dtucker300 Loc: Vista, CA

Day 13: What Is Inflation?
https://www.prageru.com/video/what-is-inflation

Inflation isn’t new.

This man-made disaster has bedeviled civilizations at least since Ancient Rome.

In order to pay for his extravagant expenses, the first-century Roman emperor Nero debased the Roman currency, the denarius. How did he do it? By replacing silver, which was valuable, with copper, which was not.

And that was just the beginning.

Rome’s corrupt governments debased the coinage on a regular basis. By the fourth century, the price of wheat was two million times higher than it had been in the mid-second century. By the fifth century, Rome was finished—overrun not by barbarians, but by inflation.

In the sixteenth century, English King Henry VIII did essentially the same thing with England’s coinage to pay for his wars, divorces, and debaucheries. In what became known as the Great Debasement, food prices soared. Ultimately, Henry left it to his daughter, Queen Elizabeth I, to clean things up by issuing new, high-quality coinage, setting the stage for the emergence of England as a great power.

The Continental Congress of the American revolution tried to print its way out of its money problems by paying soldiers with paper money. The first US currency, the Continental dollar, was so over-printed that it became “confetti”, collapsing into hyperinflationary oblivion. Alexander Hamilton, the first treasury secretary, saved the day by linking the US dollar to gold.

Figures like Elizabeth I and Alexander Hamilton are rare. These stories usually end badly. In the 1920s, rampant money printing by the Weimar Republic in Germany led to hyperinflation, economic collapse, and ultimately, the rise of Adolf Hitler. Argentina, once the most prosperous country in South America, has never really recovered from its wild money printing in the 1950s. And Zimbabwe, now one of Africa’s poorest and most corrupt nations, is infamous for its one hundred trillion dollar bill.

Look for the source of a society’s collapse, and you’ll usually find the i-word.

So what exactly is inflation?

There are two types: non-monetary and monetary.

When a hurricane slams the Gulf of Mexico, interrupting fuel production, the price of gasoline rises. This is non-monetary inflation—the rise of prices due to some external event. Over time, the market recovers and prices normalize.

Monetary inflation is something entirely different. It’s the distortion of prices that occurs when money loses value. It’s that feeling that something isn’t right. Why is my weekly grocery bill, which used to be $100, now $200?

Because your money is losing value. It’s not that bananas have suddenly become more valuable. It’s that your money has become less valuable.

This can happen rapidly—as we’ve seen since 2021—or slowly over time. For example, in 1970, a can of Coke cost a dime; a Big Mac 65 cents. Fifty years later, a Big Mac is five bucks, and you’d be lucky to get a soda out of a vending machine for two dollars. Obviously, these products haven’t changed. It’s the dollar that’s worth far less.

This slow-motion devaluation of the dollar is why young people today can barely make rent when, years ago, their parents, who made far fewer dollars, could buy a house. Their dollars were worth much more.

If you feel cheated by that, I don’t blame you. You have been.

So where should your anger be directed? You can start with our 37th president, Richard Nixon. The worst thing he did was not Watergate. It was taking us off the gold standard in 1971, which Alexander Hamilton had put in place two centuries prior. This allowed the federal government to print dollars more or less at will.

Had the US dollar stayed connected to the gold standard, it’s estimated that today’s economy would be at least 50% larger than it is. In a universe without inflation, you could buy that house.

So what is the dollar’s value linked to now, if not gold? Nothing more than faith—the faith that the money you have today will be worth the same tomorrow, next year, and the year after. But it becomes harder and harder to maintain that faith as the U.S. government prints trillions of dollars to pay for its outrageous spending.

The most devastating effect of inflation is its impact on social trust. Money, after all, was invented to enable trade between strangers by providing a mutually agreed-upon unit of value. It is a facilitator of trust. Without that trust, trade, social relationships, and life as we know it ultimately unravel.

So are we doomed to this fate? No. Just like England wasn’t and America wasn’t at its founding.

We must once again link the dollar to a stable anchor; gold or some other trustworthy standard.

The time to start that debate is now.

Or we will go the way of Rome. You can bet your bottom denarius on it.

I’m Steve Forbes, co-author of Inflation: What It Is, Why It's Bad, and How to Fix It, for Prager University.

dtucker300 Loc: Vista, CA

Day 14: The Bankrupting of America
https://www.prageru.com/video/the-bankrupting-of-america

INT. HOSPITAL ROOM – DAY

Sitting up in bed, Mom holds her precious new baby in her arms. Alongside her, Dad beams with pride. In the background, a doctor smiles. So does the nurse, dressed in her scrubs.

