Inflation: Stop Debasing the Currency

The just completed term of President Joe Biden was marked by the worst episode of

inflation in recent history.  Massive trillion dollar deficits saw the national debt balloon to over

thirty-four trillion dollars.  That’s trillion with a “t”. Billions aren’t that noteworthy these days.

Debt service on this amount is now the leading expense in the national budget, greater even than the amount spent on defense.  The ever growing budget deficits are paid for with borrowed money and those friendly folks from the Peoples Republic of China (PRC) have lent us close to nine hundred billion dollars. This debt comes due periodically and the PRC has obligingly rolled over the amount due. What happens if the PRC decides not to roll over the maturing debt and asks for payment? The US Treasury will then scramble to find new lenders who will graciously ask for higher interest on the associated debt, further increasing the deficit.

The interest rate on treasury bonds affects all other interest rates, from mortgages, to auto loans to credit card debt, to corporate debt. There is competition among borrowers for the creditor’s dollars and the lenders will consider a number of factors in deciding whom to finance. They will consider creditworthiness, the duration of the loan, the interest rate on the debt and any security the borrower may have. This will further increase deficits as interest rates will be pushed up as a result of the law of supply and demand. There is just so much money available to purchase the ever increasing supply of debt. In other words, America is in danger of drowning in a sea of debt.

The ever increasing debt leads to inflation as the supply of money continues to increase. The deindustrialization of America due to the rise of globalism presents the consumer with foreign manufactured products to purchase, increasing the trade deficit, giving our trading partners excess dollars which they use to purchase American assets, including enterprises and real estate which affects the national security of the United States. This is truly a dangerous situation which must be dealt with. The fragile economy of the US, now predominantly a service economy, will find it difficult to sustain our national security. Our trading partners have not dealt fairly with us for decades. They routinely violate World Trade Organization rules by erecting non tariff barriers to American products while proudly proclaiming how all goods enter their countries tariff free. That is a blatant lie. Anyone visiting a foreign country quickly sees that there is a dearth of American manufactured products present. On the other hand, visit any American retailer and one is overwhelmed with foreign products.

All of the above are factors in the development and persistence of inflation in the United States.

The result is the continuous debasement of the American dollar. Imagine a gallon of gasoline purchased in 1970 and placed in a sealed jar. Next to it is a gallon of gasoline purchased today.

The two jars are identical as are the jars’ contents. Yet one cost twenty cents and the other cost three dollars. The products are identical yet the cost differs by a factor of fifteen. This indicates the depreciation of the dollar. More dollars are needed to buy an identical product which was once less “costly”.

Can this situation be resolved?  This brings to mind the 2000 presidential debates between George W. Bush and Al Gore. At that time we lived in a unipolar world and the US was the sole superpower. The PRC was way behind us, the USSR no longer existed and the debate was over the “peace dividend” as it was expected that defense expenditures would  decrease drastically.  The US budget was balanced and the extinguishing of the national debt was in sight.  No one expected the attacks of September 11, 2001 by Al Qaeda and the US went to war in Iraq and Afghanistan. The peace dividend evaporated and budge deficits were back with a vengeance. Poor fiscal policy with growing imbalances between receipts and expenditures  have continued with no end in sight. In the 2024 presidential election, talk of the major economic problems the nation faces were not discussed, as if the topic were taboo. All that we hear is further expenditures, all for the common good, of course. The hour is late, the problem is great and becoming more serious. Periodic failure by the Congress to deal with the national debt is now routine along with the threat of government shutdowns. It’s time to get serious and get down to business and deal with this problem. It’s not yet too late but the clock is ticking.

Garry S. Sklar

Las Vegas, NV

February 6, 2025