When the cure is as bad as the disease

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There’s a scene in some movie, I forget which one, where the one character is about to do something nefarious to another and they say:

“Don’t move. If I do this wrong it will hurt a little.”
“And if you do it right?”
“It’ll hurt alot.” <evil grin>

That about sums up government’s latest efforts to curb inflation by inflicting ‘pain’ on the average American. In short, the plan is to purposefully throw us into a recession to slow inflation. Trying to purposefully put the US into a recession at this point is like shooting out streetlights to make the sun go down.

First off, given this administrations clueless efforts at economic manipulation, I could totally see them oversteer and give us a depression rather than a recession. But, more importantly, how far down the path have we gone where a recession becomes the more attractive solution an economic problem?

If you never saw ‘World War Z’, a rather bad zombie movie, there’s a scene where the hero realizes that the zombies only attack healthy people. The zombies ignore the diseased and sick. So the hero injects himself with something fatal but curable. He injects himself, walks through the crowd of zombies unmolested, and when he gets to safety he is injected with the cure to what he injected himself with earlier. This economic strategy of purposeful recession to stem inflation is the economic analog to this.

Also, this doesn’t take into account that we’re already in a recession and, surprise, inflation is still a problem. (And, mind you, in the 70’s inflation was calculated in a different way than it is now. If we used the same method we used in the 70’s inflationary period we would see that our current inflation rate is rather significantly higher than what is being reported now.)

As the saying goes, there is no problem so difficult that government cannot make it worse. George Washington died not from illness, but rather from the treatments given to him at the time. It is ironic that Washington (the person) died from treatments meant to heal him from illness, and now we’re looking at Washington (the .gov) inflicting treatments for an economic illness that will be  more punishing than the illness itself.

So, even if we weren’t in a recession (but we are, despite the hastily redefined term ‘recession’) we can expect one as .gov tries to stem inflation by any means except the most logical one – stop the free money express.

Inflation is too much money chasing too few goods. At least, thats one of the definitions. By that definition the solution is to either reduce the amount of money being spent or increase the amount of goods. Since we’re still dealing with ‘supply chain issues’ from when .gov mandated businesses close up or run at half-strength, increasing the supply of goods might be tricky. Easier to reduce the amount of available money. How’s that done? Well…youre going to find out. Gov could stop with the handouts (student loans, extended unemployment, etc.) but what are the odds of that. A recession, though….unemployment goes up, people hold onto their money, they stop spending, prices come down, inflation is tamed, and all it cost you was the jobs, homes, and financial security of millions of citizens.

he trick is going to be being one of those citizens who isn’t negatively affected. How do you do that? Shoot, man…you already know he answer to that. Get out of debt. Yes, in periods of high inflation you are at an advantage by paying off debt with devalued money…but you still have to have the money. And if your job suddenly goes tango uniform, the last thing you need is to be sending your remaining dollars to the bank rather than to the grocery.

Get out of debt as fast as you can, buy in large quantities things you anticipate using up over time, try to have more than one revenue source, and spend deliberately and carefully.

Midterm elections are coming, and as unpalatable as this stuff is, it is going to be even worse when the elections are over and they can roll out the stuff that will really get the masses reeling.

Skip the jet ski and new car this year..and next year. Work on your economic resilience instead. There’s gonna be plenty of jet skis and like-new cars at bargain prices being sold by short-sighted sheeple before this is all done.

 

13 thoughts on “When the cure is as bad as the disease”

  1. As a ‘Rawlesian’ since 2007, the advantages of being early are fast disappearing.
    Sadly, most of the latest to awaken, since the Covid-19 sham and experience, only talk the talk and are not walking the walk. I suspect the less than 3 percent that are truly capable of being mostly self sufficient, may not exceed that number. The rest will be apart of the problem, and not apart of the solution. Glad I’ll be in a remote location in Montana.

  2. Americans, most of them completely in the dark, are about to have a shocking encounter with a serious drop in our standard of living, planned and implemented by our own government. The freedoms our society is built on are also in peril.

  3. Under cruel to be kind, look at Cook County (Crook County),IL new plan for helicopter bribes to the FreeStuffArmy,what could go wrong? More fiat dumped in ghettos for votes for criminal politicans,sounds like paradise. Still remember the first stimmys being celebrated with fireworks displays in the hood,street cred for biggest display. I went through the 70’s and 80’s and remember but this will be a real eye opener for a lot that have only seen the last few decades.

  4. I’m all cash as far as my investments right now, I have no debt, I have plenty of guns and ammo – when the SHTF happens, economically, and those “like-new cars at bargain prices” and about-to-be-foreclosed-on homes have to be sold without the associated “equity”, I’ll be there with a smile and cash in hand offering the poor unfortunates a way out of their misery – and I won’t feel one bit of sympathy for them.

  5. Hey Commander,

    Love your blog, stop by everyday. Love your view that a handful of $50 bills will solve a lot more problems than a .50 cal Barrett. Good place to come for common sense.

    Unfortunately, you do not seem to understand the current economic situation. Powell was appointed by Trump originally, not Biden, Biden just kept him on to blame a conservative. Powell and the Fed are trying to pop the “Everything Bubble”, not to hurt people but to prevent another Great Depression and the need to start WW3 to end it. Everything right now is overvalued compared to historical norms, hence the name Everything Bubble. When you look at the price of equities compared to earnings, it is insane, in fact, it is so bad, that PE is being replaced by newer valuation methods so that stocks don’t look so over priced. It is insane. Normally in a situation like this, the rich tout how much money you can make in the market and the ignorant/retail investors pour in and buy, then the rich sell high, the market collapses and the bubble is burst, the rich make out like bandits, the retail crowd gets soaked and life continues. The problem the rich are having is that the middle class isn’t buying. It is no longer their first rodeo and they see that it is a bad time to buy. So what happens? The bubble has to burst sometime and the longer it keeps growing, the more pain for the middle class at the end. Ever hear of the roaring 20’s?

    Increasing the rate at which money is loaned to banks by the Fed and decreasing the amount of bonds the Fed buys are really its only means of influencing the bubble. First, the damn Fed should never of been buying bonds in the first place, the damn Fed should never exist in the first place, but that is another rant. Second, when the Fed is giving money away at 0% interest, which they were, then of course everyone is going to load up on money and inflate the price of everything. The Fed raising the rate they loan to banks is basically common sense, it should be 6% or so minimum, IMO. It is still less than 3% !!!

    Biden, Trump and every other rich person/politician out there wants the bubble to go on forever, and they damn sure do not want it to deflate or burst on their watch. So congress and the rest of the swamp is not going to bust the bubble, they are going to let it grow until it bursts and destroys us. No one on this forum lived through the Great Depression. My grandma who taught me investing and finance and was a millionaire by investing the $200k she got when her husband died in 1956 even though she had to raise 3 young kids on that money and put them through college on it as well, did live through the Great Depression. Until her death, she still saved the rubber bands on the newspaper, she saved everything even as a millionaire. It made an impact on people that the current generations can’t understand. In Arkansas, the number one cause of death for kids in the 30’s was heart failure, the coroners were not allowed to say the kid starved to death. Avoiding another Great Depression and WW3 is smart, not cruel.

  8. “Unfortunately, you do not seem to understand the current economic situation.”

    Ha! Ha! Ha! Good one.

  9. They used to call this actually taught it in school economics…as dear money and poor money. born 1060

  10. Actually, if you hold debt now at reasonably low fixed rates, you will be able to pay it back with increasingly worthless dollars. Inflation benefits the debtor, not the saver. If you’ve got a variable rate, get it into something fixed yesterday.

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