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Monday, November 29, 2021

Rus Smith's Advice on Inflation




Admittedly, Pickens County Councilman, Alex Saitta, is much smarter than me on inflation but I want to add my 2.2 cents (the inflation version of my personal advice):

1) Cryptocurrency is a scam in my opinion. It is a horrible investment and is not making honest people money. Honest people are using unscrupulous people to make money with it, but trust me … it’s not only tracked by the govt heavily, but pretty much a direct line to the FEDS & IRS. It’s also making each creator millions/billions. Bitcoin in particular is literally stealing from everyone that uses banks or the internet, which is everybody.

2) There is no such thing as supply & demand since roughly 2005ish. There is a huge issue with transportation/delivery of supply. There is near infinite supply of everything. There is near infinite supply of capital to create said near infinite supply - in part to the adding of 0’s to bank accounts you mentioned. 

↑ The world supply chain is moving to the Apple / Toyota model … crank out quality due to heavily capitalized automation with workers monitoring and techs designing & fixing machines rather than personally making widgets.

3) We are about to see an enormous shift to automation of EVERYTHING. I see this happening within 10 years. The labor problem will be solved for most menial tasks but as you mentioned - this will essentially leave nothing but doctors & lawyers and politicians. I expect even construction & roofing to become a two-man job within 20 years.

↑ Within the next few, years we will likely achieve close AI (Artificial Intelligence) as we already have chips so fast that they are designing their next generations on their own AND the ways chemically/physically to make themselves.

↑ This will mostly begin to fix the transportation problem and it is very likely that we start to be taxed per mile and encouraged not to drive ourselves.

4) Precious metals have been, are and always will be a horrible investment. Only survival needs are good investments. I’ve never understood why someone would say, “Well, in the apocalypse people will take my gold and silver as payment” How about, shelter, food, guns, ammo? Ammo has been an immensely profitable investment (and real estate is too). Skill to create things needed (like small scale farming) will make us useful and profitable. However harsh this sounds, in a govt collapse if someone comes to my door and says “I’ll give you 4 gold coins for some of your crop.” I’ll shoot them and take it and if I like their clothes or shoes, I’ll take them too and dispose of their body. And however funny this sounds, “I pray that rapture comes before I have to act on those thoughts.”

Really, I just pray Jesus will come soon anyway.

written by Rus Smith

Inflation Why?


If you can get through this, you’ll know more about inflation and its primary cause than 95% of our elected leaders. 

For Example:
Let me give you an example of the way production, price and money all work together.  Let’s say our sample economy produces 10 oranges in 2021, the total money supply is $10 dollars, and there are 10 hungry consumers with $1 each. The price of each orange will be $1.  

Now let’s say in 2022 the Federal Reserve (the Fed) doubles the money supply so the 10 hungry consumers have $2 each. What happens? Two things. Consumers start to bid up oranges and the price of the fruit rises, AND the rising price entices orange growers to add more orange trees, so they produce 15 oranges in 2022. 

What will be the end result? 15 oranges will be sold for an average price of $1.33, when all the $20 of money is spent (15 x $1.33 = $20). 

Money printing results in a mix of higher production (GDP) and higher prices (inflation). The politicians hope the mix is favorable – higher GDP growth with little inflation, but it doesn’t always work that way. 

Supply Constraints:
Back to our example, what if the farmers are lazy or half stay home because they are getting a government check? What if the regulation costs are high when it comes to adding acreage to farm? What if there is a shortage of labors to pick the oranges? 

Back to our example, this time with a twist. Again, the Fed doubles the money supply and all the money is spent, but because of these constraints the supply of oranges grows only to 11 oranges. The price of the 11 oranges will be bid up to $1.81 instead. Most of the new money just resulted in price inflation.   

The US Economy: 
This is roughly what is going on in the US now-a-days. The government is paying people to stay home, it is paying people who are not working, the national work ethic is in a long-term decline, regulation is high, and a variety of other things, so pumping up the money supply doesn’t increase production much. As a result, all this new money chases about the same quantity of goods and services, so prices rise a lot (inflation). 


Picture 1



Federal Reserve: 
Here is some real, back of the envelope math. Looking at the Fed’s assets, the past year assets grew from $7.2 trillion to $8.6 trillion or an increase of $1.4 trillion or about 19%. See picture 1 above – that first underline. 

Whenever the Fed buys an asset, it creates money. If the Fed bought my house in Liberty for $200,000, the house would show up on its balance sheet tomorrow, and $200,000 would be added to my account. The Fed has no cash, so it would NOT be a transfer of cash into my account, but an electronic addition to my balance. That is how they print money – electronically adding zeros to an account(s).  

