by James R. Smith
What we call inflation is actually the theft of trillions of dollars from poor, working class people, small businesses, professionals and the moderately well-to-do.
The big bite began with the CARE Act of 2020, and has continued with the high interest rates of ensuing years. The stealing continued, as of this writing in June 2024, in every sector of the economy from the basic necessities of food, housing (including home purchases and rents), medical care, transportation, clothing, higher education, insurance, and much more.
Inflation comes from the practice of Monetarism, the ideology of capitalist neoliberalism, and the intransigence of the Federal Reserve Board (the Fed).
The Fed is made up of hide-bound and very rich conservative bankers and academics who do what they are told. And what they are told is to increase the wealth of the rich, and the poor be damned.
The Federal Reserve System Board of Governors includes the Chair, Jerome H. Powell, whose multiple terms run from 2018 to 2028. Previously, Powell was a partner at The Carlyle Group, which is a private equity firm which manages $426 billion in assets. Carlyle developed a reputation for acquiring businesses related to the defense industry. After 911 (the attack on the World Trade Center and the Pentagon), it became known that Carlyle had a close relationship with the bin Laden family. Shafig bin Laden, Osama’s half brother, had been guest of honor at a Carlyle Group conference held in Washington on the very same day of the disaster, Sept. 11, 2001. In addition, the bin Laden family had previously been an investor in Carlyle funds while Powell was a partner in the firm. After Carlyle, Powell worked in George W. Bush’s Treasury Department.
Other Federal Reserve members include:
Vice Chair Philip N. Jefferson, an academic;
Vice Chair for Supervision Michael S. Barr. He is an academic and lawyer, who worked in Bill Clinton’s Treasury Department.
Michelle W. Bowman is a Kansas banker, who also worked for Kansas Republican Sen. Bob Dole, and in federal agencies including FEMA and Homeland Security.
Lisa D. Cook is an academic, whose main federal job was as deputy director for Africa Research at the Center for International Development.
Adriana D. Kugler’s most significant position seems to be as U.S. Executive Director at the World Bank. She held that office when she was appointed to the Fed.
Christopher J. Waller is an academic and the only board member who held lower positions at the Fed, before being placed on the Board.
The seven member board includes two Blacks, three women, and three white guys.
It might be a mistake to assume that the Federal Reserve Board makes economic policy. Mostly, they are told how to vote by those of higher rank in the Deep State (Wall Street, “Intelligence Community,” Military, and assorted wealthy people). During the past few years, the Fed has become a convenient vehicle for the expansion of the money supply. It does this by setting a liberal loan policy for major corporations. These loans create more money in circulation, causing everyone’s dollars to become less valuable. But since the titans of society rake in a vast amount of “new money,” they win, even if each dollar is less valuable. If more dollars are in circulation, then the cost of goods and services goes up, hence: inflation.
Origins of the Fed, and What it Became
The Federal Reserve Board was created in 1913 during the administration of President Woodrow Wilson. Today, Woodrow Wilson is mainly known for his incessant racism and for jailing Socialist Presidential Candidate Eugene Debs.
Its purpose was to address bank crises, which at that time caused havoc among the rich, and often meant that millions of workers lost their jobs. The Fed should have been abolished when it proved incapable of solving the Great Depression of 1929, but it is still with us.
Other factors that have led us to this sad economic state where workers’ incomes continue to fall as compared with society’s total wealth, include Monetarism and Neoliberalism.
Monetarism is an economic philosophy of the rich that was founded by University of Chicago Economist Milton Friedman. It theorizes that controlling the supply of money is the best way to control the economy. In practice, we get abominations like a high interest rate, no social security or other welfare, and a belief that the economy will create full employment without further tinkering.
Friedman was an advisor to both US President Reagan and UK Prime Minister Margaret Thatcher. Both heads of state were the most conservative of their times in their respective countries.
Friedman also supported Chilean fascist dictator Augusto Pinochet. A former Army General, Pinochet staged a bloody coup against the elected President Salvador Allende, which resulted in Allende’s death and the torture and death of thousands of Chileans. despite this, Friedman kept on friendly terms with the dictator and encouraged his colleagues at the University of Chicago to go to Chile and work for the oligarch.
Neoliberalism is more limited in scope. It is focused on squeezing the most profit out of every business. It came into vogue among financial capitalists around the late 1970s. Before that, “industrial capitalists” ruled the roost. As a whole, they were not as greedy as the Wall Street Crowd that supplanted them. Industrial capitalists have been portrayed in many old movies as friendly old gentlemen with hearts of gold. They were not that.
