What Does Inflation Have To Do With MAGA and Its Enemies?
And what really is inflation in the first place?
A lot going on these days. Trump will be taking office in 2 months. He was likely elected because most people can’t afford food. Elon Musk and DOGE want to slash and burn the Fedruls and that Office Space meme is everywhere. Finally, as always, Tucker Carlson keeps telling me all about inflation and what causes it. Hint: he knows just enough to be dangerous.
In fact, before we get to inflation, let’s cut for a moment and discuss that DOGE tweet and the Office Space meme. Both fail. In the first case, working in a chain is the efficient way to move heavy things. Be it buckets to put out a burning haystack (Far from the Madding Crowd reference) or moving heavy logs to a pile. Not defending FEMA here just pointing out the idiocy of that meme.
In the second, those Office Space efficiency guys were total choads who were greatly impressed by the guy who slagged them off and acted all haughty and superior. There is an important lesson here for job interviewing if you can grasp it. Effective reorganization requires humility and a willingness to “enter the shop floor”.
You have to actually observe people at their jobs and enter into discussions with them about the problems they have getting their jobs done. Sitting in a room demanding people explain what they do while your real job is to tell the boss what he wants to hear leads nowhere good if your job is to increase efficiency and potentially save a company from malaise and bankruptcy. Maybe Musk will do things the right way and maybe he won’t. Building companies is a different skill and slashing DEI and Trust & Safety jobs is easy.
The problem with Republicans of the materialist bent is they tend to over-simplify. The problem with Democrats is they tend to over-complexify. There is a sweet spot somewhere in the middle — let’s call it reality — and that’s where I hope to go with this piece. In fact, Right and Left used to do just this type of thesis/antithesis/synthesis when drafting legislation. That was a long time ago when good faith and public service were a thing.
So let’s demistify this important topic and make it really simple to start: inflation is a rise in prices. Deflation is a reduction in prices. That’s it. The complexity arises when we try to nail down the causes of inflation/deflation.
The Harvard Business Review says this about inflation:
At its root, inflation is driven by too much demand relative to supply. More precisely, as former Fed chair Ben Bernanke writes in his macroeconomics textbook with Andrew Abel: “Inflation occurs when the aggregate quantity of goods demanded at any particular price level is rising more quickly than the aggregate quantity of goods supplied at that price level.”
Leave it to Bernanke to complexify a simple statement. And to be fair the HBR says a lot more but it’s all built on the same supply and demand premise: supply fluctuations, demand fluctuations, money supply, interest rates. It all centers around supply and demand.
So back away from theory to facts. Inflation is a rise in prices. What prices? Any prices. And here we get to the first complexity. Are we talking about foodstuffs, consumer goods, electronics, housing, healthcare, autos, education, clothing, etc? This matters because sectoral price variations generally have different root causes. Why? Because market dynamics differ.
Computers and various electronics have dropped in price drastically over the last three decades (deflation). Why? I’m old enough to remember when a new Pentium PC my $1k Macbook Air could run circles around was $3-4k. So why the massive price drop? We should recall that Hewlett-Packard and Dell used to make computers in the US. Labor arbitrage is the big factor in price deflation for electronics and computers.
$1 goes a lot further in China and the people who manufacture all the bits and pieces and put them together make pennies on the dollar compared to US workers. We have labor standards in the US. We don’t have nets to catch suicidal workers outside our factories. We have a high cost economy thanks to inflation in virtually every other sector. We’ll get back to that.
Other factors in this deflation are low tarrifs (a choice) and increased efficiency in chips and other materials production. The US still produces some chips but everything else is made in Chynah. Chy-nah. The important bit for our dicussion is that nowhere in there did we mention supply or demand. You could argue that we buy more electronic shit than we used to because it’s cheaper but it’s hard to argue that it’s cheaper because we buy more.
It’s not like we’re buying in bulk and competition is causing firms to sell at a loss that they’ll make up in quantity. Electronics are cheaper because they are all made in China where slave wages and twelve hour-six day weeks are the norm. Workers live in dormitories and see their families on the rare holiday when they crowd by the hundred millions into trains to head back to their villages to recall how life was when they were “poor”.
