The Canary in the Interest Rate Mineshaft – The North State Journal
The canaries had descended into the mines to detect the presence of noxious gases from 1911 to 1986. If the bird returned chirping, the miners descended into the mine.
Otherwise, they wouldn’t. It’s a good metaphor for elected politicians to keep in mind every time they vote.
US interest rates look a lot like canaries. They can usually tell us when we shouldn’t take a particularly dark public policy path and why.
30-year mortgage rates have risen almost 70% since January. The consumer price index for headline inflation in the economy in March was 8.9%, an annualized rate of 15.4%. Wholesale prices rose 11% in March alone. Many analysts claim that if current inflation rates were calculated using the methods and standards of 1980, inflation would be over 20% today.
Highlight these two embarrassing negative economic achievements for the Democrats who control Washington. Their socialist policies are the “why” inflation skyrocketed and interest rates soared, not Vladimir Putin or even supply chain issues. Putin and supply chain issues existed long before 2022. Inflation rates were 1.4% on January 20, 2021 when President Trump left the White House and Joe Biden took office. Interest rates were below 2%.
The Bank of Russia ― the Russian Fed ― and Vladimir Putin did not cause inflation to rise in the United States. Russia has virtually no impact on the global economy given that its GDP is the size of Texas, not China.
This inflation is our fault. Nearly 40% of the US dollar in the global market today was created and injected into the economy over the past two years.
The difference between now and 2020 is the overreliance on expansive monetary and fiscal policy by the left-wing socialist Democrats now in charge in Washington. At every turn, their solution is the same: spend more money, whether we have it or not; continuing to print money out of thin air, which is the main culprit of inflation, and using the coercive power of government to crush innovation and restrict choice, as evidenced by Biden’s stranglehold on the production of American energy.
If a canary could have been lowered into Biden’s Oval Office as the radical left plotted its next round of capitalism-destroying policies, it would drop dead in a second due to its harmful properties.
It’s one thing to have no control over extraneous things in the world that happen and cause havoc and damage. It’s quite another thing for the elect to have the ability to control something―and not exercise the leadership and authority to do so.
Washington has been led intermittently by Democrats and Republicans in the White House, Congress and the Senate for the past two decades. None has been able to lead the others in a legislative effort to control federal spending. It’s hard to identify someone who tried to be honest.
In 2001, our national debt held by the public was $2.9 trillion. Today it is more than 24 trillion dollars. If we had elected someone to the White House and Congress who knew how important it was to balance the federal budget over the past two decades, our national debt today would be de minimis instead of gargantuan. .
Today, interest on the national debt would be essentially zero instead of over $300 billion a year. When there is no debt, no one really cares what interest rates can do. Zero debt means zero interest charges.
Zero debt means freedom from creditors. Freedom from worry. Absence of inflationary pressures causing interest rates to rise further.
If interest rates double, we will be spending $600 billion a year on interest. It could jump to $1 trillion a year soon after, and then the Fed will have to keep creating more money just to pay interest each year with dollars still depreciated.
It is a vicious circle that has repeated itself countless times in human history under all forms of governance.
We don’t even have to sacrifice canaries to know what can happen next.