Allow me to echo the infamous words of then Prime Minister Paul Keating when he said “This is the recession we had to have”, we are now faced with the “Inflation we weren’t going to have”… at least we weren’t going to have it according to many of the ‘experts’.

As of the other day, US CPI inflation is officially 9.1%, approaching the ‘double digit’ inflation which many of us ‘ignorant’ non-experts predicted and the ‘experts’ had dismissed as impossible. And note that the rate of increase is accelerating right now so the odds of the official rate hitting 10%+ are very high right now…

(ALSO note that the official CPI rate is way WAY lower that real-world inflation due to various adjustments they make… long story for another time, but to cut it short, if we measured modern inflation the way they did in the early 80s then our official rate would already be over 15%.)

TL/DR: The inflation we weren’t going to have is well and truly here. And it’s just getting started.

Take this Forbes article from mid 2021 for example. Not only do they insist there’s no risk of inflation, they go on to point and laugh at those who are warning that it’s coming!

“The 2021 Inflation Scare is another in a series of false alarms going back several decades. It may not quite qualify as Fake News, but it is close. Start with this Plain Fact: Inflation has disappeared from the U.S. economy. The Core Consumer Price Index has not exceeded 3% since 1995.  No American consumer under the age of 50 or so has ever had to make an adult economic decision in the context of significant inflation.”

Emphasis Original – https://www.forbes.com/sites/georgecalhoun/2021/05/01/the-inflation-scare-doesnt-match-reality

Now to be fair the one good point they make is that people have been warning of coming inflation for a long time and been wrong… until now.

See, it’s easy to predict that massive QE (like we’ve seen since 2008, and especially since 2020) will lead to inflation. It’s much more difficult to anticipate when. The underlying inflationary pressure of ‘more money chasing less stuff’ is obvious enough, but when you then add complicating factors such as velocity of money, lending criteria (affecting the availability of credit), sentiment, and more, you quickly realise that while the inflationary pressure is very real, it’s not the only thing going on.

And so Forbes mocked in 2020 that all those chicken littles who predicted inflation were oh-so-laughably wrong…

Fast forward just 13 months later and this is what CNBC, hardly a ‘right wing’ economic chicken little, had to say:

Tackling runaway inflation won’t be easy and it won’t be quick, and it may carry a steep price tag that is just beginning to be paid.

To stop 40-year highs in price increases, the economy will have to slow. The ability of producers to get their goods to the marketplace will have to get a lot better, and demand and supply will have to come back into balance. Most troublingly, until the Ukraine war settles, these factors will have a limited impact on fixing the economy.

Even under the best of conditions, a trend that has seen gasoline reach nominal new highs near $5 a gallon, the price of everyday foods like cereal, eggs and hamburger jump by double-digit percentages over the past year and housing costs rise ever higher, will ease only incrementally. That means little relief for consumers anytime soon.

https://www.cnbc.com/2022/06/09/bringing-inflation-down-is-going-to-take-time-patience-and-pain.html

Yep, the ‘inflation scare’ that 1 year earlier Forbes mocked is now reported as ‘runaway’.

I’m shocked, schocked I tell you! No one, and I mean NO ONE could have seen this coming!!!

Except of course most of us did. Sure some got the timing very wrong, but they got the cause and effect sequence right. If the QE of 2008 wasn’t enough to trigger runaway inflation, the QE of 2020 certainly was!

And my haven’t the printers been busy!

Let me break this down for you, see that ‘bump’ in the 1940s? That was the debt taken on to fund the US efforts in the 2nd World War. Now a word of caution, these are nominal dollars, NOT inflation adjusted, and if we adjusted for inflation that bump would be bigger… but STILL very small.

Notice that the debt never returned to $0 after that. No US government since then has had the will or capability to pay off the debt.

And they never will. That ship has well and truly sailed.

In the 1980s debt skyrocketed, then appeared to be bring brought under control right around the $6T mark, before the 2008 ‘Global Financial Crisis’ triggered massive ‘Quantitative Easing’ (debt) and the line ticks skywards.

It’s easy to see why people at the time would have predicted immediate inflation… the debt levels were truly extraordinary and rising at an unprecedented rate… but as noted above there’s more to it than just the amount of money in the economy, AND there’s always latent value in the economy that can be consumed in the short term, creating a lag before reality catches up.

14 years later reality is very much here. US official inflation is fast approaching 10% with a LOT further to go before it is tamed.

To see what this looks like going forward, spend some time investigating Argentina… a country led by Klaus Schwabb sycophant who has done all the ‘right things’ according to the WEF… with devastating consequences for the people of Argentina.

Here’s a simply fantastic video to bring you up to speed on what’s happening there: (click the link)

https://www.facebook.com/watch/?v=474610507694547

In response the Argentine government is doing the very same things that turned 50%PA inflation into 10,000%PA inflation in Venezuela. Price controls, capital controls, exchange rate controls, universal welfare, rationing, you name it they’re trying it, but all those things do is dig a country DEEPER into an inflationary cycle.

As I tell people EVERY CHANCE I GET, I saw what 10,000%+ inflation looks like in person when I was in Venezuela in 2015. I don’t say it to brag, I say it because I know what the future holds if we keep doing what we’re doing. If we do what others are going, we’re going to get what others are getting.

Here’s a brief talk I gave about Venezuela at the Friedman Conference a few years ago:

Venezuela is at the end of the line, it’s our ultimate destination if we don’t change tracks.

Argentina is a few stops closer than Venezuela, but not as far away as you think.

The US is the locomotive pulling the train…

And we’re the caboose!

We think we’re safe because we’re further away from disaster than the US is. Our debt to GDP ratio isn’t as bad, our inflation isn’t as bad, we have lots of natural resources (which will genuinely help, that’s probably the one thing we really DO have going for us) and so we think we’re ok.

But the signs of distress are already very VERY clear, clear enough that I spoke about them in detail in April 2021.

This is a talk that I gave by request of this church, and I cover a range of topics of which economics is only one. Take what you like, leave what you don’t, but consider what I said about the presence of inflation over a year ago and consider it in light of what has happened since:

The only thing I’d change now is the language that I used when I said that the US Fed wouldn’t be able to raise interest rates. What I meant and should have said is they wouldn’t be able to raise them enough to stop the runaway inflation, a view I still hold, NOT that they wouldn’t be able to raise them at all from where they were… but I misspoke and made a much more ‘absolute’ statement than I intended.

As for how everything else holds up… watch it and tell me in the comments what you think I got right or wrong!



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