When the author of this blog was growing up, a 6 oz. bottle of Coke cost only 5 cents. 50 years later, the same 6 oz. bottle would sell for 50 cents, if that bottle were still available. (The 12 oz. can usually sells for $1.00 in many outlets, so I use that for my comparison.) Even if my prices are off a little, the price of most optional consumables has gone up by a factor of 10 since I was a child.
Inflation is the thief that robs us all without immediate pain. Governments tend to spend more money than they take in via taxes, and quietly run the printing press to repay creditors with inflated currency. America has done this several times in our history, most notably during the Great Depression, when we changed the price of an ounce of gold from $20 to $35, and then confiscated the gold in American citizens' hands.
The second time America raped its currency was during the Vietnam war. Instead of taxing the public, and openly dealing with the costs of this unneeded war, we issued debt that would be paid off with cheaper currency. And our government got into the habit of printing money, inflating the currency, until we had short term interest rates approaching 18%. When credit card debt isn't expensive, the economy has serious problems. And we did have them in the late 1970's and early 1980's, where Jimmy Carter had to slam the brakes on the economy to prevent hyperinflation from kicking in. (Of course, Ronald Reagan got the credit here, as actions of one president often show results in the next president's term.)
Today, we're seeing a great distraction taking place. Our president has decided that the public wants a stronger military (rah, rah, rah for our team - yeah, right!) and is willing to spend money that we don't have. During his campaign, he posed a question which is very dangerous for the issuer of the world's settlement currency - why doesn't America renegotiate its debt, and settle for pennies on the dollar? Many people have forgotten that question, but I haven't. What will happen if he decides to pay back creditors with cheaper dollars?
70 years after World War 2, the world now has several decent options for a settlement currency of choice, the dollar being only one of them. The other two possibilities of note are the Euro and the Chinese Yuan. Any nation or zone that issues the dominant settlement currency has a distinct advantage, as its businesses have an easier time dealing with currency risk. And that results in lower costs for the nation/zone, resulting in a higher standard of living for people within that nation/zone.
Can we afford another round of inflation? No. But based on historical trends, we will likely see one with disastrous effects. Hopefully, I am wrong, as there are a lot more people living on fixed incomes now than when I was a child, and they are much less able to afford the risks of inflation.
In order to understand what is going on with this year's election, one has to understand history. In short, one has to understand what led up to the Great Depression, what led up to Iraq War #1, the Bill Clinton presidency, the George Bush (#43) presidency (especially the response to 9/11), and the Obama presidency. In the light of history, everything going on makes sense, and I'm still surprised that only the Libertarians have emerged to be a potential disruptor for this election.
Let's look at the Bush #43 presidency first. He was elected with the mantra of "Compassionate Conservatism" infusing his campaign. One would have expected him to be a president who focused on domestic affairs. He did push a reactionary conservative agenda to appease the hard liners of the GOP base, and did appoint many conservatives to the courts. But 9/11 threw him and the rest of the country for a loop. Politically, he couldn't allow another terrorist attack to occur without an appropriate amount of security theater - so we built up much of our dysfunctional security infrastructure in his reign. But he also had to get us into a never-ending war, where we disrupted the power structure in Iraq, allowing ISIS to form.
Next, we have to look back at the Bill Clinton presidency. Bill was a sex addict (no surprise, FDR and JFK also "suffered" from this affliction). But Bill succeeded beyond anyone's expectations, leaving the US with a treasury that was spending less than it was taking in. Yet, his presidency was marred with scandals (something common in politics), and his wife was tarred with the same brush that tarred him.
Bush had a choice - should he borrow to pay America's bills for a war in Afghanistan, or should he raise taxes to pay for the war? He chose to borrow AND decided to cut taxes - leaving whoever would following him with very tough choices - do we cut the military or social spending budgets, and which line items are sacred? Luckily these tax cuts were temporary, and would expire after he left office. They were designed to make a Democratic president look bad, as no Democrat would touch social spending - so he would have to let the tax cuts expire, allowing the GOP to claim he raised taxes.
The GOP has a mantra of "Less regulation brings on greater prosperity." When the economy collapsed in 2008, a smart GOP candidate would have to ask the question: "What happens if we continue our dysfunctional policies? Could we have another Great Depression?" And I'll bet that John McClain realized this in 2008. Could he tell his party's loyalists that they needed to pump money into the economy AND impose new regulations on the banking sector of the economy? Of course not. So he made a decision that he'll never admit making - to trash his chances of being elected President by nominating Sarah Palin for the office of Vice President. (But he had to play dumb. Any hint that he threw the election would damage his stature in the GOP - and he hasn't admitted that he did this yet, and I doubt he ever will....) John McCain was very aware of what happened to Herbert Hoover. His administration was blamed for the Great Depression, and the Democrats held the office of the President for 20 years under FDR and Truman. I'm pretty sure that McCain figured that the GOP could brush Bush #43 under the rug, and possibly tarnish the Democrat (Obama) so the GOP could win in 2012.
Obama is elected in 2008. We know from recent history that the GOP opposed everything he tried to do to prevent a Great Depression. But both Bush #43's advisors and Obama's advisors were working to script legislation to prevent the worst from happening. And Obama was more successful than expected, in spite of the GOP. He knew not to shred the social safety net while things were getting worse, and then to take away the extra support when things got better. No matter what people did to find scandal in his administration, his was the cleanest we've had in decades.
During Obama's administration, the GOP regained control of congress. And repealing Obamacare became a new mantra. Hillary Clinton takes on the job of Secretary of State, dealing with many of the foreign policy decisions that Obama doesn't have the time to make, being involved in the domestic economy and its problems. But this places her back in the cross hairs of the GOP's attacks on her. If they could have convicted her of anything, they probably would have done so. But the most they could do is to tarnish the reputation of a woman because she was married to a president of the opposition party who was very successful and very flawed.
The GOP congress was ineffectual in delivering on its many problems, and many in the base stopped believing in the lies told by its elite. So, Donald Trump became a great disruptor. Voting for Trump was a vote against the GOP elite. Sadly, Trump is a person who leaves anyone and anything he touches poorer for knowing him. But one would have to know his history to think he's anything other than a successful entrepreneur.
At the same time, the Democratic elite was also shown to be worthless, leaving fertile ground for Bernie Sanders' candidacy. If it weren't for Bernie NOT realizing how powerful his message and candidacy would become, and how the Democratic party's elite structured things for Hillary to win, he might have just pulled up the upset of the century.
Now we have Hillary Clinton and Donald Trump as our presumptive nominees. They have the lowest approval ratings in decades. And the Libertarian, Gary Johnson is polling in the double digit range. Will he be able to keep polling this high and get into the debates? I'm not sure, but he is another disruptor. If Johnson were to win any electoral votes, and if neither Trump or Clinton win a majority of electoral votes, the presidential election could go to the House of Representatives. Would the majority GOP states vote for Trump, or would they do something embarrassing like voting for Clinton? I suspect that neither candidate would be acceptable, and this would leave the Libertarian (who is, I believe, a former GOP governor) as the only palatable choice.
Could this scenario happen? It's highly unlikely, but we've seen the strangest things happen this year, and I'm not ruling out even stranger things from happening.....
