"I Don't Think There's Going to Be an Inflationary Problem"

Yellen’s Famous Last Words Were you forwarded this email? [Sign-up to The Daily Reckoning here.]( [Unsubscribe]( [Daily Reckoning] "I Don't Think There's Going to Be an Inflationary Problem" - "I don't think there's going to be an inflationary problem"… - The arrival of helicopter money… - Then Jeffrey Tucker shows you the unprecedented scale of the monetary project we’ve been subjected to… Recommended Link [Rickards: “Dollar doomsday plot” revealed]( [Read more here...]( Jim Rickards made some spectacular financial predictions in the past… In 2016, Jim predicted Brexit would pass. He was right. That same year, Jim predicted that Donald Trump would win the U.S. Presidential election. Jim was right again! And in 2019, Jim didn’t just correctly predict a pandemic — he also predicted exactly how the government would respond! Now Jim is forecasting a “dollar doomsday plot” you won’t believe. [Go Here Now To See]( Annapolis, Maryland June 3, 2022 [Brian Maher]Dear Reader, Ms. Janet Yellen, May 2021: "I don't think there's going to be an inflationary problem." The same Ms. Janet Yellen, June 2022: “I think I was wrong then about the path that inflation would take.” The lady continued: There have been unanticipated and large shocks that have boosted energy and food prices, and supply bottlenecks that have affected our economy badly that I... at the time, didn’t fully understand. We applaud Ms. Yellen’s candor. A public admission of error is rare among government grandees. Yet it casts grave doubt upon the value of a doctoral degree in economics, especially from the Ivy Leagues — Yale University in this instance. The duller graduate of a lesser institution would have noted that 1) One-fifth of all United States dollars ever issued entered existence in 2020. The M2 money supply skyshot nearly $6 trillion within the space of one year. And 2) Inflation generally bubbles within 18 months of a money-printing delirium. This dunce would therefore conclude that inflation would begin sizzling by late 2021 (the printing fevers commenced in March 2020). The dunce would have been correct. Explains our own Jeffrey Tucker: “Every bit of this unfolding disaster traces to lockdowns and money printing. Every bit of it.” Perhaps it is time to pluck the nation’s monetary and fiscal authorities from the academic backwaters and slums. The higher institutions have not clubbed the sense out of them. They can still add 2 +2. Their Ivy League superiors — meantime — often cannot put two and two together. Yet the devil’s advocate springs to Ms. Yellen’s defense… He claims that Russia’s special military operation in Ukraine has played the mischief with energy and food markets. The conflict therefore brunts the blame for the present inflation. But we would remind this fellow that inflation was on the jump long before Mr. Putin’s troublemaking. We concede it has fanned the inflationary flames. Yet the blaze was already going. The devil’s advocate retorts that supply chain delinkings have likewise kindled inflation. Shortages have elevated prices as supply cannot meet demand. There is a degree of justice here — yet we hazard the printing press theory carries far more. That is because the money blitz assumed a different aspect than quantitative easing. The “money” fabricated under quantitative easing failed to enter the goods and services economy. It was squirreled away, sequestered, within the banking sector. Instead, the monetary excesses of the past two years represented a sort of helicopter drop. The aforesaid Jeffrey Tucker: What was radically different this time (I’m not sure anything like this has happened in U.S. history) is that the Congress authorized the money to be dropped helicopter-style straight into the bank accounts of businesses, nonprofits and consumers. Should you be surprised then that inflation is presently loose? You perhaps are not surprised. Yet you likely lack a doctoral degree in economics from Yale University. You are not an “expert.” Your vision is not clouded, your judgment is not addled, by beautiful yet fanciful theories. You do not babble gobbledygook understood by a mere few. “Making itself intelligible is suicide for philosophy,” said philosopher Martin Heidegger. To which we add: Making themselves intelligible is suicide for economists like Janet Yellen… Below, Jeffrey Tucker shows you the unprecedented scale of today’s monetary luncy. Read on — but not before imbibing a stiff drink. Regards, [Brian Maher] Brian Maher Managing Editor, The Daily Reckoning Editor’s note: How can you protect your wealth against the ravages of inflation? Some are turning to cryptocurrencies, but the recent crypto crash makes that look like a bad decision. History points to something far more enduring — gold. Gold is real money. It’s private and secure and remains incredibly valuable today. It is also dirt, dirt cheap… for now. When the bug really hits the windshield, gold will likely explode in value, and quickly become out of reach for most investors. When Rome was overrun by barbarians and the empire collapsed… [powerful families survived by storing their wealth in gold.]( [Click here for more...]