Is Illegal Immigration the Reason Why Inflation is High?

The end of Title 42 isn’t the punctuation point everyone thinks it is.

It’s more like a comma in the decades-long failed immigration policy that’s been kicked from one administration to the next.

Open-border activists constantly talk about the economic benefits provided by the illegal immigrant population. These same individuals claim we can solve inflation by feeding our economy with cheap labor.

None of this is true.

Nefarious actors exploit immigrants in a long chain of events that can lead to death, sex trafficking and work that amounts to little more than indentured servitude.

And this isn’t hidden behind some back alley either.

Just this past February, the New York Times, yes that New York Times, published an article that highlighted migrant children who have been exploited by our consumer goods supply chains.

Can you imagine a liberal icon pointing out:

• A 15-year-old girl packing Cheerios in Michigan (at a food contractor that packages products for well-known cereal brands).
• A ninth grader who works 14 hours at a sawmill in South Dakota.
• A 14-year-old who works construction in north Miami even though it’s illegal.

None of this should be acceptable on any moral grounds. However, we leave those debates for clergymen and politicians.

We take umbrage with the economic arguments.

It is both naive and short-sighted to solve a labor shortage with uncontrolled immigration.

And it’s also why we’re far more likely to see inflation exacerbated as a result of these actions, or inactions, to be more accurate.

Yes, that’s a bold claim to make. But as always, we back it up with actual evidence.

Because as investors, our job is to analyze these issues and make our decisions objectively.

You see, real money isn’t made by following the crowd.

It comes from the fortitude to take a strong position against the mainstream and invest accordingly.

We can lay out the case. But only YOU can decide whether to do something about it.

Let’s start by asking the simple question: where are the jobs these folks are supposed to fill?

Or better said, where do we see the highest levels of inflation?

According to the Bureau of Labor Statistics, that would be food and shelter.

So, immigrant labor could temper inflation by filling those jobs, right?

That only works if there ARE jobs to fill.

Except, the latest job openings report puts the highest needs in health care, leisure and hospitality and professional and business services.

Where does construction rank, you ask?

Way down on the list, where it’s been for a very long time.

Here’s the real story.

Labor is PART of the inflation story but not even close to the most important part.

We have a supply-side issue constrained by capacity. Period.

Sure, there’s a shortage of houses. But not because we can’t find people to build them. That’s only one part of the problem and doesn’t provide the necessary context.

Construction relies more on skilled labor than ever before. And guess what? It’s a crapshoot as to whether an illegal immigrant has the skills to match.

This is a big reason for the push by some folks to tie immigration to skills and bringing in more people to fit our economy, not the other way around.

But more importantly, people truly do not understand how the failed pandemic policies left us in a hole. We literally stopped working for an entire year. You can’t just double production coming out of that kind of slump. It can take years, if not decades, to rebalance.

In simple terms, our economy suffers from too much demand compared to supply.

The Fed can stoke or temper demand to some degree with interest rates. But it cannot influence supply.

Think about it. The same high interest rates it uses to choke off demand also make it costlier to increase any production capacity.

Now, can you guess what would make this demand-side problem even worse?

Government spending would certainly do it. Having to pay folks overtime to travel down to the border to supplement an underfunded staff doesn’t help. Nor does the cost of holding folks for trial.

However, that’s short-term thinking.

When illegal immigrants come into the country to flood already saturated industries, you get the same pay split over more people while demand increases.

It’s basic economics.

If I only need $100 worth of work, I can pay one person $100.

But if I can pay two people a total of $75, I’ll take that deal. I make out fine. But now, our economy has to support two people who make less than one would have alone.

That’s the piece open-border advocates miss. They treat labor like it’s transferable and elastic when it’s really neither.

This fundamental flaw will cause market participants, including major investment banks, to underestimate inflation’s strength and endurance.

Now, we’ve already laid out the case for why we see 20% interest rates as a real possibility.

The question is, what can you do about it?

If you want to beat inflation, then you need to out-earn inflation.

We’re not suggesting you try to pull off 20% a year.

But what about 13.93%?

Remember that old concept of compound interest they taught us back in school?

It’s still relevant.

If you start outpacing inflation now, you won’t need to scramble in the coming years.

Don’t know about you, but that sounds a lot less stressful.

Okay, so where did we get 13.93% from?

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A fund that is used by some of Wall Street’s most profitable hedge funds, mutual funds, and investment banks to invest their cash and boost their total returns.

We could go on, but we’d rather let Bryan tell you in his own words.

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