A massive inflationary storm is on its way in this country. It’s bad now, but it’s only going to worsen sooner than later.
Why would this be?
There are several factors, but the biggest factor is the war. Not the war in Ukraine, but rather the war against the dollar. There are many moving pieces, but the key point is that the world is moving away from the dollar.
A Debt-Laden Dollar Means WeaknessFor one, the U.S. national debt is simply unsupportable. Since taking office, the Biden administration has added more than $6 trillion to the balance sheet in liabilities. That alone has hurt the credibility of the United States as an economic power and the dollar as a viable currency in the future.
A little context helps explain what’s happening.
A currency can be measured by the strength or value of the commodity that backs it, such as gold or oil. But it can also be measured by the strength of its issuer’s economy or, as is the case at this time, the currency issuer’s ability to impose its will on others.
Leaving the Gold Standard for Oil StandardRecall that the United States left the gold standard in 1971. Market disruptions followed because without an anchor reserve currency based on the value of a tangible commodity, it’s difficult to establish pricing for goods and services on the international market.
The linking of the dollar to oil in the mid-1970s solved that problem. The world’s oil producers and exporters cartel (OPEC), led by Saudi Arabia, agreed only to sell oil in the global market for U.S. dollars. What’s more, the Saudis also agreed to store their surplus revenue dollars, or “petrodollars,” in U.S. government bonds.
Adversaries and Allies Leaving the DollarBut today, we’re seeing the de-linkage of the dollar from oil, accompanied by an implosion of U.S. leadership on the world stage and catastrophic economic policies at home.
But it’s not just U.S. adversaries that see the U.S. decline.
US-Led Global Order Is DisintegratingOur allies and adversaries alike know that the U.S.-led global order is disintegrating. They also know that it’s the direct result of the Biden administration’s passive posture against China and Russia. The United States has failed to stand up to either successfully.
There’s no credible currency without credible leadership.
Domestic Deception of InflationDomestically, the U.S. economy is drowning in debt but continues to spend record-breaking amounts. The combination of these factors is leading to inflation, even though it’s being hidden or underreported.
That sounds bad—and it is—but it doesn’t reflect the true reality. The real inflation rate—the cost of everyday products and services that impact the middle and lower classes the most—is actually much higher than the White House and the Democratic Party want you to believe.
What about food prices?
A Rough Ride AheadThe near future doesn’t look any better, with 30 percent of farmers saying they still have trouble finding necessary crop inputs for this year’s planting. Those farming input shortages are expected to carry over into 2023.
All this means is that not only will prices continue to rise, but rising fuel prices and food shortages will also likely further drive inflation.
For many Americans, it’s going to be a rough ride.