CONK!
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Robert Wright’s review of my book captures the essence of my journey in America.
“There is a right way and a wrong way, always choose the right way.” Abraham Sabrin (1914-2001)
Most Americans were not alive during the last multiyear inflation cycle (1965-1982). Inflation accelerated coinciding with President Johnson’s escalation of the Vietnam War and the initial phase of his Great Society spending spree. The Federal Reserve pumped up the money supply and we were off to the races. The inflation cycle had three up cycles each lasting a few years peaking in 1981.
For the next 40 years inflation was relatively subdued with several spikes until the CPI hit 9 percent in 2022 and has since decelerated but still higher than the Fed’s 2 percent “target.”
The geniuses at the Fed do not understand that in a free-market prices decline, i.e., “natural deflation.” In other words, the Fed’s money printing is keeping prices from declining, which is the primary way the public increases their living standards.
Wages flat, prices decline, purchasing power of the dollar increases. Instead, the Fed’s endless money printing causes average American families to be squeezed by higher price.
I believe we are in a long-term inflation cycle, which began in 2020 and could last a decade or more. We are not out of the woods by any means despite the CPI having decelerated sharply recently.
However, yesterday’s WSJ explains why inflation is “sticky,” and is about to accelerate. Higher inflation has enormous impacts on stocks, bonds, real estate, commodities and other financial assets. The good news is that entrepreneurs are not deterred despite the Fed’s destabilizing policies and will continue to provide us with goods and services we want. The bad news the Fed will continue to manipulate interest rates and print money. I will continue to monitor the monetary and financial conditions to provide forecasts of upcoming economic activity.
Yesterday was the 88th anniversary of FDR signing the Social Security Act, America’s longest intergenerational letter better known as a Ponzi scheme. Two monographs are worth reading about the history of Social Security, Roots of the Social Security Myth, and The Revolution of 1935: The Secret History of Social Security.
There is a “fix” to Social Security, which I have proposed in the past. I will continue to make the case that the only sensible solution is to phase out SS by paying off current beneficiaries and soon to be beneficiaries and young and middle-aged workers would fund their retirement with their own income. And Americans would be better off investing their own money.
Saving for your retirement is a critical component of personal responsibility and financial independence.
In other words, we need a cultural transformation from financial dependency/statism to financial independence/individualism.
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On August 15, 1971, President Nixon declared the US dollar “bankrupt,” when he closed the gold window, ending the convertibility of dollar for foreign central banks and other international organizations. Nixon’s actions led Murray Rothbard to assert the president launched another round of economic fascism. I read Rothbard’s op-ed 35,000 feet above the Atlantic flying home from an Italian vacation.
FDR confiscated the people’s gold in 1933 ending the convertibility between the dollar and gold domestically. Since 1971 the purchasing power of the dollar has declined 87 percent and more than 98 percent since the creation of the Federal Reserve, which was founded “to maintain the purchasing power of the dollar.” Hah!
To end inflation and the boom-bust cycle, the dollar must be as good as gold. Rothbard spells it out in another monograph.
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My latest piece on the economy was published in Fortune, https://fortune.com/2023/03/27/recession-2023-layoffs-tech-finance-unemployment-outlook-fed-rates-murray-sabrin/ This is an update of my 2021 forecast, https://fortune.com/2021/12/09/next-recession-heres-everything-bubble-markets-2021-2022-covid-murray-sabrin/
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Murray Sabrin, PhD, is emeritus professor of finance, Ramapo College of New Jersey. Dr. Sabrin is considered a “public intellectual” for writing about the economy in scholarly and popular publications. His new book, The Finance of Health Care: Wellness and Innovative Approaches to Employee Medical Insurance (Business Expert Press, Oct. 24, 2022), and his other BEP publication, Navigating the Boom/Bust Cycle: An Entrepreneur’s Survival Guide (October 2021), provides decision makers with tools needed to help manage their businesses during the business cycle. Sabrin’s autobiography, From Immigrant to Public Intellectual: An American Story, was published in November, 2022.
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