What's REALLY Driving Inflation?

In this episode of the Stock Strategy Circle, I, John, delve into the critical relationship between government spending, inflation, and the stock market, particularly in the context of the current economic landscape as of September 19, 2024. I begin by emphasizing that inflation has been the primary driver of the stock market throughout my lifetime, and I warn listeners about the impending hyperinflation that I believe is on the horizon.

I challenge the common misconceptions surrounding interest rates and inflation, asserting that it is not low interest rates or the Federal Reserve that creates inflation. Instead, I argue that inflation is fundamentally caused by governments overspending and accumulating debts that they never intend to repay. Drawing on historical examples, including the Roman Empire and various Chinese dynasties, I illustrate how governments have historically engaged in practices that lead to inflation, such as debasing currency.

I discuss the implications of moving off the gold standard and how this shift has allowed for unchecked government spending, which I believe has led to the stagflation of the 1970s and the economic conditions we face today. I highlight the misleading nature of GDP as a measure of economic health, explaining that it includes government spending, which should be viewed as an expense rather than an asset. This misrepresentation obscures the reality that U.S. industrial production has stagnated since 2003, despite rising GDP figures.

Throughout the episode, I urge listeners to reconsider how they view government spending in relation to economic productivity. I propose that if we were to subtract government spending from industrial production, we would see a more accurate picture of a shrinking economy. I emphasize the importance of recognizing that government functions primarily as a security provider, and its expenditures should not be conflated with economic growth.

I also address the role of the Federal Reserve and the financial media, arguing that they serve as scapegoats for congressional spending practices that truly drive inflation. I explain how banks are compelled to hold government debt, which I believe is fundamentally flawed, as governments do not repay their debts. I advocate for a reformed banking system that relies on private sector capital rather than government debt.

In conclusion, I call on my listeners to awaken to the realities of our economic system and to critically evaluate the information presented by financial news and politicians. I stress that without this awareness, individuals risk becoming serfs in a system rigged against them. This episode is a clarion call for financial literacy and a deeper understanding of the forces shaping our economy.

00:00:00 - Introduction and Market Overview
00:00:10 - The Role of Inflation in the Stock Market
00:00:31 - Myths About Interest Rates and Inflation
00:01:54 - Historical Context of Government Debt
00:02:38 - Inflation and the Gold Standard
00:03:00 - The Impact of Government Spending on GDP
00:04:13 - Understanding Economic Productivity vs. Government Spending
00:05:37 - The Misconception of Government as an Asset
00:06:43 - The True State of the U.S. Economy
00:07:03 - The Role of Financial Media and Politicians
00:07:46 - Government Debt and Banking System Flaws
00:08:40 - Proposed Changes to Bank Capitalization
00:09:12 - Conclusion: The Rigged System

00:00:20 - "If you don't hold stocks, that you're going to get clobbered in the coming hyperinflation, which is still coming."

00:00:41 - "There has never been a time in history where interest rates have been this cheap."

00:01:02 - "It's not low interest rates that create inflation. This is a myth that is widely perpetrated by the financial media."

00:01:23 - "Inflation, always and everywhere throughout history, has been caused by governments overspending and running up debts that they do not pay off."

00:02:05 - "The worst possible person you could loan money to, if it was a person, would be your government."

00:03:00 - "The stagflation that took place in the 70s was caused by irrational deficit spending in order to finance the Vietnam War."

00:04:45 - "GDP is a measurement of actual economic productivity added into government wasteful spending."

00:05:37 - "Government spending should be counted as an expense, not as an asset."

00:07:24 - "Congress blames the Fed when Congress knows why there's inflation. It has nothing to do with the Fed."

00:08:29 - "The whole system is rigged against us in the favor of the people who are in power."