About Me

In writing the "About Me" portion of this blog I thought about the purpose of the blog - namely, preventing the growth of Socialism & stopping the Death Of Democracy in the American Republic & returning her to the "liberty to abundance" stage of our history. One word descriptions of people's philosophies or purposes are quite often inadequate. I feel that I am "liberal" meaning that I am broad minded, independent, generous, hospitable, & magnanimous. Under these terms "liberal" is a perfectly good word that has been corrupted over the years to mean the person is a left-winger or as Mark Levin more accurately wrote in his book "Liberty & Tyranny" a "statist" - someone looking for government or state control of society. I am certainly not that & have dedicated the blog to fighting this. I believe that I find what I am when I consider whether or not I am a "conservative" & specifically when I ask what is it that I am trying to conserve? It is the libertarian principles that America was founded upon & originally followed. That is the Return To Excellence that this blog is named for & is all about.

Sunday, June 28, 2026

Pledge Allegiance To The American Republic This Independence Day

Academic research has shown that special days like birthdays or New Year's are the best time for people to review their plans or make new goals.  For people who have strayed from America's founding principles of limited government, personal responsibility, & free enterprise, what more special day will we ever have in our lifetimes than the nation's 250th birthday to rebuild & refresh the vitality of our patriotism & appreciation for our country?  

As we mark the nation's semiquincentennial anniversary this Independence Day, the first point to celebrate is that our Founding Fathers in the Second Continental Congress by unanimous Declaration of the thirteen United States of America had in mind creating a limited government of enumerated powers, such a government deriving its just Powers from the Consent of the Governed.  

In so doing our Founders most definitely did not create a democracy - they created a constitutional representative republic.  Every time you hear a Democrat talk about "saving our democracy" or some similar statement they are trying to brainwash people into thinking the United States is a democracy where citizens vote on every issue & therefore the mob-majority always rules.  Democrats know they will always be in the majority just by the sheer numbers of poor & downtrodden people they play for, who they never want to help lift up, but rather want to keep poor & down trodden to use as pawns to reach their goal of political power thereby stifling the rest of us. 

So when you hear a Democrat, like Schumer or Jeffries, talk about "saving our democracy" substitute to yourself the words "saving our republic" & then disregard whatever else he says because you know he has already tried to mislead you.

In fact, the word democracy does not appear anywhere in the Declaration Of Independence or the Constitution.  The Founders were against a pure democracy because they feared the tyranny of the majority, where the rights of minority groups & property owners could easily be trampled.  A democracy will not exist beyond the point that the voters realize they can vote themselves generous gifts from the public treasury via the candidates who promise the most benefits.  This process has always resulted in collapse due to loose fiscal policy ending in the tyranny of a dictator.

On April 15, 1814 in his letter to Virginia politician & writer John Taylor of Careline (county), John Adams confirmed the Founders' skepticism of a pure democracy when he wrote  "Remember, democracy never lasts long. It soon wastes, exhausts, & murders itself. There never was a democracy yet that did not commit suicide. It is in vain to say that democracy is less vain, less proud, less selfish, less ambitious, or less avaricious than aristocracy or monarchy.  It is not true, in fact, & nowhere appears in history."

An important safeguard the Founders provided against democracies' mob-rule-tyranny was the Guarantee Clause, Article IV, Section 4 of the Constitution, that guarantees to every State of the Union a Republican form of Government.  The Founders knew this clause was necessary to protect the nation from internal tyranny that could result from direct democracies in a state.

At one point I was going to call this blog "Death of Democracy" but Carol thought it was too depressing so I settled on the subheading "A Libertarian Web Log Dedicated To Stopping The Death Of Democracy Of The American Republic."  She thought that summed it up nicely.

The Declaration holds that all Men are created equal & that they are endowed by their Creator with certain unalienable Rights - specifically Life, Liberty, & the Pursuit of Happiness.  At this point the document acknowledges that Governments are instituted among Men to secure these rights - not to confer them.  Rights are secured through the rule of law after Men leave the state of nature.

Progressive Democrat Socialists Bernie Sanders & AOC intentionally mislead by conflating securing God given rights described in the Declaration of Independence to mean conferring rights by government, like claiming healthcare is a right that can be signed into law by politicians.