Now do housing. Housing prices have shot through the roof for over two decades with a little blip during the GFC. Why? Prolonged low interest rates, goliath financial firms hoovering up private housing using free Fedbucks in the aftermath of the GFC in 2009 did most of it. Some say supply shortages but that is disputed. I think supply is a part of the story but by no means the weight of the increase. The Feds decided after 2008 they were going to do anything and everything to jack housing prices back up and beyond to generate a “wealth effect”. Problem is there’s only a wealth effect if you already own a house. Young people have been priced out of buying houses for at least a decade.
Money supply played a massive role in housing price rises but that artificial increase in Fedbucks to Blackstone and BlackRock (why is it always black with these guys?) wasn’t a natural increase in demand. It’s a looting operation. An enslavement enterprise. You will own nothing, rent from BlackRock, and be miserable and poor forever.
So neither of these large and long term price changes were due to supply and demand in any organic way. And that’s key to understanding where we are. We don’t live under a classical capitalist system anymore. We live in a massively offshored oligopoly where all the old rules of supply and demand, inflation and deflation, don’t really apply. In order to see how this operates on a domestic level let’s look at food prices.
Why has the price of food inflated massively over the past few years? Have we been eating so much more? Was there some great supply collapse? No and no. Sure, there were fuel price increases and parts for machinery were harder to get after we completely shut our country down during the covid scam. Those led to price increases but they don’t explain this chart; now we’re on the scent of the major reason for food price inflation:
Graph: from 2020 to 2024, four years in graph time, Corporate Profits in Nonfinancial Domestic Industries rose from $1.25 trillion USD to $2.85 trillion USD, a 128% increase. Depending on how inflation is being estimated, this rise in corporate profits could explain most or all of the current epoch of inflation is the US. What this means is that it wasn’t inflation at all. It is extortion committed by firms with pricing power combined with there being no one to stop them from doing so. Source: wolfstreet.com.
From an article at Naked Capitalism.
Yes, you read that correctly. A great chunk of the “inflation” at your local supermarket over the last 3-4 years wasn’t “inflation” at all. Instead it was the result of the monopoly pricing power of a slew of oligopolistic corporations that are gouging the crap out of you.
Dole, Conagra, Archer-Daniels Midland, Sysco, Cargill, Tyson, JBS (Brazilian), Marfrig Global Foods (Brazilian) are the oligopolists that not only rob poultry farmers, cattle ranchers and small farmers across the country also sell us high-priced poison as food… along with these guys:
Another massively inflated sector — healthcare/pharma — is the result of all sorts of perverse dynamics. How does one determine quality v. price (economists love to talk about this) when we have no idea if a doctor is any good and the price for a test or treatment is entirely opaque. Pharma gouges charges whatever it wants and owns the regulators and media.
Education inflation has been completely off the charts for decades and quality keeps getting worse. Why? Where else you gonna go to make a decent living in an ever inflating economy? It’s getting so outrageous kids are abandoning it anyway. I’ve been reading sob stories for a decade from people who got degrees and spend half their income just paying debt service on loans that have predatory terms that should be illegal and won’t allow them to ever pay them off. Usury: it’s what’s for dinner. Along with the American people.
In the long-long-ago inflation was a naturally occurring phenomenon caused by an overheated real economy arising from increased industrial output and business growth leading to rising wages and demand. This created a vicious cycle that required an economic slowdown to tame. In such cases raising interest rates was the (still controversial) solution since it slowed growth by raising the cost of capital. Businesses would slow their growth if borrowing costs made it less economical to invest in new plant. That was the theory anyway. We haven’t lived in that kind of economy for at least 25 years in the US.
Most “American” firms don’t even produce their products here and haven’t grown in decades. Even if they did grow they’d be growing in China. Instead they engage in stock-buybacks to juice the price and reward top executives with massive stock options. They don’t operate as real economy national firms. The days of “what’s good for GM is good for America” are long gone.