I was active in newspaper unions at the time of this big change. When I began negotiating labor contracts, most newspaper owners would expect an annual profit of between five and 10 percent. Not so with the neoliberals. They believed they should be entitled to 30 percent profit, and then 40 percent. The sky was the limit. It took drastic action to make their dreams come true. They had to get rid of many of their long-time employees, such as reporters, editors, typographers, press operators, ad salespeople, and so forth. In many cases, they sold their downtown headquarters (often quite beautiful) and headed for a warehouse in the suburbs. The price of a newspaper skyrocketed, and regular raises were replaced by “merit” raises and bonuses. Union-busting companies were hired to get rid of all guaranteed provisions in the labor agreement.
The same thing happened in nearly every industry. In Los Angeles, all four tire plants shut down and moved to the Deep South, leaving their union-paid workers behind. At least three steel plants and three auto plants followed the rubber plants’ lead. Other companies in the garment, furniture, and service industries likewise shut down.
The result was a great deal of poverty, drugs, and crime in South Central LA and Compton, as thousands of Black and Latinx workers searched for a way to survive.
As the years went by, the Wall Street moguls found they could make bigger profits by leaving the country entirely. Southeast Asia and Mexico vied to provide the lowest wage. The income gap between rich and poor turned into an ever-growing chasm.
Then came the Pandemic. This provided an awesome opportunity for trillions, yes, trillions, of dollars to be printed and used for loans for the big corporations. It was funny money, not backed by a damn thing. In earlier years, people might have fallen for it, but in the 2020s the game was up. Less and less income was available to working people. Of course, there were stories about how ordinary people suddenly became rich on the stock market or by inventing a miracle device, but that happens mostly in peoples’ dreams.
Inflation is here to stay if the Fed has anything to say about it. Just a few days ago, the Fed refused to lower the interest rate even though the rate of inflation has come to a screeching halt.
By manipulating the interest rate, the Fed can take even more money out of your wallet and deposit it in a corporate bank account. So is there no recourse to Monetary policy, Neoliberalism, Modern Monetary Theory, or whatever you want to call it?
An Alternative to neverending interest rate hikes
Once upon a time, there was an alternative. It involved direct manipulation of the whole economy. It wasn’t meant to increase the wealth of our leisure class, but to make sure that working people got their fair share. Who could make that happen? It was none other than President Franklin D. Roosevelt. This president really cared about the plight of the poor and workers, in contrast to the bunch we have today who love to hang out with the Deep Staters.
Here are his own words (edited to stay on subject). This was a radio address (Fireside Chat) he gave on Sept. 7, 1942, when confronted with WWII, perhaps the fiercest inflation maker of all time.
President Franklin D. Roosevelt
On Inflation and Progress of the War Labor Day Radio Address of the President
September 7, 1942
MY FRIENDS:
Today I sent a message to the Congress, pointing out the overwhelming urgency of the serious domestic economic crisis with which we are threatened. Some call it ” inflation,” which is a vague sort of term, and others call it a “rise in the cost of living,” which is much more easily understood by most families.
That phrase, “the cost of living,” means essentially what a dollar can buy.
From January 1, 1941, to May of this year, nearly a year and a half, the cost of living went up about 15%. And at that point last May we undertook to freeze the cost of living. But we could not do a complete job of it, because the Congressional authority at the time exempted a large part of farm products used for food and for making clothing, although several weeks before, I had asked the Congress for legislation to stabilize all farm prices.
At that time I had told the Congress that there were seven elements in our national economy, all of which had to be controlled; and that if any one essential element remained exempt, the cost of living could not be held down.
This act of favoritism for one particular group (farmers) in the community increased the cost of food to everybody — not only to the workers in the city or in the munitions plants, and their families, but also to the families of the farmers themselves.
Since last May, ceilings have been set on nearly all commodities, rents (and) services. Installment buying, for example, has been effectively stabilized and controlled.
Wages in certain key industries have been stabilized on the basis of the present cost of living.
But it is obvious to all of us (however) that if the cost of food continues to go up, as it is doing at present, the wage earner, particularly in the lower brackets, will have a right to an increase in his wages. I think that would be essential justice and a practical necessity.
Our experience with the control of other prices during the past few months has brought out one important fact — the rising cost of living can be controlled, providing that all elements making up the cost of living are controlled at the same time. I think that also is an essential justice and a practical necessity.
We know that parity prices for farm products not now controlled will not put up the cost of living more than a very small amount; but we also know that if we must go up to an average of 116% of parity for food and other farm products — which is necessary at present under the Emergency Price Control Act before we can control all farm prices — the cost of living will get well out of hand. We are face to face with this danger today. Let us meet it and remove it.
I realize that it may seem out of proportion to you to be (worrying about) over-stressing these economic problems at a time like this, when we are all deeply concerned about the news from far distant fields of battle. But I give you the solemn assurance that failure to solve this problem here at home — and to solve it now — will make more difficult the winning of this war.
