Math Hard

If there is one thing Washington DC is not short on it’s stupidity. There are times that I read or watch things come out of their mouths and have a serious what-the-fuck reaction.

The most recent push that makes no sense whatsoever is now Democrats are pushing the idea that there needs to be a fourth round of stimulus checks. Some have even suggested that the government provide regular payments “until the pandemic is over.”

What I hear is this: “Keep buying votes until at least next year’s mid-term elections.”

But Democrats have their own logic for wanting the payments, and the one I hear most often is this: The payments will lift people out of poverty.

Just a fourth stimulus check could lift more than 7 million people out of poverty, according to an analysis from the Urban-Brookings Tax Policy Center.

Sounds great, right? So just how long are they lifted out of poverty anyway? A month? Maybe two? And then they are right back where they were, and possibly even worse off.

Several things are happening right now due to the current policies of this government and it’s careening toward an inevitable conclusion – a crash of mammoth proportions.

First, the Federal Reserve has kept interest rates near record lows for quite some time now, and has indicated they have no desire to raise them anytime soon. As has been seen in the past this has inflated asset prices significantly. Record stock market prices are coupled with a housing market that frankly has been insane. I’ve been an Indianapolis area real estate investor for twenty five years. There are houses on the market right now selling for $125,000 that I bought in 2010 for $25,000. Great for me, not so great for people wanting to buy a home or find a reasonable rate of rent.

Second, the government continues to pay people not to go to work. We discussed this last week but it’s a crisis that no one seems to be covering in the media. Help wanted signs are everywhere and no one can get people to apply. A recent conversation with a local here in Florida I learned that a restaurant I frequent had gone through eight dishwashers in ten days.

The result of this massive amount of labor demand has forced restaurants and similar businesses to offer more money, incentives and other perks. A restaurant here in downtown Saint Augustine is now offering $15/hour to dishwashers. Anyone starting at the DQ in Spencer Indiana makes $11+/hour. This may sound great for workers, however, the effect of this, of course, is that prices are rising.

I made the mistake last week of ordering a fish sandwich at a local restaurant. It was a grouper sandwich, and it was quite tasty. The menu listed it as “market price,” which I didn’t think much about honestly. When I looked at the bill even my pocketbook was stunned to see it was $26. Yes, twenty-six bucks. For a sandwich.

Coming home from Indiana a few weeks ago I hit up a Dairy Queen for a four piece chicken basket and small shake. $11.11.

The cheapest gas I saw on the trip was $2.59. We all know as summer approaches and all the pent up demand for travel begins to be unleashed that $3 gas is right around the corner. And all this leads us to the problem that must soon come to a head.

What happens when the stimulus checks do run out? The rich are richer – in some cases way richer – and the people who have been “lifted out of poverty” are back where they started and are now even further in the hole. Likely so much so that they’ll never get out. Rents will have increased beyond their capacity to afford it. Prices for gas, food and necessities will have gone up to the point that suddenly things are very unaffordable. The federal reserve will likely raise rates to combat this inflation, but it will be too late. People who bought overpriced real estate with variable loans will feel the pain of that – do we not recall 2008?

The debt we are adding and the environment we are creating are not sustainable. And history has shown us what happens every time we have gone down that path.