This sad state of affairs really got started with Reagan busting the air-traffic controllers union. This gave the green light to private union-busting efforts across the nation since the Feds would no longer protect unions from illegal and unethical tactics. Once NAFTA was inked and China entered the WTO offshoring went into overdrive and say goodbye to your steel industry and everything else that made America great.
So we live in an ever-inflating, high cost, oligopolistic economy where most production of real goods happens in other countries and where an ever-increasing percentage of our income is fed into the maws of voracious predators. This all contributes to GDP even though it’s totally counterproductive. You could say our economy is rigged for inflation. Just not the classical supply/demand inflation.
Why do clowns like the Harvard Business Review and the Federal Reserve maintain this old paradigm? One of their primary jobs is to pretend we have a normal, classical capitalist, competitive real economy. That’s what keeps the gravy flowing to the big boys strangling the nation with “inflation”.
These days, almost half of that useless indictaor — GDP — is directly generated by our hyper-financialized FIRE sector (finance, insurance, real estate). These additions to GDP are largely a net drag on real economic growth and productivity. If we calculated real economy GDP in the US China’s economy would be close to double its size rather than slightly smaller as it is calculated now. If we used purchasing power parity as well I have no idea but it would be a David and Goliath type situation.
This is one of the main reasons I voted for Trump and one of the main reasons he is enemy number one for the oligarchic corporate monopolists. Trump wants to MAGA — which means raising tariffs against GE, Apple and Frigidaire and all the companies building their crapified products in China. This will give breathing room for US real economy companies to “reshore” or start from scratch at home to rebuild our industrial base from the ground up.
If he is successful expect demand for skilled jobs to explode over the coming decade. Machinists, tool & dye makers, manufacturing engineers, and a hundred other trades may flourish again. With any luck finance will go back to being a handmaiden to the real economy instead of a speculation and looting machine that operates for its own sake.
But there are a lot of headwinds that will hinder this effort. One of the biggest is our high-cost inflationary economy itself. How do we compete when a real living wage in the US is $25-30/hour and in China they earn a few dollars a day? Very high tarrifs will help but the transition will be extremely painful and costly. And with an oligarchic class fighting against the national interest the entire way it’s just not clear we can beat back the beast.
There could be massive internal economic shocks — sabotage if you will — in addition to any organic economic dislocations. And each one will be played up to the hilt by the whore media to delegitimize the MAGA efforts to do right by the citizenry and the nation. Make no mistake: globohomo is a traitorous octopus and won’t go down without a fight. They are the dirtiest, backstabbingest cretins you never want to meet.
Johnny Cash should be our guide and inspiration on how to take them on:
Go tell that long-tongue liar
Go and tell that midnight rider
Tell the rambler, the gambler, the back-biter
Tell 'em that God's gonna cut 'em down
Tell 'em that God's gonna cut 'em down
Excellent piece.
We have probably two generations now that know of nothing but 'crapified products in China' This is another form of inflation, or perhaps economic degradation, whatever you want to call it ... planned obsolescence predated transferal of the manufacturing base to China, but they have made it into standard procedure for everything You are likely old enough to remember when power tools, or refrigerators, or even simple plumbing parts, were built to last, in many cases a lifetime. That era is long gone.
I'm not sure how to deal with the racket economy now that monopoly/oligopoly and racketeering are the norm in EVERYTHING, you name the industry, it has been racketized in the US. Hyper-financialization is certainly a factor as well in bringing all of this about. It's definitely been a motivator for shipping decent jobs out of the US.
Standard anti-trust, even if there were a will to do it, is probably not a workable solution for many markets, though for food conglomerates it would probably work. That requires honest effective leadership and a noncriminal government. Perhaps we will get there, but not soon, and never if the rigged elections systems are not addressed.
Corporate governance might be used to address the exec stock options/buyback problem, but again, political will is not there, and this is very much bipartisan as no one, elected or not, in DC gives a shit about America or Americans.
Perhaps Mencken had the only true solution:
"Every normal man must be tempted, at times, to spit on his hands, hoist the black flag, and begin slitting throats."
High prices should be signalling the opportunity for profit, and market competition bringing prices down.
Unless you don't have free markets; you have cartels, with regulatory capture and artificial scarcity.