Trump Inflation 2.0

 

We all remember these stickers, plastered on gas pumps everywhere.

 

 

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It was fun to blame Biden for the very high inflation we suffered through his presidency, and there is no doubt that his policies, along with the Fed’s view that price inflation was “transitory,” contributed to the significant price increases.

As a reminder, the Year-over-Year CPI increase in 2021 – 2022 hit a high of 9.1%, with 26 straight months (from April 2021 to May 2023) of 4.0% or higher. 

We called this the Biden inflation, but it was driven by policies which were initially implemented during Trump’s last year in office – money pumping and lockdowns (remember those?): in other words, plenty to spend and little to buy equals price inflation.

Let’s begin with federal government expenditures.  The following are seasonally adjusted annual rates, per quarter.  So, Q1 2020, basically before the lockdowns, the annual rate was $4.9 trillion.  In Q2 2020, that jumped to $8.9 trillion (keep in mind, this is not for the prior four quarters; it is annualizing the current quarter).  In other words, the rate of federal spending almost doubled in one quarter under Trump.  Thereafter it ranged from $5.9 trillion to $8.4 trillion.  So, note: the drastic increase in federal spending initially and primarily occurred during Trump’s last year in office of his first term.

Next, let’s look at the balance sheet of the Federal Reserve.  This balance sheet both helps to finance government spending, but also provides base money to support fractional reserve banking.  Following are the balances at specific points in time:

·         January 2017: $4.5 trillion (when Trump 1.0 came into office)

·         September 2019: $3.5 trillion (the low of Trump’s first term)

·         March 2020: $4.2 trillion (before lockdowns and the explosion of federal spending)

The increase from September 2019 to March 2020 should be noted: recall the overnight Fed market was frozen in September – federally insured and guaranteed banks wouldn’t lend overnight to one or more of their brethren.  I still hold (as I wrote at the time) that this issue was one of several which drove covid mania by the government – to fund the banks without another 2008 type populist revolt.

Continuing:

·         Jun 2020: $7.2 trillion (within three months, a $3.0 trillion increase, and more than double the September 2019 balance)

·         Jan 2021: $7.3 trillion (Trump’s last month in office)

·         April 2022: $9.0 trillion (the Biden peak)

Now, my point isn’t that the price inflation we experienced from 2021 – 2023 was all Trump and not Biden, but it was begun by Trump and would have still been significant even if Biden hadn’t done anything to advance it.

Which brings us to Trump Inflation 2.0.  He’s done it again, this time via the Iran war.  Since the start of the war in Iran ten weeks ago, Year-over-Year CPI went from 2.4% to 3.8%, and few see any end in sight, at least regarding oil, gas, and dependent or related products (which means pretty much everything we buy).

But look: the Dow, the S&P, and the Nasdaq are all at record highs!  So things are great!

Understand, inflation is great for the wealthy.  It increases asset prices, first of all.  Second, it doesn’t matter to them if price inflation costs them an added $20,000 or $200,000 per year for food and gas when their asset values are going up ten or one-hundred times that.  Anyone with even $10 million in assets will have made at least $1MM in net worth gain in the last year; anyone with $10 billion in assets would have made $1 billion.  Do you think they can’t cover a gas price increase of a few dollars a gallon?  Do you think they don’t like the tradeoff?

Trump has instigated a great wealth transfer of the covid years, and he is presiding over another great wealth transfer via the Iran war.  No wonder the oligarchs love him.

Slight change of subject, but while I’m at it.  “How have I failed thee?  Let me count the ways.”

·         DOGE

·         End Ukraine war “in one day”

·         No new wars

·         If I was president, that war wouldn’t have started

·         Release the Epstein files

·         Iran

·         Considers himself God

 

Besides this, he hates or has alienated all those who were the strongest supporters of MAGA: Thomas Massie, MTG, Rand Paul, Tucker Carlson, Candace Owens, Megyn Kelly, Alex Jones.

Conclusion

“I did that!”  They already have the stickers.

 

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Government Money, Taxes, and War

Struggle for Empire: Kingship and Conflict Under Louis the German, 817 – 876, by Eric J. Goldberg.

One key source of income for Louis the German was the collection of tribute – for example, collected from the Danes and various Slavic people.  I find this of little noteworthy interest in and of itself; what is noteworthy is the amount – and what that amount represented:

…Louis could demand some 335 pounds of silver annually from the Slavs and the Danes….Of course, frequent rebellions made it likely that Louis often received only half the owed tribute in a given year.  Nevertheless, the estimate suggests an annual income of some 170 pounds of silver.

Call it $55,000 at today’s price of silver (I am not going to get into pure silver per ounce, troy or otherwise, etc.).

To put the sum in perspective, this amount was enough wealth for the king to reward sixty-eight young noblemen with a complete set of military equipment – a horse, coat of armor, helmet, sword, shield, and spear – every year.

This is about $800 per young nobleman.

I can think of a dozen points that must be examined before I feel I fully understand the meaning of this calculation; I do not intend to examine any of these points.  Instead, I offer two observations:

First, the total sum collected from the entirety of Louis’ non-Saxon tributes is $55,000 in today’s value of silver.  That’s it.

Second, the fighting men of Louis’ time required only $800 worth of equipment to turn them into the most destructive fighting force of Europe at the time.

Times have certainly changed, on both points.