• Tag Archives inflation

  • Republican Platform Ignores Real Causes of Inflation

    Posted on by Azrael Comment

    The 2024 Republican platform promises that, if Donald Trump returns to the White House and Republicans gain complete control of Congress, they will reduce inflation. The platform contains some proposals, such as reducing regulations and extending the 2017 tax reductions, that may help lower prices in some sectors and spur economic growth. However, the GOP platform does not address how the Federal Reserve’s enabling of spendaholic politicians contributes to price inflation.

    Other than an obligatory promise to cut “wasteful” spending, and a pledge to eliminate the Department of Education, the Republican platform is largely silent on proposals to reduce federal spending.

    The GOP’s apparent desire to increase military spending is a disappointment to those of us who hoped the increased skepticism of foreign intervention among Republican voters would dampen Republican enthusiasm for the military-industrial complex. The platform also opposes any reduction in Social Security and Medicare. So, the “fiscally responsible” Republicans want to increase spending on one of the largest items in federal spending (“defense”) while opposing cuts in two others (Social Security and Medicare). Interest on the national debt, another of the top spending items, will continue growing under a Republican government. The only way Republicans may look like champions of small government is by comparison with the Democrats.

    While it is disappointing that the Republican platform rejects fiscal responsibility, it is not surprising. President Trump increased the national debt by between seven and eight trillion dollars. While spending did explode with the covid lockdowns, the debt increased by trillions between Trump’s inauguration and the covid-inspired spending spree. Spending increased during Trump’s first two years in office, when Republicans controlled Congress. This is not the first time a Republican president has betrayed his promise to cut spending: Both President Bushes, as well as President Reagan, campaigned on pledges to cut spending then increased spending and debt while in office.

    Politicians could not increase the national debt unless the Federal Reserve monetizes the debt by purchasing Treasury bonds and increasing the money supply to keep interest rates low. The need to monetize the debt is the main reason the central bank must keep interest rates from rising to anywhere near market levels. According to Manhattan Institute Senior Fellow Brian Riedl, every one percent increase in interest rates increases federal interest payments by 35 trillion dollars spread out over three decades.

    It is no coincidence that the rise of the debt-based economy with ever-growing levels of consumer, business, and (especially) government debt — along with the accelerated decline of the dollar’s purchasing power, which reduces Americans’ standards of living — all occurred after President Nixon severed the last link between the dollar and gold. Yet, the Republican platform does not call for Congress to pass the Audit the Fed legislation, much less create a free market in money by legalizing competing currencies. Of course, the platform does not endorse ending the Fed’s ability to monetize federal debt by forbidding the Fed to purchase federal debt instruments.

    It remains up to those of us who know the truth to keep spreading the message that the real key to making America great again is to make money real again by auditing and ending the Fed.

    https://ronpaulinstitute.org/republican-platform-ignores-real-causes-of-inflation/


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  • Economists Are Roasting Biden’s ‘Incoherent’ Inflation Tweet—and for Good Reason

    Posted on by Azrael Comment

    President Joe Biden’s approval rating is tanking, and he’s now trailing former President Donald Trump in national polls, as well as in some key swing states .

    Vox blames the economy for Biden’s plunging popularity — or at least voters’ perception of the economy. A new Gallup poll shows that just 32% of people approve of Biden’s handling of the economy.

    To combat the narrative that Biden’s policies are to blame, the White House has gone on the offensive, attacking billionaires and blaming corporations for the economic pain the public is experiencing.

    “Let me be clear to any corporation that hasn’t brought their prices back down even as inflation has come down: It’s time to stop the price gouging,” Biden tweeted . “Give American consumers a break.”

    It’s a strange line of attack for several reasons, but the most glaring one is that it’s entirely devoid of economic sense, something University of Michigan economics professor Justin Wolfers observed on X.

    “This is not only incoherent; it’s unhelpful,” Wolfers, a senior fellow at the left-leaning Brookings Institution, said of Biden’s tweet. “It’s incoherent because lower inflation is cause for firms to moderate their price hikes, rather than cut prices. It’s unhelpful because the only path back to earlier price levels is deflation, which comes with massive economic pain.”

    Melissa S. Kearney, an economics professor at the University of Maryland, responded with a face-palm emoji.

    “I’m guessing the economists weren’t consulted on this one,” Kearney deadpanned.

    The obvious fact the Biden White House missed is that while inflation might be slowing, it’s still positive, which means prices are still increasing — and at a clip much faster than the Federal Reserve’s target of 2%. That companies would cut prices amid a general rise in consumer prices defies economic sense.

    A second problem with Biden’s tweet is that he points the finger at companies for inflation that stems from the government’s policies. In one of his most famous lectures, the Austrian economist Ludwig von Mises pointed out that inflation is just that: a policy .

    And if we look at recent U.S. monetary policy, it’s clear why people are suffering from inflation.

    Over a four-year period, the Fed increased the M2 money supply from $14 trillion to $22 trillion at its height in the summer of 2022, an increase of more than 50% in just four years.

    The M2 money supply has fallen slightly, to $21 trillion, due to tighter Fed policy, but it is still significantly above pre-pandemic levels.

    This is the cause of price inflation, and one need only look at the Fed’s description of what causes inflation to confirm this.

    “Inflation is caused when the money supply in an economy grows at a faster rate than the economy’s ability to produce goods and services,” the Federal Reserve Bank of St. Louis states on its “ Money and Inflation ” resource page.

    The obvious question is: If printing money causes inflation, why are we doing it?

