About Me

In writing the "About Me" portion of this blog I thought about the purpose of the blog - namely, preventing the growth of Socialism & stopping the Death Of Democracy in the American Republic & returning her to the "liberty to abundance" stage of our history. One word descriptions of people's philosophies or purposes are quite often inadequate. I feel that I am "liberal" meaning that I am broad minded, independent, generous, hospitable, & magnanimous. Under these terms "liberal" is a perfectly good word that has been corrupted over the years to mean the person is a left-winger or as Mark Levin more accurately wrote in his book "Liberty & Tyranny" a "statist" - someone looking for government or state control of society. I am certainly not that & have dedicated the blog to fighting this. I believe that I find what I am when I consider whether or not I am a "conservative" & specifically when I ask what is it that I am trying to conserve? It is the libertarian principles that America was founded upon & originally followed. That is the Return To Excellence that this blog is named for & is all about.

Sunday, June 19, 2022

Fresh Faces Needed In 2024 For The Good Of The Country

"There's a significant amount of our base that is happy with an off-ramp from the Trump train."  Arkansas Governor Asa Hutchinson speaking @ a meeting with WSJ reporters on May 31.

"As Ronald Reagan understood, successful politics really is about addition & multiplication.  We have been doing far too much subtracting & dividing."  Maryland Governor Larry Hogan speaking @ the Ronald Reagan Presidential Library in California as part of a speakers series on the GOP's future following its loss of the White House, Senate, & House during Trump's tenure in office.


A WSJ poll in March found 85% of Republicans viewed Trump favorably.  Hutchinson & Hogan, in the above quotes, were addressing the 15% who don't, plus those who would not like to see Trump run again, & those who are sorry he has endorsed so many primary candidates in the midterms.

Trump has endorsed over 300 primary candidates including those in primaries yet to be run.  Some of these endorsements have helped candidates but also some races have shown there are limits to a Trump endorsement.

Conservative commentators on TV do the disservice of overstating Trump's influence.  For instance earlier this spring it was reported that Trump went 22 for 22 one particular primary night.  What wasn't reported was that in 19 of the 22 contests Trump's endorsees were running unopposed.

Some of Trump's endorsements include Rand Paul, & the following congressmen who all won their primaries with 100% of the vote:  John Joyce, Russ Fulcher, Dan Bishop, Mike Kelly, Guy Reschenthaler, & Scott Perry.  These types of endorsements pad Trump's overall record.  Another trick is to endorse late when the winner is pretty well known like Doug Mastriano running for PA governor.

Karl Rove has developed what he calls his 30-70 Rule - namely that in contested primaries a significant percent of the time Trump's endorsed candidate, whether winning or losing, receives between a quarter & a third of the vote, meaning that such candidates have about 70% of the electorate not supporting them.

J.D. Vance won the Ohio Senate primary with 32% of the vote.  Mehmet Oz won the Pennsylvania gubernatorial primary with 31%.  Bo Hines won NC 13th CD with 32%.  Madison Cawthorn lost the NC 11th CD with 32%.  Janice McGeachin lost the ID gubernatorial race with 32%.  Charles Herbster lost the NE gubernatorial race with 29%.

And in the Georgia races that Trump took personally his endorsees lost big:

David Perdue lost with 22% of the vote to Brian Kemp in the gubernatorial race.  Jody Hice lost with 33% to Brad Raffensperger in the Secretary of State race.  John Gordon lost with 26% to Chris Carr in the State Attorney General race.  Patrick Witt lost with 17% to John King in the state Insurance Commissioner's race.  

Perdue, Hice, & Gordon focused their campaigns on discussing the 2020 presidential election while the three victors, & Witt, focused on more current issues of concern.

Voters will learn another important point about Trump's motivation in his primary endorsements - namely, does he back Republicans he did not support in the primaries who won, against a Democrat opponent in the general election in November.  There is no bigger example than the Georgia gubernatorial race in which incumbent Brian Kemp now has a rematch with Stacey Abrams.  Kemp beat Stacey in 2018 by 54,723 votes, out of just under 4 million votes cast, 50.2% to 48.8%.  Lightning will have struck twice in Georgia if Trump does not get behind Kemp like he failed to do with the two Georgia Senate runoff candidates in January 2021 that cost the GOP control of the Senate thereby bringing on all the misery that Biden has inflicted on the country.  Trump's failure to back Kemp would be a loss for Georgia & the republic. 

Along with Brian Kemp & Brad Raffensperger, Trump's ire has focused on Liz Cheney from Wyoming.  We'll have to wait & see how her primary turns out on August 16.

Trump's endorsement of House Minority Leader Kevin McCarthy is a confusing one when you consider Trump's dislike for Cheney, who is Vice -Chairwoman of the House January 6 Select Committee investigating the riots of January 6 @ the Capitol.  After denying it, McCarthy is heard on audiotape blaming Trump for the attack on the Capitol & saying that he was going to ask Trump to resign, which he never did that we know of.  Who was McCarthy talking to on the audiotape?  Liz Cheney (among others).

In McCarthy, Trump sees a future Speaker of the House that he wants to be allied with.

McCarthy has a Liberty Score of F @ 44% & Trump feels he is "an outstanding Representative" & "a strong & fearless Leader."  Of course McCarthy is anything but & some of the most loyal members of Trump's base, like John Cardillo, are growing more & more dissatisfied with some endorsements like Oz & McCarthy.

Contrast Trump's endorsement of McCarthy with his criticism of Congressman Chip Roy of Texas - Liberty Score A @ 100%.  Chip originally supported contesting the 2020 presidential election (as did I) but as the weeks rolled by his repeated calls to Mark Meadows for evidence of election fraud were unanswered & finally Chip voted against overturning the presidential election.  Trump then turned on Chip & said he "has not done a great job, & will probably be successfully primaried." Chip won his primary against three opponents with 83.2% of the vote.  There is no elected representative finer than Chip Roy.

