2022 Economic Crisis? Inflation, Oil, and Banks

“Never let a good crisis go to waste.” Winston Churchill.

Is there such a thing as a good crisis? Well they do seem to help grow the government.

Check out the aftermath of each of these historical events.

Bank Panic of 1907 : Creation of Federal Reserve by Woodrow Wilson

The Great Depression : The New Deal (Social Security, SEC, FDIC, FHA, FCC, etc still in effect)

50s Recession, 60s Recession: JFK increased Social Security and Unemployment, LBJ’s Great Society (Medicare, Medicaid, the Older Americans Act, and the Elementary and Secondary Education Act (ESEA) of 1965).

1970s Recession/Gas Crunch : End of Gold Standard and creation of Petrodollar

Savings and Loan Crisis 86-95 : Federal Bailout $3 billion

Subprime Mortgage Crisis 2007-08 : TARP Bailout $425-700 Billion

I’m not saying that these crises were planned , but they sure weren’t prevented. And looking at the long list and the current state of our economy, it’s easy to assume that no one really intended to change the banks or business practices that create these recessions.

I’m not a fan of too much regulation, but I’m even less a fan of bank bailouts. When there are no consequences for taking irresponsible risks, why stop ? You might win big! The loser in every case is the American public .

As you can see, all of these were financial crises which resulted in huge amounts of federal spending and new social programs. From the Bank Panic of 1907 which was the result of overleveraging, to the 2007 Financial Crisis caused by betting that bad home loans would fail, taxpayers paid the price to ‘save the economy’ from irresponsible and greedy investors.

Bank History

Since the formation of the United States, regulating banks had been controversial and different versions had been attempted while trying to keep the government small. 1836 to 1863 was the era of ‘free banking’ meaning that there was no regulation or federal oversight. This was ended by the passing of the National Bank of 1863.

But this did not solve all the country’s economic problems. Prior to the Panic of 1907, Wall Street was the wild, wild west of investing and wealthy businessmen like J.P. Morgan and Charles Morse created monopolies to remove competition and create price fixing.

In order to take control of credit and currency and keep it flowing, the Federal Reserve was created, and with that the federal government became the thing that the founding fathers never wanted it to be: a large central government with increasing power over the states.

Of course the Federal Reserve in it’s original form did not prevent the Great Depression and because of that even more regulatory control and new functions had to be created.

Each bank crisis helped the federal government grow in size and budget.

Covid Policies and Federal Reserve money printing : Inflation and Supply Chain issues

Today we have a two-fold crisis, high inflation and gas prices. Both of these are related to monetary policies during the Covid pandemic. Covid relief was given to all people regardless of how they were impacted by the pandemic. This caused a lot of people to have ‘extra’ money and they went shopping! But due to some businesses being shut down, there weren’t enough goods to buy. This caused high demand and low supply which makes prices go up.

Climate agenda : Higher oil prices, new regulations and restrictions

And the second part of the crisis, high gas prices, which has been erroneously blamed on the Russian invasion of Ukraine, is a result of low oil supplies. The low supply of oil is a result of oil producers reducing production in anticipation of and reaction to investors pulling money from fossil fuels due to the global climate agenda. Oil producers are also trying to recoup their losses from when oil dropped to extremely low prices (even negative) when Covid restrictions prevented people from traveling. Oil company shareholders would like to get a return on their investment while they still can.

And with investors like BlackRock shifting their funds to renewable energy industries, at the same time that billions of dollars are up for grabs from governments to help fund these new industries, oil companies are no longer getting the influx of money they need to produce more oil and keep prices low. President Biden is placing the blame on Russian and OPEC while omitting the reasons that US oil companies are refusing to ramp up production.

Others say that shale oil producers want to keep prices high instead of overproducing and driving the price too low to make a profit, especially considering the global push to phase out fossil fuels and gas-powered vehicles. In other words, it’s a last ditch effort to build up their bank accounts.

What many people don’t know is that many pension funds are based on fossil fuel stocks. This is creating a battle between those who believe these funds should divest from fossil fuels versus the people who depend on and support the fossil fuel industry.

To make matters worse, the Biden administration is considering a carbon tax and a carbon border tax on imports, two taxes based on carbon emissions. Obviously these costs and taxes will be passed on to the consumers in the form of higher prices. Oil companies are not going to put out money from their own pockets if they are not going to be able to sell the oil at a profit.

Meanwhile, the public is already suffering from the high price of groceries and gas at the pump. Considering that nearly 3/4 of Americans make less than $50,000 a year, this inflation is taking a big bite out of their budget and they are making their feelings known.

My prediction is that we will be seeing some kind of ‘climate relief’ act/checks to help people struggling with inflation, which of course will simply exacerbate the problem!

It’s a good thing that the Federal Reserve literally has unlimited ability to print money and Congress can simply continue to add to the deficit with zero accountability or concern. At least until the next ‘sudden’ financial crisis. And with the soaring inflation, budget deficit, trade deficit, and unprecedented pandemic spending, that crisis could happen at any time.

As we can see, the interventionist economic policies that began before the Great Depression have not been the societal panacea that they claimed to be. They are simply a temporary band-aid on a problem that no laws can fix, greed. The sad thing is that when the next financial crisis comes, it will result in a much worse and less free future for everyone.

Note: I’m not an expert on this subject . I’m still learning. Feel free to share your thoughts and opinions in the comments.

7 comments

  1. Note, I have a very simple solution to these problems that I believe governments will jump onto very quickly as soon as they hear my original idea!
    We need digital currency so that everyone’s net worth can be easily tracked by the government, Just think how easy taxes would be! No one would have to file anymore, as the government can just access your account to fund the next boondoggle,
    And to avoid the risk of losing your card with your account number, we need to put am implant in the right hand or on your forehead (or some type of biometric associated to one of these two body-sites) that could be scanned for any and all purchases, whether groceries or property. So simple, it’s hard to believe I thought of this before the government or Someone Else. 😒

  2. I don’t think any of these catastrophes were planned. If someone could plan them, then someone could stop them or write a book about how they were prevented from stopping them.
    Only one person can keep a secret.
    During a real estate crash the government should have given those billions of dollars to people struggling to pay their mortgages. The banks still would have gotten their money but all those people would still be in their homes.
    As far as government getting bigger, so is the US population and the complexity of our society and economy.
    They didn’t need an FCC or SEC in colonial times. A country doesn’t just run it self. Just like a business, people need to make things happen every day. As a business grows so do the number of employees.

      • Not really. I think it is human nature and there are probably examples in the bible. I think openness in governance, a free press and independent judiciary are key to holding people accountable for their corruption and abuse of the law. Not just in the US, but world wide. This is not just our problem.

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