( Centuries ago, smart families maintained their lifestyle while the rest of Europe plunged into centuries of chaos by owning gold. [Click here to see how gold can potentially save you from chaos today.]( Recommended Link [“The Situation Is Getting Worse By The Day”]( That’s what the President of the US Chamber of Commerce just said about the supply chain. If you thought the supply chain issues were over, think again… Things are about to get much, much worse. And everything from your local grocery store to your gas station could be impacted. That’s why I’m urging everyone I can to prepare now… See the #1 move to make before this problem gets any worse... [Click Here Now]( The Daily Reckoning Presents: “What the Fed did in 2020–21 is truly beyond belief, straight out of the crudest medieval playbook on how to expand the state by depreciating the currency”… ****************************** Awash in Paper Money By Jeffrey Tucker [Jeffrey Tucker]On Feb. 3, 2020, the M2 money supply stood at $15.3 trillion. Today, as of March 2022, it stands at $22 trillion. That’s a 43.7% increase in a mere two years. And contrary to what is being advertised, there is no real evidence of a current tightening beyond some small perfunctory moves. This is a monetary experiment we’ve not seen in the U.S. since Colonial times, when worthlessness was measured against the most worthless thing of all, the Continental currency. The notion that this ends smoothly is utterly ridiculous. What’s more, at this point, the Fed is not necessarily in control. Velocity statistics show there is tremendous potential for far more inflation in our future. Banks don’t control that. People do. And we are already starting to see a shift in spending patterns. The savings rate keeps falling as consumers and businesses spend down the assets they socked away for two years. Gross private savings are lower today than before lockdowns. Personal savings are running 6.2% from a high of 33%. The money is running out and now personal debt is on the rise: a large increase of the trend in 2021 and following. Now, you could say that maybe this is smart: Take out the loan and pay it back in cheaper dollars due to inflation. Perhaps, but more likely this is too clever by half. The actual reason is more simple: People need the money to sustain a lifestyle in the face of growing pressure from all ends. It’s not absolutely crazy to speculate on the worst possible outcome: the death of paper money. We’ve been there before, many times and many places. We can look back at the historical cases and marvel at the stupidity of the money masters for having allowed such a thing. And yet it is not obvious to me that we have brighter bulbs at the helm today. What these people have done is utterly crazy. The current inflation crisis is every bit as bad as it was in 1979–80. The circumstances are slightly different, of course, but the underlying causes are similar. Back then we had price controls that exacerbated price pressure. Today we have post-lockdown supply chain breakages that are artificially reducing the availability of goods. Still, in the end, it’s all about the money. What the Fed did in 2020–21 is truly beyond belief, straight out of the crudest medieval playbook on how to expand the state by depreciating the currency. It was no better than coin clipping. It went as follows. Governments smashed economic activity. It created an artificial and pretty-well instantaneous depression. That’s exactly what happened, but the administrative state and the politicians didn’t want to face this reality. So they turned to the magic of redistribution. In other words, they just wrote legislation that spent $1.7 trillion, then more, then more, then $6 trillion at least, and, by some estimates, more than twice that amount overall. Obviously, that money was not in the U.S. Treasury, so what to do? Well, obviously: Issue debt. Nothing unusual about that. Same thing happened in 2008, without obvious damage to the average person. Recommended Link [Man Who Predicted Bitcoin Warns: “Don’t Buy Bitcoin!”]( [Read more here...]( James Altucher first predicted Bitcoin all the way back in 2013… And ever since, he’s been one of the biggest advocates for it. But now, he’s warning Americans that buying Bitcoin could be a big mistake… [Click Here To See Why]( What was radically different this time (I’m not sure anything like this has happened in U.S. history) is that the Congress authorized the money to be dropped helicopter-style straight into the bank accounts of businesses, nonprofits and consumers. You probably saw this and wondered why the heck they were doing this. It was all about keeping up the appearances of prosperity even as economic activity was being crushed. By the way, we should completely understand why when people look at these situations, they assume the wildest conspiracy theories are correct. The Great Reset, for example. They were actively trying to crush free enterprise as we know it, promote dependency on governments, wreck the cities, get rid of fossil fuels, promote digital technology and green energy and balloon state power. From everything we can see, the connection between that ambition and the policies seems clear. That such a policy would produce massive debasement