Healthcare is not a right, it is a good like food, shelter, & clothing.  Click here to hear Judge Napolitano explain that a right is a gift from God that extends from our humanity, natural rights that we were born with - the government does not give them to us, the government does not pay for them, & the government cannot take them away unless a jury finds we have violated someone else's rights.  The judge goes on to explain that a good is something we want or need starting with our parents buying us goods & then in adulthood we buy for ourselves for existence.  In summary, a right stems from our humanity; a good is something you buy or someone else buys for you.

Thomas Sowell asks "why would you expect someone else to provide for you what you do not provide for yourself?"

There are many strong indications that Gen Z & Millennials have increasingly favorable views of socialism including the elections of Zohran Mamdani as mayor of NYC & Katie Wilson as mayor of Seattle, both taking office on January 1, 2026.

In an interview with Jacobin, Wilson said "I was a socialist when I moved to Seattle back in 2004. ... as a socialist, I believe that the profound changes that need to happen in our society & our economy can only be accomplished through the organized power of working people."

Now that is about as socialist as you get comrade - right in line with AOC's similar thoughts:  "There's a certain level of wealth & accumulation that is unearned.  Right?  You can't earn a billion dollars.  You just can't earn that.  You can get market power.  You can break rules.  You can do all sorts of things.  You can abuse labor laws.  You can pay people less than what they are worth, but you can't earn that.  Right?  And so you have to create a myth that since you didn't earn that - you have to create a myth of earning it." 

There is a term for what Wilson & AOC are talking about.  And that term is the central concept of Karl Marx's critique of capitalism written in 1867 in Das Kapital, the foundation work of communist theory - it is called surplus value.

Surplus value is the cornerstone of Marxist economics.  Marx asserts that workers are the true source of all wealth.  However, under capitalism, they are paid a subsistence wage while factory owners (capitalists) extract "surplus value" - the extra worth generated by workers' labor that is kept as profit.  Accordingly, surplus value is the difference between the wealth workers generate through their labor & the actual wages they are paid.   Everything in the national income that doesn't go to the worker constitutes surplus value.  This uncompensated value is taken by business owners as profit, forming the engine of capitalist accumulation.

In September, 2011 Elizabeth Warren gave BO a similar socialist lesson in her "you didn't build that" speech - "There is nobody in this country who got rich on his own. Nobody. You built a factory out there - good for you. But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police forces & fire forces that the rest of us paid for. You didn't have to worry that marauding bands would come & seize everything at your factory... Now look. You built a factory & it turned into something terrific or a great idea - God Bless!  Keep a Big Hunk of it. But part of the underlying social contract is you take a hunk of that & pay forward for the next kid who comes along."

And BO learned his lesson well before reversing himself because he didn't think the country was ready.

But boy do we seem more than ready now.  

Not only do we have the two avowed socialist mayors mentioned above elected by the votes of thousands of people, we have a Democrat Senate candidate in Texas, James Talirico, saying "There are many more than two biological sexes, in fact there are six."  Also consider former congresswoman & current incumbent mayor of LA Karen Bass's support for Fidel Castro - after receiving heavy criticism for her statements in sympathy for Fidel Castro, following his death in 2016, that caused her to be dropped from consideration for Biden's VP selection in 2020, Bass has since walked back her praise for Castro for obvious reasons.  Bass's November opponent, Democrat Socialist of America candidate Nithya Raman, is even further to the left than Bass.  And Mamdani, in a blatant display of not representing all his constituents, did not attend the Israel Day parade in NYC on May 31 preferring to concentrate on the Nakba, an Arabic word for “catastrophe” that is used to describe the displacement of an estimated 700,000 Palestinians during the 1948 Arab-Israeli war that followed Israel’s establishment.  Mamdani has also endorsed three socialist candidates for congressional seats (seventh, tenth, & thirteenth districts of NY) - two of the three won in landslides in NY's June 23rd Democrat primary & the third was a closer victory over a five term incumbent who was the chairman of the Congressional Hispanic Caucus.  And in a ranked choice voting system DSA candidate Janeese Lewis George won the Washington DC primary on June 16.   

Now the above words & actions of AOC, Katie Wilson, Elizabeth Warren, BO, James Talarico, Karen Bass, & Zohran Mamdani when coupled with critical race theory, the 1619 Project, preferred personal pronouns, the woke ideology & Democrats' intolerance for dissent for anything unwoke, free healthcare for illegal immigrants, abolishing ICE, defunding the police, free government childcare, free college, packing the Supreme Court, a national wealth tax, & Democrats having a more favorable view of socialism than capitalism not only adds up to an unhappy & disunited country celebrating its 250th birthday but it shows clear examples of the nonsense that Democrat socialists speak - but it is a dangerous nonsense that makes imbeciles out of their followers.

