legislation passed. That’s a good thing.
And my final observation: I was very disappointed to see Pennsylvania go for the far-left candidate John Fetterman over Dr. Oz, the Republican. Dr. Oz only recently relocated to Pennsylvania from New Jersey in late 2020, where he lived for over three decades, so many PA voters considered him a “carpetbagger.” Plus, he ran a terrible campaign. So, a majority of PA voters rejected him and instead voted for far-left Fetterman who is recovering from a stroke.
US Inflation At A 40-Year High – Why?
Americans are facing 40-year high inflation and there’s been no shortage of discussion on the topic. It’s been the number one issue on the minds of Americans as we headed into the midterms, and every day on TV and in newspapers pundits are debating how long it will last and opining as to who is to blame.
What’s most astonishing amid the flurry of news on soaring inflation is just how badly the commentary misses the real reasons for it. While there is broad agreement that the US is experiencing dangerously high inflation, partisanship and ideology have polluted the discussion as to the reasons behind the rise in prices. Now it’s come down to a “blame game.”
Progressive politicians like Robert Reich, Senator Elizabeth Warren and others tweet incessantly that “corporate greed” is to blame for soaring inflation, an idea even many Democratic economists have summarily dismissed. President Joe Biden, meanwhile, has repeatedly blamed Vladimir Putin this year. Republicans, on the other hand, have consistently made the case that high inflation is the result of Joe Biden’s unprecedented federal spending.
All of these explanations are mostly or entirely wrong.
While it’s true that Putin and Biden deserve some blame – particularly in terms of high energy prices — there seems to be an unspoken bipartisan consensus to ignore the elephant in the room: the Federal Reserve’s unprecedented money printing.
The Fed has created a never before heard of amount of money over the last two and a half years, expanding the money supply by over $7 trillion in the last 30 months, much of it done to fight the Covid-19 virus effects on the economy and consumer spending. This level of growth in the money supply in such a short time has never happened before. No wonder inflation is soaring!
Since 2019, the M2 money supply has exploded to nearly $22 trillion. This has never happened before in such a short time. It’s no surprise then that inflation is at a 40-year high. The Consumer Price Index was at 8.2% (annual rate) at the end of September. It has since receded to 7.7%, but it will be very difficult to get it back to the Fed’s 2% target anytime soon.
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