The above examples show that Trump can positively influence some races but the bigger story is that he is divisive & could cause major harm in many races this fall like both the Georgia gubernatorial & Senate races (Herschel Walker versus incumbent Senator Raphael Warnock).  Whether it is people in Trump's base not supporting a candidate who irritated Trump somewhere along the never-proven-election fraud trail or a Liz Cheney supporter who refuses to back a candidate that Trump endorsed, the division could result in two more terrible years of Biden being unchecked by Congress.

Biden won the presidency in 2020 with 306 electoral votes to 232 for Trump - virtually the opposite of Trump's electoral college win over Hillary Clinton in 2016 - 304 to 227.

Biden received 81,284,778 votes nationally compared to Trump's 74,224,501.  If you subtract the popular vote totals in California & New York Biden was still ahead in the total from the other 48 states by 36,327 votes.  In 2016, the same analysis showed Trump winning the other 48 states by over 3 million votes so there was definitely a stronger anti-Trump movement this time in the other 48 states.

The majority of people who voted for Biden could not stand Trump, in fact they loathed him, & just as importantly they were more interested in security than liberty, never understanding or caring that it is liberty that provides security.  They just ignorantly knew they wanted the security that they thought socialism provided.

These people knew that voting for Democrats meant they were taking a chance on politicians, who to one degree or another, had supported defunding the police, had agreed with establishing sanctuary cities & states that protect illegal immigrants from federal law enforcement, & had turned a blind eye to the night after night burning, looting, & destruction of innocent residencies & businesses in Portland, Seattle, Minneapolis, & Kenosha by Antifa & Black Lives Matter thugs.  There was no condemnation by the hostile anti-American media or any Democrat candidate, including Biden, for these violent acts so voting for a Democrat ticket was @ a minimum tacit approval of the aforementioned violent acts.

I looked @ election results to find out the relative strength of both Biden & Trump as the person @ the top of the ticket in 2020.  A strong presidential candidate will bring out supporters who then vote for his party's candidates for other offices riding the coattails of the person @ the top of the ticket to victory.

Biden had very strong coattails.  

In California CD-12 Biden got 86.1% (337,517 votes out of 392,046 votes cast for president) & Pelosi got 77.6% (281,776 votes out of 362,950 votes cast for congressional candidates).  Biden got 55,741 more votes than Pelosi in her own district - a strong performance.  Biden similarly outperformed AOC (73.3% to 71.6%) & Ilhan Omar (80.3% to 64.3%).

Trump's coattails were weaker & even non-existent in most congressional districts in the three states that provided Biden's electoral college victory.

In the opposite of what you'd expect from a strong presidential candidate Trump received fewer votes than every winning congressional Republican candidate in Wisconsin & all of them in Georgia except for Marjorie Taylor Greene.  The results were more mixed in Arizona but still weak.

For instance, in Wisconsin CD-1 Trump received 53.9% (220,668 votes out of 409,363 cast for president) & Bryan Steil received 59.3% (238,271 votes out of 401,754 votes cast for congressional candidates).  Congressman Steil received 17,603 more votes than Trump in CD-1 & yet there were 7,609 more votes cast for president in the district, meaning there was an underperformance for Trump.

Trump received 63,547 fewer votes in Wisconsin than the five winning Republican congressmen combined.  Trump lost Wisconsin by 20,682.  Had he kept up with the winning Republican congressmen's vote tallies Trump would have won Wisconsin by 42,865 votes.  There are similar underperformances in Georgia & Arizona.

Click here to see my detailed tabulation for all three of these states in a Table entitled Presidential & House Vote Count By Congressional District - 2020.

For die hard Trump supporters who think he can win in 2024 if he runs, I'd like to see a state by state analysis to see how he reaches 270 electoral votes, especially considering the above analysis of votes by congressional districts.  Peggy Noonan wrote "He lost in 2020 by seven million votes with a growing economy & no inflation - & that was before the events of 1/6."

Starting in July 2020 Trump set the stage for his post-election claims of fraud & court appeals when @ one of his signature rallies he presented an out of character scenario in which he raised the possibility of him losing the election - he gave the excuse of losing because of voter fraud.  I remember, watching live, thinking to myself, if he knows all of these details of potential fraud why doesn't he do something about it now - months before the election?  This way he could win.

But one poll after another had continuously & repeatedly shown Biden winning the presidency by large margins.  I believe Trump's internal polling showed him losing also, especially in the important swing states that he had won in 2016 by very narrow margins.  It makes sense that Kellyanne Conway not only told him that he lost after the election, as she wrote in her recent book, but most likely also told him that he was going to lose before she left the White House in August 2020 - why else would the only woman who had successfully guided a presidential campaign to victory resign shortly before her chance @ a second victory.  One way or the other Trump turned on Kellyanne also.

Candidates' internal polling is the best.  Pat Caddell famously told Jimmy Carter the night before the election in 1980 that he was not going to win & Carter wept.  More recently Hillary Clinton called off a fireworks display over the Hudson river the day before the 2016 election when Trump admitted "I surprised them."  Accordingly, if Trump's internal polling led by someone of Kellyanne's caliber tells him he cannot win in 2024 we will not run.

The 2016 presidential election was extremely close with Trump exceeding the needed 270 electoral votes by winning Pennsylvania, Michigan, & Wisconsin by a combined total of 77,736 votes thereby setting up the potential for a Biden win in 2020.

