Crashing Confidence: The Dallas Fed Reveals All

Crashing Confidence: The Dallas Fed Reveals All
Consumers shop for meat at a grocery store in Annapolis, Md., on May 16, 2022. (Jim Watson/AFP/Getty Images)
Jeffrey A. Tucker

The Fourth of July is always a bittersweet holiday, a time to reflect on the grand ideals of the founding of American independence. But this year, it will once again be impossible to believe that those ideals are still with us as a governing principle, at least not consistently, not even predominantly, certainly not right now.

To summarize the current problem, the nation decided to turn against those ideas of freedom and rights in the name of virus control (a model mysteriously copied from the praxis of the Chinese Communist Party) and thereby unleashed at home the very tyrannies that our ancestors fought so hard against, establishing them as a permanent feature of American life.

And we're paying the price in the worst way now. They shut down nearly the whole of the U.S. economy—as if that would be possible without causing egregious damage—and closed churches and schools. They tried to make up the difference by spending and then printing trillions of dollars, believing somehow that this wouldn't create an eventual calamity.

That calamity is here now, and it's showing up not only in raging inflation but also in worker demoralization, cultural nihilism, radical political discontent, and economic dislocation. While the most pressing problem right now is satisfying U.S. energy needs, the Biden administration offers no more than wind and sunlight—literally recommending those two means of powering our lives rather than tapping abundant fossil fuel resources.

The incompetence on display daily is truly mind-boggling. As a result, not even our usual July Fourth celebrations can be observed without pressing reminders of how prosperity is being drained away. The cost for typical celebratory parties this year, according to Wells Fargo, is up fully 11 percent over last year. That’s also the real-time rate at which food and beverages are going up in price.
The Farm Bureau, according to The Epoch Times, fully expects a 17 percent increase:

“The authors of the study assessed many of Americans’ favorite cookout foods. They found that the price for two pounds of ground beef surged 36 percent to $11.12, two pounds of boneless and skinless chicken breasts jumped 33 percent to $8.99, three pounds of center-cut pork chops climbed 31 percent to $15.26, and 32 ounces of pork and beans rose 33 percent to $2.53.”

Such a level of inflation has been unknown in the United States for 40 years, and it's worse this time because of its longevity. There is no one at the Federal Reserve right now with the courage to do what needs to be done, and no one in any policy position within the reigning party will push economic growth over control, enterprise over diktat, or freedom over compliance.

For these people in office, command and control are all they know.

We will soon be watching those firecrackers in the sky to celebrate freedom as a principle, but it was a little over a year ago when many ruling-class voices were dismissing the whole idea and even calling it “freedumb.” That was surely a turning point in American cultural life, when the people who imagined living out this country’s main ideals were put down as enemies and suspected as possible insurrectionists.

Regardless, the resistance to this unrelenting attack on American ideals is growing and appearing in highly unusual places. One that struck me most recently was the printing of actual truth on the pages of a site run by the Fed itself.

Some background: The Fed was created in 1913 with branch banks around the country to give it the appearance of decentralization, even though it’s not true. Those branches survive to this day. Each specializes in a few tasks to give them some reason for existence. Each one has a different character. The Dallas Fed has always had a more conservative bent, leaning more toward tighter money and freer markets.

The Dallas Fed’s latest survey of manufacturing output sentiment has done the world a service by actually printing comments from businesspeople who answered the survey. Here are some of the choice answers. It’s remarkable to me that such sentiments have been printed.
  • Inflation on raw materials, especially steel, gasoline, and diesel fuel, continues to damage gross margin. Because our contracts are longer-term and fixed price, we have no way to pass this on to our existing contracts.
  • Inflation is continuing on anything that relates to oil and gas prices; i.e., almost everything we buy.
  • Everything we buy and sell comes and goes by truck, if we can get a truck at any price. Inflation will continue until the country is self-sufficient in oil and gas. The current political policy may not change until 2024. Therefore, inflation will be our consistent companion for a while, then stagflation!
  • We see the environment for the oil industry becoming even worse than in the previous months. Biden is promoting a very caustic attitude toward the oil industry, which doesn’t help the country in any way.
  • We are seeing a contraction in business activity.
  • We’ll all be lucky to have a job with two more years of this disaster.
  • The supply chain is a nightmare, while prices are increasing. It’s difficult to find employees, and the ones we can find are expecting more pay.
  • As a country, we are not looking at the future and establishing relationships with emerging countries like we should, to ease the dependency on Chinese products and services. This will hurt us in the long run.
  • Our manufacturing facility is continuing to see unsustainable increases and lead times for raw materials. Skilled labor is a rarity to find. We have increased our starting pay by 40 percent, which puts us above our nearest competitors, and we offer competitive benefits, yet we still cannot attract the personnel needed.
  • You can’t ignore the economic fundamentals leading to a likely recession, and the administration [in Washington] is either stubborn or as paralyzed as a deer in headlights. The Federal Reserve is slow to react and will have to hit the brakes harder than it should have had to do.
  • As you can see, we are already into a bit of stagflation. There is demand for our product, yet limited funding for it.
  • We are very concerned about inflation and its effects on stocks, bonds, and interest rates. It looks like a recession is on its way. The future does not look good for housing. We are expecting a major slowdown due to material cost, labor cost, and mortgage rates.
  • The price of fuel is driving up all the costs for supplies and distribution. Also, since we do mail production, the cost increase on postage is causing our customers to trim their volumes.
  • Government overspending and transfer programs have inflated the money supply while resulting in unchecked corruption and waste. We will be paying that bill for generations, and what a colossal waste of resources and missed opportunity.
These comments are not only obviously true; that they appear on a Fed site is stunning and indicative of real revolt happening at all levels of society.

Let’s return briefly to the problem listed above, namely that none of this can be fixed anytime soon. We are in for 2 1/2 years of continuing hell. It seems incredible to contemplate. And remember, we're talking about responses from Texas, a state that opened earlier than others and has a lower tax burden than most states. It’s a state to which people have moved in order to escape the despotism. And yet even here, there is no escape.

After years of this, what will be left of American industry, culture, the labor pool, and optimism generally is hard to know. The tragedy of it all is that the Biden administration really did have a chance to do some good, to bring calm and normalcy to American life. They instead chose some kind of mythical revolutionary path inspired by untested woke ideology hatched in university settings that has nothing to do with real-world longings for liberty and a happy life.

It’s best not to let this July Fourth pass without deep reflection on the meaning of the holiday. The ideals of this holiday are not just for the 18th century. They are for the 21st century, too. The sooner we see this and act on it, the sooner America can get back to being a light unto the world.

Jeffrey A. Tucker is the founder and president of the Brownstone Institute, and the author of many thousands of articles in the scholarly and popular press, as well as 10 books in five languages, most recently “Liberty or Lockdown.” He is also the editor of The Best of Mises. He writes a daily column on economics for The Epoch Times and speaks widely on the topics of economics, technology, social philosophy, and culture.