is so obvious. They surely knew it. Did they care? The short-term thinking in government today is the real virus. It’s like they are in survival mode, just bumping from month to month. Maybe it was an extension of the crisis environment that has affected everyone in the country, with the media screaming about the deadly pathogen coming to wipe out humanity and so on. Regardless, it’s hard to imagine a more stupid policy. The current dilemma was easily foreseen. That’s what the Fed is now proposing to do, with inching up the discount rate, selling bonds into the market as a way of sopping up excess liquidity that is far less than what would seem to be necessary. Even by the Fed’s own inflation target, they need the federal funds rate at 2–3%. And yet not even that will cut it. Back in the day, with inflation running into the double digits, Paul Volcker assumed control and promoted the view that the only way to get this under control was to become recession tolerant. Raise rates, let the economy tank into negative growth, white-knuckle the grim scene for 18 months and then watch the growth begin anew. It’s almost charming to think of that now. I cannot remember a single public official, elected or not, who in 40 years has said something similar. Let’s look at what the Fed did back then to get inflation under control, and in the context of what came before and what came after. Let’s start with the discount rate that the Fed directly controls. [IMG 1] The peak there is what the Fed manufactured as a policy response to inflation. The recession in the gray bar was not only a result but an intention. Maybe that sounds cruel but it is not. It set up the American economy, and really the globe for decades of growth. Now let’s look at the Federal Funds Rate that the banks charge each other, which is the market rate most directly influenced by the Fed. It peaked at an astonishing 22%. [IMG 2] To see the charts is to realize the scale of the problem here. The very notion that the Fed’s current plans stand a hope of getting inflation under control is utterly preposterous. No one there today has the brass to pull it off. Another path to soaking up all this extra liquidity is to unleash the market: open supply chains, unleash entrepreneurs, allow more high-skilled migration, dramatically cut taxes, and generally become more encouraging toward enterprise. And that’s not happening right now. Regards, Jeffrey Tucker for The Daily Reckoning Ed. note: How can you protect your wealth against the ravages of inflation? Some are turning to cryptocurrencies, but the recent crypto crash makes that look like a bad decision. History points to something far more enduring — gold. Gold is real money. It’s private and secure and remains incredibly valuable today. It is also dirt, dirt cheap… for now. When the bug really hits the windshield, gold will likely explode in value, and quickly become out of reach for most investors. When Rome was overrun by barbarians and the empire collapsed… [powerful families survived by storing their wealth in gold.]( Centuries ago, smart families maintained their lifestyle while the rest of Europe plunged into centuries of chaos by owning gold. [Click here to see how gold can potentially save you from chaos today.]( --------------------------------------------------------------- Thank you for reading The Daily Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:dr@dailyreckoning.com) [Jeffrey Tucker]( is an independent editorial consultant who served as Editorial Director for the American Institute for Economic Research. He is the author of many thousands of articles in the scholarly and popular press and eight books in 5 languages, most recently Liberty or Lockdown. He speaks widely on topics of economics, technology, social philosophy, and culture. Add feedback@dailyreckoning.com to your address book: [Whitelist us]( Additional Articles & Commentary: [Daily Reckoning Website]( Join the conversation! Follow us on social media: [Facebook]( [LinkedIn]( [Twitter]( [RSS Feed]( [YouTube]( The Daily Reckoning is committed to protecting and respecting your privacy. We do not rent or share your email address. By submitting your email address, you consent to Paradigm Press delivering daily email issues and advertisements. To end your Daily Reckoning e-mail subscription and associated external offers sent from The Daily Reckoning, feel free to [unsubscribe here.]( Please read our [Privacy Statement](. For any further comments or concerns please email us at feedback@dailyreckoning.com. If you are having trouble receiving your Daily Reckoning subscription, you can ensure its arrival in your mailbox [by whitelisting The Daily Reckoning.]( [Paradigm Press]© 2022 Paradigm Press, LLC. 808 Saint Paul Street, Baltimore MD 21202. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized financial advice. We expressly forbid our writers from having a financial interest in any security they personally recommend to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of a printed-only publication prior to following an initial recommendation. Any investments recommended in this letter should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company. Email Reference ID: 470DRED01[.](