Inflation is Here and it is the Poor Who Will Suffer

The much feared inflation is now certainly here. The recent Consumer Price Index increased to 6.2% from a year ago, the biggest inflation surge in 30 years. The national debt has ballooned to around 29 trillion, over $80,000 per citizen. As a result, the federal government’s debt burden in 2021 will be larger than the size of the total U.S. gross domestic product. There is no practical way to ever pay off a debt load such as this short of selling Yellowstone National Park or other National resource. The only way to finance the debt is to issue more government bonds and other debt instruments. Yet, there are not enough persons willing to buy this much debt except at an exorbitant interest rate, so much of our debt is financed by the printing of money. When the massive amount of Treasury Bonds and other debt instruments are issued the Federal Reserve simply prints money and buys the debt itself, known as quantitative easing, flooding the markets with money but keeping the interest rates low for the big business interests the government supports and more importantly for itself. If the government had to pay a fair market interest rate on its debt it would soon grow to amounts that would effectively bankrupt the country.

Inflation is caused primarily by too much money chasing too few goods and services. If a government prints excessive amounts of money to pay its spending/debts there will be more cash in the economy to spend on the same goods/services, bidding up the costs of the goods/services. As the government makes welfare handouts or wastes money by sending it to political cronies who give little in return for it, it effectively becomes a transfer of wealth from persons who do not get these government indulgences to persons who do. More importantly, it allows government to tax the working poor and middle class whose wages and savings lose value from the inflation caused by government’s printing of money for it to spend. This is important to government because it cannot easily tax the working poor and middle class due to political restraints and there are not enough rich persons in the country to tax sufficient to finance the excessive government spending. The poor who are dependent on government will receive their stimulus and other welfare payments but their government support will be whittled away by the inflation which will make their payments of much less value. The only way to lower inflation is to spend less and thus print less money or grow the economy through increased productivity/innovation producing more goods/services for the dollars to chase. Even with a growing economy, the government should not print money for wasteful spending as everyone should be allowed to benefit from the resulting deflation (same money chasing increased goods/services) and therefore resulting increase in wealth that would result for all from a growing economy.

In “The Christmas Carol”, the businessmen who are negotiating with Mr. Scrooge over the corn he has to sell tell him that if they meet his outrageous price demands food will be more expensive and the poor will suffer. The businessmen say that this is not fair and Scrooge agrees it is not, but it is business. Inflation caused by government printing of money in response to its wasteful and excessive spending beyond its incoming tax receipts will cause many to suffer but especially the poor. The rich can find ways to invest their holdings into hard assets such as real estate and the stock market which will tend to go up steadily with inflation as we have already seen. Big business will get the lower interest rates they desire and the value of their goods and profits will move up with inflation as well. Government will get its low interest rates to help finance its debt and with the rise in business profits much increased tax receipts to spend as well. The poor, who have little way of benefiting from inflation and whose wages tend not to rise enough to match inflation, grow poorer and poorer. Persons on fixed pensions and who depend on interest income from savings which are held artificially low by the Federal Reserve’s financial tricks are especially impoverished. Perhaps this is just business but it is certainly unfair. I say God help us one and all and deliver us from the irresponsible persons who run our government.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s