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Economic Injustice: Inflation, The Fed, and The Great Reset

Overview

The ongoing economic hardship is a major concern that has become increasingly worse. Jesus employed money into his parables and had much to say on the subject. Likewise, the early church served as voices of incoming calamity upon those who remained in Jerusalem. Unfortunately, many political pundits often are incorrect within the realm of the economy and financial markets. They see Netflix stock being down and interpret that as “get woke, go broke” when the most equity sectors are in bear market territory. Thus because they employ a cultural-political lens, they interpret the financial or economic markets through their scope of expertise. Being of a financial background, I hope this will provide useful information to explain the various elements contributing to the ongoing economic crisis in a combination of technical and laymen terms. Economics is tedious and involves many moving parts. Aside from political interests employed—being that of globalists and environmentalists, there is not some global cabal working behind the scenes. It is just moving parts reacting to the situation.

A Flattened Economy

One cannot shut down an economy for two weeks. Remember that sentiment? The 2 Weeks to Flatten the Curve proceeded to flatten our economy through global supply chain disruption, debt fueled inflation, and regulation of basic everyday commerce that have metastasized into the economic catastrophe we are experiencing in the present. The initial recession caused by Covid shutdowns are being utilized as an opportunity to recreate global economies in a sinister image(s) of Beijing, the World Economic Forum, Bill Gates, and other malicious actors in what has been dubbed the Great Reset.

Yet the ongoing economic crisis is only partially the fallout of lockdowns. Against rational instinct, governments are opting against policies which might mitigate economic collapse. Around the world, they are restricting the ability of fertilizer use, causing uproar in Sri Lanka and the Netherlands, where Dutch farmers have taken to the street in protest of their government’s environmentalist policies. In America, rather than access the plethora of natural resources available, the Biden Regime is restricting the oil production, preventing expanded refinery capabilities, offloading the strategic reserve to foreign entities (where there is conflict of interest at play), and gaslighting the price of oil onto the corporations.

Inflation and Demand

In its latest release, the Bureau of Labor Statistics just announced the June inflation was 9.1% year over year (YOY), primarily driven by food, energy, and transportation (New Cars, Airline tickets). When analyzing the CPI number, it is important to understand that it is derived from a market basket of goods. Within one’s everyday budget, they are seeing far higher than 9.1% inflation, as gas is up 60%, food up 12%, and electricity up 13.7%. Housing is a disproportionately weighing down inflation, a fact not often realized as mortgage and rent are fixed expenses within a monthly budget. Because it is a larger portion of the market basket, housing being up only 5.6% is (dis)proportionately weighing down this key inflation metric. One can look at Zillow or casually discuss real estate within their circles and understand that the housing market is tapering around them, which should continue as interest rates keep rising.

There is reason to speculate that inflation could be easing and that June represents the peak of inflation. After all, consumer income is finite and Real Wages have decreased 3.6% YOY. Since wages are not keeping up with inflation, something has to give. We have even seen gas prices recede from record highs upon speculation of recession reducing future demand for oil. The tradeoff of lower gas prices is an imminent recession.

Moreover, retail inventories are bloating as stores like Target, Walmart and other major retailers have elevated inventory values. Back in April, inventories were up 16.6%. Walmart is up 33% against only a 3% rise in comp store sales. This could be multi-faceted issue as previous supply chain issues resulted in delayed shipments, thus elevating their levels now. Regardless of the cause, this indicates that stores will begin marking down inventory to reduce their supplies. This poses a downward pressure on inflation, which combined with the housing could prevent inflation from continuing its upward trajectory.

Even though inflation might be cooling off, the aftershock is that of a recession, where the economy is contracting and demand is reduced. Even if gas is increasing in price, the CPI could be offset by markdowns in inventories and other factors. However, since this has been going on for several months, retailers might have already reacted so it is partially baked into the 9.1%.

Unemployment and Recession

Surprisingly, the jobs report delivered on 7/8 was rather positive in light of all the inflation, with the economy adding 372K jobs versus the 250K jobs that were expected. Overall unemployment remains at a steady 3.6%. Labor force Participation Rate remains between 62% and 62.4%, which is down about a percent since its February 2020 peak. Basically, fewer people are in the labor force than were before Covid. This is a continuation of a macro trend where this metric has not recovered since the 2008 Financial Crisis. The primary driver would perhaps be youths not participating in the workforce as they did in past generations. At 3.6%, there is credence to the idea that employers are struggling to find workers as such a low rate would previously have indicated “full employment.”

