Many people have likened the battle against coronavirus to a war and invoked imagery of the US fighting World War II. President Trump has even deemed himself a “wartime president.”
The president told reporters at a White House briefing that fighting the virus would require a sacrificial national effort just like it took to defeat the Axis in the Second World War.
Every generation of Americans has been called to make shared sacrifices for the good of the nation. To this day, nobody has ever seen like it, what they were able to do during World War II. Now it’s our time. We must sacrifice together, because we are all in this together, and we will come through together. It’s the invisible enemy. That’s always the toughest enemy, the invisible enemy.”
But listening to all the rhetoric coming from politicians and pundits, one has to ask, where exactly is the sacrifice?
The government is promising bailouts for everybody. We’re just weeks into the crisis and there is already an expectation that the government will be sending everybody checks. Peter Schiff called it “bailout nation.”
Apparently, the government wants “sacrifice” with no pain.
Unfortunately, that’s not a thing.
Americans didn’t get checks from the government in World War II. They got higher taxes. Schiff summed it up in a tweet.
During WWII middle-class Americas sacrificed to support the US government’s war effort. They paid much higher taxes, substantially reduced their consumption, and loaned their savings to the government. The people support the government. The government can’t support the people.”
Therein lies the ugly truth. There is no sacrifice without pain. The government can bail out the airlines. It can bail out the hotels. It can helicopter money in and drop it on your head. You’re still going to pay, either through higher taxes in the future or through inflation.
In the end, economics always wins.
Trump is right. You are going to sacrifice for the government actions surrounding the coronavirus. What he’s not telling you is it’s going to hurt.
The government and central bank response to the economic crisis precipitated by coronavirus are creating the perfect storm for price inflation. The problem isn’t a lack of money. It’s a lack of stuff. We’re all sitting at home and a lot of us aren’t producing anything. Uncle Sam can stuff our mailboxes with checks. That money doesn’t do us a damn bit of good if there is nothing to buy.
The end result will be a lot more dollars chasing a lot fewer goods. That means prices will go up.
When inflation heats up, interest rates rise. That’s the proper response. How exactly is that going to work in a world up to its eyeballs in debt?
This is why Schiff keeps saying we’re on the path to a dollar crisis.
All the money the Fed is printing isn’t going to have value. It isn’t going to buy anything. Prices are going to skyrocket. And in fact, this coronavirus is accelerating that process because the coronavirus is reducing the supply of goods available to buy.”
I’ve always held to the theory that when the doctor tells you “this won’t hurt a bit,” it’s going to hurt like hell. You would be wise to treat politicians the same way. When they tell you the sacrifice won’t hurt because they will make it all OK, you had better hold on to your wallet. Because you will sacrifice. And it will hurt.