Inflation and the Potemkin Economy

The dollar remains, amazingly, the world’s most desirable currency [Gilder's Daily Prophecy] July 18, 2022 [UNSUBSCRIBE]( | [ARCHIVES]( Crypto’s Next Up-and-Comer Coins See these three coins below? [Click here to learn more]( They could be responsible for the next mega-shift in crypto-tech. And of the 6,000 or so cryptos available today, these three have some of the biggest profit potential of them all. [Here’s proof](. Inflation and the Potemkin Economy [Richard Vigilante]Dear Daily Prophecy Reader, Dominating the dollar’s value is its attractiveness to investors, which is in turn, a derivative of the health of the U.S. economy. The dollar remains, amazingly, the world’s most desirable currency because the U.S. remains, perhaps also amazingly, the most desirable place in the world to invest. The once popular notion that the dollar might be replaced by the yuan is dying fast as China shoots itself in the foot, possibly as a test run for shooting itself in the head. Because the economy dominates the dollar, monetary policy is a weak sister compared to the rules set by the political branches or the resourcefulness of the entrepreneurs they attempt to govern. Tom Brady critics take note: the rules of the game and the talent of the players are far more important to the outcome than the condition of the ball. The near coincidence of Intel’s invention of the microprocessor with the Reagan tax cuts dwarfed a monetary policy rudderless since Nixon took us off gold. Consider the ruble. (You weren’t expecting that were you!) One might suppose Communists to be uninterested in monetary policy. On the contrary, from the early 1920s till the end the Soviets were obsessed with restoring what under the Tsar and the gold standard had become one of the strongest currencies on earth. Not that gold itself is wealth. The ruble remained robust because Russian grain exports and a growing capitalist sector supported a relatively high ratio of gold in the Treasury backing the paper on the streets. When Revolution destroyed the Russian economy, the Soviets spent most of the gold. The ruble was pulverized. Even under a gold standard, it’s national productivity that determines the wealth of nations. Gold merely renders that rule explicit. Commies at Prayer The Communists, not unlike the Fed, worshipped money and were clueless about the source of its value. They tried mightily to restore the ruble, going through so many monetary reforms the revolution might have been a conspiracy of bankers rather than bank robbers. From 1917 through 1993, the Communists went through seven different rubles, each varying mostly by the number of zeros removed from its predecessor. Ruble Two, Lenin’s ruble, allegedly backed by gold, collapsed to an exchange rate of 50 billion paper to one of gold when it transpired that it wasn’t. In 1923 Ruble Three replaced Ruble Two at a rate of one new ruble to 1,000,000 old; only to be replaced 15 months later by Ruble Four swapped at one for 50,000 of Ruble Three. Joseph Stalin, Monetarist Stalin, the most ideologically committed Communist ever to rule the USSR, was, naturally, a monetarist. Ahead of his time, he shared the monetarist view that manipulations of the money supply dwarf in importance the quotidian business of producing things people want. In 1947 the Soviet ruler, fearing that peasants enriched by selling produce at war-time prices would flood the economy with their ill-gotten rubles, decided to get rid of 90 percent of the rubles in circulation. When shooting people who had too many rubles proved insufficient, he supplemented those efforts by a surprise 90 percent devaluation (leaked to favored Party members so they could get out in front). As Russian historian Kristy Ironside writes: “people rushed to invest old cash rubles in material goods and nonperishable foods before they lost 9/10 of their value overnight. The reform allowed the state to renege on much of its debt to the population after years of semi-forced investments in state bonds. Ordinary people lost millions of rubles as their savings were ‘converted.’” And so it went until the Soviet collapse in 1992 was met with the Russian ruble issued in 1993. Yay! the Communists were gone! Home free, right? Nope. The Russian Ruble experienced inflation on a comic opera scale during its first four years, as prices rose some 1,692%. Since then inflation has calmed down to a Jimmy Carter-like level, that is if Carter had been President for 25 years. After decades of inflation in the teens, the ruble today buys about five percent of what