BY KENNETH MUFUKA Monetary policy refers to tools used by central banks and financial organisations to influence money supply, or the amount of money in the economy. In the hands of charlatans, the goofy part is the desire on the part of policy makers to force the units they print as stores of value or units of account and make them acceptable purely because of their convenience.
If those two sentences above sound familiar and rather goofy, they are intended to confuse.
US president Joe Biden and the Democrats fell prey to these goofy theories and applied them to the US economy. Using what they called Covid-19 pandemic stimulus, they printed and distributed money generously everywhere.
Initially, stimulus money was intended to cover the basic expenses of the needy parents, but there was no way of making a differentiation. In the end, virtually everybody and his uncle received a cheque from government.
Since the money was tax free, for the very poor, government income was higher than their wages. They prolonged their stay at home.
Then came students who owed billions in student loans. Then came the needy single mothers who were late in their rent payments in New York City. Landlords were forbidden to evict them. In the long run everybody got a stimulus cheque. Then it was decided that kids at school whose parents already received some government support needed further help. And so it went on forever.
Life was good.
Here is the voodoo part of this kind of economics.
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Let us say a small business owner with a US$200 000 a year income (the cut off level) receives government stimulus money. Similarly, a freshman medical doctor earning a similar amount got his U$50 000 educational loan forgiven. If he was paying US$1 000 a month, that amounts to US$12 000 free money a year.
What the Democrats did not envisage is that the wealthier recipients of the stimulus money could invest the money and become richer and gravitate towards Republicans. The recruitment tool for Republicans is the fear that anybody who accumulates wealth finds himself running a race against Internal Revenue which seeks to deprive him of any surplus income.
Another contradiction is that the poor, if they receive any benefits from government, tend to spend rather than accumulate wealth. So, the poverty cycle reinvents itself.
Biden has also got himself in a no-win situation regarding the limits he has placed on the production of fossil-based products.
Biden’s first action as president was to prohibit the building of the Canadian oil pipeline.
The results, should, however, be looked at in conjunction with another Democratic part of their voodoo economics. President Biden promised to get rid of fossil-based energy outputs like petrol powered automobiles and coal based electric generation.
The loss of the Canadian pipeline alone saw 20 000 men and women lose their jobs and the price of oil rise from $2 per gallon to $5 dollars even as we speak. This has wreaked havoc on every aspect of business. Certain basic products are no longer available in shops. Empty shelves are now a common sight.
If one walks along any town ring-road, there are NOW HIRING signs every hundred yards.
Workers have simply disappeared into thin air.
Inflation is raging. Government says inflation is at 20% annual increase; economists say inflation is at an all time high in 50 years at 30%. The US treasury secretary confessed that she did not see inflation coming.
The real voodoo aspect of Democratic policy is that the poor are worse off than before. With a doubling of petrol prices, the supply chain has tapered off. Many 18-wheeler transporters are independent owner drivers. Whereas, they say at twice the prices of petrol, they are shutting down their businesses, their actions are reflected in empty shelves. Propagandists are referring this situation as Zimbabwe induced.
Some Congressional leaders are complaining that Biden is practicing Robert Mugabenomics. “I saw Robert Mugabe destroy his country,” one Republican said.
Bidenomics is having the opposite result of what they were intended to do. Raising interest rates affects the housing market and removes low income housing from the market.
Wealthy people normally have one extra house for recreation at the beach or in the mountains. They can use their savings as collateral to mediate the effects of interest rates. When rents rise, the poor are ruled out of the housing market and replaced by landlords who then raise their rents. As we speak, rising rents are becoming a problem. It is as if all the landlords are in conspiracy to do that.
Then there are certain groups, like Asians and Hispanics who practice group economics. These groups pool their finances together and help members with start up financing.
The African American population is the worst affected by these voodoo economics. Without banks, savings associations, and credit unions of their own, every little wind that blows their way affects them negatively.
Yet, Biden depends heavily on the black population for his razor thin electoral margins.
Biden denies any wrongdoing or using bad economic theories to begin with. He denies ever having contributed to the oil crisis or to the on-going war in the Ukraine.
Foreign policy in shambles
Biden’s foreign policy is also falling apart. Biden, who loves plain talk, condemned Saudi Crown Prince Mohammed bin Salman al Saud for the murder of journalist Adnan Khashoggi.
Khashoggi who was suspected of selling state secrets to the Washington Post was lured into a Saudi embassy in Turkey and his body was cut into little pieces and flown to Saudi Arabia.
President Donald Trump saw the issue differently. Saudi Arabia had a contract to buy US$10 billion military equipment. Biden and Democrats said that human rights should take precedence over monetary gain. Some say he called bin Salman a “thug” and other bad words.
Now as we write, Biden is planning to travel to Saudi Arabia to meet with bin Salman. He wants Saudi Arabia to increase oil supplies, or Biden goose is cooked in the coming US November elections.
Biden finds himself drawn further and further into the Ukrainian conflict. Preferring neutrality, he has offered US$80 billion in military support. But it is doubtful whether this help is too little too late.
Support for the war has taken its tool. Pope Francis revealed to a Jesuit magazine that the US provoked the war by seeking NATO encroachment on Russia.
The Republicans are salivating. The mid-term elections are due in November this year. Biden has nothing to show.
- Ken Mufuka is a Zimbabwe patriot. He writes form the US.