Unlike in my example, the Fed does not deal with the public directly, only banks that are part of the Federal Reserve System. The Fed buys US Treasury bills, notes and bonds or mortgages that those banks own. Going back to the first picture below – lines 2 and 3, the past year the Fed bought $981 billion in US Treasuries and $568 billion in mortgages from member banks. That is, the Fed created electronically out of thin air $1.4 trillion in reserves at those banks. Those bank reserves become money supply if the banks lend that money out to the public. (I know this does skip over a few things; I know about reserve ratios and multipliers, but I’m keeping this basic.) 

Looking at picture 2 below, you can see a graph of the annual percentage change in money supply known as M2. In the year that followed COVID-19, the Fed and member banks grew money supply more than 25%. Right now, money supply is growing about 12% annually.  


                    Picture 2 

Inflation vs Production:
Thinking back to our oranges example, if money supply is growing 12%, output or GDP is up 3%, the rest is going to result in about 9% inflation annually. (I know about the velocity of money and the percentages are probably off, but I’m keeping it basic here.) To lower inflation, the Fed/ banks either: a) slow the growth of money supply, or b) get GDP production up. 

GDP growth in good times is restrained to about 3% a year. If money growth is 5%, you’ll have about 2% inflation. That’s ideal. 
The current obstacle to that is, the Fed can’t slow money growth to 5% to 6% a year, because the US Treasury borrows so much, interest rates would then rise and crash our debt latent economy. 


US Treasury Borrowing:
US government revenue is about $4 trillion, expenses are $6.8 trillion and it borrows $2.8 trillion a year to plug the gap (see picture 3). When you talk about the 800-pound gorilla in the room, it is the US Treasury in the debt markets. The Treasury borrows a huge amount. As a result, the cost of that money (interest rates) wants to rise in response to all their borrowing. 

The transaction looks something like this. The US Treasury needs to borrow. ABC, XYZ and LMNOP banks each have $100 extra in their vaults, so they lend the Treasury $100 each or $300 in total. In return the Treasury gives each of the three banks a $100 IOU or bond, with the promise to pay 1.5% interest on the $100 loan each year. 

The next week the Treasury is back at it again, looking to borrow. Now the banks have no extra cash to lend. To attract other lenders to lend, the Treasury has to offer a higher interest rate. Each week the Treasury goes to the market to borrow more, in time the lenders become satisfied and interest rates must rise even more in order to draw out additional lenders/ funds. Rising interest rates weigh on individuals, corporations and government which are up to their eyeballs in debt. Some start to default and the then the economy collapses. Our leaders cannot allow this to happen, so the Fed steps in. 

After ABC, XYZ and LMNOP banks lend $100 each to the US Treasury and the banks are holding their 1.5% yielding T-Bonds, the Fed calls the banks and asks if they want to sell those bonds? The Fed offers to pay them $101 for the T-Bond they paid $100 for. The banks sell those bonds to the Fed and each bank receives $101 from the Fed electronically in their accounts the next day, ready to re-lend to the US Treasury or someone else. 

Above I showed you the Fed bought $981 billion in US Treasury securities last year. I just described the shell game they are playing. The government borrows and sells bonds; the banks buy they bonds; the government then buys those bonds back with printed money. The Fed buys up Treasury bonds, bills, notes with a regular injection of new money that keeps interest rates from rising. However, all this new money supply growth, as I illustrated above in the oranges example, creates inflation.   

You see the impossible dilemma our leaders have put themselves in. They must keep interest rates low, and to do that they have to buy up oodles of Treasury debt and do it with printed money. All that printed money in the face of low production, results in more inflation. Wages aren’t rising that much, so on a real basis people are falling behind and standards of living are starting to fall.  

Hyperinflation:
I was asked about hyperinflation and the chances of that. By definition hyperinflation is an inflation rate of 50% or more a year. To get that, the Fed/banks will have to grow money supply 50% plus a year. They had a 25% growth rate over the 12 months following Covid-19. Money supply is growing about 12% a year now. 50% would be outright banana republic, and would have to be a dire and desperate situation. 

The other way we could see hyperinflation is the dollar loses is status as a reserve currency (a long story), the dollar plummets and import prices skyrocket. We import a lot, so inflation would increase an awful amount if the dollar lost its status as a reserve currency.  

Conclusion:
Now how do you protect yourself? I knew this was coming and have been talking about it 10 years. Remember me writing a million times, wages are rising 3%, but true inflation is 5 or 6%, so on a real basis the Average Joe is losing 2 to 3% a year of purchasing power each year. Those living hand to mouth are going to get squeezed the most. 

I bought precious metals and real estate as a hedge, thinking both would rise with inflation. I was right on real estate and wrong on precious metals.  Knowing or suspecting what will happen is often not enough. You have to pick the right investments too, and I really didn’t. Never in a million years did I think stocks or crypto currency would prove to be inflation hedges.