Republicans do no better in their practice of idolatry of Trump.   We will pay a tremendous price for Trump's selfish, narcissistic, vindictive, delusional presidency for a long time to come.  

Whether it's 1) the bad feelings of allies over tariffs arbitrarily imposed plus the added cost Americans are paying for the imported goods & services subject to the tariffs, 2) the loss of stature & cost of the war with Iran that Trump unilaterally started or the humiliation that the theocratic terrorist regime not only withstood the American military might but has actually increased its influence in the Middle East as a result of the war, 3) the $1.776 billion anti-weaponization fund Trump plans to use to compensate people who assaulted police officers & marched to the Capitol on January 6, 2021 to harm Mike Pence & many of the Members of Congress  who are still in office but are also still too spineless to vote to stop this self-dealing outrage of Trump suing the government that he runs & then dropping the case when his DOJ agreed to the creation of the fund, or 4) Trump's preoccupation with the construction of a ballroom & a 250 feet tall "triumphal arch" located between the Lincoln Memorial & Arlington National Cemetery all demonstrate how tone-deaf Trump is to Americans' troubles.

Trump has abandoned America on the affordability issue satisfied that the stock market's record highs - the NASDAQ, S&P 500, & DJIA simultaneously hit record highs on the last trading day of May - equate to outstanding 401(k) performances that he claims credit for without presenting one thing he specifically did to propel these indices that were really the result of the AI mania that also propelled these indices to new highs during the woeful Biden years as well.

There are approximately 70 million people who have 401(k), 403(b), or IRAs with median balances of $30,000 to $87,000 depending on the specific age demographic considered - i.e., a small amount in the overall swing of things for millions of Americans meaning Trump's bragging about 401(k) increases is not being experienced in a meaningful way by the great majority of people.

People are interested in affordability - not ballrooms & arches.  For over 75% of owners of 401(k)s there is no immediate impact for the stock market's positive performance.  The immediate impact of wages not keeping up with inflation is the problem.  For both April & May inflation outpaced wage growth, inflation was higher in March, April, & May than when Trump took office, & labor's share of gross domestic income in the first quarter sank to 51%, the lowest level since records began in 1947.  Source Greg Ip, WSJ, May 29, 2026.

When the Founding Fathers in the Second Continental Congress mutually pledged to each other their Lives, their Fortunes, & their sacred Honor in forming the new republic they had no idea how long the republic would last.  And neither do we.

Our situation is the opposite of the Founding Fathers' who were declaring the causes which impelled them to seek Separation from Great Britain, abolishing & throwing off a long Train of Abuses & Usurpations from an absolute Despotism form of government while we are facing the onslaught of deceptive, manipulative propaganda campaigns designed to bring about dissatisfaction & influence public opinion against America.  Examples of these propaganda campaigns have been documented hereinbefore by Democrat Socialists, Marxists, progressives, &/or populists, in order of mention - Schumer, Jeffries, Bernie, AOC, Katie Wilson, Warren, BO, Talarico, Bass, Mamdani, & Trump.  All of these people have great admiration for dictators & @ one point in their careers, including now for some, aspired to be tyrants, despots, caliphs, or otherwise people who rule the world themselves. 

From the beginning of civilization up to July 3, 1776, over six thousand years of human history, slavery had been the norm - places like Babylon, Athens, & Rome all had massive enslaved populations.  As did Native American tribes.

But all of this entrenched slavery had a chance to end – a beginning, a start to being able to change with the signing of the Declaration Of Independence & the founding of the United States Of America on July 4, 1776.

During the Jefferson administration Congress prohibited the importation of slaves effective 1808 – but there was smuggling thereafter.  The process of obtaining freedom for all men continued with the Missouri Compromise of 1820 in which Missouri was admitted to the Union as a slave state but slavery was prohibited in all the western territories.  And of course the fighting of the Civil War resulted in the ratification of the thirteenth Amendment which banned slavery in the entire country.
 
Although Lincoln certainly wanted to preserve the Union, the Civil War was fought for more than just the secession of eleven slave-holding states from the Union.  Lincoln believed  that free men should not be free to choose slavery for others.  Lincoln knew that the United States Republic was the only noteworthy free country in the world in the early 1860s & he believed that a significant portion of the young country could not abandon its founding principles & survive for long. 