    The Fed has long claimed that inflation is just the price we must pay to keep unemployment low, but using monetary policy to fight unemployment has always been problematic. It’s true that there is, generally, an inverse relationship between unemployment and inflation, as demonstrated by the Phillips curve . When inflation rises, unemployment falls and vice versa — at first.

    This relationship weakens over time , however, which is why some astute economists, including the Nobel Prize-winner F. A. Hayek , believed that using monetary policy to curb unemployment would inevitably result in higher and higher inflation, as central banks would have to print more and more money to maintain low unemployment.

    We’ve seen this phenomenon play out in numerous countries in recent history, including Argentina , where inflation is above 140%. Despite Argentina’s high inflation, its unemployment rate has averaged about 8.5% over the last decade. In other words, Argentina has high inflation and high unemployment, just as the United States did in the 1970s.

    Managing unemployment might be the stated reason for inflationary policy, but the actual reason seems to be something else: It facilitates government spending. As the Nobel Prize-winning economist Milton Friedman and others have pointed out, inflation is a tax.

    Taxes are what facilitate government spending, and once one grasps that inflation is a tax, the inflation picture becomes clear. Inflation is caused by expanding the money supply, but the impetus behind the money printing is government spending.

    Politicians can’t admit this, of course. So they concoct ridiculous economic arguments that blame companies for the very inflation their policies cause.

    This article originally appeared on The Washington Examiner.


    Jon Miltimore

    Jonathan Miltimore is the Editor at Large of FEE.org at FEE.

    This article was originally published on FEE.org. Read the original article.


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  • Why Justin Trudeau Is Blaming Grocers for Surging Food Prices in Canada

    Posted on by Azrael Comment

    New government data emerged this week showing that food prices in Canada continue to climb.

    Though year-over-year inflation of consumer prices overall cooled to 3.8% in September, food prices increased 5.8% from a year ago, driven by surging prices of bakery products (up 8%), fresh vegetables (7.6%), pasta products (10.8%), and poultry (6.5%).

    Food prices have long been a sore spot for Canadians. Even prior to 2023, statistics showed that some 7 million Canadians, including 1.8 million children, were in households struggling to put food on the table.

    As inflation continued to drive food prices upward in 2023, consumer outrage quickly mounted.

    “If I’m paying that much, I hope there’s gold in that chicken,” one user responded to a viral tweet in January showing a $37 price tag on a package of chicken breasts.

    The episode prompted accusations of price gouging and a high-profile story in the New York Times — but the paper reported that outrage at grocers was misplaced.

    “While it’s easy to get angry at the grocer, there’s very little evidence that the grocers are actually taking advantage of the situation,” said Mike von Massow, a food economics professor at the University of Guelph in Ontario.

    Food prices have only gotten worse since then, and Prime Minister Justin Trudeau, apparently not a reader of the New York Times, has found the same scapegoat as many others unversed in basic economics: grocers.

    Last month, Trudeau threatened to slap grocery stores with new taxes if they don’t find a way to lower food prices.

    “Large grocery chains are making record profits. Those profits should not be made on the backs of people who are struggling to feed their families,” Trudeau told an Ontario crowd.

    By taking aim at grocers and “record profits,” Trudeau is parroting the rhetoric of some U.S. politicians, including Sen. Elizabeth Warren (D-MA), who has argued that inflation is being driven by “corporate greed.”

    The idea that corporations suddenly became greedy in the aftermath of the pandemic never passed the economic smell test, and it was recently rebutted in a Federal Reserve paper.

    “Corporate profit margins were not abnormally high in the aftermath of the COVID-19 pandemic, once fiscal and monetary interventions are accounted for,” noted Dino Palazzo, senior economist at the Federal Reserve Board.

    Yet politicians such as Trudeau, who less than a year ago criticized the idea of using a windfall tax on grocery companies to lower food prices, have repeated the claim over and over again that greedy corporations are the root cause of inflation. Why?

    The answer is simple: the true blame for inflation lies with them.

    Pierre Poilievre, leader of Canada’s Conservative Party, hit the nail on the head in a recent interview when he pointed out that the Canadian government’s policies are to blame for inflation — as are those who lead it.

    “[Trudeau] prints $600 billion, grows our money supply by 32% in three years,” Poilievre said. “That’s growing the money eight times faster than the economy. No wonder we have the worst inflation in four decades.”

    This is the mystery of inflation. (It’s not really a mystery.) Politicians and central banks flooded the economy with money, which devalued the currency.

    Basic economics teaches that increasing the money supply faster than an economy can provide new goods and services will result in price inflation, and that is precisely what we’ve witnessed. Indeed, for much of modern history, inflation was defined as expansion of the money supply, not an increase in prices (which is the consequence of expanding the money supply). Henry Hazlitt famously explained the difference in Economics in One Lesson.

    “Inflation is an increase in the quantity of money and credit. Its chief consequence is soaring prices,” Hazlitt explained. “Therefore inflation — if we misuse the term to mean the rising prices themselves — is caused solely by printing more money.”

    Politicians such as Trudeau cannot, of course, admit it’s their own policies and money printing that are to blame for high food prices. So they hold speeches blaming grocery stores and food producers for the inflation they caused and threaten them with new taxes.

    Whether Canadians will see through Trudeau’s crude charade is unclear. What is clear is that Canadian grocers are not responsible for the skyrocketing price of food in Canada. Justin Trudeau and the Bank of Canada are.

    This article originally appeared on The Washington Examiner. 


    Jon Miltimore

    Jonathan Miltimore is the Editor at Large of FEE.org at the Foundation for Economic Education.

    This article was originally published on FEE.org. Read the original article.


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