By John Richcreek

Guest columnist

How governments’ “blue-sky” thinking destroys consumer economics around the world was finally revealed recently in a short newspaper article titled “Fed’s rate hikes likely to cause a recession,” wherein was recapped by a panel of researchers, which included three Fed officials, of a study of 16 episodes of high inflation worldwide. Different countries, but the exact same impact of recessions.

This was something that has never before been admitted to the public.

In my way of logical thinking, this short little article should have had bold headlines on the front page of every newspaper nationwide, as this is the first time that I can recall or the public has ever seen it in print what we all know happens in our billfold — the lost buying power of our precious dollars.

The results of government agencies, such as our own Federal Reserve Bank’s program of cranking up interest rates to fight off soaring inflation, have always been followed by periods of recessions and real depressions where jobs disappear and unemployment claims soar and the welfare rolls explode as is happening now. The logic is so simple it’s almost embarrassing.

In very easy to understand words, it’s known as cause and effect, or better yet, think of this as a vicious circle where the cost of borrowed money increases the prices of consumer products, which often leads to reduced sales, which leads to reduced employment, which then leads the regional economy into a recession and lost tax revenues, leading to more deficient government spending for welfare type claims.

As a further example of this simple fact, in the early 1950s, a married couple enrolled in a Michigan college were both awarded doctorates in economics for their studies of the relationship of industrial manufacturing jobs to regional service type jobs in areas across the United States.

The database for their studies were government records of unemployment claims, and their findings were, without fail, consistent everywhere as: For each gain or loss of one manufacturing job, there were always three service jobs likewise affected in that region: 1 to 3 and it never varied.

Right now, there are steel mills rusting away as many attractive manufacturing jobs disappeared due to the crush of imported products. Now, we are faced with a huge opportunity to restore steel producers, one of our basic industries, as we must soon rebuild the failing interstate highway system, again funded by taxpayers, and the first priority of every elected congressman must be to ensure that all labor and every pound of materials, such as steel and concrete, comes from our American resources.

The world of commerce runs on borrowed money, and the normal wear and tear requires replacement of worn facilities from time to time. But no company can afford to foolishly set aside funds only for that purpose, and consequently, they must borrow those funds when necessary, and any rise in interest rates has a multiplying impact as it passes along the chain of commerce from source to a finished product.

A small interest increase in borrowed money often means a sizeable jump in the cost of the finished product. And many of these “banking” experts have little or no experience in the real hard-knock school of commerce passing from theoretical university studies into mostly government type desk jobs pushing around reams of nonsense data and guessing as to solutions for problems they don’t understand.

It’s also surely doubtful that any member of such governing agencies, like the Consumer Price Index, has ever set foot in their local grocery store with a list of weekly necessities in one hand and a budget billfold in the other hand. As a former president said, “The buck stops here,” and so it is with inflation, the end customer always suffers and pays the price.

Seymour resident John Richcreek occasionally writes columns and letters to the editor for The Tribune.