Economically speaking, the aggregate demand for the U.S. economy represents the quantity of domestic products in general that are demanded at each possible value of the price level. If there is too much money being printed and in circulation, an increase in the aggregate demand pushes the price level up. If the aggregate demand continues to increase month after month, the economy will suffer from inflation – a sustained increase in the general price level.
When production
falls and people lose jobs, two consecutive quarters to be exact, the economy
experiences a recession.
The mainstream
media pundits, who are not economists, but communication or English majors, are
twisting themselves into pretzels, trying to redefine the term recession
to spare embarrassment to their favorite Democrat president, Joe Biden, and his
disastrous economic policies. They are counting on most Americans, with or
without a college degree, not knowing basics of Macroeconomics.
If recessions
are deep and sustained, they turn into depressions. Here are events in economic
history that had affected American families deeply:
-
the
depression of the 1890s after the rapid industrialization and railroad
prosperity
-
the
panic of 1907
-
the
postwar depression following WWI
-
the
Great Depression of the 1930s
-
the
postwar recession following WWII
-
the
1974-75 recession with serious stagflation in the U.S.
-
the
1982-83 recession
-
the
1990-91 recession
-
current
inflation and recession under President Joe Biden
The economy also
experienced dramatic deflations, sustained decreases in the general
price level, such as the post-Civil War deflation, in the 1870s, the
1880s, 1921-1922, and 1929-1933.
The decline
in economic activity during the Great Depression was the most severe in
our economic history until the lockdowns of Covid-19 in 2020 from which world
economies are still struggling to recover from due to the disastrous government
interference in the free markets.
The Great
Depression taught us that recessions and inflations take a long time to self-correct,
and the right combination of economic policies, fiscal and monetary, must be adopted
by governments. Are these economic policies successful? Not all the time.
To power large
economies, crude oil and coal are necessary for energy and economic growth, not
the unreliable green energy, solar and wind. Governments are expected to manage
their economies so that “recessions do not turn into depressions and
depressions will not last as long as the Great Depression.”
When rapid inflation
occurs while the economy is growing slowly (“stagnating”), or in a recession,
then we experience stagflation such as that experienced in the 1970s in
the U.S.
The Federal
Reserve, which is neither federal nor a reserve, but a private corporation
since 1913, controls monetary policy, money stock and interest rates. When
a competent person is at the helm of the twelve regions’ federal reserve banks,
the Federal Reserve (Fed) can take actions to influence aggregate demand by
changing interest rates up or down, making borrowing more expensive or cheaper,
or by altering the money stock (supply). The Fed engages in buying and selling
of securities and the printing of new fiat (Latin for “let it be”) money not
backed by any goods or services, to control interest rates and the money
supply.
Can the
government stabilize the economy with its fiscal policies (federal taxation)
or even manage it correctly? As history shows, the answer is no. One of the reasons
is the out of control spending that Congress engages in which requires more money
that we do not have enough of from taxation, money which then must be printed
by the Federal Reserve’s printing presses or borrowed from countries like
China.
Printing so
much money without the backing of goods and services devalues the currency, i.e.,
the dollar. During the American Revolution, one dollar was worth 2 ½ cents. The
Bureau of Engraving and Printing runs the printing presses since 1862 and produces
dollars (“greenbacks”), using the same magnetic ink and special cotton (75%) and
linen (25%) paper made by Crane and Company since 1879.
So, is
inflation bad for everyone? It is if you look at it as unlawful taxation forced
upon all Americans because they must pay so much more for their food, gasoline,
medical care, travel, entertainment, housing, energy, etc. It is worse for the
elderly and people living on fixed incomes who do not qualify for or are too
proud to ask for welfare.
Debtors can
come ahead in an inflationary environment. Earning $100 you borrowed two years
ago becomes easier. What you repay in real terms is much less than the $100
because the money you use to repay the lender will not buy now what it would
have bought two years ago.
From Richard V. Busch in Wilmington, N.C.:
ReplyDeleteAs an economics major in college and a small business owner for over 40 years, I have read a number of articles, books and related materials on economics and none have articulated the basics of this subject as Ileana has done here.
The American public is suffering from a lack of awareness and apathy as to the evil economic manipulations being practiced currently. We are about to lose our great country unless basic policy changes such as domestic production of fossil fuels, dramatic cuts in spending at both the federal state levels, border control and all the basic practices President Trump had in place just 20 months ago.
From Joe Boudreault in Alliance, Alberta:
ReplyDeleteGood descriptive article, Dr Paugh.
"...world economies are still struggling to recover from due to the disastrous government interference...". I'm glad you said that, i.e. not 'recovering from' but 'struggling' to recover from'. They will not recover in the long run. There's no evidence of full economic recovery to come. None. The global Fix is in place. The Great Reset rolls along, and the destruction of economies and the lower and middle classes is the agenda. Mark my words. Next year will be terrible.
I'm 65 and have been through many many of these economic ups and downs and every time there are "the sky is falling" people who believe it's "the end!!". Then the economy improves and they shut up, until the next downturn. Just remember 2009, when it would have been a great time to invest in stocks.
DeleteThank you, Ileana Johnson, for your excellent article -- on basic economic concepts that SHOULD be common sense and KNOWN -- to anyone who is not brainwashed by the socialist education system. I may reference your article, if I decide to write another article along the line of "the USSA money tree." My 7/27/2022 article was "PRESIDENT BIDEN'S REPLY TO MY LETTER – Over a Year Late (published 7-27-2022; article #341)." I don't like writing those type of articles -- but I feel as if I must -- to try to help save this once great nation -- as you are trying to do also. Thank you again.
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