Thursday, September 08, 2016

How Entitlement Drives Inflation

Our Slavic Agent in the Field sent me this:

I've seen this chart before and nodded my head saying to myself "Yep, that's inflation."  But it is what she said in her message that piqued my interest:

"I'm no economist and I don't understand inflation, but it seems to me something fishy is going on here."

This confused me because she's a smart gal and I would have figured she'd know precisely what's going on.  I wanted to yell

"Money's flooding these markets!  There's a fixed amount of goods.  Prices go up!  What's not to understand???"  

But that's what my SAEG economist mind sees, and not your everyday Joe.  Alas, it dawned on me that unless you dedicated a significant amount of time to studying economics, most people aren't going to understand this chart, or perhaps, more specifically, WHY certain things go up in price more than others.  And that is going to be our economics lesson of today.

The first lesson to pull from this chart is to note the things that have gone up in price the most.  Tuition and college are most prominent in the chart, along with childcare and health care.  I would also throw in health insurance and stock prices, because those are two other major items that have gone up faster than the rate of inflation.  But if you look at the most inflated items vs. the others, something should stand about about them.

That's right, the government is highly involved in these fields.

Government backs up, if not lends directly to students.  The government also guarantees and in some cases outright buys (therefore becoming the technical lender) the mortgages of most people.  The government has also mandated Obamacare, driving up your premiums and insurance costs.  And the government through low interest rate policies, quantitative easing, and the invention of 401k's and IRA's has either lent money to corporations to buy their stocks back in the stock market, or provided people a huge tax break to sock away money in the same.

So let me be a bit of an arrogant economist - why are you shocked these respective markets are the most inflated?

We can talk about inflation merely being "the increase in prices."  But to really understand inflation you need to know how prices got so inflated in the first place.  And that happens when MORE money is flooded into a market than others.

In other words say the government didn't spend/lend $1 trillion annually on education and left it up to people to pay for it privately?  What if Obama wasn't taking another $700 billion of working people's money to pay for the health care of the parasitic classes?  What if you didn't have every government guarantee backing up the housing industry?  That would damn well take away 75-80% of the money flooding these markets and prices would drop by the same.  People fret saying, "Well how can we pay for college/healthcare/housing/retirement/etc. without government help!?" but they fail to realize it's government money that is precisely driving these costs up.  If you simply took away this money (be it college, the stock market, healthcare, etc. etc.) prices would drop dramatically because there's be TRILLIONS less in money chasing those same fixed amount of degrees, doctors, houses, and stocks.

The second lesson is one that the Austrian economists keep trying to make, but you idiot commoners with your lips affixed to Keynes dick just can't seem to grasp.  Inflation, caused either by government spending, or excessive lending results in bubbles that overprice assets.  These assets become overpriced and cannot generate the income to pay off the debts incurred to purchase them.  As people default on these assets, closing their businesses and operations down, this then results in a genuine economic recession, until prices go back to where they naturally should have been in a free market allowing for profits (and lower prices I might add) once again.  The housing bubble and education bubbles are perfect examples of this LAW of economics.

Idiot Gen X dudebrodouchebags borrowed $800,000 on a $30,000 income to impress their blond bimbo wives back in the 00's by buying McMansions.  The government and banks were only too willing to provide them financing via ARM's and NINJA loans.  Sure enough, this flood of money drove housing prices up that their prices were no longer worth the rent these houses could generate.  And sure enough when Chaz McStevenson the IV got laid off because his dad was embezzling funds at the company AND the ARM reset at .5% higher than he could afford, he defaulted on his mortgage, becoming the first snow flake that caused the avalanche of our worst recession since the Volker Recession.

The education bubble is exactly the same.  Millions of idiot millennials (and Gen X'ers) thinking they're smarter than they are, deem themselves entitled to a college education.  Combine this with their parents, teachers, counselors, and progressive credentialism, they go off to college by the millions, spending trillions on degrees that for the most part are worthless.  This does a two-fer on the education market.  It drives the cost of tuition up (as evidenced by the chart above), but also lessens the income generating potential of degrees as the market is now flooded with them.  The economic cost is an entire underemployed generation living at home, unable to afford homes themselves, and a postponement of families as the female members of the millennial generation get to worry about menopause striking before they pay off their student loans.  We also get to see dwindling economic growth that barely keeps up with population growth, and thus a stagnation of standards of living.

In short, if we did even a half-ass job of educating our population about basic economics instead of the full-ass job we do today, two full entire generations would be able to vote in politicians and policy makers that would have said, "leave it the fuck alone."  The housing bubble (and subsequent recession) would never had occurred.  The education bubble and a generation of self-absorbed talentless and perpetually unemployable millennials would never have become.  And medical care/child care would not be going up as much as it has today.  But merely having the wisdom to say, "keep the government out of it" would not be enough.  We would also have to be willing to say, "I will do without."  And that's the real problem driving inflation - entitlement.

