Canaries used to be lowered into mines to detect the presence of noxious gas from 1911 to 1986. If the bird came back chirping, the miners would go down in the mine.
If not, they wouldn’t. It is a good metaphor for elected politicians to keep in mind every time they vote.
American interest rates are a lot like canaries. They can usually tell us when we shouldn’t go down a particularly dark public policy path and why.
30-year mortgage rates are up almost 70% since January. The Consumer Price Index for overall inflation in the economy in March came in at 8.9% which is an annualized 15.4% rate. Wholesale prices went up 11% in March alone. Many analysts say that if current inflation rates were calculated using 1980 methods and standards, inflation would be in excess of 20% today.
Chalk up these two embarrassing negative economic achievements for the Democrats in control of Washington. Their socialist policies are the “why” inflation has exploded and interest rates have spiked, not Vladimir Putin or even supply chain issues. Both Putin and supply chain issues were around 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 America. Russia has next to zero impact on the world economy given that its GDP is the size of Texas, not China.
This inflation is all our own doing. Close to 40% of American dollar currency in the world market today was created and injected into the economy during the last two years.
The difference between today and 2020 is the over-reliance on expansive monetary and fiscal policy by the left-wing socialist Democrats now in charge of Washington. At every turn, their solution is the same ― spend more money whether we have it or not; keep printing up currency out of thin air, which is the main culprit behind inflation, and use the coercive power of government to crush innovation and restrict choice as evidenced by Biden’s stranglehold on American energy production.
If a canary could be lowered into the Biden Oval Office when the radical left-wingers were plotting their next round of capitalism-destroying policies, it would keel over dead in a second due to their noxious properties.
It is one thing to have no control over extraneous things in the world that happen and cause harm and damage. It is entirely another thing for elected officials to have the ability to control something ― and fail to exercise leadership and authority to do it.
Washington has been led intermittently by Democrats and Republicans in the White House, Congress and Senate over the past twenty years. None have been able to lead the rest of them in any legislative effort to control federal spending. It is hard to pinpoint anyone who has tried to be honest.
In 2001, our national debt held by the public was $2.9 trillion. Today it is over $24 trillion. Had we elected anyone 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.
Interest on the national debt today would be essentially zero instead of over $300 billion annually. When there is no debt, no one really cares what interest rates may be doing. Zero debt means zero interest costs.
Zero debt means freedom from creditors. Freedom from worry. Freedom from inflationary pressures pushing up interest rates further.
If interest rates double, we will spend $600 billion annually on interest. It could go to $1 trillion per year soon thereafter and then the Fed will have to keep creating more money just to pay the interest each year with further depreciated dollars.
It is a vicious cycle that has been repeated innumerable times in recorded human history under every form of governance.
We don’t even need to sacrifice any canaries to know what can happen next.
