No, inflation is not caused by citizens having too much money, but by government printing and spending too much money.
“There too much consuming going out there.
Senator Ernest Fritz Hollings
North Carolina
Recently I’ve subscribed to The Atlantic, one of the greater news “sources” for the DC Ruling Class. Reading it, no public official (at least Democratic officials) has ever made a mistake. I like to read, as I’ve often said, propaganda of our nation’s enemies, e.g., Pravda, Izvestia, The People’s Daily and the New York Times.
That is somewhat factitious, but I believe it is good to read the writings of people on the opposite political side as you. Good to know what they are thinking if you will. I found this recent article rather thought provoking. I actually read it and wondered if the author had taken a basic economics course. I looked at her bio on the article and she writes on “economics and polities” for The Atlantic. So safe assumption she’s studied economics. Does she know it? Let’s take a look at her article:
If people are so mad about high prices, why do they keep buying so many expensive things?
By Annie Lower
You would think, with prices as high as they are, that Americans would have tempered their enthusiasm for shopping of late; that they would have pulled back spending on luxury items; that they would have sought out budget and basic options, bought smaller packages, fewer things.
This is not what has happened. Consumer spending rose 0.2 percent, after accounting for higher prices, in October, the most recent month for which the government has data. Online shopping jumped 7.8 percent over the Thanksgiving long weekend, more than analysts had anticipated. The sales of new cars, dishwashers, cruise vacations, jewelry—all things people tend to give up when they are watching their budget—remain strong. Consultants keep anticipating a recession precipitated by the “death of the consumer.” Thus far, the consumer is staying alive.
People hate inflation, just not enough to spend less: This is one of the central tensions of today’s economy, in which things are going great yet everyone is miserable. And in some ways, Americans have nobody to blame but themselves.
Three years ago, the pandemic gnarled supply chains around the world, leading to shortages of many consumer goods. At the same time, the American government transferred roughly $1.8 trillion to households in the form of generous unemployment-insurance benefits, an amped-up child tax credit, stimulus checks, and delayed or forgiven student-loan payments. Less supply, more demand—it was a recipe for higher costs.
Costs really rose. A dozen eggs went for $1.33 the summer after the pandemic hit; the price topped out at $4.83 last winter. Gas prices nearly tripled. Used cars started trading for as much as or even more than new cars. The cost of leasing an apartment surged. The cost of buying a house went up even more…
I might suggest to the author some simple reading, first from the Encyclopedia Britannica. Inflation is defined there (also, see The Wealth of Nations by Adam Smith:
Inflation:
Inflation refers to the general increase in prices or the money supply, both of which can cause the purchasing power of a currency to decline.
As the first and oldest of the inflation theories, the quantity theory of money views inflation as primarily a “monetary” occurrence. In other words, the influence of the amount of money in the economy takes precedence over all other factors, including income levels, demand for goods, and frequency of spending (aka, the velocity of circulation or velocity of money).
Money has no intrinsic value. The US dollar was taken off the gold standard by Richard Nixon and has been handled by the Federal Reserve since. Therefore it’s value is set like any other commodity, supply and demand. It’s worth what someone will give you for it.
When Ronald Reagan entered office in 1981, he had to handle a multi-year (and multi-presidency) double digit sustained inflation. The cure was painful, tight money supply and high interest rates for the first two years of his presidency. The process was laborious but had the virtue of working every time it’s tried. Reagan and the Federal Reserve Chairman Paul Volker cut inflation from 13.5% in 1980 to 3.21% in 1983.
Fast forward to 2021, Democrats inherits an inflation rate of 1.23%, partially from reduced economic activity caused by Covid. Not to be outdone, President Joe “Come on man!” Biden and the Democrats in Congress would not let a good crisis go to waste. Massive unfunded spending, such as the 2.2 trillion 2021 “Build Back Better Bill” (better called the “Build Back Broke Plan”) and the “Inflation Reduction Act” (aka the “Inflation Production Act”) adding a reported 800 billion in outlays (actually over another trillion). Please don’t forget the bi-partisan Infrastructure Bill of 2021, coming in at only 1.2 trillion.
These idiots (both parties) should remember you spend a billion here, a billion there, and a billion there, before you know it, you’re talking real money. I don’t think you need to count that high where you’re talking about spending a trillion here and there. In three fiscal years, the Democrats (with little push back from the GOP, Speaker Johnson’s term is to be determined) put on 6 trillion dollars to the nation debt. They also increased the amount of the debt held by the public (you know, the dollars printed out of thin air with nothing backing them) from 21 trillion in 2021 to 22.3 trillion in 2022.
Let’s not forget deliberately driving up fuel costs (Biden’s war on energy) which increases prices on everything, trying to force people into electric vehicles they don’t want, and completely transforming an economy that will not be transformed without a fight. Trying to make people buy overprices EVs that will not work outside of NY or LA (did anyone think about how 18 wheelers are supposed to be powered?) will make cost higher and supplies smaller.
The lesson? Inflation is NOT caused by people having too much money. It is caused by government printing too much and trying to control a 20 plus trillion-dollar economy with idiots too stupid to run a Girl Scout cookie stand.
Michael A. Thiac is a retired Army intelligence officer, with over 23 years experience, including serving in the Republic of Korea, Japan, and the Middle East. He is also a retired police patrol sergeant, with over 22 years’ service, and over ten year’s experience in field training of newly assigned officers. He has been published at The American Thinker, PoliceOne.com, and on his personal blog, A Cop’s Watch.
Opinions expressed are his alone and do not necessarily reflect the opinions of current or former employers.
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