Now What:
As I said, our leaders have painted themselves into a corner. This situation will continue to get worse – disappointing economic growth, higher inflation until some of the wheels wobble off. I’m sticking to my guns – real estate, metals and I’ll take another dive into commodities. I am staying away from stocks, bonds, collectables and things like crypto currencies. 

Written by Pickens County Councilman Alex Saitta

American Policy Center's President Tom DeWeese Scheduled to Speak in Pickens!


 

Wednesday, November 10, 2021

SC Dept of Education Needs YOUR Comments on Proposed Textbooks

 




The South Carolina Department of Education has invited the citizens to review textbooks and instructional materials which are "proposed" to be used in our government run schools. 

These textbooks and materials will be available at 15 locations and also online . The dates available for YOU to view are from November 9th thru December 9th.  Keep in mind these are potential textbooks that may be used on children in our School District of Pickens County in the upcoming school years. 

The closest live viewing of these materials in Pickens County will be The Education Media Center @ 212 Tillman Hall, on Clemson University's campus. 

The hours at the Media Center at Tillman Hall for hands on viewing are as follows:

Monday-Thursday 7:30 AM till 9:00 PM
Friday 7:30 AM till 4:30 PM. 

These materials are for viewing on site and cannot be checked out.

The link to view the textbook and materials virtually is below:


The link to submit your much needed comments/feedback is below: 







Citizens, it's YOUR money they are proposing to spend. Children are the future of whether or not we remain a Constitutional Republic or whether we fall prey to the Marxist/Socialist/Progressive/Globalist agenda that is being pushed in our government run schools.

It is indeed imperative YOU review these textbooks and materials. The chances of leftist government indoctrination taking place in YOUR tax supported education system is high. A great deal is at stake. Children should be taught HOW to think not WHAT to think. 

Conservatives of the Upstate will be discussing this issue at our next meeting to be held:

Thursday, Nov. 18th at 7 PM at Cafe' Connections, 319 E. Main St, Pickens, SC 29671. 

We should organize and work in groups to divide the list of proposed textbooks up amongst us. That way, it is not an overwhelming job for any one person. 

If you are interested in helping review these textbooks, 
PLEASE contact Johnnelle Raines @ 704-860-0648.



Tuesday, November 2, 2021

Consequences Needed For Councilman Wilson's Lack of Decorum


Below is COTU Leadership Team Member Johnnelle Raines' speech last night to County Council:


We all fall short of pleasing our God when it comes to how we handle anger. If I seem overly angry or passionate when I speak, you have not accepted the fact that my freedoms are passionate issues which can evoke an angry tone.

 

After hearing 4 eye witness accounts of what happened at the Oct. 18 Committee of the Whole meeting and looking over your own Organizational Rules for Pickens County Council, it is clear to me Councilman Wilson has violated Rule 4.4 (B)… Decorum in speaking when he became angry.

 

This rule states, that councilmen, in speaking, shall avoid disrespect to a council member and ANY PERSONALITIES Councilman Wilson’s use of the "F" bomb at a Committee of the Whole public meeting recently, along with aggressively moving his seat to confront Councilman Saitta in an intimidating way is not proper decorum.

 

Also, Councilman Wilson continually disrespects other personalities and uses degrading and insulting words to describe citizens who disagree with him.  He has called citizens whiney, bullies, BS artists, and liars. He even said recently he doesn’t care what citizens have to say if they haven’t applied to serve on a board.

 

I presently serve on the Citizen Advisory Board for the Comprehensive Plan, but honestly that shouldn’t give me “extra” brownie points for you to listen to what I have to say.

 

Citizens shouldn’t be degraded because they haven’t volunteered for a board, there is no one here who serves on a board that has some kind of corner on the market of intelligence or understanding.

 

Citizens pay plenty of taxes and should have a voice that is listened to whether the council agrees with what they say or not. Verbal abuse of citizens on social media further degrades citizen’s confidence in the integrity and trust of local government.

Any attempt to intimidate citizens into not speaking is an attack on our freedoms. 

County Council members should respect the rights of citizens to pursue goals and policies different from their own. They should expect criticism and satirical memes while still maintaining decorum in their conversations, regardless of whether the citizen uses decorum or not.

It is also clear in your rules that the Chair has the right to instruct the Sheriff’s Officer to remove any councilman for disruptive behaviors. Chairman Bowers, you should indeed use that power should this situation arise again.

 

Disciplinary measures should be employed against Councilman Wilson for extreme lack of decorum, or it will continue or worsen.  I strongly suggest that the members of this council reprimand Councilman Wilson tonight in the strongest way possible for his conduct which is unbecoming of his elected office and demand his public apology to Councilman Saitta and the citizens he has disrespected.