JCo, a long time subscriber to this blog commented on July 4, 2020 to that year's Indepence Day post, "Human trafficking and sex trafficking are the concerns that should be focused on, not in the slavery that was abolished 155 years ago.  Because Thomas Jefferson or other historical figures owned slaves simply states a fact that slave ownership was common in that era. But as one of my history professors said, '"Judge history on its own terms, not by today's standards."'  JCo went on to write "It's curious why if we live in such a racist, sexist, and oppressive country, why people want to get in, not out."

The common sense of this statement goes a long way to undo the propaganda espoused by the socialist agitators cited above.  If you are among the 39% of adults who have a favorable opinion of socialism (or 67% of college students who do) be sure to take into account the freedom you are throwing away.  You won't have that freedom when the central government directs the economy by controlling the means of production that it owns.

When F. A. Hayek dedicated "The Road To Serfdom" to "The Socialists of All Parties" he was not talking about today's agitators presented hereinbefore because they all know better than the nonsense they speak.  AOC, Bernie & the lot all broke their oaths of allegiance to the Constitution & want to change the country from one of personal responsibility to one of dependence on government with them being the government.

No better proof of this than to hear it in AOC's own words - "They assume that my ambition is positional.  They assume that my ambition is a title or a seat.  My ambition is way bigger than that.  My ambition is to change this country.  Presidents come & go.  Senate, House seats, elected officials  come & go.  But single-payer healthcare is forever." 

And just how qualified is AOC to change this country?  When asked "Would or should the U.S. actually commit U.S. troops to defend Taiwan if China were to move" AOC haltingly responded - "Um, you know, I think that, uh, this is such a a you know, I think that this is a um, this is of course a very long standing, um policy of the United States, a, & I think that what we are hoping for is that we want to make sure we never get to that point.  And we want to make sure that we are moving in all of our economic, research, & our global positions to avoid any such confrontation & for that question to even arise."

In writing this Independence Day post I call on the actual type of socialists that Hayek dedicated his book to in 1944 - well-intentioned individuals who were unwittingly building the infrastructure for the very tyrannies they despised by not realizing that the loss of economic freedom inevitably leads to the loss of political freedom.  Hayek's dedication was not meant for socialists like AOC, Bernie & the rest who know communism, fascism, and state-socialism all stem from the exact same root: collectivism & state control over the individual, which is their ultimate plan.

Look over the propaganda documented above & be sure you understand where it breaks down so that when you pledge allegiance to the American republic this Independence Day it will be stronger than ever because other snake oil salesmen will surely follow to try to once again turn people against America.

"As a city, Babylon exists no more.  When those energizing human forces that built & maintained the city for thousands of years were withdrawn, it soon became a deserted ruin."  - George S. Clason, The Richest Man In Babylon, page 138 – first published in 1926.  Mr. Clason's description of Babylon is one that every one of us has a vested interest in preventing happening to the United States.

How long do you think the republic will last  if it is up to you alone,  if it is up to only you?

Sunday, June 7, 2026

Quotations Number III

In this old divisive, Us v. Them, progressive-populist world of take & take some more by supposedly pure forgotten people on the political left, concerned about income inequality & not taking enough of the earnings of successful people & corporations who employ people, & the political right, concerned about finding Trump-inspired autocratic ways of bypassing the checks & balances of Congress & the courts while looking @ the Constitution as a nuisance to work around rather than the bedrock foundation of our republic that mandates oaths of allegiance to support & defend, & displaying an exclusionary nativist trait regarding job protectionism for American workers competing against foreign workers who make pennies a day, I present the following quotations to help turn the progressive-populist "you deserve" mindset around.

1.  "A house divided against itself cannot stand." - Abraham Lincoln (originally traces to the Bible - Matthew, Mark, & Luke)

2.  "A people that values its privileges above its principles soon loses both." - Dwight D. Eisenhower

3  "I attribute my success to this:  I never gave or took an excuse." - Florence Nightingale

4.  "Discipline: doing what you have to do, & doing it as well as you possibly can, & doing it that way all the time." - Bobby Knight

5.  "Never give an order that can be understood; always give orders that cannot be misunderstood." - Gen. Douglas MacArthur

I find the point of #5 regarding giving orders that cannot be misunderstood also applies to writing.  You should write not to be understood, but so that you could not possibly be misunderstood.  And in this regard, quotation #1 is exactly what progressive-populists have in mind.   


