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Pat Buchanan is Wrong: There Will Be No Inflation with Recovery

I love Pat Buchanan. He’s the main reason I watch The Mclaughlin Group, and the only reason I watch MSNBC. His knowledge of history and foreign policy is impeccable. He’s sincerely interested in politics, and he’s just plain fun to watch.

But like a lot of great political commentators inside the Beltway and out, I won’t go so far as to say he knows little to nothing about economics, he knows a great deal about economics, but his fundamental principles about the subject are just plain wrong. They are upside down, totally the opposite of how the economic world works. Take Foreign Trade for example. As a country YOU WANT a trade deficit. Why? Because your economy is so much larger than the other country’s they cannot possibly import from you as much as you import from them. Believe me, we will rue the day that we have even equal, much less more exports to China or any other country, as imports. Take a second and think about what that means.

But let’s concentrate on a subject that’s been on Pat’s mind a lot lately: Inflation, specifically inflation as the result of a booming economy. Look, on the face of it, it seems to make sense: The Fed has doubled their balance sheet since last fall to quote unquote “Bail out the financial sector” although such a ploy was a total red herring, and only a grab for power masked as such, but that debate is for another blog post. Also, with the prospect, God forbid, of a booming economy on the horizon, Inflation would seem to be a Tiger waiting in the wings to tear our figurative buying power’s heads off. But this is wrong headed thinking because precisely the opposite is the case:

Growth economies soak up excess liquidity like the Amazon rainforest soaks up Carbon Dioxide.  The truth about economics is that conventional wisdom is turned on its head, just as in 1906 Relativity turned the conventional wisdom about Reality (determinism, logic) on its head. Growing economies put downward pressure on inflation, not upward, by soaking up liquidity.


Look, I am no fan of the Fed.  It is an unconstitutional, Quasi Government/Private Corporation, that literally prints money that it sells through its distribution channels of partner shareholder banks, to a gullible, unquestioning public. And it does this while not only NOT fulfilling its Government Charter of providing a stable currency (which a de facto Gold Standard would do for free) but by actively (surreptiously or not is unknown) making the currency upon which we live swing wildly back and forth in value, causing the devastating inflations and deflations we have experienced for the first time in history since the 1971 closing of the Gold Window by President Nixon. I am a total libertarian, totally for Ron Paul 2012, and think it should be abolished, or have its reigns pulled in tightly with a Executive Order that it will not let the open market Gold price swing beyond a tight range.

But in the months ahead, if we are lucky enough to have a economic recovery, and I believe we will although the unprecedented “stimulus” (which is actually a pork bag full of free money to people who provide no value or production to our economy, but instead scam the people, by virtue of having power in legislative halls) will be a furious headwind not in our favor, inflation is the last thing one needs to worry about. Happy days will be here again, and the punch bowl can be brought out. To use a horse racing analogy, as I am in love with horse racing, the “Class” of technological innovation and productivity will over come the grueling pace duel with governmental regulation and confiscations that line pockets of political power brokers. In short Technology is the only thing propping our Economy up, but it is indeed a Secretariat, a Tiger Woods, and has the strength of Atlas.

I wish too that the government would not shrug Atlas, but Governments from time immemorial until today and forever more, simply have only one purpose: Internal and External Plunder. It’s time to get over that, unless we indeed can have a Libertarian Revolution.

But for now lets hope and expect a recovery. And with it there will be no signs of inflation on the horizon. The Gold Standard provides stable currency for free, and so does economic growth, with the only threat in such a situation being Inflation’s horrible ugly sister: Deflation, which is the real threat with the prospect of recovery, as the Fed is inclined (will) raise rates and starve the Growth engine’s main fuel supply: liquidity.

And then back on the Roller Coaster we shall all go. But if we can’t have a Libertarian Revolution and have a real democracy and a real free market we might as well adopt the Grateful Dead’s attitude (if not take the same contraband) and “enjoy the ride.”


Stephen Pickering. May, 2009






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