Dollars to the Moon

I mean, not that you should be surprised. Or that being lied to is something that is suddenly unique and novel in this American economy.

Still, pointing out the lies is always good.

As Supreme Court Justice Louis Brandeis wrote in the 1950s (back when the Supreme Court was widely respected): “Sunlight is the best disinfectant.”

So, we disinfect today…

I will tell you now that the sunlight shines at the end of this story.

But we first must wander the darkness to get there…

With that preamble out of the way… What is today’s message actually about?

Inflation—and the false stories you’ve been told about it.

I see a ton of media and political narratives out there about shrinkflation and greedflation… but these all conceal an essential truth about inflation.

Shrinkflation is the idea that companies are charging the same amount for less product. So, your Snickers bar has gotten smaller but still costs the same. Probably a good bit of that going on, for sure. Corporations have never been do-gooders when it comes to giving you more than they have to.

I’ve also seen chatter abut greedflation—companies profiteering by raising prices on essential goods. Probably a good bit of that unfolding, too, though likely less than most people assume. Companies have certainly seen raw-input prices rise for various commodities, transportation, insurance, salaries, etc. And, well, this is America after all. Land of the Capitalist Pig Dogs, for the commies among us.

And then there’s something called drip-pricing. You know this scam: When airlines and banks and restaurants tack on spurious surcharges for things like luggage that’s six ounces too heavy; or hiking an ATM fee, even though the use of an ATM actually reduces a bank’s cost structure. Or the extremely unethical scam among restaurateurs to slip in bogus fees for “employee feel-goods,” or “worker healthcare,” or, I don’t know, “replenishing the oxygen you breathe in our restaurant.”

That fleecing and hoodwinking is certainly on the rise.

There’s also excuseflation and sellers inflation, which are kinda similar. Companies are using all kinds of excuses like COVID transportation snafus to jack up prices even when they might not have actually been affected by it. Again, I will point you back toward the notion that this is Corporate America—‘nuff said.

While there’s some truth in all of that, the peddlers of mainstream financial news are lying to us about one fact.

It’s a lie of omission, to be sure.

And, I would bet, most financial writers haven’t written about this because they’ve not really thought about it or even recognized this source of inflation for what it is.

And that source of inflation is… the Federal Reserve and Congress, and Uncle Sam’s history-breaking mountain of debt.

That, sadly, is not figurative imagery.

It’s literal in the most ridiculous sense.

Someone has calculated that, based on the thickness of a dollar bill, you’d need about 3.69 billion George Washingtons stacked on top of each other to reach the moon.

With the US’s near-$35 trillion debt, a careful stacker of greenbacks could reach the moon and back 4,745 times, or 9,490 one-way trips.

I mean, that’s just laughably sad.

Along with the extra spending he’s doing, all that debt is causing Sammy to increase his borrowing to afford the debt-repayments costs. That’s an additional $3.65 trillion every year on top of the debt America already has (495 trips per year to the moon and back—more than one trip a day).

The Treasury creates that money every year by printing more dollars. Technically, Treasury isn’t printing anything. Just a few computer key strokes and money magically appears.

It goes out to lenders in the form of interest payments on the money those lenders have loaned to the debt-addled American government. Those lenders then in turn release the money into the US/global economy in various ways…

By definition, inflation is too much money chasing the same amount of goods and services. And so, you have the purest form of inflation spinning out of government itself.

As the Fed tries to fight inflation with high interest rates, America’s crazy moon-debt is pouring dollars into the economy like a fire hydrant no one can shut off.

This is why the Fed is destined to cut interest rates. High rates applied across America’s debt means the $3.65 trillion keeps growing larger every year because interest rates are pushing up the debt-servicing costs of all of America’s old, low-rate debt that is now coming due and, out of necessity, being refinanced at higher rates.

So that’s the lie and the sunlight in 800-ish words.

Government debts are forcing the creation of a ton of new dollars… that are flowing into the economy… helping fuel resurgent inflation.

I’ve written many times over the last many months that inflation has not finished playing with the economy, despite the lower readings we had for a while.

But there is something you can do to protect yourself against inflation.

As I regularly say in this space, Swiss francs, gold, and bitcoin are my go-to inflation hedges.

“Bitcoin” might seem like the odd one out in that list… but only to folks of your and my generation…

As I also wrote in Field Notes recently—our kids have already learned that crypto can protect their wealth:

“Inflation is destroying the value of fiat money, and in places like the US, the UK, and elsewhere, young people can barely afford to live in the local economy. Crypto allows them to preserve their purchasing power because over time bitcoin rises (and takes other cryptos with it) as the dollar and other currencies sink.”

America’s economy from here on will be even bumpier.

Buckle in with a golden seatbelt while you count your Swiss francs and crypto.