There are silver linings in the unemployment data, but this is likely where the recession impact will be most televised, as the inflation has already arrived, and only based on CPI are we not officially in recession. Major banks like Bank of America and Goldman Sachs are now predicting recession, with the former projecting 4.6% unemployment in 2023.

This comes after Fed Chair Jerome Powell stated that a “4.1% unemployment rate, with inflation well on its way to 2%, I think that would be a successful outcome.” In layman’s terms, the Fed believes unemployment needs to be higher in order to combat inflation. This could be achieved through a higher labor force participation rate, or that rate can remain the same while employers begin a series of layoffs.

What the Fed?

On the right, the Fed is often maligned for its nefarious interest in wrecking the economy. Admittedly, there is much to say on the pitfalls of centralized banking combined with FIAT currency, but in this situation, the Federal Reserve functions as a laggard, not an instigator. Fiscal spending is responsible for the inflation, not Jerome Powell. The national debt rising to $30 trillion has effectively made America live under Modern Monetary Theory, where the debt is illusionary, and the only consequence of deficit spending is inflation. Thus taxes are more about curbing inflation than accruing revenue. The economic situation we are in is more akin to post WW2 than the 1970’s, except without the gold standard and a strong domestic manufacturing presence. Post WW2 inflation was primarily driven by government spending on the war and post war efforts. Relative to the present, that deficit spending was better spent than government waste nowadays.

In an academic setting, business students are taught that in order to reduce inflation, the Fed must increase rates. This is the underlying premise behind the Federal Reserve’s actions. However, there is little the fed could or should do to mitigate this problem especially as the underlying factors are beyond their scope.

Because the Fed’s response is delayed, this creates a bull-whip effect to their policy decisions. The recent .75% hike in interest rates by the Fed is a drastic step aimed at combating inflation. This rate hike will undoubtedly stimulate a recession. As has been seen, mortgage rates are rising upwards of 6%, crushing the housing market. To paint a picture, on a $300K mortgage at 6%, that is .5% of the principle every month, beginning at $1500 in interest for the first payment. The persistent expectation that the Fed will continue raising rates has strengthened the dollar of late and crushed precious metals that serve as inflation hedges, like gold.

One of the most reliable indicators of recession is the yield curve inversion, particularly that of the 2-year and the 10-year bond (although economists rely on multiple yield spreads). To simplify this concept even more, long term rates become lower than short term rates. Shorter term securities are more subjected to short term expectations, like upcoming rate hikes by the Fed, while long term rates are impacted by overall economic outlook and inflation. When this dynamic is inverted, meaning the 10-year’s yield is less than that of the 2-year, the bond market is signaling that there will be lower rates in the future. The market believes the Fed will reinitiate quantitative easing and lower rates (again), reversing their current hikes. This inversion has happened twice in 2022 and is the present circumstance in the bond market.

This harsh increase in rates and reversal in previous easing policy will cause a recession as industries like housing and autos are dependent on lower rates for sustained sales. Much of the issues in the economy stem from supply side issues, that being the supply of oil, chips, and other goods—not the demand. So when the Federal Reserve attempts to manipulate demand through rate increases, this will do nothing to resolve the underlying supply side problems. To make matters worse, they will probably end up reversing course, but only after the damage is done.

Death of the Petro Dollar

One of the most undiscussed stories of 2022 is the death of the Petro Dollar, which is ultimately derived from the impotence of the Biden Administration and its propagation of war in Ukraine. Until now, oil was traded in US Dollars across the globe, so when the Saudi’s sell their oil, they are doing so in USD. Because of sanctions against Russia, Putin has broken this paradigm, requiring that oil exports from Russia be paid in Rubles, thus strengthening the Russian Ruble against the dollar and rebounding their economy in face of global sanctions. The global reliance on the USD has effectively been shattered in 2022, though the effects will linger for the years to come as this reduces the USD’s global reserve status that it has enjoyed since WW2.

Although oil has receded, little has been done to improve the supply. Moreover, China’s shutdowns, like those experienced in Shanghai this spring have reduced Chinese oil demand, meaning that when China’s oil demand begins picking up steam, this will result in upward pressure on oil prices.

