Good and Hard
Consumers are emulating Uncle Sam when it comes to accumulating debt according to the Federal Reserve Bank of New York which reported last week that aggregate domestic household debt reached a record $17.94 trillion as of Sept. 30. That’s an increase of 4.5% over the past year which outpaced the 4% increase in nonfarm wages. Almost Daily Grant’s wrote, “Credit card balances reached $1.17 trillion per the New York Fed, up 8.1% from September 2023 and 26% over the past two years, while the share of serious delinquencies (meaning in arrears by at least 90 days) is nearly 12%. That’s the highest since at least 2003 outside the aftermath of the Great Recession.”
Consumers continue to consume despite price inflation with the use of credit. Some considered it Joe Biden’s fault and voted for Donald Trump, believing Trump’s campaign rhetoric about returning prices to the good old days of 2017 to 2021.
Paige DeCombes said after voting for Donald Trump, “I know when we lived during Trump's presidency, everything was much lower. Groceries were lower, gas was lower. So I'm just hoping to see that come down.”
Joe Lamos of Las Vegas told NPR, “Everything's gone up for us. Our power bill - everything. Gas - everything has gone up, and I don't see wages going up alongside with it. So that's very problematic for people that are just trying to survive and take care of their family.”
In January 2017 the M-2 money supply, according to the St. Louis Fed (FRED), was $13.286 trillion. While Fed Chairman Jerome Powell claims monetary policy has been restrictive, M-2 has grown, again, according to FRED, to $22.221 trillion as of the end of September. That’s more than a 67% increase during the Trump/Biden era.
Ludwig von Mises famously wrote, “What people today call inflation is not inflation, i.e., the increase in the quantity of money and money substitutes, but the general rise in commodity prices and wage rates which is the inevitable consequence of inflation. This semantic innovation is by no means harmless.”
Ms. DeCombes and Mr. Lamos did not focus their ire about rising prices at the Fed Chairman or the Treasury Secretary who may actually have been responsible for increasing the money supply with the result being an increase in consumer prices. They believe democracy allows them to vote for lower prices and higher wages. Not hardly. Inflationism was put in place long ago, making some people winners and some people losers.
“Inflationism, however, is not an isolated phenomenon. It is only one piece in the total framework of politico-economic and socio-philosophical ideas of our time,” wrote Mises. “Just as the sound money policy of gold standard advocates went hand in hand with liberalism, free trade, capitalism and peace, so is inflationism part and parcel of imperialism, militarism, protectionism, statism and socialism.”
As H. L. Mencken wrote, “Democracy is the theory that the common people know what they want, and deserve to get it good and hard.” Sound money was voted out long ago and the people continue to get it “good and hard.”