But the 2020 presidential election was even closer with Biden exceeding the needed 270 electoral votes by winning Arizona, Georgia, & Wisconsin by a combined total of 42,918 votes.

The results of the last two presidential races were about as even as you can get so 2024 candidates all get a good start.  We need fresh faces for the good of the country.

Thursday, June 2, 2022

Forecasting Red Wave In Midterms Is Ripe For Disappointment Sooner Or Later

After reporting on one pitiful Biden anti American policy after another, just about every conservative TV commentator I watch has become giddy forecasting the red wave that they are sure is coming after the November midterms.  Some even correct their cohost calling the red wave a red tsunami. 

Republicans are counting on the historical fact that almost always the President's party loses congressional seats in midterm elections.  Since 1900 only three presidents have seen their party gain House seats in their first midterm election - TR in 1902, FDR in 1934, & GW Bush in 2002.  And of course James Monroe, our best president, not only gained House seats for his party in both of his presidential terms but also did not lose a Senate seat during his entire administration which is something that no other president ever achieved.

The forecast red tsunami in the Senate is on shakier ground in that Republicans are defending 20 Class III Senate seats in 2022 & Democrats are defending 14.

Now I shudder every time I hear such glowing forecasts & early last month I was vividly reminded why when I started to receive messages, including from people in this readership, about Dinesh D'souza's new documentary entitled 2000 Mules that claimed that 2,000 people (i.e., the mules) were part of a plan to stuff fraudulent ballots in drop boxes in key counties in five swing states that changed the outcome of the 2020 presidential election.

In making the documentary Dinesh worked with the conservative Texas-based vote-monitoring organization True the Vote founded by Catherine Engelbrecht, whose stated objective is stopping voter fraud.  The thesis of the film is based on using the location ping system that cell phones generate to observe & analyze the activity around ballot drop boxes of carefully selected counties of five swing states (Michigan, Pennsylvania, Wisconsin, Arizona, & Georgia) that figured in the final outcome of the 2020 presidential election.

Yahoo-Finance reported - "Dinesh D'Souza's new movie "2000 Mules," which launched on Saturday, May 7, 2022, grossed more than one million dollars in less than twelve hours on the video streaming platform Rumble and its subscription-based platform."  And it didn't take long thereafter for fact checkers like The Dispatch to write that "the movie, however, is riddled with errors & previously debunked claims of voter fraud, & it's based on a faulty premise."

Now, in discounting the documentary I didn't get into any of the weeds regarding cell phone pings & the like - I began by just looking @ the general picture.  In May, 2018 Trump pardoned Dinesh for a felony conviction for making illegal campaign contributions - so for starters Dinesh owed Trump one.  And Dinesh knew he had a willing audience of Trump supporters & he could use the money after being in prison.  Also, Dinesh had presented videos out of context before to make deceptive points - like Biden & the Pledge of Allegiance when he was not really reciting the Pledge.  (We have enough real gaffes by Biden without making them up.)

But then I wondered how the conspirators knew which five states to concentrate on & how many stuffings of the drop boxes it would take to pull the voter fraud off.  For instance, the conspirators wasted their efforts in MI because Biden got 43,000 more votes than Hillary did in 2016 just from the counties where the University of Michigan & Michigan State are located - this figure alone is more than four times what Trump won Michigan by in 2016.  Also, why leave the Senate 52 to 48 with a Republican majority on the November election day?  And as I have told many people for over a year, if the Republicans were so inept to let this happen to them & the Democrats were so crafty to pull the fraud off the Republicans deserved to lose.  

Finally, Dinesh's timing is awful, releasing the documentary 18 months after the presidential election serves no practical purpose @ a time when more & more people are fatigued by Trump's constant drumbeat of election fraud without ever producing one piece of evidence that stood up even in courts with Trump appointed judges.  

For instance click here to listen to the recording of the January 2, 2021 telephone call between Trump & GA Secretary of State Brad Raffensperger where Trump said "I won this election by hundreds of thousands of votes.  There's no way I lost Georgia.  There's no way.  We won by hundreds of thousands of votes," while reciting smaller numbers of allegedly contested votes (providing no sources) before stating "All I want to do is this, I just want to find 11,780 votes, which is one more than we have because we won the election. . ." 

Brad calmly told Trump "Well, Mr. President, the challenge you have is the data you have is wrong," & Georgia General Council Ryan Germany told Trump "What we're seeing is not @ all what you are describing."  Brad replied in part to a specific claim ". . . it's extremely unfortunate that Rudy Giuliani or his people, they sliced & diced that video & took it out of context.  So the next day we brought in WSB-TV & we let them . . . see the full run of tape.  I mean, what you'll see, the events that transpired are nowhere near what was projected by" - Brad was cut off by Trump but it is safe to say Brad was about to say "Rudy" based on his preceding remarks.

The above listed telephone recording is part of the evidence that Fulton County District Attorney Fani Willis is using in her criminal investigation of Trump's efforts to influence the Georgia election results in the 2020 presidential election.

Far too many Republicans are still happy to discuss the November 2020 presidential election while the Democrats are busy working on issues to convince voters to vote Democrat in the midterms.

Biden is considering forgiving up to $10,000 of student loans for borrowers with incomes below $125,000 per year - a mere token gesture for AOC, Bernie, Warren, & Schumer who want every dime of federal student loans forgiven but would consider $50,000 as a good starting point of discussion.  Forgiving $50,000 of federal student loan debt per borrower would eliminate the entire student loan debt of 36 million people - a powerful & tempting argument for Democrats trying to buy votes from students & their parents.  But it does come with some negatives & Democrats will sort them out & make a play closer to the midterms.