GOVT DEBT COLLECTOR (VO)

I’m here to collect your $600,000 share of the national debt!

The Government Debt Collector, clad in a black suit, stands in the doorway

Mom turns white with horror.

DAD

“What! We don’t have $600,000!

GOVT DEBT COLLECTOR

I wasn’t talking to you. I was talking to your baby.

He reaches over and tags the baby’s tiny little toe with $600,000 IOU.

GOVT DEBT COLLECTOR

Have a nice life.

Open mouthed, Mom, Dad, Nurse, Doctor and finally Baby watch him exit.

INT. Maternity Ward

See the baby with a toe tag.

---

PRESENTER SEGMENT:

This isn’t a made-up horror story. It’s real. It is the unpaid credit card bill our kids and our grandkids are facing—money they didn’t spend but will have to pay.

The Democrats point their finger at the Republicans. The Republicans point back at the Democrats. The truth is that the politicians of both parties have brought us to the edge of this financial cliff.

They say they’re spending all this money with the best of intentions: the trillions are needed to end hunger and reduce inequality; provide everyone with free health care; and save the planet from global warming.

But there is no way around the simple math. You can’t spend what you don’t have—not indefinitely. Debts have to be repaid.

We’ve been sweeping this problem under the proverbial rug for decades, but now we’re running out of rug.

During the year of the Covid crisis, a Republican president, Donald Trump, approved a massive increase in government spending. His reasoning went like this: We shut down the economy. We have to help people out.

Did he go too far? Maybe, but just about everyone agreed something had to be done.

Then, Joe Biden, a Democrat president, entered the White House and called for $1.9 trillion in additional spending—even though one trillion of the previous Covid relief money had not yet been spent, and even though the economy was already well on the way to recovering.

Then the new President quickly asked for another $1.1 trillion for “infrastructure”, which used to mean projects like roads, bridges, and airports, but now includes giveaways like electric car charging stations for Tesla owners. By the way, 19 Republican Senators joined the Democrats. Nobody is blameless.

But, wait—that only turned out to be President Biden's opening bid. He put another $3.5 trillion in spending on the table for a whole slew of goodies: free child-care, free community college, student loan forgiveness, expanded Medicare and Medicaid, vast subsidies for “green” technology, and on and on.

Add all this extra spending and you arrive at $6 trillion dollars. Yes, that’s a six with 12 zeroes after it.

This is a level of spending we have never seen before.

The numbers are so big, it’s impossible to grasp. But to offer a little perspective consider this.

$6 trillion is more money (adjusted for inflation) than we spent on the Revolutionary War, the Civil War, World War I, World War II, the Louisiana Purchase, the Transcontinental Railroad, the Interstate highway system, and the Moon Landing combined.

Normally, we borrow money as a nation during a period of crisis. Then, when the crisis ends, we start to pay down the debt.

What the Progressive Left wants to do is launch the biggest spending spree in American history—after the crisis is over!

What’s looming ahead, however, is a new crisis: a nuclear-sized debt bomb. Our multi-trillion dollar national debt was bad enough before all this proposed spending.

But, progressive politicians and some economists tell us we have nothing to worry about. All we need to do is tax the rich! But there aren’t enough millionaires and billionaires to pay this kind of bill. Or they say, as long as China keeps buying up our debt we're fine. We can spend all we want.

But do we really want to be in debt to the Chinese for trillions of dollars? They aren't exactly our best friend.

And what if there is so much debt, the Chinese and other nations can’t buy all of it, even if they wanted to.

You know what happens then?

The US government is forced to buy its own debt. This just means we print money to pay our bills. If your common sense tells you that’s crazy, that’s because it is.

If printing money could make a nation rich, then Argentina, Venezuela, and Zimbabwe would be among the richest nations in the world.

You don’t have to be an economist to know that printing money is the perfect recipe for serious inflation.

And inflation is a prosperity killer. It shrinks what you can buy with your paycheck, and it eats away at your savings.

In the 1970s prices rose so fast that the economy crashed and unemployment soared. Things were so bad economists created a misery index: inflation plus unemployment, and that hit 20%.

And today, prices for everything, from gas to food, are on the rise again.

Once inflation gets going, it’s hard to stop.

Runaway inflation leads to financial ruin.

This is what happened after World War I in Germany, for example. The debts were so high and the currency so debased that women had to bring wheel barrels full of bills to the grocery store to pay for food.

And we know where that led.

If that’s not the future we want for our kids, we need to stop the wild spending and defuse the debt bomb.

The sooner, the better.

I'm Stephen Moore, economist at FreedomWorks, for Prager University.