Inflation and Recession

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.

 

The Con-Con: Solution or Pandora's Box

The Article V Convention Forum: Solution or Pandora’s Box was organized by a coalition of conservative groups and met on December 8, 2014 in Falls Church, Virginia. The moderator and one of the organizers, Sevil Kalayci, discussed the necessity of such a meeting since most of the conservatives who oppose an “Article V Convention” have been shut out of the debate by other conservatives with the exception of Danville, Henrico, and Fair Lakes Tea Parties. “The Convention of states has divided the conservative movement,” she said. Kalayci asked, “How do you enforce the Constitution? How do you enforce the amendments?”

The speakers, who argued against state legislatures asking Congress to call for a convention to amend the Constitution, included:

-       Jeff Lewis, National Director of the Patriot Coalition

-       Richard D. Fry General Counsel, Patriot Coalition

-       Dr. Edwin Vieira, Author and Constitutional Scholar

-       Robert Broadus, former Congressional Candidate in District 4 Maryland

-       Mitchell Shaw, Citizens for Constitutional Government

-       Peter Boyce, political activist and Chairman leading the effort to stop a call for an Article V Convention in New Jersey

Mitchell Shaw was the first to address the audience. He described the Constitutional convention known as “con-con,” “amendments convention,” “article V convention,” all phrases referring to the same event, a “convention held for the purpose of proposing amendments to the U.S. Constitution as authorized by Art. V of the present Constitution as it was written.”

He enumerated the conservative groups interested in this “con-con” are the Convention of States, Compact for America, Balanced Budget Amendment Task Force, Middle Resolution, and other individuals interested in addressing what is wrong with America.  

Shaw mentioned many groups and individuals on the left equally interested in amending or potentially replacing the existing Constitution such as “Code Pink, Alliance for Democracy, Wolf Pack, Center for Media and Democracy, Independent Progressive Politics Network, Vermont Single Payer, Sierra Club, MoveOn.org, occupy groups,” and some billionaires.

Are there flaws in the Constitution? Why do we need to amend it in order to rein in an out-of-control government? What “magic language would an amendment adopt,” wondered Mitchell Shaw, in order to force Congress to abide by the Constitution that they are already ignoring? In his opinion, there are no flaws in the Constitution. Congress is ignoring it and American citizens allow it because they are too ignorant of their own Constitution. An amendment is not the solution, Shaw said, the solution is the creation of an informed electorate that understands the power of the state legislators to rein in the federal government. Unfortunately states compromise because they have become dependent on federal money to pay their bills.

Robert Broadus, a Navy veteran and the host of the east coast anti-federalist radio show, presented the anti-federalist viewpoint of an article V convention of the states.

Richard D. Fry explained that our current legislators no longer fear the people and God. They are no longer serving the interests of the American people; they are serving their own interests. We as citizens are not doing our job of holding them accountable. “This article V convention has been promoted for 50 years, starting with the Ford Foundation.” Fry concentrated his speech on the idea of sovereignty of a state with inherent power to regulate itself internally. “The states themselves are sovereign.”

Dr. Edwin Vieira, a Constitutional scholar, summed up the Constitution convention in three words, “imprudence, incoherence, and irrelevance.” He made the most important point of the evening that any kind of amendment, agenda, proposal, or draft are irrelevant in light of the looming national debt which is impossible to repay or manage currently or in the near future.

 “We are on a Titanic right now,” $18 trillion in national debt. If we add unfunded liabilities, we are at over $200 trillion.” That is the biggest threat to our national security. “And the solution is hyperinflation, followed by depression, or hyperinflation with depression.” He continued that the debt is unpayable and must be written off through currency depreciation. “We already have currency wars around the world in reference to the dollar being the reserve currency. This is the run up to WWI again. WWI was ultimately caused by trade rivalries between Germany and England. This war is going to be caused by monetary rivalries.”

Dr. Vieira believes that the Constitutional convention will not happen before “these monetary and geostrategic events come to fruition.” “The Ship is going to come down first,” he said, referring to the irreparably damaged ship of state.

When the monetary system and the banking system collapse, prices will go into freefall, there will be social effects, civil disobedience, a breakdown of society, and other unpredictable events caused by a devastated economy.

Preserving the original Constitution is most important. How long would an amendment take to pass if that is the only intent? Quoting Oswald Spangler and his “Decline of the West,” Dr. Vieira said that the “Untergang” (fall, downfall, doom) of the West will occur first. “The amendment might pass after the Carpathia shows up,” he concluded.

Copyright: Ileana Johnson 2014