It’s the Economy

6/14/2022

We can all easily see that the economy is on a failing path recently; and we can predict the next phase.

The past performance and the future predictions are based on the fundamentals of basic macroeconomics, as we shall describe in this document.

The real covid disease caused an unrealistic overkill response, which was certain to help destroy the economy. Telling people that they should stay home and therefore not spend money in the economy; plus, not learn, train or innovate, because they are told not to go to school, causes another huge economic hit; which is made probably ten times worse by the government pumping trillions of dollars in to the economy ‘printing money’.

Most of this spending was unfair and unnecessary. Much of it was wasted on useless programs and pork projects for unions and other special interests associated with the party in power. All of it was put through a very wasteful, inefficient, ineffective bureaucratic filter. This lowered the value of money and therefore made everything much more expensive. Everyone had to raise prices in order to attempt to make profits, since all their own costs were going up, and their employees were performing at lower levels, with less hard working in person hours. Plus, liberal policies overregulated companies and mandated or pressured and financially burdened them with all sorts of absurd expensive rules, in the woke age.

A weak federal government, local governments, an expanding crime wave, and causal policies lessens consumer and business sentiment regarding the economy; in many respects this becomes a self-fulfilling prophecy and the economy begins to fail even worse. People begin to invest less and purchase less, to retain past profits and protect themselves from potential downfalls. So, the public helps perpetuate a dropping economy, even though it is started due to bad government employees, advisors and policies, with extensive pork and graft.

The projection of weakness in a multitude of American venues is perceived by foreign enemies who then seek to expand, knowing there won’t be consequences. In this example Putin correctly felt that there would be no serious military response to his invasion of Ukraine; Biden even said it out loud. Aside from the horrific genocide in the ongoing Russian invasion, this disruption predictably harmed the whole US economy. The perceived and real reduction in oil and gas coming out of Russia predictably raised energy prices world over (ironically the oil and gas companies are not being harmed at all; they’re taking advantage of the situation and making extra profits, which should be punished if possible. Plus the price of energy Putin sells has doubled for him.)

Inflation extends across all major product lines due to the extreme unnecessary government spending  mentioned. Massive inflation caused the US Federal Reserve to raise interest rates. Instability and rising rates encourage fewer borrowers, who are then taken out of the economy to some degree; essentially preventing the trickle-down economic growth which would be helping grow a normal healthy economy. (Creates jobs, creates a tax base, creates valuable innovation which trickles around and fuels growth everywhere in a normal healthy economy, based on fundamental popular economic theory and reality.)   

The government eventually realizes there is massive inflation once it’s too late to stop it, and despite denying the reality that they caused it. So next up is raising interest rates to slow down consumer spending, still without taking any accountability for government spending, and still idiotically recommending extensive additional government spending; always claiming in some miracle manner that “it’s paid for” and that money is free. What a horrible joke that is. But I digress.

Higher interest rates, high inflation, massive instability and extensive uncertainty harm corporations, and make investors rightfully fear there is more harm on the horizon, so they start selling off stocks on Wall Street; the market crashes and becomes a “bear market”, trillions of investor dollars are lost in a short period.

Now we are at today; and what is next? Next the companies will start laying off thousands of people, causing a greater burden on the government and driving us in to a recession. People won’t be able to afford the rising prices of basic goods; homelessness and poverty will increase.

This entire economic paradigm will begin to crash the housing market and broader real estate marketspace, mostly due to higher interest rates and more difficulty qualifying for loans. Plus, probably a lot of banks failing due to loan failures of their customers, and ever more fraud of their employees.

Of course, crypto has also crashed hard and will continue to do so; it was never a real asset in the first place; people will be unable to justify ‘investing’ more in it, and will just be heading for the exits until it is mostly worthless, where it belongs. Plus, very extensive criminal activity in that space will start taking a huge toll on the valuations; and people deservedly being fined and going to jail.

Higher taxes, and bigger government debt, in the form of trillions of dollars of bonds issued (money printing) the American people are on the hook to redeem, will further erode the economy on top of the other items mentioned.

So, what is the solution? Once we hit bottom, likely in 2023/2024, common sense economics, math, and policies need to take root. Firstly, by electing people that use math and who hire others that use math and leverage basic common-sense economics (not happening at all at present). The new political teams can stop the crazy spending; and use policies that encourage hard work, innovation, education and job training.

Eventually, all the hard work and innovation will create more employees, companies and more profits; which will improve the tax base again; and government will hopefully use that money to give us a chance to start rectifying all the horrors the current administration has caused, as mentioned above.

This is certain to take a couple years if we are lucky, and could be longer if voters and politicians keep making bad decisions. Don’t shoot the messenger; do heed the message.