The Green New Deal

Nothing is being done about these issues because the governments around the world are adamant about pushing green energy on the consumers against the obvious need for oil. Instead, governments are antagonistic towards oil production and pursue the folly of their environmentalist agenda to the detriment of their citizenry.

In the Netherlands, Dutch farmers have taken the streets in protest of upcoming restrictions that will burden them going forward. In addition to restricting fertilizer use, it is estimated that they could be forced to reduce their livestock count by 30% as the government seeks to cut emissions by upwards of 70%. Alongside the farmers are the fishermen, whose industry is also threatened through the reduced issuance of permits.

Unlike the Dutch, America’s implementation is subtler, with Congress stuffing their inflationary “Build Back Better” spending package with environmental regulations (that the RINO’s in Congress saved), or on the state level as states like California attempt to phase out internal combustion engines. To resolve the fuel crisis, Biden has been pursuing the use of added ethanol in gasoline for year-round use, which is an inefficient use of land, provides upward pressure on corn prices (to the benefit of lobbyist), and harms consumers who lose fuel efficiency with ethanol diluting their tanks. All this is while the Biden Administration seeks to raise fuel economy standards for average new vehicles to 49 MPG by 2026, which will raise new and use vehicle prices while boxing out middle class consumers. 

This also corresponds with their push for electric vehicles, which will allow the auto industry to achieve this 49 MPG requirement. However, our electric grid is incapable of handling a massive conversion to electric vehicles as states like California have already warned against charging EV’s during daytime amidst a heatwave. Even Texas has brown outs. In combination with the “green energy” push, the electric grids in many states are unlikely capable to withstand the electrification of the auto industry without substantial investment in reliable energy which contradicts their environmental agenda.

All of this is by design. Nations would rather build up preferred “climate friendly” industries while remaining dependent upon their less environmentally conscious competitors like China, Russia, and India for energy, semiconductors, food, metals, and other cheap goods. As a result, the middle class becomes squeezed, forced to sink or swim. The next generation will become priced out of the same lifestyle and prosperity as those who came before them. It is almost like the plan is for them to own nothing.

Economic Injustice in Amos

One of the most abused versus by those on the left is Amos 5:24, “let justice roll down like waters” where justice is misapplied to mean racial or social justice. The reality is much different, as the earlier verses 10-12 articulate:

They hate him who reproves in the gate, and they abhor him who speaks with integrity. Therefore because you impose heavy rent on the poor, and exact a tribute of grain from them, though you have built houses of well-hewn stone, yet you will not live in them; you have planted pleasant vineyards, yet you will not drink their wine. For I know your transgressions are many and your sins are great, you who distress the righteous and accept bribes and turn aside the poor in the gate.

The injustice being described is not that of perceived racism, but economic hardship being imposed onto the poor, mainly in that the kings of Israel were burdening the people through taxation and denying them the fruits of their labor. Additionally, they were favoring those who paid bribes, who were presumably affluent cronies, over those who were in despair. And before the liberals misapply the “gate” to being equivalent to a border, verse 15 clearly defines the gate where justice was rendered as was commonplace or forum in the ancient world.

The injustice described in Amos is reminiscent of that which divided Rehoboam’s kingdom in two. Rehoboam intended to impose stricter burdens of labor and taxation on the people, which lost him dominion over ten tribes and split the kingdom. In both scenarios, Israel was in a state of prosperity yet also mistreating its people and imposing heavy burdens upon them.

America was likewise in a state of prosperity and has been intentionally mismanaged to the benefit corporations and the elite who cozy with the government, plundering the people to their physiological and financial impairment. Inflation is a tax on the poor and middle class. It is by wanton spending and obstinate environmental hubris that we have created this tax on our people. It is unjust for the governments to restrict fertilizer usage by their farmers, preventing them from reaping the full fruits of their fields. It is unjust to recklessly raise interest rates on money that is unbacked by gold, causing the people to pay higher rents or excessive interest. This is before detailing how the justice system ignores flagrant corruption of the White House while abusing the January 6 political prisoners, the bought and paid for alphabet agencies (FDA, CDC, NIH), or a Pentagon more interested in feminism than protecting the citizens.

This is what real biblical injustice looks like.

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