By Ralph J. Benko
Donald Trump, inadvertently, certainly, and unnoticed, virtually, has put his successor Joe Biden in the hot seat. How so?
As Nobel economics laureate Milton Friedman famously declared and later distinguished economists confirmed it takes up to two years before the Fed’s overenthusiastic gunning of the money supply shows up in consumer prices.
Called: “inflation.” Let’s rewind.
But first… inflation is a misnomer. Rising prices are just a symptom of the real problem: a sinking dollar.
Donald Trump spent a lot of time pounding the table for a weaker dollar going on two years ago:
- Bloomberg, March 3, 2019: Trump Says Dollar Too Strong in Renewed Criticism of Powell;
- Reuters, June 25, 2019: Trump thinks dollar is too strong, blames Fed policy;
- Reuters, November 18, 2019: Trump says he told Fed’s Powell US interest rates are too high.
Trump, a very “in the moment” guy, surely had no idea that a weak dollar would cause inflation later. But … you get the drift.
Fed chairman Jay Powell discretely accommodated Trump’s incessant demands. Now Trump’s inflation chickens are coming home to roost … in the Biden henhouse.
A president, after a lag, always gets the dollar – weak or strong – he wants. This is an open secret. As I wrote at Forbes back in 2014:
As journalist Steven Solomon wrote in his indispensable exploration of the Fed, The Confidence Game: How Unelected Central Bankers Are Governing the Changed World Economy (Simon & Schuster, 1995):
“Although they strained to portray themselves as nonthreatening, nonpartisan technician-managers of the status quo, central bankers, like proverbial Supreme Court justices reading election returns, used their acute political antennae to intuit how far they could lean against the popular democratic winds. ‘Chairmen of the Federal Reserve,’ observes ex-Citibank Chairman Walter Wriston, ‘have traditionally been the best politicians in Washington. The Fed serves a wonderful function. They get beat up on by the Congress and the administration. Everyone knows the game and everyone plays it. But no one wants their responsibility.’”
True news.
Yet old news.
What’s weird and unsettling is that virtually nobody in Washington is pinning the blame where it obviously belongs, on Donald Trump’s weak dollar demands. The Pachyderms, who know better, or should, blame inflation on the big Democratic Party-led spending.
Balderdash! Yet it’s understandable that Pachyderms would wish to avoid placing blame on their former titular leader, the punitive Trump. Truth be told, the GOP spent at least as drunkenly as the Dems. But it’s plain dopey to pin a monetary disorder, inflation, on fiscal policy.
So, what’s up with the Donks? Instead of sticking their archnemesis Trump with the blame that belongs to him they are making absurd claims that Greedy Big Business is at fault for rising prices. Preposterous.
We have known at least as far back as Adam Smith that businessmen will always conspire to raise prices. Smith, who practically invented capitalism, called out the greed of businessmen explicitly in capitalism’s bible, Wealth of Nations.
It’s not munificence or counsels of civic virtue that constrains businesspeople from raising prices. It’s competition.
Big Businesswomen (and men!) are no greedier now than they were before inflation kicked up. Profit maximization is a constant among the merchant class.
So, by blaming Big Business, Biden and the Bidenistas are making a transparently absurd argument. Nobody to the right of Bernie Sanders – meaning, most Americans – buys this lame story.
This is doubly weird because the midterm elections are coming up. These will be a referendum on the government’s pandemic response … and inflation.
This farce would be funny if the joke weren’t on us. With both the Republicans and Democrats getting the cause of inflation badly wrong we are likely to get continuing inflation… followed by a cure as bad as, or worse: recession.
As the Wall Street Journal recently observed, “Historically, the Fed hasn’t been able to push down inflation without a recession.” This, sadly, is true enough. Yet a recession really isn’t required to cure inflation.
H.L. Mencken once wrote that “Democracy is the theory that the common people know what they want, and deserve to get it good and hard.” So long as the Republicans and the Democrats are engaging exclusively in blame-shifting, rather than restoring the proven-effective supply-side policies of stabilizing the dollar and keeping tax rates reasonably low, we common people are going to get it good and hard.
That said, nobody I know of in power in America is looking at the real, historically proven, Constitutional solution. That would be making the dollar legally convertible into gold at a fixed price, say $2,000/oz.
After a short adjustment period gold convertibility would end inflation while creating a wonderful climate of equitable prosperity and job creation. The gold standard worked extraordinarily well for almost 200 years!
Gold is out of fashion with the smart set, such as PhD economists who haven’t delivered anything nearly as good. Nothing else has worked nearly as well as gold.
And so here we are, facing the worst inflation in 40 years. Our politicians giving us a Hobson’s Choice between seeing our savings and salaries shrink in buying power, by inflation, or seeing our neighbors, or even ourselves, thrown out of work by a completely unnecessary recession.
Yikes! Money printer go brrr?
It falls to us—including you, dear reader—to contact our Representatives by their websites, emails, phone calls and even good old-fashioned letters. Guide their footsteps back onto the Paths of Righteousness. Tell them:
“You shall not press down upon the brow of labor this crown of thorns; you shall not crucify mankind upon a cross of federal reserve notes!”
Onward to a golden age.
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© 2022 by Ralph J. Benko, co-author of The Capitalist Manifesto and chairman and co-founder of “The Capitalist League,” is the founder of The Prosperity Caucus and is an original Kemp-era member of the Supply-Side revolution that propelled the Dow from 814 to its current heights, doubled American real per capita GDP, and world GDP from $11T to $94T.