The point is while some Republicans were thrilled that Dinesh released a documentary with air tight proof, to them, that Trump had the election stolen from him Democrats were coming up with a student loan forgiveness plan that could affect millions of voters in the midterms.  Borrowers had already been warming to the idea because payments & interest accrual have been suspended for borrowers with federal student loans since March 13, 2020, @ the start of the Covid-19 pandemic.

The leak last month of a Supreme Court draft opinion dated February 10, 2022 indicated that the high court could overturn the hideous Roe v. Wade decision by the end of the month.  This issue will bring every Democrat & then some out to vote.

And after 19 children & two teachers in Uvalde, Texas were shot to death by a madman the Democrats have new material in their never ending gun-control arguments.  A CBS poll last month showed 54% of Americans want stricter laws covering the sale of guns, while 46% want to keep gun laws as is or make them looser.

But topping it off will be the January 6 Committee report that will fill the airwaves in the weeks before the midterms with photos, quotations, & more detail than any of us could imagine targeted to remind Independent leaning women in the suburbs, who voted against Trump in droves in 2020, of just why they voted that way.  And of course Republicans handed this to Democrats on a silver platter that the media will find irresistible.

Now the purpose of this post is not to debate student loan forgiveness, the possible repeal of Roe, gun-control laws, or the legitimacy of the January 6 Committee.  The point is the Democrats should not be taken lightly & will use these four issues to increase their turnout while trying to change the subject from their 16 month despicable assault on America that reversed every policy that was working under the Trump administration.  Biden assumed the presidency on January 20, 2021 to find, in Mike Huckabee's words, "the most secure southwest border in history, a strong recovering economy, energy independence, a vaccine for Covid-19, a return to manufacturing, an uptick in wages for the working class, a stronger NATO & military, & protection for unborn babies."

Since becoming President, Biden's pitiful record includes 1) trying to destroy the oil & gas industry, in a play to promote AOC's Green New Deal, that has resulted in the highest gasoline prices ever, 2) flooding the country with deficit spending that has produced the highest inflation in 40 years with only Manchin stopping even more spending under the Build Back Better plan that provides benefits that become part of permanent universal new middle class entitlements & ample funding to get AOC's Green New Deal started before it overwhelms everything, 3) incentivizing tens of thousands of the poorest, lowest skilled, least educated people from Central America, all originally wearing Biden T-shirts (with virtually none of them even knowing who he was), to come to our southwest border to pursue admission to the U.S. to take advantage of the 126 welfare programs identified by the Cato Institute - & to vote Democrat out of appreciation for being allowed entry into the country, 4)  abandoning Afghanistan with a humiliating withdrawal plan that was exactly backwards -  implementing it during the summer fighting season, closing Bagram Air Base with our troops stealthily leaving the base in the middle of the night without telling the new Afghan commander, relying on the Taliban for security that resulted in the deaths of ten Marines, two Army soldiers, & one Navy corpsman, & worst of all evacuating civilians last, 5) condeming & criticizing police instead of those committing rampant crime on our streets while not calling out the breakdown of the family structure in the crime ridden zones where the high percentage of out of wedlock pregnancies & the large number of children who can not identify their fathers are the points that really matter, 6) tricking people into believing we have top notch government schools when many graduates can barely read @ a fourth grade level while the hateful teachings of Critical Race Theory (CRT) & Black Lives Matter (BLM) coupled with the historical inaccuracies & deliberate lies of The 1619 Project are pushed to indoctrinate not only students from 4 to 23 but also people in businesses & even the military, & 7) nominating unqualified people to high poitions such as Saule Omarova, educated @ Moscow State University on the Lenin Personal Academic Scholarship, to oversee banks in her position as head of the Office of the Comptroller of the Currency, Sarah Bloom Raskin, a Green New Dealer, to be the Fed's top bankiing cop more interested in climate change than the proper allocation of capital to grow the economy,  Lisa Cook, the first Black women to sit on the Fed's board, whose academic studies focused on policies that promote opportunity for racial minorities & women rather than macroeconomics & monetary policy, & Ketanji Brown Jackson to Associate Justice of the Supreme Court, whose hearings exposed her as having a liberal judicial philosophy & record that is sympathetic to terrorists & to being soft on crime with special leniency towards child pornography offenders.

The above paragraph describes a detestable record that clearly shows Biden needs to be checked in the second half of his presidency before he can do more damage.  This can be accomplished, for the most part, by voting in Republican majorities in the House & Senate, but bragging about a red wave is not helpful & can easily backfire.  And we have found that RINOs are not the answer.  Just ask yourself - did you vote for Mitt Romney for President in 2012?

The recent $40 billion aid to Ukraine bill shows the weak-kneed representatives we have elected.  Only eleven senators & 57 congressmen voted against the package - not because they were against helping Ukraine but because there was no responsible financial alternative offered by their fellow representatives such as taxing every taxpayer $500 or cutting some other program or taking it from already authorized funds.  Only 68 (12.7%) of our 535 elected representatives thought this way.  You can find all of the Senate votes here & all of the House votes here.

I summarize the nay voters below:  

Senate - Marsha Blackburn, John Boozman, Mike Braun, Mike Crapo, Bill Hagerty, Josh Hawley, Mike Lee, Cynthia Lummins, Roger Marshal, Rand Paul, & Tommy Tuberville.

