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Now It’s Ketchup and Cotton

Posted October 08, 2021

Jeffrey Tucker

Wow, this “transitory” inflation sure is transitioning to ever more sectors of the economy, in the US and all over the world. The transition is starting to look hegemonic. Note that more outlets are starting to admit it: ok, yeah, well, it’s true that inflation has hit double-digit levels in many areas, but no need to panic! Everything will be fine.

But will it? The Chicago-based food packing company Conagra reports that its cost for everything from ingredients to materials, in addition to freight and fuel, are rising about 11% per annum. It is passing those costs along to others — like a hot potato — as best it can. In practice, this means that ketchup is going to go up in price. Don’t be surprised when you have to pry those little packages from the fingers of the employees at Burger King. They are going to get more scarce than ever. You might have to show up carrying your own bottle.

Similarly, General Mills is reporting the same. We are in double-digit territory now nearly across the board. Producers are facing the worst of it. Consumers come next.

Now let’s talk cotton. Cotton futures have soared to the highest prices in more than 10 years. The pressure is intense right now. In April 2020; cotton was priced at 60 cents per pound. Now it is more than a dollar and rising. Prices have risen 22% over the past 11 sessions. This will affect millions of household products and clothing. So much for cheap tee shirts. So much for discounted sheets.

I’m a bit of a crawler of thrift stores (again, don’t judge me) and I’ve even noticed over the last six months that the fabulous bargains at these places are not as easy to come by. Plus the crowds are growing larger as regular retail outlets keep raising prices. You think you would never shop at Goodwill. Just you wait.

Say the Word: Money

Unlike a month ago, the media is at least starting to write about this stuff. Not often. Not with alarm. Not with the blunt truth that inflation is a form of robbery that is wiping out all wage gains to consumers. Not with frank discussion of the implications of this on politics and economic health. But at least now there is some recognition that this is a reality.

What I find most bizarre about the coverage is the absence of any discussion of cause and effect. Why precisely is this happening? We hear about weather difficulties, supply-chain breakages, frustrations over the persistent labor shortage, and other factors. Mostly the press treats the price pressures as some kind of miasma that is mysteriously floating over the American and world economy.

What is not being discussed is the money problem. The Fed has completely lost control over its policies. It has turned to the printing press with a sense of complete abandon, as if nothing it does can ever really have a bad effect on real economic events. The Fed’s balance sheet is still stuffed to the gills with liquidity and banks are still keeping their deposits there rather than lending them out, which is helping to suppress the amount of hot money on the streets. In addition, the tanking of money velocity reduces price pressure. Those factors however could change in an instant and unleash utter hell.

To understand the inflationary potential, it’s best to examine the money base. To be sure, this is not money washing around the world; it is currently sitting in vaults. But it still matters in order to understand just how radical the policies of The Fed have gotten.

The chart below is the money base in raw numbers from 1960 to the present. I’ve not shown you this chart before, simply because it can be misleading regarding money’s actual supply. It is best to think of this as what is possible. Feast your eyes on this. In the last 12 years, The Fed has added $5 trillion to the money base.

Total Monetary Base Chart

Can’t Be Explained Away

Economists over the last decade have taken up the habit of pooh-poohing any serious worries about hyperinflation. And in this, they have generally been correct. The problem with being generally correct in saying the sky is not falling is that you might be too reluctant to point out that the sky is indeed falling when it IS actually falling. As a result, we are creeping to and past double-digit increases in prices across the board, and yet hardly anyone is speaking frankly about the implications, much less the root cause.

It’s pretty strange to live in times when people are supposed to panic about a virus with a 99.8% survival rate but NOT supposed to think much at all about the first serious across-the-board inflationary trends in many decades. Plus, nothing about the current data concerning money trends should give us hope. The Fed will be called upon to print ever more.

The spending and taxing package now sailing through Congress is by far the largest spending extravaganza in the history of all governments in all times and all places. How is this going to be paid for? The revenue collected doesn’t even come close. The plan is to reduce the value of the dollar enough so that the debt gets essentially inflated away. In other words, it’s not looking like an accident or a mistake anymore; it seems like a plan.

Despite the carnage in international markets, these inflationary trends are still international. The UK is going through a terrible political crisis now, but the economic crisis is intensifying as well. The Washington Post — which somehow tells truths about the UK that it cannot and will not tell about the US — writes as follows:

In the energy market, tightening gas supplies in global markets are amplified in Britain, which doesn’t have a large storage capacity and is dependent on fuel imports. U.K. natural gas futures exploded to a record this week, extending their price gains in the past 12 months to an astonishing 700%.

A shortage of truckers closed swathes of U.K. service stations as they ran out of fuel in recent weeks. The laws of supply and demand have duly kicked in; the price of gasoline has climbed by almost a fifth this year, leaving it just a few pennies short of all-time highs.

They are going so far as to slaughter pigs in the midst of all of this due to a shortage of workers even to work the farms. The United Nations’ global food price index has risen by 25% in the past 12 months. This happens at a time when millions have suffered tremendous deprivation of food and healthcare due to lockdowns.

Periodic Apology

I suddenly feel the need once again to apologize for all this bad news. I’m normally a very happy person who has long revelled in the improvement of life on earth. Something has fundamentally changed, a genuine shift in the Matrix. Lives are shortening, and life in general has become more brutal. The restraints on government seem almost to have disappeared, and rationality suspended.

I’m at the point right now where I would be shocked at an inflation rate next year of 10-15%, along with effective price controls on everything. Where is the resistance to it? Who in control is in a position to yell stop? I’m not seeing it.

I had a reader the other day tell me that he dreads my articles, but somehow can’t stop reading them. Good. We have to face the truth squarely before we can prepare to deal with the fallout, much less pursue strategies for getting civilization and prosperity back on track.


Jeffrey Tucker

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