If the vicious spiral of inflation ever gets under way, the whole economic system will stagger. Prices and wages will go up so rapidly that the entire production program will be endangered. The cost of the war, paid by taxpayers, will jump beyond all present calculations. It will mean an uncontrollable rise in prices and in wages, which can result in raising the overall cost of living as high as another 20% soon. That would mean that the purchasing power of every dollar that you have in your pay envelope, or in the bank, or included in your insurance policy or your pension, would be reduced to about eighty cents worth. I need not tell you that this would have a demoralizing effect on our people, soldiers and civilians alike.
In my Message to Congress today, I have (told the Congress) said that this must be done quickly. If we wait for two or three or four or six months it may well be too late.
I have told the Congress that the Administration can not hold the actual cost of food and clothing down to the present level beyond October first.
Therefore, I have asked the Congress to pass legislation under which the President would be specifically authorized to stabilize the cost of living, including the price of all farm commodities. The purpose should be to hold farm prices at parity, or at levels of a recent date, whichever is higher. The purpose should also be to keep wages at a point stabilized with today’s cost of living. Both must be regulated at the same time; and neither one of them can or should be regulated without the other.
At the same time that farm prices are stabilized, I will stabilize wages.
That is plain justice — and plain common sense.
And so I have asked the Congress to take this action by the first of October. We must now act with the dispatch, which the stern necessities of war require.
I have told the Congress that inaction on their part by that date will leave me with an inescapable responsibility, a responsibility to the people of this country to see to it that the war effort is no longer imperiled by the threat of economic chaos.
As I said in my Message to the Congress:
In the event that the Congress should fail to act, and act adequately, I shall accept the responsibility, and I will act.
The President has the powers, under the Constitution and under Congressional Acts, to take measures necessary to avert a disaster which would interfere with the winning of the war.
There may be those who will say that, if the situation is as grave as I have stated it to be, I should use my powers and act now. I can only say that I have approached this problem from every angle, and that I have decided that the course of conduct which I am following in this case is consistent with my sense of responsibility as President in time of war, and with my deep and unalterable devotion to the processes of democracy.
The responsibilities of the President in wartime to protect the Nation are very grave. This total war, with our fighting fronts all over the world, makes the use of the executive power far more essential than in any previous war.
If we were invaded, the people of this country would expect the President to use any and all means to repel the invader.
Now the Revolution and the War between the States were fought on our own soil, but today this war will be won or lost on other continents and in remote seas. I cannot tell what powers may have to be exercised in order to win this war.
The American people can be sure that I will use my powers with a full sense of responsibility to the Constitution and to my country. The American people can also be sure that I shall not hesitate to use every power vested in me to accomplish the defeat of our enemies in any part of the world where our own safety demands such defeat.
And when the war is won, the powers under which I act will automatically revert to the people of the United States — to the people to whom (they) those powers belong.
I think I know the American farmers. I know (that) they are as wholehearted in their patriotism as any other group. They have suffered from the constant fluctuations of farm prices — occasionally too high, more often too low. Nobody knows better than farmers the disastrous effects of wartime inflationary booms, and post-war deflationary panics.
So I have also suggested today that the Congress make our agricultural economy more stable. I have recommended that in addition to putting ceilings on all farm products now, we also place a definite floor under those prices for a period beginning now, continuing through the war, and for as long as necessary after the war. In this way we will be able to avoid the collapse of farm prices (which) that happened after the last war. The farmers must be assured of a fair minimum price during the readjustment period which will follow the great, excessive world food demands (which) that now prevail.
We must have some floor under farm prices, as we must have under wages, if we are to avoid the dangers of a post-war inflation on the one hand, or the catastrophe of a crash in farm prices and wages on the other.
Today I have also advised the Congress of the importance of speeding up the passage of the tax bill. The Federal Treasury is losing millions of dollars (a) each and every day because the bill has not yet been passed. Taxation is the only practical way of preventing the incomes and profits of individuals and corporations from getting too high.
I have told the Congress once more that all net individual incomes, after payment of all taxes, should be limited effectively by further taxation to a maximum net income of $25,000 a year. And it is equally important that corporate profits should not exceed a reasonable amount in any case.
The nation must have more money to run the War. People must stop spending for luxuries. Our country needs a far greater share of our incomes.
For this is a global war, and it will cost this nation nearly one hundred billion dollars in 1943.
I have devoted much more space to Roosevelt’s Address because everyone should have an opportunity to see how far our political life has fallen. Today, no president would speak the way Roosevelt spoke. By that, I mean that the candidates would not dare antagonize their donors and benefactors in favor of working people. We need to join together to bring back those days when a president really did work for us, and not for the rich. Economics is easy to understand, the point is to change it.