Sunday, May 17, 2026

The Levels Of Sophistication In Economics

My freshman-year college chemistry professor told the class that there are levels of sophistication that students naturally move to in their study & understanding of chemistry as they progress from memorizing fundamental principles in introductory courses to highly specific, deep expertise in a chosen subfield where they engage in original research, creating new chemical knowledge, & developing critical thinking to solve unsolved problems.  At the graduate level & beyond their understanding & mastery moves to another level of sophistication contributing to scientific literature, developing research proposals, & communicating findings through presentations & publications.  I always thought that he could have added becoming a chemistry professor like himself to the list..

Taking from the old prof's idea I have come to realize that there are levels of sophistication in economics that Americans naturally rise or fall into - starting with those who have absolutely no understanding of, interest in, or use for economic planning.  Such people couldn't care less about handling money.  Their lack of sophistication in economics means leading a life of economic illiteracy never having any idea of why their life is so miserable.  The other end of the spectrum is a retiree who is a net saver in inflation adjusted terms.

The first group of people described above has not even a basic interest in their own personal financial wellbeing - these people are level 0 sophisticated.  For instance such people could have money mistakenly withheld from their monthly Social Security benefit & then neglect to file an income tax return to receive the money withheld.  Such people do exist.

Now move a sophistication level higher to the portion of people who profess to have their roots in Reaganomics supply side economic theory but can't wait to get their ever increasing income tax refunds while never realizing that receiving a large refund is a Keynesian principle of demand side economics.  April was National Financial Literacy Month & we learned that refunds were received by many people, not just supply siders, way ahead of the  April 15th deadline for filing individual income tax returns.  The IRS opened the tax filing season on January 26 for tax year 2025 & most early filers expected a refund, as usual, figuring it made no sense letting the government hold their money interest free any longer than the beginning of the year.  

But should we expect better economic reasoning from people in a country where over 50% of adults read @ an elementary school level?  Source - National Literacy Institute

The rapid inflation of the Covid-19 pandemic years accelerated much faster than wages grew so after some months of losing purchasing power the general public became aware of the affordability issue meaning they had come to realize that things were unaffordable.  See graphic below that shows how inflation grew faster than wages.  The area between the blue & red lines from April, 2021 through April, 2023 represent the 25 consecutive months that wages lost ground to inflation.










Click on graphic to enlarge

Now the Federal Reserve (Fed) has been tasked by Congress to conduct monetary policy "so as to effectively promote the goals of maximum employment, stable prices, & moderate long term interest rates."  Since 2012 the Fed has considered 2% annual inflation measured by the personal consumption expenditure (PCE) index as meeting the stable prices congressional mandate meaning that the Fed is fine knowing that every $50,000 of annual earned income loses $1,000 in purchasing power every year.  

People's understanding of the Fed's 2% annual inflation target reveals another level of sophistication in economics.  Even from those who are aware of the Fed's 2% target (leaving alone those who are not aware of the target, which reveals another level of sophistication in economics) I have never heard of one complaint to any elected representative regarding this Fed insidious monetary policy that gradually & cumulatively robs us of purchasing power.  But when the prices of gasoline, where fifty foot high signs along the highway tell us, or groceries, where the price of everything in the store is marked, go up people get belligerent & an entire affordability movement takes place like in the last NYC mayoral race.

The Fed, under Chairman Paul Volcker, ended the double digit inflation that ravaged the country all through the 1970s & early 1980s after Nixon took the country off the gold standard in August, 1971.  After concentrating on an ineffective austerity monetary approach from 1979-1981 Volcker turned his attention to the dollar's relationship to gold which had always been the dollar's anchor of value.  It was only after Volcher focused on the value & stability of the dollar linked to gold that he started to get the desired result.  Volcker oversaw & guided the quantity of money (base money portion of the money supply consisting of currency in circulation plus bank reserves) by holding the real inflation-adjusted Fed funds rate above the PCE core inflation rate until inflation came down.  This was done @ the tremendous cost of double recessions in the early 1980s but the dollar price of gold had been cut by more than half from September, 1980 to June, 1982.  From this point until the end of Greenspan's term as Fed chairman in January, 2006 these two men (Volcker & Greenspan) followed a defacto gold standard that kept gold in a relatively narrow range thereby providing a stabilization to the value of the currency.  Even then it took over 25 years to break the back of inflation to the point that it was not a major consideration for most of the general public.  See graphic below.
















