Welcome, my dear readers. Yes, you have heard a lot from me in the last few days. It is partially because it is too hot to do anything but the bare minimum I need to keep this place running outside and that there is so much going on in the world that I am convicted to write about right now. I am sure most of you can see what is happening and understand it. Still, I have been told that my works have helped many of my readers explain issues to others more concisely than they otherwise could, and of course, some of my readers tell me they learn a lot from not only my take but also reading the links I include in my writings. So here we go again.
By now, I am sure you have heard of communist Kamala’s brilliant economic plan—a plan that is as simplistic and communist as it is destructive and wrong. Food prices are too high, so let's pass a law that caps what prices can be charged so that greedy grocery stores stop gouging us. The problem is, first, they are not gouging. Every proof of gouging I have seen either argues that since many stores’ gross profits are setting record highs, inflation can’t be pushing prices up, or the raw dollar amounts of net profits are at record highs, it can’t be inflation and must be price gouging (here, here, and here). The problem is gross profits, like your gross pay, are the numbers before deductions with your paycheck. It would be health insurance, retirement, taxes, and those things that reduce the amount of money you make. For stores, these gross numbers are before they deduct the cost of labor, merchandise, building expenses (maintenance and utilities), and other overhead costs.
Even with the record-breaking gross profit numbers, the stores still exist on razor-thin 1-3% net margins (here, here, and here). As economist E.J. Antoni, Ph.D. said in his Twitter post about price gouging:
" Here's your "price gouging" narrative: average costs paid by businesses have risen just as much as costs charged to consumers - if businesses are being "greedy," they're doing it all wrong...”
He accompanied this with the Bureau of Labor Statistics Chart that disproves any gougeing narrative.
This shows that prices paid by producers and retailers mirror prices charged to consumers. We are talking about businesses, not charities, so they must make their margins to stay in business. As he noted, maintaining the margins between prices changed and the cost of production isn’t how gouging works. The second argument is easily defeated with logic. If a company’s best year ever had a gross profit of $10,000 and a net 3% margin of $300, then inflation happens. They have a gross profit of $20,000, so naturally, the net profit of 3% would be a record high of $600. While they are both record numbers, it isn’t an indication of price gouging, and when adjusted for inflation, is not an increase in buying power year over year. Please realize that inflation is why companies have to increase sales\profits yearly because if a company turns a profit of $300 this year. The following year, inflation was 5%; anything less than a $315 profit was losing wealth/buying power/profit year over year. Any company with static profits year over year in the face of inflation will fail in a very few years because it will quickly be unable to purchase the raw materials or inventory to sustain itself.
Just yesterday, I shared an excellent piece on inflation (here) and have written extensively on how government policy and the fiat currency that enables government policy are responsible for all long-term sustained inflation (here, here, here, here, and here). To understand how we got here, we have to look at the history of American recessions, panics, and depressions, all names for essentially the same things throughout the history of our country (here and here). Interestingly, there are disagreements about what constitutes a historical recession and what doesn’t, so I have included two wildly different lists of all the recessions ever. They line up much more closely after 1913 than before. That being said, we can see on either list all recessions before the recession of 1929 that were not linked to war, fraud, or piracy tended to be very short and sharp, 18-24 months. If you look, they were all based on malinvestment in one thing or another. For whatever reason, the investment money thought widgets were the next big thing, but they weren’t, and the public wanted dodads instead, or the guy selling the widget idea couldn’t deliver as promised. In either event, the malinvestments were quickly liquidated, the resources reallocated to more productive use, and the economy recovered.
Then, the Great Depression happened, and looking back, it is clear that it was only the Great Depression because the government kept messing with it. Had the Government done nothing like all the recessions before, it would most likely have been short and sharp (here, here, and here). This worsening was so apparent by 1939 that Henry Morgenthau, FDR’s own Treasury Secretary, said, “We have tried spending money. We are spending more than we have ever spent before, and it does not work.” he further decried the New Deal as an abject failure citing that the unemployment rate in 1939 was worse than in 1931 (here, here, and here). If FDR’s Treasury Secretary thought that the New Deal policies had, at best, done nothing to help and, at worst, exacerbated the depression, he is the one to know.
So why do we all learn in government schools that FDR saved America and ended the Great Depression with his extraordinary economic interventions? Government schools aim is to produce obedient employees who don’t overthink and don’t ask too many questions. So, like the idea the Civil War was fought over slavery, had the South laid down arms when Lincoln issued the Emancipation Proclamation, not only would they have kept their slaves, but he had stated he was willing to codify slavery in the Constitution. Lincoln only cared about preserving the Union and little else (here). Lincoln, the emancipator, and FDR’s brilliant interventions in saving America from the Great Depression are two foundational lies on which the modern American mythos is built. The Foundation has allowed the post-WWII Warfare Welfare state to dominate the American economy and justified every economic intervention while providing cover for any adverse effects of those interventions.
By now, you are probably asking why the history lesson. It is because I want to make sure you have a foundational context for what is to come. On one of the worst days in American history, August 15th, 1971, Richard Nixon broke the Bretton Woods Agreement just 28 years after it was created and “Closed the Gold Window,” fully decoupling the American Dollar from Gold. He did this because America had squandered her massive wealth advantage after WWII and borrowed significant amounts of money by way of bonds to fund Social Security, the Great Society Welfare programs of 1964, and the Vietnam War. These bonds were payable in gold and, as such, were draining America’s stockpile (if gold isn’t money as we are told today, why did he care so much). The worst part after WWII because of the lend-lease program and being the primary source of materials to rebuild Europe and Japan, America was a Creditor nation. Unfortunately, rather than reissuing gold currency and enjoy the fruits of our success. America immediately went to war in Korea, then Vietnam, and started the Welfare system in 1964. We also spend extravagantly on the space program and other scientific endeavors (that would probably have been fine had it not been for the other boondoggles). When Nixon unhooked the dollar from gold, he removed all constraints on the government’s ability to print money. As we began repaying bonds with dollars (freshly printed out of thin air), this created a situation where more dollars began chasing the same amount of goods. Coupled with the OPEC embargo followed by the Iranian revolution, it became more dollars chasing fewer goods, depressing the economy. As a result, wages stagnated or decreased. The more people looking for work, the less employers have to pay, especially at the low and unskilled end of the labor spectrum.
