The Fossil in the U.S. Senate

Democrat Joe Manchin has been holding up two bills in Congress to protect the billionaires he serves. Meanwhile Republicans in his state, West Virgina, are suing the Federal government to throw out the Obama/Biden Clean Air acts.

Manchin gets his wealth from investment in fossil fuels, coal, gas and oil. His wealth is set at $5 million. Mansion’s expressions of worry about inflation and debt in reference to passing these two bills were spurious smoke screens.

Today the Fed has 8 trillion dollars on its balance sheet. And it can create more money to spend if needed.

The real problem is what the government is spending money on and how to make sure it gets to the right people.

I feel that good that Congress has been weighing and measuring specific goals it wishes to meet by passing those two bills. But is it doing enough?

The Real Problem – Inflation

The reason we have inflation is that stimulus monies during Covid were targeted to the rich and upper middle classes rather than many of those really in need. This made the demand side of the equation shoot upwards.

People paid off credit cards, (myself included, guilty of) mortgages, and thanks to the Fed’s low interest rates, that move spurred new housing construction booms and Americans buying houses at grossly inflated prices.

The demand side of Keynes’ equation shot up. Consumers went wild buying things – this is what has created supply chain problems for the whole world. Our insatiable demand.

Now President Biden is trying to funnel the money into lower income families. This would be useful for creating new jobs, and job training for those who earn less than their costs of living. But it would have to be monitored closely.

For example, pre-school for kids are being funded through families. But what if poorer families buy things for themselves rather than their children. This would simply add on to our supply-chain problems.

This is why it is a must that we should be training pre-school teachers as well. This training would need to be offered through the higher education system.

But are higher education institutions going to be funded for gearing up programs and curriculum for pre-school teachers? And if so will community colleges, if free or low-cost, be able to offer pre-school teacher training.

Will the buildings where pre-schools are located be funded as well? How about the supplies needed for children?

I like Joe Biden’s speeches, but they need to be backed up by him doing a little big-picture thinking about how to lower demand and increase jobs and job training.

Surely the President can find competent assistants, such as educators, micro-economists, or statisticians from each of the micro-industry sectors targeted by these bills to ensure that his goals can be met.

Assset Balloon Problems

However, it wasn’t just supply chain problems that the ‘helicopter money’ stimulus created. It is also resulting in creating asset bubbles inflation in the markets.

For example, Zillow was a site set up to perform a service, i.e., to circumvent the middle men in real estate transactions and help people buy houses more cheaply. Suddenly Zillow became a speculator during Covid. Zillow started to buy up tons of houses resulting in assets worth $2.8 billions of dollars.

All of a sudden this inflated housing bubble burst. Because people couldn’t afford to overpay  up to 30% for houses.

More importantly, supply chain problems stymied both the new and old housing markets. As an example, new apartments sitting emplty waiting for windows to arrive. As a result of this bursted bubble—Zillow just laid off 25,000 American workers.

This is exactly what happened during the Great Recession of 2007-2009. Only it was banks not property managers who speculated on derivatives, not housing when their bubbles broke. Over 500 banks were lost in that Recession.

Now the markets are also concerned about cryto-currency bubbles or commodity sectors having bubbles that break and put us back into recession.

On the Positive Side

On the positive side, just by watching ads on TV or off-cable company streaming apps we can see that hundreds of new entrepreneurial companies are springing up during this time, largely to serve new needs caused by the Covid pandemic.

So as the supply side gets going in this country, it would be immensely helpful for the government to support small businesses, educational institutions, (e.g. pre-school included and worker training), transportation sectors, and new technologies.

But our government also needs to make sure that its policies do not work to create more consumer demand resulting in more supply chain problems.

But then, there are fearful people like Joe Manchin who cannot see the big picture—and fear dealing with big numbers. What can we do?

Are we going to keep letting a small-minded self-centered fossil snuff out our dreams?  I hope not. If he doesn’t stop trying to claim “we can’t afford it” how about we all send Joe Manchin a Christmas stocking with a piece of coal in it.



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