Federal Reserve Jerome Powell repeatedly claimed that inflation was only “transitory” for a good portion of 2021. (Spoiler alert: the official data show shows he was wildly wrong.)
Since Biden took office in January 2021, inflation has shown a consistent upward accelerating trend — with only a couple of months of mild “easing” before rising dramatically again.
Treasury Secretary Janet Yellen adopted the same stance as Powell. But after a recent meeting with Powell and Biden, she finally admitted to CNN’s Wolf Blitzer:
I think I was wrong then about the path that inflation would take.
Powell issued similar remarks, saying he “could have used a better term.”
Neither mea culpa is very comforting for retirement savers who are paying 10.8% more for food at the grocery store and 43.6% more for gasoline at the pump.
But why offer these apologies now, when it won’t change the reality of the situation? POTUS himself took to the Wall Street Journal to let us in on his plan…
Biden finally has a plan for fighting inflation!
In an op-ed written under his own byline, President Joe Biden laid out a three-part plan to combat inflation, making it his “top priority” to tackle it. So far, so good.
The actual plan comes halfway down the article after Biden tries to frame what he calls “economic recovery” in such a way as to comfort the public. (Not much in the way of taking accountability for what is happening right now)
Leaving that framing aside, and leaving out his partisan blaming of Trump and Putin, his plan reads fairly well when taken at face value.
It has three parts, in Biden’s own words:
First, the Federal Reserve has a primary responsibility to control inflation... highly qualified people from both parties lead that institution. I agree with their assessment that fighting inflation is our top economic challenge right now.
Second, we need to take every practical step to make things more affordable for families during this moment of economic uncertainty – and to boost the productive capacity of our economy over time. We can also reduce the cost of everyday goods by fixing broken supply chains, improving infrastructure, and cracking down on the exorbitant fees that foreign ocean freight companies charge to move products.
Third, we need to keep reducing the federal deficit, which will help ease price pressures. Last week the nonpartisan Congressional Budget Office projected that the deficit will fall by $1.7 trillion this year—the largest reduction in history.
Digging a little deeper into Biden’s plan, we learn there’s truth in the old saying, the devil’s in the details…
The fine print
The first part of the plan reads like a rehashing of the Fed’s dual mandate. By law, they have two jobs: to maintain stable prices (keep inflation tame) and maintain low unemployment. So it’s fairly obvious that the Federal Reserve under Chairman Jerome Powell’s leadership is failing miserably at half their jobs.
In other words, the first part of President Biden’s plan is, “Let the people who failed to do their jobs the first time try again.”
We don’t have much of a choice, do we?
Hopefully, Powell’s upcoming rate hikes will provide some real-world relief before gas hits $20/gallon.
Moving on to the second part of the plan, we start to encounter the President’s favorite solution for nearly every problem: whip out the government checkbook. For example…
“Lower costs on essentials” means the following, according to the WSJ article:
- “Improving infrastructure,” which requires spending money. (Don’t forget that President Biden already signed a $1 trillion infrastructure plan back in November 2021 – maybe that wasn’t big enough?)
- “Lower the cost of child and elder care to help parents get back to work.” Well, that means either federally-mandated price controls daycare facility rates, or spending taxpayer money to “lower the cost.”
- “Passing clean energy tax credits…” Unless President Biden figured out how to derive massive “clean energy” from all the hot air coming out of Washington D.C., this also means spending more taxpayer money.
Part two of Biden’s big plan is to spend more money. And, honestly, that’s not much of a surprise.
Part three of his plan explains that we need to “keep reducing the federal deficit, which will help ease price pressures."
Read that again. That’s right – our President actually understands that spending too much money increases price pressures (which is what you and I call inflation.) The man who tried to pass the largest federal budget in history, who shelled out $1.9 trillion in covid pandemic relief funds, understands a tidal wave of cheap money drives prices up.
Now, I agree the idea of “reducing the deficit” makes good sense. I’ll go the President one better, and say we need to balance the budget, and stop spending money the nation doesn’t have (keep in mind, the U.S. hasn’t run a budget surplus in over 20 years).
One small problem with this line of thought… How do we reduce the deficit by spending more money?
Keep in mind, about ten months ago Biden claimed that his $3.5 trillion budget would actually lower inflation. Twitter still remembers.
My plan to fight inflation will lower your costs and lower the deficit.
17 Nobel laureates in economics said my plan will ease long-term inflationary pressures.
That didn’t make sense then, and it doesn’t make sense now. Especially after we’ve seen the consequences, 40-year-record inflation, blazing higher month after month since then.
Here’s something any first-grader can tell you: the obvious way to reduce the deficit is to lower spending. What do all of Biden’s concrete suggestions have in common?
And therefore, by his own logic, more inflation.
Why is he telling us that government should spend less, while also telling us government should spend more? (Maybe he’s hoping the next President will sort this out?)
I’ve got to say, this plan is appalling. I’m shocked no one in the White House so much as glanced at it before sending it over to the WSJ for publication. Such a basic error in logic is simply embarrassing.
Worse, it sure looks like we’re going to get a heaping helping of more of the same… And that’s a financial disaster waiting to happen.
Here’s the bottom line…
What got us here won't get us there
As Albert Einstein famously said:
No problem can be solved from the same level of consciousness that created it.
We can see the President is still stuck in the “same level of consciousness” that created this inflationary bonfire in the first place…
Since President Biden took office, the purchasing power of your dollar has declined more than 10%. Prices are still accelerating and at the same time your buying power is evaporating.
I think it’s time to give up on the notion that this administration is capable of making smart fiscal decisions. Just like I’ve already given up on the Federal Reserve’s ability to create a rational monetary policy.
So where does that leave us? Right now is a good time to learn how you can take charge of your own financial security. That way, when you read about any politician’s self-contradicting plan, you’ll have the confidence and security of a better plan of your own. A plan that puts your goals and your concerns first.
That plan could include taking a few minutes to learn about inflation resistant investments, diversification away from dollars, and of course you can consider physical gold and silver if you have concerns about your long-term buying power.
No matter how long it takes for financial sanity to return to the White House, you can take a great deal of comfort from owning assets that have real intrinsic value that can't be distorted even by the worst government plans.
Peter Reagan is a financial market strategist at Birch Gold Group. As the Precious Metal IRA Specialists, Birch Gold helps Americans protect their retirement savings with physical gold and silver. Based in the Los Angeles area, the company has been in business since 2003. It has an A+ Rating with the BBB and hundreds of satisfied customer reviews.
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