Click on graphic to enlarge

The story of the breaking of inflation in the late 20th century is told on the following two graphics.  The first graphic shows the Fed funds effective rate raised to almost 20% when the core PCE rate was running @ 10% - both annual rates.  The slope of the core PCE rate (red line) moves steadily down over the years as the Fed funds rate is held above inflation & the quality of money follows Volcker's de facto gold standard.  The second graphic shows the same information for the blue line read on the left scale expressed as a net difference between the Fed funds rates & the core PCE rates (i.e., the example described above for the first graphic is shown as 10% on the second graphic).












Click on graphics to enlarge

In the 2000s many countries operated under negative nominal interest rates.  In the 2010s the United States started operating in earnest under negative real interest rates - i.e., the blue line of the second graphic is below zero from 2008 until the Fed started raising rates in March, 2022. 

The following graphic shows that the Fed under Chairman Jerome Powell tried to emulate Volcker's control of the monetary system by raising the Fed funds rate, but, just like Volcker did @ first, Powell did not first focus on the value of the currency linked to the price of gold as the dollar went from $1,605 per troy ounce in March, 2020, when the Covid-19 pandemic caused by the Wuhan coronavirus began, to $5,311 in March, 2026, an increase of 231% in six years.  In short Powell did nothing to stabilize the value of the currency before he started raising rates - the same mistake Volcker originally made in 1979 before he realized a pure monetary approach was not working then either.  Powell proceeded with a monetary statistical approach using higher interest rates to rid the economy of inflation, like Volcker did, but has found this will not work until a process for stopping the drop in the nation's currency value is put in place.










Click on graphic to enlarge

The high inflation of 2022 started to ease after June when the effective Fed funds rate was just starting to be raised & was still almost 8 percentage points below June's 9.1% YoY inflation rate.  So something was different about Powell's inflation problem & Volcker's.

To be sure both bouts of inflation were rooted in the debasement of the dollar - Volcker's by Nixon abandoning the gold standard & Powell's by the massive spending by Trump & Biden.  See graphic above entitled "The Link Between Gold & CPI Inflation," that shows the near doubling of the national debt every eight years this century.  As Powell's Fed balance sheet expanded we certainly had too many dollars chasing too few goods.  

But the year-plus long lockdowns & partial lockdowns ensured that the spending of the Covid stimulus checks were @ least somewhat curtailed resulting in an excess savings of over $2.5 trillion (the amount above what would have been saved if there was no pandemic).  In addition to the stimulus checks the elderly also received Social Security automatic annual cost of living increases (5.9% in 2022 & 8.7% for 2023).  Price controls enacted in a majority of states further distorted this situation.  However, the negative supply shock caused by the lockdowns was short lived as U.S. manufacturers & global supply chains quickly made goods & services available.  

Add this all up & you have a graphic (Fed Funds Rate & The Control Of Inflation above) that displays a situation that is different from the Volcker experience.  Why would the inflation rate start to come down if real interest rates were still negative, even though less so than before if the above Covid related conditions were not in play?

The Fed has not hit its 2% inflation target in over five years & if Powell's successor Warsh is going to use interest rates the way Volcker did he will never hit the target without raising the real rate above current levels & without linking the currency to gold - i.e., the process will not work any better now than it did for Volcker originally.  

It is important to understand that the Fed's modern mandate from Congress is based on the discredited Phillips Curve that found an inverse relationship between unemployment & money wage rates (later expanded by Samuelson & Solow to unemployment & price inflation).  Even after the 1970's stagflation misery where inflation & unemployment simultaneously moved higher, the Fed & Congress still think prosperity can be controlled & recessions can be avoided by adjusting interest rates.

At the heart of this still current mistaken method of operation is the idea that growth is bad bringing about inflation & that by raising interest rates inflation can be slowed but all the while hoping that the interest rates are not raised high enough to cause a recession.  Shouldn't we have long ago questioned an inflation fighting model that deliberately slows growth & raises unemployment?  Reaganomics proved that growth is good & not inflationary.

Instead of the Fed playing inflation against unemployment by raising & lowering interest rates the Fed should adopt a market-based approach where interest rates are determined by supply & demand market forces that signal where people think the economy is going rather than through their direct intervention & control that is really a form of price control.  The Fed's current mode of operation impedes natural price discovery in the market by distorting information that often results in the misallocation of resources leading to suboptimal economic outcomes.  This price control point is why I have written that the Fed is the biggest currency manipulator in the world.  Naturally, as emphasized earlier herein, the interest rate function comes after the return to the Gold Standard & the sound money it ensures as Volcker & Greenspan demonstrated.

