The Blind Lead the Blind

President Biden recently has posted a tweet:



What was that - deliberately misleading the Americans? An irresponsible lie like Mr. Trump used to do? Dementia? Blindness?
It seems Mr. Biden is unaware about the official inflation rate was 6.8% in November, 2021 and food inflation according to some experts was running at least 30%.
Moreover, this tweet shows the President does not understand what inflation is, how it debases the US dollar, why this debasement impoverishes his fellow Americans, and the role of the Federal Reserve System in this process. Otherwise, Mr. Biden wouldn’t reappoint Mr. Powell for a second term as Federal Reserve chair.

Well, almost all people (presidents and economists including) perceive or pretend to perceive the inflation like a kind of natural disaster, a force majeure which is beyond our competence. No, it is actually a product of the Fed which is called “inflation targeting policy”.
So this tweet was probably a blindness as well as the reaction of almost 76K Americans who liked that tweet.


I have already written about the inflation in the US here.

The conclusions shortly are:
- Almost all governments in almost all countries are constantly borrowing money because they usually spend more than their countries earn. Also they always want to create some more money to pay off less.

- Inflation is created by releasing superfluous money into circulation. The central bank of nearly every country (Federal Reserve in the US) is responsible for that. Then the amount of money which is already in circulation is depreciated for the amount of additionally created money and the prices of goods and services grow, thereby the residents have to pay more.

- The Fed's usual inflation "target" is 2% per year, i.e. the usual rate of impoverishment of Americans is 2% per year. It is geometric progression with a common ratio of 1.02 and compounding effect over time. If you earned $100K in 2016, you needed to make $102K in 2017, $104.4K in 2018, $106.12K in 2019, $108.24K in 2020, etc. just to keep your living standards of 2016. Wages do not grow so fast.

- There is a very simple explanation why most central banks have been unwinding the inflation for a long while from great American economist Milton Friedman:
"Inflation is the one form of taxation that can be imposed without legislation." Thus Americans are burdened with one more tax they are not aware of.

- Creation of the inflation is a very profitable business for the US elites. $100 in February 1971 had the same buying power as $659.18 in February 2021 according to CPI inflation calculator. This means that current retirees can buy 6.59 times less of goods and services with their pensions than they would do in 1971 when they started remitting their money to Social Security Administration 50 years ago. And the government gets $100 and pays back $100: 6.59=$15.17 fifty years later...

- FRS fights any economic crises (which it creates time after time by its inflation targeting policy) only by "quantitative easing", and if that does not help - by "dropping money from a helicopter". "Quantitative easing" means the Fed purchases the government bonds for a newly emitted electronic money (i.e. creating money out of a thin air) and in such way injects this money into the economy. Wall Street Journal states that “... Between December 2019 and August 2021, the U.S. money supply, measured by M2, grew by $5.5 trillion, a stunning 35.7% increase in only a year and a half, driven primarily by the Fed's purchases of Treasurys and mortgage-backed securities.“

- No claims can be made against the U.S. president or any official in the country on inflation due to the Fed is “an independent central bank because its monetary policy decisions do not have to be approved by the President or by anyone else in the executive or legislative branches of government…”.



Within 24 hours, around 18K Americans responded to the President’s tweet, and most of the replies were critical. These people rightly did not share the President's optimism and pointed out that life had become more difficult for them last year.

Also, many students ask to cancel their student loan debt. It is easy to do, but this will increase the inflation again. The students’ personal debts will be spread out over all Americans and debase their dollars more.

Unfortunately, the majority (nearly 76K) readers are as blind as Mr. Biden is, since they liked his tweet. They believe they got richer because they bought 8.5% more comparing to the previous year holidays. They don't see the inflation, depreciation of their USD and the increase of prices for almost everything.


The blind lead the blind. Indeed, every nation deserves its rulers. Actually, they are mirrors.



P.S. Dear Reader! I am very much interested in your opinion on the subject of this article. Please, write a comment or ask a question if you want to clarify something.
Yours,
Igor Chykalov