Nixon sought to fix these issues with price and wage controls, and the result was, as always is, terrible shortages of controlled products, black markets, and fewer jobs when wages were floored below the value of labor (here and here). This isn’t the only example of price controls not working; they have failed with the same results every time from the Roman Republic to modern-day Venezuela (here, here, and here), always resulting in shortages, unemployment, black markets, crime, and much worse economic conditions than before the controls were put in place. That is why we should listen to and take very seriously the warning of Robert Sterling who has worked on the supply side of the grocery industry for years as to what will happen if Harris gets her way (here):
The government announces that grocery retailers aren't allowed to raise prices.
Grocery stores, which operate on 1-2% net margins, can't survive if their suppliers raise prices. So the government announces that food producers (Kraft Heinz, ConAgra, Tyson, Hormel, et. al.) also aren't allowed to raise prices.
Not all grocery stores are created equal. Stores in lower-income areas make less money than those in higher-income areas, as the former disproportionately sell lower-margin prepackaged foods ("center of the store") instead of higher-margin fresh products like meat ("perimeter of the store"). Because stores in lower-income areas aren't able to cover overhead (remember, even if their wholesale costs are fixed, their labor, utilities, insurance, and other operating expenses aren't fixed… yet), grocery chains start to shut them down. Food deserts in rural areas and in low-income urban areas alike become worse.
Meanwhile, margins for food producers are also quickly eroding. Their primary costs (ingredients, energy, and labor) aren't fixed, and their shrinking gross profits leave less cash flow available to cover overhead, maintain facilities, and reinvest in additional production capacity.
Grocery chains, which have finite shelf space, start to repurpose their stores (those they didn't have to shut down, I should say) to sell more non-price-controlled items—everything from nutrition supplements to kitchenware to apparel—and less price-controlled food products. Your local Kroger or Safeway starts to look and feel more like a Walmart.
Food producers stop making products with lower margins. Grocery chain start competing with each other to secure inventory. Since they can't compete by offering stronger prices (remember, producers aren't allowed to raise prices here, and, even if they could, grocery chains no longer have the gross profit to bear price increases), they compete on things like payment terms.
Small grocery chains start to shut down entirely, or get sold to larger chains like Kroger. In addition to not being able to cover fixed costs, a major reason for this is because they can no longer reliably secure delivery of products, due to producers prioritizing sales to larger customers, which are able to leverage their stronger balance sheets to offer superior payment terms.
Smaller food producers—which typically sell via distributors, rather than directly to grocery chains—start to go out of business. Because these producers have an additional step their value chains, and because they have lower volumes over which to spread their fixed costs, their cost structure is inherently disadvantaged compared to major food producers. When grocery stores aren't able to raise prices, cutting product costs becomes all the more important, and deprioritizing purchases from smaller producers is an easy way to do so.
As supply chains break down, lines start to form outside grocery stores every morning. Cities assign police officers to patrol store parking lots, and food producers draft contingency plans to assign armed escorts to delivery trucks.
The federal government announces a program to issue block grants for states to purchase and operate shuttered grocery stores. The USDA also seizes closed-down production facilities.
The government announces that prices for all key food costs—corn, wheat, cattle, energy, etc.—are also now fixed, to stop "profiteers" from gouging the now-government-operated food industry.
Shockingly, the government struggles to operate one of the most complex industries on the planet. The entire food supply chain starts imploding.
Communism, mass starvation, and the end of America quickly ensue.
We should take it seriously because history shows that he is correct. Every time price controls have been tried for the last 4000 years, they have consistently failed and have yet to help. I don’t think this is Kamala’s idea for a minute. I don’t think she is intelligent enough to have ideas or convey whatever passes for her ideas intelligently. I think she is just another sockpuppet for various Globalist Non-Governmental Organizations who was selected to be Vice President because if Joe’s infirmity was discovered, she was dumb enough to be controlled entirely. She checked all the DEI boxes simultaneously as icing on the cake. Now, they are using her to launch policies that will put paid to the US dollar and open the way for Central Bank Digital Currency (CBDCs). It will be the only way out. You must do it for grandma, the kids, or whomever. The CBDC is the total and abrupt end to all freedom in America (here).
This is bad, bad news, and it must be resisted by educating people and making the histories of these policies known. Get the boomers to remember gas lines or whatever you need to do to stop this madness.
As far as her 25K to new home buyers, more government assistance in home ownership has created our current housing market, where only the most wealthy can afford to buy a home. It will result in more of the same and inflation (because they will print the money). I already wrote about the child tax credits (here), so it isn’t a new idea. She is just rebranding it. I don’t think Trump or Harris can do anything by stimulus or policy to improve anything. What they can do, and we see more talk of this from Trump, is cut regulations and remove government interference in the markets, which will help improve things. That being said, our economy will never be stable or secure so long as the Federal Reserve exists and our currency is fiat. No economy in history with either of those two conditions has been stable or secure.