BY KEITH TUCKER
Special to The Enterprise
Not being an economist, there is something that is too obvious to miss. What is so hard to understand is the high-paid people that control this sort of thing has to know where this is going. The money supply is up 23 percent in a year. The next highest year was 1981, and that was a 15-percent increase in one year. That resulted in a 10-percent yearly inflation rate. The goal for this year is 2 percent, which is getting blown out of the water.
The only thing that has kept this from getting totally out of hand is the velocity of money exchange is low. Velocity is how often money is spent over and over. People are still being conservative with their money, it seems. Then there is the Amazon effect. Brick-and-mortar businesses are hesitant to raise prices as much as they would like because of the competitive prices from Amazon.
If COVID starts to ease up by spring and velocity picks up, the result is going to be an avalanche of inflation because of the unprecedented shear mountain of the available money supply. You simply cannot print an extra $4 trillion and put it into circulation without the basic economic metrics that justify it. GDP has not and does not make it pass muster.
Now I know COVID helped create a need to help support people in need. This was a special circumstance that required actions that were not good from an economic standpoint, but it was the right thing to do. However, human nature took over and people did not go back to work in a timely manner because they had stimulus money to live on. And who can blame them?
I don’t care if you are blue or red, there is a right and wrong way to do things using basic economic principles. Now many will not like this next premise, but interest has been and is too low. It arbitrarily hurts the older population by keeping their savings from earning money and gives the advantage to younger people who are borrowing money to buy houses and cars.
In every circumstance, decisions have winners and losers. Proper actions require the effects on all parties be taken into account. I believe that interest had been arbitrarily low because if it goes up, the US government is going to have to commit an even bigger part of the budget to pay the interest on our national debt. So that’s my take on the current situation.
Editor’s note: Keith Tucker is a Greenfield resident and owner of The Marble Shop.