In the real world where people are forced to be self-sufficient, affordability is a determinant of demand.  And if tuition or children or a McMansion was not affordable, you would simply do without.  However, because we've brought up a generation of spoiled, entitled pussies since the baby boomer era, nearly all of our population thinks they're entitled to...well...just look at Bernie Sander's platform:

Free health care
Free child care
Free mental care
Free education
Free housing
Free food

And whereas some of these things are necessities, others are not.  But if you still insist on them being "rights," and you invoke the intervention of government to help you pay for them, this then drives prices up to the point you'd DEFINITELY be better off without them.  And we all know somebody personally who has endured financial, personal, and psychological hardship trying to buy one of these "rights" they were entitled to.

The college student who the government "helped" by lending her $150,000 for her "Masters in Poetry."

The fratbrodudedouche who borrowed $499,999 to pay for a $500,000 house in 2005.

The ghetto/barrio/trailer trash legions of single moms who "didn't need no daddy 'cause I got me my gubmint check!" and spat out a gross of bastard children.

Yes, congratulations, you sure are entitled to those things, and by gosh the government did help you finance for them.  But you ruined your life in the process purchasing assets that will never pay the debts you incurred to get them.

So yes, inflation is boring if you think it's merely "the increase in prices."  And if you had your run of the mill economics professors, I can see why you think inflation is dullsville.  But if you look at the details of our most inflated markets you witness a wonderful story of avarice, greed, entitlement, and stupidity being punished with a lifetime of debt, pain, poverty, and cluelessness.  And that, my friends, is how you enjoy the decline.
Asshole Consulting
YouTube Channel
Books by Aaron
Amazon Affiliate


Weak Stream said...

Political shit at the top, usefull shit at the bottom. I would also add that things like cars actually are going down in price if you calculated the effect of the credit machine that's attached to them. So they're also in the political shit column.

Anonymous said...

Damn...just...drop the mike on your way off the stage!


Having been trapped among grad students who only care about 'teh feelz', this is a breath of fresh air.

CEO Nikolic said...

Really good article, Heartiste.

Greg Nikolic here again. Thank you for permitting the publication of my prior two quotes on your site. I would like to comment a bit on this to demonstrate my economic knowledge. If I'm to get your respect, I should at least be able to dabble in the field you're adept.

When Keynes was head of the British delegation during World War II's negotiations on multilateral trade, he alienated the American opposite numbers with his attitude, his pretensions, and his lack of understand of U.S. (or as the Brits would say "US") business.

It is hard to understand how you can be a Great Economist without fully comprehending the workings of the U.S. market. The Canadian economy, where I'm from, is an appendage of the U.S. one. Power lines and economic flows run north-south, from Canadian city-states like Toronto to Chicago/New York, and from Canadian resource pits like Calgary down to California. They do not run east to west, as they should in a real country.

If Canada were part of the United States -- which it should be -- the opportunities for business here would be much, MUCH greater. The socialistic left-wing tinge of Canadian politics makes it less efficient to run a business here.

The Corporation I plan on incorporating in Toronto in the year 2018 will be one, thus, operating under handicaps. You, Captain Capitalism, as V-P of Finance (assuming I can ever get enough moolah together to launch this thing) will have to figure out a way to reduce my corp -- Quadelitedom's -- tax burden, and lighten the Canadian regulatory onerous concerns that will bedog and bedevil it.

Anyway *chops hand sideways* we can discuss this later.

Thank you again for not dismissing me as a crackpot. You have been wandering for a long time in the wilds, and I feel that you are coming to the end of your tether. You need rescue. Someone MUST lend a hand to lift you up. If I can bootstrap myself, that someone will be CEO Nikolic for you, Aaron.

BTW, I wrote a review of you as a writer on my website. Go to and scroll down. It's sandwiched between two reviews of your fellow co-executives, Delicious Tacos (visit his site at based in Los Angeles to get a glimpse of his mind at work) and Heartiste (ditto, at These are the men you will be working CLOSELY with. I have great faith and trust in you all. And, even, I suppose, love, if you can believe that of a total stranger who's just seen your videos, heard your podcasts and read your works. You're a gem, Cappy. -- (future) CEO Greg Nikolic of Quadelitedom Corp and novelist

grey enlightenment said...

make professors rely on patreon instead of tax payer dollars...prices would fall real fast

Borepatch said...

One thought looking at the graph (and it's only a thought) is that the items with low or negative inflation are mostly manufactured goods where production can be outsourced.

Anonymous said...

It's hard for me to believe that new cars are only up 2.1%; it has got to be hell of a lot more than that. I certainly won't be buying any new pick up trucks or cars. I've only bought one new car in my life and that will probably be the last. Especially with gubmint meddling on CAFE standards and asinine safety crap that adds no value but costs to a vehicle.

ST said...

In other charty economic news, can you to spot the correlation? Not 100%, but pretty high.

The Number of People Per State That Receive Some Form of Cash Welfare

Anonymous said...

Spot on, as always.

Anonymous said...

I would buy more of your books if they were 80+ pages of economic education like this. As one of the (apparently) three people who bought Reconnaissance Man, I found the low information density disappointing.