Get Ready for Stagflation!
“This is the least responsible macroeconomic policy we’ve had in the last 40 years. The primary risk to the United States economy is overheating — and inflation… Policymakers need to accept economic reality. The moment has come to move past emergency policies.”
— Larry Summers, Director, National Economic Council
Larry Summers knows what he is talking about. A former Secretary of the Treasury, president of Harvard University and Director of Economic Policy under President Obama, his warnings merit attention.
Both fiscal (Biden’s $6 trillion budget) and monetary (money supply up 25%) policies under the current presidential administration are irresponsible, given the economic recovery.
Inflation Prediction May be Off
What’s remarkable about the Biden/Harris budget are the crazy economic assumptions. President Biden’s economists are assuming an inflation rate of only 2.1% over the next couple of years.
Source: American Enterprise Institute
The chart directly above shows that inflation is heating up far above 2.1%. The April Consumer Price Index (CPI) rose 3.9%, double from the previous month. I expect price inflation to rise to 4% or more in the coming years, based on today’s policies.
The $6 trillion budget proposal is a monstrosity, proving that small government is over. Biden proposes enormous “investments” in education, green energy, infrastructure, universal childcare and other big-government boondoggles.
Maximum Taxes, Maximum Deficits
To pay for it, he wants Congress to make the tax system even more progressive than it already is. Biden proposes raising taxes on the wealthy and entrepreneurial class, removing the exception on long-term capital gains and forcing those people to pay more in income and Medicare taxes.
Economist John Ramsey McCulloch said it best, “The moment you abandon the cardinal principle of exacting from all individuals the same proportion of their income or their property, you are at sea without rudder, and there is no amount of injustice or folly you may not commit.”
Source: American Enterprise Institute
Even with the tax increases, the federal deficit will continue to grow. The Biden budget expects the deficit to be $1.8 trillion at a minimum.
It will undoubtedly be more than $2 trillion, and the red line (see chart above) will continue to skyrocket.
Result: Low Growth, High Inflation
What’s more shocking is that President Biden’s economists predict that real gross domestic product (GDP) will grow only at an annual rate of 1.8% a year under his plan! That’s less than the economic growth rate under Trump and much less than the average real growth rate of 3% historically.
Stagflation, here we come.
FreedomFest Audio Recordings Are Now Available
Good news! I’m happy to announce that FreedomFest 2021 audio recordings are now available for only $195 for the full set (over 250 sessions).
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Join Me at the Las Vegas MoneyShow on September 12-14, 2021
Join me at my talks on Bears Make Headlines, Bulls Make Money: My Top Investment Recommendations from the Maxims of Wall Street, The New Debate: Crypto vs. Gold and Puzzles and Paradoxes in Money & the Economy. Secure an attendee pass here!
Good investing, AEIOU,
Mark Skousen
You Blew it!
Peter Drucker’s Incredible Prophecy Comes True
“The private corporation represents the ideal social institution, the only free non-revolutionary way for a new social order. America must take the lead in building the free industrial society.” — Peter Drucker
During my lifetime, most Americans looked to the government to solve the problems of poverty, unemployment, racism and inequality through a variety of social, fiscal and monetary programs.
Meanwhile, big business and Wall Street were vilified as the source of greed, inequality and fraud. And yet, the reality is that most government programs have failed or exacerbated the problems they were intended to solve.
As Peter Drucker, the 20th century’s #1 management guru, stated, “Indeed, government is sick — and just at a time when we need a strong, healthy and vigorous government.”
He argued that government can do only three things well — tax, inflate and wage war. We could add “lockdown the economy” to the list.
Business Has the Answer
Where should Americans turn to solve our problems? After World War II, Drucker said that private business, the corporate society, provided the only “free, non-revolutionary way” to a prosperous new social order.
According to Drucker, the large and growing corporation should be the conduit through which economic stability and social justice would be established. Only big business could afford to assume social responsibilities such as job security, training and educational opportunities, along with other social benefits, while providing new products and services to increase our standard of living.
He stated, “The only solution which makes possible both a free and a functioning society is the development of a company into a self-governing community.”
And Drucker predicted that America would lead the way.
Good News: New Survey Ranks Business as THE Most Trusted Institution in the World
A new worldwide survey has just been released. It shows that, after the 2020 pandemic, business is now more trusted than government, churches, non-profit charities or the media.
Here is the summary of the survey:
Credit: https://www.edelman.com/trust/2021-trust-barometer
According to the Edelman polling in 14 countries, trust in the government is at an all-time low.
Globally, the majority (60%) of people say their country won’t be able to overcome its challenges without the involvement of business. Most people, 77%, said their employer has become their most trusted institution.
In the survey, people say businesses have outperformed government across every issue measured. They offered new ways to employ workers at home and they developed new technologies like Zoom to teach and correspond from anywhere; companies like Amazon and Netflix provided ways to deliver products and entertainment at home; they came up with vaccines in record time.
The great management guru Peter Drucker has finally been vindicated. (Click here to read my article, and learn more about this visionary leader.)
Business leaders used to be the villains in Hollywood. Now, they are the heroes.
Wall Street, the showcase of capitalism and entrepreneurship, rightly deserves to be at an all-time high. It pays to be invested in free enterprise.