House - Jodey Arrington, Brian Babin, Jim Banks, Andy Biggs, Gus Bilirakis, Dan Bishop, Lauren Boebert, Ken Buck, Tim Burchett, Cat Cammack, Madison Cawthorn, Michael Cloud, Andrew Clyde, James Comer, Warren Davidson, Scott DesJarlais, Byron Donalds, Jeff Duncan, Ron Estes, Ron Fulcher, Matt Gaetz, Bob Gibbs, Louie Goumert, Bob Good, Paul Gosar, Garret Graves, Marjorie Taylor Green, Diana Harshbarger, Vicky Hartzel, Kevin Hern, Yvette Herrell, Jody Hice, Clay Higgins, Bill Huizenga, Ronny Jackson, Mike Johnson, Jim Jordan, Debbie Lesko, Billy Long, Tracey Mann, Thomas Massie, Brian Mast, Mary Miller, Barry Moore, Troy Nehls, Ralph Norman, Scott Perry, John Rose, Matthew Rosendale, Chip Roy, Pete Sessions, Greg Steube, Tom Tiffany, Jeff Van Drew, Beth Van Duyne, Bruce Westerman, & Roger Williams.

Please note that members of the Republican leadership are not on either list.  And there is a good reason.  The Liberty Scores of every member of congressional leadership of both parties is graded "F" ranging from 2% to 56%.  A Liberty Score is a tabulation that concentrates on fidelity to the Constitution that shows the actual voting record of each member of Congress, summarized below for the leadership of both parties.  

Republican: McConnell F @ 44%, Thune F @ 47%, McCarthy F @ 54%, Scalise F @ 56%, & Stefanic F @ 44%, 
Democrat: Schumer F @ 2%, Durbin F @ 2%, Hoyer F @ 8%, & Pelosi F @ 7%

As you can see Republican scores are higher than Democrats', but still @ a failing grade, for every member of the leadership.  And that is what we get when we elect these types of people.  Liberty Scores help separate rhetoric from reality.  Whenever I see a politician on TV that I am unfamiliar with I check their Liberty Score & that flushes out the fakers instantly.

Click here to find the Liberty Score of all Members of Congress.  (Please note that not everyone on the above Senate & House lists are graded highly.  Some Members just get religion @ times over certain issues.  For instance, there is no more staunch supporter of the Senate filibuster rule than Kyrsten Sinema - who is graded F @ 5%.  Counting on Sinema & Manchin - F @ 18% - to block Biden's programs clearly shows the fragility of the Republic.)

Compare the above seven points regarding Biden's record with what is needed in Republican leadership from special people that have Liberty Scores of "A" - people who speak of & demonstrate through their voting records & actions the ability to lead a strong party like Ed Butkera recently wrote in the WSJ - a "party of lower taxes; a strong national defense; a strong border; free, not limited, speech; freedom to practice your religion; getting criminals, not guns, off the streets; insuring that parents can imbue their values & not those of some educator to their children; & the sanctity of unborn life."

What we have are leaders, & in turn a very great majority of the rank & file Republican members, who can only support these points some of the time.  Accordingly, forecasting a red wave in the midterms with such people on the ballots is ripe for disappointment sooner or later.

Click here to hear Mike Huckabee provide his list of what to stand for in such a way that reminds us how much his leadership is sorely missed.

Tuesday, May 17, 2022

Inflation Analysis - Its Cause, Cure, & Danger From China

"Inflation is when you pay fifteen dollars for the ten dollar haircut you used to get for five dollars when you had hair." - Sam Ewing, former professional baseball player for the White Sox & Blue Jays


The Federal Reserve (Fed) has never telegraphed their intent to raise interest rates as clearly as they have recently calling for seven rate increases in 2022 & four more in 2023 - this to the consternation of investors & borrowers but a delight to the long forgotten saver in America.  

Short term interest rate increases are the primary way the Fed uses monetary policy to bring down inflation - & they have finally recognized the need to do just that after a year of inaction.

Interest rates have risen fast as the bond market has not waited for the actual rate increasing action by the Fed.  The yield on the benchmark 10-year U.S. Treasury note has risen from 1.496% @ the end of 2021 to 2.995% today, doubling.  

Now the Fed's intent & need to raise rates so dramatically was prompted by their recognition that the inflation caused by their participation (creating money by buying Treasury Covid stimulus securities) in the Treasury's cash-in-hand spending programs over the past two years in response to the Wuhan coronavirus pandemic was not transitory as they had thought. That is, for far too long the Fed thought inflation would be short-lived & would not lead to permanent economic damage - they were counting on the supply-chain problems caused by Covid interruptions being corrected without any intervention on their part.   

We are seeing the definition of inflation play out - namely, what happens when too much money chases too few goods & services.  During the pandemic the Fed electronically printed $5.5 trillion covering Covid stimulus bills while millions of people did not produce goods or were unable to perform services due to the government's lockdown rules - yet people received this stimulus money from the government to purchase the fewer goods & limited services that were available.  This is the cause of the current inflation that started to pick up in March 2021 & has continued to accelerate with no definite end in sight.  In essence money was created & spent faster than the short handed pandemic-affected economy could produce goods & services inevitably resulting in inflation.

Inflation refers to a general & sustained increase in prices of goods & services in an economy - not just for any single item.  Professor Friedman, who gave us the above definition, famously said that "inflation is always & everywhere a monetary phenomenon, in the sense that it is & can be produced only by a more rapid increase in the quantity of money than in output."

The Fed has the congressional mandate to conduct monetary policy "so as to promote effectively the goals of maximum employment, stable prices, & moderate long term interest rates."  We can see that the Fed is behind the curve in fulfilling their function.

Right out of the box, on March 3, 2020 Congress threw $8.3 billion in emergency spending @ the Wuhan coronavirus to fund the development of a new vaccine that resulted (with a portion of funding from the CARES Act) in Trump's Operation Warp Speed vacince project, for health agencies & testing, & for small business loan subsidies.  Fifteen days later Congress raised the stakes to $100 billion to provide free testing for Covid-19, tax credits for employers who offered paid sick leave, & increases to unemployment benefits & food assistance so you can see the too much money part of the inflation definition actually encouraging the too few goods & limited services part of the definition.

