Talking at the Eisenhower Executive Office Building, President Joe Biden on Tuesday morning declared inflation to be his top “ domestic priority” and was adamant that inflation would not become a problem were it not really for covid and the battle in Ukraine.
There was small room, however , for any sound economics in a speech which was little more than a campaign presentation for the ruling Democratic Party in an election year where the party looks to take a defeating at the ballot box.
In truth, it is the US regime itself— and the regime’s central bank— that is the source of today’s galloping inflation. And even worse, neither the central bank nor the White House will confess its role or invert course. Last week it was clear that Fed chairman Jerome Powell refuses to admit any role in today’s price inflation, and he apparently has no clue about what to do about it. This week, Biden insists his own government will be blameless all while additional pursuing regulation and fees that will only make pumpiing worse.
It’s Putin’s Fault!
Along with inflation at forty-year levels, and with wages falling behind, Biden was careful Wednesday morning to spin inflation as the fault of everything except the US government and the Government Reserve.
Specifically, Biden placed the blame of price inflation on covid-19 and on “ Mr. Putin” for the battle in Ukraine. Biden claimed the covid disease itself— i. e., not the forced government lockdowns— continues to be to blame for logistical problems and shortages that have contributed to rising prices. Moreover, Biden blamed the war within Ukraine for increasing costs given Ukraine’s role as being a grain-exporting nation and the current difficulty of exporting from war-torn regions.
Biden is correct for the reason that these events have a role in raising some costs, but it is a straight-up then lie to imply or suggest that logistics and grain-export issues are the major reasons for cost inflation in the United States today.
The real cause of price inflation is definitely monetary inflation , plus monetary inflation has been on overdrive for more than a 10 years. Over the past two years, moreover, financial inflation has accelerated in order to even more remarkably high levels.
Considering that 2009, the Federal Hold, the US regime’s central financial institution, has printed more than $8. 9 trillion to buy up mortgage securities and authorities debt. This increased after 2020 as the Fed again accelerated purchases of government bonds in order to keep interest rates low on a national debt overflowing upward.
Moreover $8 trillion created away from thin air, the Fed also set the target federal funds rate to historic lows to add liquidity into the banking system . This encouraged commercial banks to further accelerate monetary inflation through the mechanisms associated with fractional reserve banking.
Today, $12 trillion of the existing $21 trillion was created after 2009. That means 60 percent associated with today’s entire M2 cash supply was created in only days gone by fourteen years.
This wave of monetary creation has grown so immense that even International Financial Fund economists can no longer deny the role of main banks in surging prices. IMF director Kristalina Georgieva last month accepted central banks globally “ printed too much money and didn’t think of unintended consequences. ”:
I think we are not paying sufficient attention to the law of unintended consequences. All of us take decisions with an goal in mind and rarely think through what may happen that is not our objective. And then we wrestle with the impact of it.
Take any choice that is a massive decision, like the decision that we need to invest to support the economy. During those times, we did recognize that probably too much money in circulation and too few goods, but did not really quite think through the particular consequence in a way that upfront would have informed better what we do.
Without having all this new money development, the inflation we’re witnessing today would be impossible. That isn’t to say that we wouldn’t notice some rising prices thinking of wars and China’s on-going lockdowns. Those events certainly do drive up some prices.
But in a setting without constant monetary inflation perpetrated by central banks, inflation would not be general in the way it is now. Some prices would increase, but additional prices would decline, since would make sense when the cash supply is limited. There would certainly only be so much cash to go around so price inflation in some areas would be balanced by price deflation within others. But with monetary inflation running rampant, price pumpiing can do the same throughout the whole economy: more money is chasing goods and services.
Biden Is Making Price Inflation Worse simply by Hobbling Production
But even in routines when monetary inflation is usually rampant, the effect on cost inflation can be tempered simply by increased production and increased worker productivity. Specifically, improved technology, innovation, and global trade are all disinflationary energies that can make price inflation less bad.
The Biden administration, nevertheless , is currently waging war upon innovation, productivity, and business, and thus making price pumpiing even worse. In his Tuesday talk, Biden called for even more legislation on businesses and higher taxes. He wants more power to coerce businesses directly into higher fuel economy, plus to mandate more electrical vehicles. He wants to boost fees on oil and gas producers. He wants higher taxes on employers.
This will all only assist to cripple production and thus will put further up pressure on price inflation.
As far as international production goes, the Biden administration has largely maintained the Trump administration’s antitrade innovations. Biden’s anti-Russia guidelines have also only served to help cripple international trade by imposing economic sanctions on nations— including those that have friendly relations with the US— who consume critical Russian goods. This will be most disastrous for the poorest nations of the world, but United states consumers will be impacted as well. (Gas prices in the US on Tuesday hit a new high . ) As a result, the US has done much to boost energy and food prices worldwide while taking no steps at all to seek the diplomatic solution to the end from the war in Ukraine.
Americans have the misfortune of living under a regime that often inflates the money supply while working to cripple production. It is a recipe for ongoing inflation in both assets and customer goods.
But you won’t hear anything relating to this from the White House. This past year, the inflation culprit was “ greed, ” which supposedly prompted corporations to boost prices. (Why inflation-casing greed suddenly became far even worse in 2021 is in no way explained. ) Now, Putin provides a convenient scapegoat. Within the past six months, the regime provides repeatedly groped around just for whatever bogeyman could be blamed— so long as the central financial institution remains blameless.