The Terms of Inflation

By Marc Nuttle

Federal Reserve officials came to the conclusion at their January meeting that the threat of inflation could not be ignored any longer. The committee advised the financial markets that a rate hike in the national benchmark interest rate was forthcoming. Depending upon the intensity of conditions causing prices to rise, more rate hikes throughout the year were justified and likely.
Inflation can be an insidious factor destroying savings and livelihoods when left to roar out of control. History has taught the world that, once inflation creeps into an economic system, it must be contained lest it consumes all in its path.
What is causing this inflation and what can be done about it?
Most analysts comment that the Covid pandemic, and government response to it, are the main culprits. Covid economic disruptions are certainly a key element. They are by no means the full story.
Prior to the Covid pandemic for the past decade, the Federal Reserve engaged quantitative easing. This is a process wherein the government buys certain securities to liquify banks to keep interest rates low. The idea is that low interest rates stimulate economic growth. At some point when the economy regained its strength, the securities would be eased back into the financial markets, and interest rates would be allowed to rise. The problem is, to achieve this result, government spending was required to be disciplined. This axiom was ignored. Governments around the world continued to spend with abandon. At the proffered point wherein the economy was hitting on all cylinders and unemployment was below 4%, the U.S. government continued to run a $1 trillion annual deficit. This combination of deficit spending and accumulated debt, without the guardrails of increased interest rates, produced the economic equivalent of dry tinder on a forest floor.

The consequences of societal disruptions caused by the Covid pandemic were unprecedented in modern history. Businesses and economies were shuttered. Disruption in the supply chain has resulted in shortages. Shortages will cause prices to rise even without an expansion of the money supply. Covid financial relief packages passed by Congress were necessary to first, sustain businesses, and then to restart the economy. By some estimates, the U.S. government has introduced, either in borrowed or printed funds, $12 trillion into the U.S. economy. This is over 50% of the annual Gross Domestic Product (GDP). By any measure of economic formulas, this stimulus would result in initial inflation.
In addition to U.S. government policy, geopolitics between Russia and Ukraine have caused spikes in the price of the world’s largest commodity, oil. Developing countries struggling with the management of their own local currencies in reference to the U.S. dollar face challenges. They experience expanded inflation through the exchange rate between their currencies and the dollar when buying strategic materials. This currency cost is exacerbated by the growing economic conflict between the United States and China. Free enterprise is in competition with communism for the basis of restructuring the world’s economic system.
A further chronic underlying problem is the 40% of the U.S. population living at or near the poverty line. This sector of society needs consistent government programs upon which they can rely to support their families, pursue education, and strive to climb the economic ladder. It is senseless to debate cause or blame. Whether by oblation or appropriation, we have a moral commitment as a country to support each other in these difficult times of economic restructuring.
Inflation impacts every citizen differently depending upon their current situation. Fuel and food price increases are the first inflation indicators to impact all citizens. Rental costs are lag indicators that will soon work their way through the system. Inflation is now confirmed to be non-transitory. This means that it is not temporary and will touch all aspects of economic transactions. These are the terms of inflation.
When fighting a major fire, firefighters will look for fire breaks, protect other buildings before the heat reaches the point of combustion, and apply water to the core source of the outbreak. Depending upon the intensity of the fire and the underlying flammable material, it may take days or weeks to finally bring the fire under control.
And so it is with inflation.
The world’s economy is facing a great reset. Sovereign governments’ attempt to address healthcare, climate change, the fair distribution of wealth, and the financing of developing countries, will result in one of two outcomes. Either a one world government will emerge as a socialistic system. Or a free enterprise system will prevail allowing sovereigns to act economically, independently, and collectively as an established economic system.
The solution is simple. The United States government should cut its budget by 10%. This can be easily achieved without curtailing any programs whatsoever provided to those in need. As the world enters into this great reset, governments should take advantage of the opportunity to restructure and become more efficient to meet the needs of the new economy.
The second thing the government should do is just tell the American people the truth. A fire is burning. Certain steps must be taken to contain it or it will burn out of control. It doesn’t matter right now how it started or by what means the underlying conditions occurred. We must address the situation together as a country. Americans can handle the truth. We always have. America has a history of doing the right thing and making the sacrifices necessary in defending freedom.
Great World Economic Reset is coming. It cannot be avoided. The choice of individual freedom or totalitarian government will be the pantheon of the future.
Our leaders owe the citizens of the United States the right to make the choice.
My name is Marc Nuttle and this is what I believe.
What do you believe?

Marc Nuttle is an attorney based in Norman, Oklahoma, who specializes in international trade, international foreign policy, and international political affairs. He is widely recognized for his expertise in forecasting political and economic trends. He represents corporations, business projects and political entities nationally and internationally. Mr. Nuttle is the founder of the New Horizon Council, a forum for the discussion of transcendent government and business principles.