Prices Up, Labor Participation Down
The outlook for the U.S., a country with $40 trillion in debt, $2-3 trillion annual deficits, rising prices, and smaller labor force participation is bleak.
Money Supply (M1) continues to grow coming off of the 360% growth (Jan. 2020-Apr.2022) during the COVID spending debacle. There are a number of reasons for the money supply growth, none of which are good, all of which I’ve covered in great detail over the past 5 years.
What the graph below tells us is that as the money supply grows, a smaller percentage of the population is working - labor force participation rate is shrinking. So, as goods and services become more expensive (as the Dollar loses value due to the growth in M1), fewer people will be able to afford “stuff” - meaning both essential and discretionary goods and services.
There is a populist story to be told: how the Government spends trillions to satisfy institutional donors, including military contractors. How the Fed subsidizes banks and industry with low rates, QE, various one-off lending programs (ORR, BTFP), and a zero percent reserve requirement (the big daddy bailout which nobody talks about) - industry which has done little to improve GDP (PE firms of course being the big borrowers). Since 2011 PE firms’ key accomplishment is having traded software companies while cutting heads - which does not equal productivity gains - and whilst paying themselves huge dividends. Is that a business model? Seems more like left pocket right pocket reallocation of taxpayer wealth (taxpayer deposits underwrite bank loans to PE firms) to private equity firms.
The answer? Take away the punch bowl:
Jack up the bank reserve requirement from zero to 10 percent,
allow Fed Funds to float,
outlaw QE,
audit the Fed,
define a waterfall wind down for Social Security, Medicare, Medicaid and eliminate the related taxes.
Kill or radically reduce spending on the Dept of Education.
Break up Lockheed, RTX, Boeing, Northrup, Google, Amazon, Microsoft, Meta.
Kill the income tax and institute a 10% national sales tax on finished goods and services. This will yield approximately $3 trillion in tax revenue. You could run my skinny version of the Federal Government on $3 trillion and have money to return to the people.
What politician running for President in 2028 is willing to do the above? Instead, the opposite will happen. More handouts, more deficits, more printing, thus goods and services will become increasingly expensive and even fewer people will be working.
This is shitty way to run a country.