Then on March 27, 2020 the $2.2 trillion CARES Act (Coronavirus Aid, Relief, & Economic Security Act) passed Congress that included direct cash payments to households ($1,200 per adult plus $500 per qualifying child under 17), an additional $600 per week in unemployment compensation through July, bailouts for airlines & other businesses, & loans & grants to small businesses.  By the time CARES was done $2.7 trillion had been added to the national debt.  

But, to top it off, during the week of December 21, 2020 the fourth, & first since March, Covid relief bill (The Coronavirus Response & Relief Supplemental Appropriations Act) for $900 billion & the $1.4 trillion omnibus Consolidated Appropriations Act for 2021 were both signed into law by Trump.  The Covid relief bill included direct cash payments in the form of income tax rebates of $600 per adult plus $600 per child; an increase of $300 per week in federal unemployment compensation; an allowance for employers to voluntarily provide paid leave through March 31, 2021 thereby receiving a payroll tax credit; an extension of the federal eviction moratorium through January 31, 2021 including $25 billion in emergency rental assistance to help renters impacted by Covid-19 to pay for past due rent, future due rent, & utility bills to prevent power shutoffs; a 15% increase to SNAP (food stamps) benefits through June 30, 2021 estimated to be an extra $25 to $30 a month for everyone enrolled in the program; $69 billion for Covid-19 vaccines, testing, & tracing; $3.2 billion to expand broadband access to low-income families; & $100 million for the Administration for Community Living to address abuse, neglect, & exploitation of the elderly.

This ended the Trump portion of economic stimulus bills that contributed to the inflation that started in March, 2021 & grew progressively worse each month until it accelerated in October, 2021 reaching 40 year highs starting in January, 2022.  This opened the door for Biden to finish the job by showing we really have one big government party with two wings. 

On Thursday March 11, 2021 Biden made his first presidential prime time TV address to mark the one year anniversary of the Covid-19 pandemic in America.  The address also coincided with his signing into law the same day of the $1.9 trillion stimulus bill known as the American Rescue Plan Act (ARPA).

Almost half of this gigantic stimulus spending went directly to the well publicized $1,400 per person direct deposits or checks ($8,400 for a family of two adults & four small children), $1,300 per child expanded child tax credits ($5,200 for this same family), bigger food-stamp payments, & $300 per week federal enhanced unemployment benefits in addition to regular state unemployment benefits.  And $350 billion payments were made to states - the majority of which went to Democrat states that have been financially irresponsible for decades meaning that states like Tennessee, Florida, Texas, & Georgia bailed out New York, New Jersey, Illinois, & California.  For instance, New York received more money from the bill than Florida despite New York having a smaller population than Florida - one of the consequences of the November, 2020 election. 

The ARPA also provided 14 weeks of paid sick, family, & medical leave through September, 2021, while reimbursing local governments for the cost of this leave, provided an additional $25 billion for rental relief & $5 billion to cover home energy & water costs for low income people, extended the federal eviction moratorium through September & allowed people with federally guaranteed mortgages to apply for forbearance until September, provided $40 billion to ensure childcare providers can remain open & expanded the childcare tax credit, provided an additional $15 billion to the Paycheck Protection Program in flexible, equitably distributed grants to small businesses to help them reopen & rebuild, & provided $20 billion to support public transit agencies to ensure that workers keep their jobs & routes are not cut from service.

Under Biden's direction Congress also passed a $1.2 trillion Infrastructure bill (Infrastructure Investment & Jobs Act).  But thanks to Democrat Senators Joe Manchin (WV) & Kristen Sinema (AZ) the much larger $3.5 trillion Build Back Better bill (which originally included the infrastructure bill) has stalled @ least for now.

Breaking out the cost of the Covid stimulus the past two years:  $3.6 trillion under Trump & $1.9 trillion under Biden.  Much of the money from the federal spending bills in 2020 went to household savings because of the lockdowns - i.e., much of it wasn't spent right away.  As the lockdowns were removed the pent up demand started to come forward & inflation started to pick up in March, 2021 - the very month Biden signed the $1.9 trillion American Rescue Plan Act thereby adding more fuel to the fire.  Americans are still holding an estimated $2.5 trillion more than normal stockpile of savings that was accumulated during the pandemic spending spree.  Source: Princeton Professor Alan Blinder.  And some of this savings will be used for consumption thereby continuing to feed the inflation beast.

From the supply side: the pandemic has produced a gap of about 3 million fewer people in the labor force than what had been projected for 2022 as some 2.6 million people retired earlier than expected between February, 2020 & October, 2021 thereby crimping the supply of goods & services by this measure - see graphic below.  And employment is still 1.2 million people below the pre pandemic level.  The April unemployment report showed a decline in the labor force of 363,000 people attributed to either lingering fears of catching or spreading Covid or workers thinking that their wages will not keep pace with inflation - some employers complain that workers quit after just a few hours on the job, if they show up @ all.  Also hurting supply is the China Covid lockdown, the Russian war in Ukraine, & Biden's policy to destroy the oil & gas industry as he continues AOC's Green New Deal war on fossil fuels.  Increasing the supply of oil & gas back to the point where just two years ago America was energy independent would bring down the price of gasoline @ the pump without any action by the Fed.

The most widely reported measure of inflation is the Consumer Price Index (CPI) prepared by the Bureau of Labor Statistics.  The CPI measures the weighted average of the prices of a fixed set of consumer products & services meant to represent the broader economy & specifically the things that an average urban consumer buys.  The prices in this basket of goods & services are evaluated, including price checking by a workforce of 477 on-the-ground economists who track changing prices for hundreds of thousands of goods & services every month.  The final monthly change is known as the CPI inflation.  About 80,000 items make up the CPI.  See image below for the eight major groups of the CPI.