it could buy back in 1997. Did Biden Just “CANCEL” Your Cash? This is the scenario we’ve been fearing… Instead of President Trump… We’ve got “Sleepy Joe” Biden behind the wheel. And now, a [sinister move that Biden just made]( could TORPEDO the U.S. dollar once and for all. In fact, thanks to this one move… Your dollars could be made worthless, or even CONFISCATED. Do NOT get caught off guard. [Click here to discover 4 EASY STEPS you can take to protect your wealth NOW](. More Monetary Policy Than God The Soviets did not lack for monetary policy. They had tons of monetary policy, deeply cogitated by a plethora of Special Committees. The Politburo discussed it obsessively. Some saw the moribund ruble as perhaps the greatest threat to Communism, as the USSR desperately needed to import basics—even grain—from abroad. Like the Fed, the Soviets got hold of the wrong end of the stick. The Soviet economy did not collapse because the ruble collapsed. The ruble collapsed because the Soviets replaced a real and growing economy with a Potemkin version, sustained by smoke, mirrors, and murder. Stalin resorted to enslaving several million peasants to prepare Russia for WWII. Even after 1992, a kleptocratic economy, and thus the ruble proved little more attractive to investors. Today, however, the ruble sits at its highest level in more than three years: the war has demonstrated how difficult it would be for Europe to replace Russian fuel. As the Tsar’s ruble was supported by grain exports today’s is supported by Russian oil and European greens. It Can Happen Here. Oops, It did! The current U.S. inflation is the predictable result of the political branches reacting to the Pandemic by creating a little Potemkin economy of their own. For the first time in American history the U.S. forbade millions of people to work and paid them to stay home. For all too many the payments exceeded their prior compensation. For many more the spread between pay for work and pay for leisure was small enough to damp their ardor to return. Some millions of workers—it’s not yet clear how many—have been permanently lost to the U.S. economy. Progressives think of workers as a problem and worry whether the government can provide jobs for them. We are seeing now how much of a resource we had, and lost, in those missing hands and heads. [chart] Because GDP—which we should toss onto the trash heap of history—counts transactions not productivity, it fell a deceptively small 3.4% in 2020. Actual production surely dropped much more. Inflation was mostly driven, as I have argued previously, by people saving during the crisis and then suddenly spending in an economy no longer producing, or shipping, enough of the things people want to buy. There was a piece in the WSJ yesterday lamenting the rising cost of travel. Pent-up demand accounts for much, but the airline industry lost 24,000 employees from 2019 to 2020. Most were still missing at last count. The hotel industry lost 100,000 rooms. Making all this worse is the progressive commitment to Potemkin energy. Neither windmills, nor solar panels nor electric cars would exist in current numbers without massive government subsidies psychologically augmented by green propaganda. We are spending billions and wasting billions more in human capital on a net destruction of our energy sources. Inflation, said Milton Friedman, is always and everywhere a monetary phenomenon. Right. But the specific monetary phenomenon behind inflation is the pretense that money makes you rich, a pretense as common to progressive central bankers as it was to the Soviets. Regards, [Richard Vigilante] Richard Vigilante Richard Vigilante is a senior analyst with the George Gilder Report President Trump’s Secret In his final year of office, President Donald Trump did something that could transform America. And create trillions of dollars in new wealth for everyday Americans. [You won’t hear this anywhere else – get the full, uncensored story here.]( [Three founders Publishing]( To end your Gilder's Daily Prophecy e-mail subscription and associated external offers sent from Gilder's Daily Prophecy, feel free to [click here](. If you are having trouble receiving your Gilder's Daily Prophecy subscription, you can ensure its arrival in your mailbox by [whitelisting Gilder's Daily Prophecy](. Gilder's Daily Prophecy is committed to protecting and respecting your privacy. Please read [our Privacy Statement.]( For any further comments or concerns please email us at GildersDailyProphecy@threefounderspublishing.com. 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