I positioned the last post entitled Dow Jones 50,000 Quiz, that asked readers to strip out inflation from the 4,900 point run up in the DJIA, directly in front of this post as a preview for understanding the impact inflation has on people's standards of living & to point out its importance especially to people about to graduate from high school, vocational school, or college.  Those who can see & manage the dynamics involved with the erosion of their money will have a much higher level of sophistication in economics than those who don't.  They will have a much happier life.

I think a new graduate should not only note his own personal starting salary but also gauge the standard of living of an older experienced person in his field who makes twice that salary.  There he has a good measure in 2026 dollars of what can be realized in that career.  For instance a new chemical engineering graduate starting this June @ $85,000 per year should focus on making $170,000 per year in 2026 dollars when he is 62 years old.  In order to actually make such a figure his nominal salary forty years hence may very well be over $800,000 per year due to inflation, which has to be stripped out to get the real purchasing power compared to the starting salary & its doubling goal.

Mark down the CPI in June, 2026 & keep track of your salary in 2026 dollars your entire working career focusing on that doubling goal that requires real growth of 1.75% per year over 40 years - say ages 22 to 62.  Focusing on the doubling goal may actually result in a tripling goal if you see that doubling your starting salary in real terms will not get you to the desired standard of living - i.e., some career fields have low starting salaries.  Along the way you will be able to buy a house, invest in IRAs & 401(k)s, & watch your investments grow as your salary grows.  Having a target on work day one is a far superior method of managing the progress of your career than just aimlessly hoping for raises that are masked by inflation that don't readily reveal real purchasing power growth or even worse don't reveal real purchasing power decline.  You can adjust the arithmetic for goals of tripling, or more, of your starting salary.  

The point is to have an anchor of value to gauge your progress so that you can quickly strip away the inflation portion of any income increases to clearly judge your progress from your starting point & your realistic starting point goal.  CPI data are readily available so people who did not begin their careers with this method can easily check on their progress no matter how old they are.  See graphic below for the doubling scenario.













Click on graphic to enlarge

Periods like the 25 consecutive months beginning April, 2021 shown on the above graphic entitled "Affordability Display - Inflation Greater Than Wage Growth," leave wages losing ground to inflation.  And just last month in April, 2026 YoY inflation escalated to 3.8% while inflation adjusted hourly earnings declined 0.3% from a year earlier.  These periods have to be made up in order to reach the doubling goal.  Also periods of income growth that do not keep up with the annual 1.75% real rate growth requirement have to be made up because you won't get to doubling @ 0.3% wage growth - the rate for the twelve months ending in March, 2026 when the nominal average wage increase of 3.5% masked the real purchasing power subpar growth.  Likewise interest rates have a real & an inflation component that sophisticated investors use one way when borrowing money (looking for negative real rates) & the exact opposite way (looking for positive real rates) when adding to their savings.

After you retire, keep track of your retirement income purchasing power & total asset value & net worth as time rolls on.  You'll need the CPI the month you retire, which will never change, & the CPI for the month of your comparison.  This is the gauge to use to make sure you are living within your means in retirement so that your money is spent well & does not run out.  If your real purchasing power & real net worth increase in retirement you are one of the elite net savers I mentioned @ the beginning of this post.  If you have enough data you can determine your own inflation factor & use that instead of the CPI.

At the top of the levels of sophistication in economics is Steve Forbes who defines inflation as "the distortion of prices that occurs when money loses value" & goes on to say "to this day, most economists still don't understand that the critical factor in the 1970s stagflation, as well as in the Great Moderation of the 1980s & '90s, was the value of the dollar."

Every bit @ Mr. Forbes' top level of sophistication in economics is Vladimir Lenin who over 100 years ago said "There is no subtler, no surer means of overturning the existing basis of Society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, & it does it in a manner which not one man in a million is able to diagnose."   

When I first read Lenin's remarks as a young man I was inspired to want to spend my time with that infinitesimal portion of people Lenin described who could diagnose & prevent the inflationary ruin of a society that results from currency debasement that this post is all about.  Even more importantly, I strived to learn about this destructive force so that when I was fortunate enough to come in contact with these precious few people they would want to spend any time @ all with me.