The CPI is meant to reflect the purchases of a typical urban consumer, which represents 87% of the American population so when you hear the CPI inflation report for the month that is what they are talking about.

Since the above description of the basket of goods & services uses the words "average" & "typical" it is important for everyone to calculate their own individual inflation rate for the sake of accuracy in financial planning as well as having a better understanding of the government's inflation policies that devalue your income & net worth.  This becomes obvious when you see that someone who has a greater weighted average of their expenses in medical & housing expenses has a higher individual inflation factor than someone who spends most of their money on things like apparel whose prices rise slower than medical & housing items.  That is, if medical costs are going sky high but you are in good health & take no medicine your inflation factor is not affected by high medical costs - the opposite is also true if you are in poor health.

This type of phenomenon can also play out in different regions of the country.  The April inflation report showed that CPI inflation was 8.3% year over year for the country as a whole but 11.0% in Phoenix, 10.8% in Atlanta, 9.6% in Miami in contrast to 7.2% in Chicago, 6.3% in New York, & 5.0% in San Francisco.

People are often fooled by what are known as visible price change components in the CPI.  For instance everyone knows when gasoline (signs along the highway tell you) & grocery (everything marked in the store) prices are increasing & this realization tends to make people feel everything is high.  Compare this to prices of appliances that you may not have bought for years & are not as aware of their costs as you are of gas & groceries.  It is best to check your own personal record to see if other items in your budget are increasing as fast as you think gas & groceries are.  The results of a detailed calculation of changes in your entire expenses is much better than an opinion you get based on one visible component you see @ a gas pump.

Food & energy prices are the components in the CPI that the Fed has the least control over because they are both traded in the futures markets where their prices are actually determined & can be volatile.  For instance, during the two year pandemic West Texas Intermediate (WTI) oil has traded as high as $119 per barrel on March 1, 2022 & as low as negative $37 per barrel when the front month May, 2020 contract price dropped over 300% in the final two trading days of the May contract before the owner of the contract had to take delivery.  See graph below.  Obviously, the Fed has no control over even less volatile situations that regularly pop up in the futures market.

Food & energy price volatility is the reason that the Fed concentrates on what they call "core inflation" - that is the inflation rate with food & energy contributions stripped out.  It is not that the Fed thinks that people don't buy food & energy products but rather they think they have a better control of the core inflation measure than one with these two components that can be distortedly volatile.

Since 2000 the Fed has preferred to use the Personal Consumption Expenditure (PCE) index for inflation prepared by the Bureau of Economic Analysis.  Like the CPI this index accounts for the prices that consumers pay for a wide range of goods & services but also more heavily takes into account changes in consumer behavior substituting less expensive items for items that have increased more in price. See graphic below.

The PCE index runs about 2 percentage points lower than the CPI - same economy but different results which is partly why I suggest calculating your own individual inflation factor & just talk about the CPI or PCE when referring to the general economy for the average urban consumer.  BTW - the CPI changed methodology along the way - the 7.5% CPI inflation of last January would be more in line with the 10+% CPI readings of the 1970s when rent-housing prices made up a higher contribution to the overall index.  Since January that rate has only gone higher.

So how does the Fed intend to bring inflation down?

The first way is to increase interest rates as mentioned @ the very beginning of this post.  And it just can't be a willy nilly increase here or there.  A good starting point is to raise the Fed's policy rate (the Fed Funds rate) so that it is higher than the PCE core inflation rate which is currently running over 5%.  The Fed funds rate is less than 1% currently so they have a long way to go.  It should stay above the core PCE rate until the Fed's inflation target of 2% for the overall PCE index is reached.  The PCE inflation rate was 6.6% in March - a new four-decade high.  See graphic below.

You can also check out the relationship using the following graph where the difference between the Fed Funds rate & core PCE inflation is depicted.  Notice that core inflation was higher than the Fed Funds rate in the 1970s (i.e., the blue line was below zero from 1975 to 1980) that led to the high inflation that Paul Volker had to bring down starting with raising the Fed Funds rate to 9% higher than inflation - a move that was devastating then & would be again today.  These two graphs provide a world of information regarding the history of American inflation over the last 60 years.

Since January 2012 the Fed's Federal Open Market Committee (FOMC) - the actual committee that determines short term interest rates - has interpreted a PCE inflation rate of 2% as meeting the Fed's congressional mandate of price stability.  The Fed targets this positive number instead of zero because they feel that the price indexes have a slight upward bias meaning that if the reading is 2% the actual inflation rate is probably slightly less than that.  Since interest rates & inflation tend to be proportional, having a positive number target implies that the Fed will have somewhat more room to cut interest rates if needed than if they targeted no inflation.  And having a positive number target guards against the even worse (than inflation) economic disease "deflation."

Nevertheless, the Fed's program of effectively inducing 2% PCE inflation will reduce the purchasing power of the median-income American household by $1,370 each year if the members of that household's consumption patterns coincide with the methodology used in determining the PCE index.

The second way that the Fed plans to bring inflation under control is to shrink its massive balance sheet passively.  Also known as runoff, passive reduction of the balance sheet means the Fed will allow some of the individual debt instruments in its portfolio to mature without reinvesting the proceeds, rather than actively selling them in the open market.  The Fed takes the money @ maturity & just like it created the money out of thin air lets it disappear by erasing it electronically thereby actually reducing the money supply meaning there is less money chasing the same amount of goods @ the moment of erasure which is a move in the right direction for bringing inflation down.

