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I’ve blogged about how high labor and energy costs are prolonging inflation, but there’s another business expense which hasn’t been discussed enough — interest. Almost all corporations rely on some kind of debt financing, usually in a combination of short & long-term bonds. In the past, this has been a cheap form of financing, and since businesses plan to go on indefinitely, they generally keep the debt on their balance sheets forever through refinancing. It’s sort of like taking out interest-only mortgages that you never pay off. This is especially true of the blue chip & staple companies. Think Wal-Mart, Cambell’s Soup, General Mills, Proctor & Gamble, Hormel, etc. The cash flow of these companies is virtually guaranteed, so why not take advantage of cheap financing to use for dividends, buy-backs, and new investment opportunities? However, these companies usually have debt originally financed at 2-4% interest. Eventually all this debt will come due, but when they refiance this time, rates are 5-10%. All that additional cost is passed on to consumers as higher prices. If interest rates keep going higher, this will be like yet another time bomb to hit the economy.
California recently passed a new minimum wage for fast food workers of $20/hour. The business-illiterate dipshits in charge obviously can’t make the connection with higher prices. In addition to wage laws, many liberal areas of the country, as “champions of labor,” do their best to keep out low-price companies like Wal-Mart and Dollar Tree since they don’t pay their workers enough. This constant business interference sounds good for political campaigns, but what good does it do when you make more money if it doesn’t buy squat? A dozen eggs may cost a few bucks at Wal-Mart, but if you must rely on a small mom & pop grocery store, the cost might be 2-3 times that. All goods & services operate similarly — the more government does to price them higher, the less wages will buy. BTW, higher wages push people into brackets where tax rules “on the rich” suddenly hit more and more people. I’m sure that’s by accident. 👌
Energy development is not something that can be done in days. It takes months and years of development — exploration, extraction, refining, and transportation. And it’s expensive! So, when Democrats do everything in their power to punish & constrain energy companies, what do you think potential future investor/developers are thinking? No one can predict future elections and regulations. Why would they bother with the time & expense if at the end they get zero return on their investment? This is why the Biden Administration is not only killing current energy development but also long-term energy independence.
I’m often accused of reflexively opposing the American government. That’s not exactly true. I’m reflexively distrustful of ALL governments, both at home and abroad. I’m naturally suspicous of people who are motivated by power, who have decided they shall make a full-time job of controlling other people. I begin with the assumption their actions are to preserve & enhance their own power. I’m sure that’s not true of all politicians, but how many have you seen that actually try to reduce the size of government and its intrusion into our lives? However, I’m more likely to trust governments if there is some kind of check on their power, mostly notably by a free & honest media. So, I trust and believe virtually nothing in China, Russia, and especially terrorist-sponsoring countries like Iran and Saudi Arabia. There was a time in the U.S. and other Western nations decades ago when the press at least tried to be a check on government power. They were liberally-slanted to be sure, but they still had some semblance of ethics and professionalism. Nowadays, that has almost completely disappeared. Mainstream media has become nothing but a bullhorn for the Ruling Class. There isn’t just bias–it’s full advocacy, and they can’t even do that without constant lies and distortion. It’s made so much worse, of course, by the mass censorship from Big Tech companies. Academia, Hollywood, Big Tech, MSM, woke corporations — virtually all the influencers are pushing for the suppression of free speech, and therefore, a suppression of checks on government power. So yes, I am, and will definitely stay, reflexively distrustful and non-believing of EVERYTHING in government.
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