Decision of the Century

Two years of short, sharp pain... or a decade and a half of grinding depression?

(Source: Getty Images)

Bill Bonner, reckoning today from Youghal, Ireland...

We have nothing but good news today.

First, the US is in a good place, says White House press secretary Karine Jean-Pierre… a “good position to take on inflation.”

We are coming up to the Decision of the Century. There are only two real choices.  One way or another, this scam economy is going to blow up. So, the question is whether the Fed blows it up by stopping inflation now. Or, it lets inflation rip and the whole thing blows up later.  

Either way, there will be hard times ahead – with crashing stocks, bonds and real estate… and probably riots and maybe even revolution. But if the feds end the scam voluntarily, the wreck could be short and sweet, like ripping off a Band-Aid, with a crash followed by a depression, but ending in a fairly quick recovery. If the pre-Fed depressions (before 1913) are anything to go on, the whole thing could be over in 18 to 24 months.  

A Money Problem

If inflation is allowed to run wild, on the other hand, the disease will fester… and metastasize. These intentional, government-policy inflations last about 16 years on average. In the end, the economy is almost completely destroyed…and the nation’s political and social institutions are left as burnt-out hulks.  

And there’s the second bit of good news: in neither case will it last forever. We may even live long enough to see the end of it. 

And still more good news: inflation can be easily (but not painlessly) stopped. Like obesity or drug addiction, all it takes is willpower. If the feds wanted to, they could bring inflation to a halt in a few months. Easy. Peasy. As Dan and Tom are quick to point out, that’s because we don’t have a price problem. Prices are just information. What they tell us is that we have a money problem. 

Let’s take a look at it more closely. Here’s The Washington Post:

Empty wallets, empty tanks: Surging gas prices leave drivers stranded

AAA fielded 50,787 out-of-gas calls in April, a 32 percent jump from the same month last year. More than 200,000 drivers have been similarly stranded this year, the automobile club said. And gas prices have risen precipitously since April.

People are running out of gas because they can’t afford to fill their tanks. The average gas tank holds about 26 gallons. At its low price 50 years ago, it cost about $6.50 to fill it up. That was nearly two hours of work at the average wage at the time.

Today, it will cost about $130 to fill the same tank. At an average wage of $29, that’s four and half hours… more than twice as much time as it took a half century ago.

What happened? Did the oil industry forget how to pump the black goo? Did Vladimir Putin singlehandedly undermine the entire global energy business? Did the Covid 19… which only appeared two years ago, and killed so few people the population of the world actually grew in 2020… undo half a century of economic progress?

Fantasy Land

More likely, the feds lit the match 51 years ago. Now almost the whole world is on fire.

But if they wanted to do so, it would be an easy fire to put out.

Congress could begin by balancing the federal budget. Why should the feds spend more than ‘the people’ are willing to pay for? Why should they burden future generations with debt and inflation? Aren’t they just forms of ‘taxation without representation?’

The Fed could do its part too. It would only have to announce that it would no longer be backstopping the stock market or bailing out Wall Street. No more money-printing. No more rigging interest rates. No more loans to member banks.

Better yet, it could announce its retirement. No more central bank to meddle in the world’s financial affairs and mislead investors and businesses with fake money lent out at phony rates!   

In a matter of minutes, the whole grotesque abomination… the scam economy… would be history. No more zombie businesses. No more ‘negative’ real yields. No more inflation.

But wait… let us take a deep breath and come back down to earth. Can you imagine Joe Biden, Jerome Powell, and the 435 members of Congress actually doing these things? Of all the possible configurations of the future, this one seems least probable. It’s more likely that aliens from space will land on the White House lawn and take charge of US financial policies! And do a far better job, of course.

So, tomorrow, let’s continue our look ahead… to what ought to happen.

Regards,

Bill Bonner

Joel’s Note: Is case you missed Ms. Jean-Pierre’s good news bulletin, here she is, explaining the situation as if to a roomful of kindergarten children…

Benny Johnson @bennyjohnson

White House Press Sec. Karine Jean-Pierre: "What I'm trying to say to you, is that the economy is in a better place than it has been historically."

Hmm…

“Thanks to our navigational expertise,” the Titanic’s captain announced to concerned passengers, “we’re in a good position to address the giant tear in the hull.”

Now, you cooouuuld wait for the crew to bail out the water as it floods the deck… or you could grab your gold, your cash, your valuables and head for the lifeboats. Tom and Dan have a wealth of research papers and investment notes available for Bonner Private Research subscribers on the website.

The strategy they’re developing is specifically designed to help you preserve your capital over the next few years. If you haven’t joined already, we might suggest you get on board now and beat the rush!