Home buyers are already feeling the impact of the mortgage interest increases.  The average rate on a 30-year fixed rate mortgage rose from 3.1% @ the end of 2021 to 5.1% @ the end of April bringing the monthly mortgage payment for the median priced house to $1,383 from $1,064 a year earlier.  The old rule of thumb to determine if someone could afford a mortgage was to make sure that the mortgage payment was less than 25% of the buyer's gross income.  Over time that figure gradually increased to 28% & had stretched to 29% @ the start of 2021.  The percentage ballooned to 34.2% of gross income in January 2022 so the Fed's interest rate hikes in April will cut even more people out of the housing market thereby reducing demand for houses as shown by these changes to the old rule of thumb.

But a 5.1% mortgage rate is still less than the current annual inflation rate of 8.3% meaning that over the long term if this higher rate persists the borrower will pay the mortgage off with inflated money.  The bank will have unwittingly subsidized the purchase of the house @ their own expense by accepting mortgage payments with money worth less & less in purchasing power every month.  This example shows why the Fed has to raise the Fed Funds rate, & in turn commercial banks the mortgage rate, above the inflation rate.   The economy is very used to functioning with cheap money & its way past time for the Fed to bring back stability & reestablish value in the economy.

Following his Senate confirmation (80 to 19) to a second four-year term, Fed Chairman Jerome Powell said "The one thing we really cannot do is fail to restore price stability.  The economy doesn't work for anyone unless you do that."  That is the central point of a healthy economy & only time will tell if he really understands & believes this.

Commercial banks help in the flow of money in an economy by providing deposit & credit facilities.  When a commercial bank grants a mortgage they credit the account of the borrower with new funds & write up a loan liability @ the same time.  Both sides, assets & liabilities, of the commercial bank's balance sheets expand thereby creating money under what is known as our fractional reserve banking system.  As mortgage interest rates go up there will be less demand for mortgages thereby helping to keep the money supply in check through reduced volume of commercial bank's lending programs. 

The destructive nature of inflation is also clearly shown by understanding the cost-of-living-adjustment (COLA) that the Social Security Administration (SSA) makes every year.  In October the SSA announced that the COLA for 2022 would be 5.9% based on the CPI.  But on an annual basis so far the CPI has been higher than 5.9% every month in 2022 so people on Social Security are playing catchup & really will never catch up.  They should get another scheduled increase in October 2022 based on these higher 2022 numbers but if inflation keeps increasing it will be to no avail.  This principle also applies to worker's salaries - workers are always trying to catch up to what inflation has been.

In summary, America is suffering the highest inflation rates in over 40 years because of the government's deficit spending programs that overstimulated the economy in attempts to help ease the tragedy of the Wuhan coronavirus pandemic.  Way too much money was created in America to chase a pandemic reduced supply of goods & services.  Although the Fed seems to be prepared to solve this problem the Democrat Biden administration wants to keep on spending.  It has never given up on passing the $3.5 trillion Build Back Better (BBB) plan that provides benefits that become part of permanent universal new middle class entitlements & ample funding to get AOC's Green New Deal started before it overwhelms everything.  Just imagine how high inflation would be if this BBB plan had passed.  The Biden administration could not take inflation any less seriously than they do.

But China does take inflation seriously & sees our lack of preparedness & interest in this regard over the past two years as an important opportunity to move another step forward to reaching their goal of replacing America as the financial leader on the world stage.  

While America did nothing for a year but grow the money supply China stayed particularly focused on price stability in China starting with providing far less stimulus than the U.S. during the pandemic.  

China relies more on investment than consumer spending to drive economic growth so it is less susceptible to demand-led inflation - the opposite of the U.S.  China also maintains enormous reserves  of strategic commodities it can call on to contain inflation - it has enough wheat to last a year & a half & enough rice to last over a year.  Copper, aluminum, soy beans, & wheat were released in 2021 as needed.

China also uses price controls & protective trade actions.

Now all of these tactics do not follow good economic principles but they are shuffled quickly from one to the other so that so far no long term damage has occured from using them.  At least they have a plan including a rainy day fund which is more than we have.

And global investors are buying China's approach.  On April 12 the yield on the benchmark 10-year Chinese government bonds closed lower than the comparable 10-year Treasury note meaning investors in the bond market saw less risk with Chinese debt securities than equivalent American debt securities.

Over the past several months Saudi Arabia has also considered accepting Chinese yuan instead of dollars as payment for oil delivery.  But the Saudis hedge this bet by continuing to peg the riyal to the dollar in foreign-exchange currency markets.

The dollar has been the world's reserve currency since July 1944 with the signing of the Bretton Woods Agreement that pegged the dollar's value @ $35 per troy ounce of gold with the other countries' currencies pegged to the dollar.  On Sunday night August 15, 1971 Nixon took America off the gold standard because the dollar could no longer maintain its value in relation to gold.  Inflation from the Vietnam war & the enlargement of the American welfare state were overpowering the value of the dollar & the economy.

The gold standard was completely replaced by fiat money meaning it is used because of the government's order that the currency must be accepted as a means of payment.  What really backs the dollar is the future tax generating power of the economy  - euphemistically known as "the full faith & credit of the U.S. government."

Now spending money with no regard for any economic principle does not inspire much faith & credit in the U.S. government - especially since we now have a giant competitor that really is an enemy that wants to take over America's prominent economic position in the world.

Inflation is a devaluation of a currency & this leads to trouble as Lenin very well knew when he said "There is no subtler, no surer means of overturning the existing basis of Society than to debauch the currency.  The process engages all the hidden forces of economic law on the side of destruction, & it does it in a manner which not one man in a million is able to diagnose."  

Consumer prices in China rose 0.85% in 2021 while they rose 7.0% in America.