August 19, 2022

At this point Inflation Is the Millennials’ Fault! Or Is It?

Somehow, the particular Fed manages to escape scrutiny in any mainstream discussion of inflation. But the central financial institution is the root of the problem.

Putin is causing inflation.   Greedy corporations are usually causing inflation . COVID-19 caused inflation. We hear all kinds of reasons for  the recent spike within prices . And now we have a new one. It’s the millennials’ fault.

This really is all wrong and it demonstrates the problem with redefining pumpiing to be something it isn’t.

Smead Capital Expense chief investment officer Costs Smead  told CNBC   the size of the millennial generation is causing inflation.

“ See, what everyone is not including in the conversation is what actually causes inflation, which is many folks with too much money chasing not enough goods, ” he stated, explaining that there are roughly ninety two million millennials.

“ So we have in the usa a whole lot of people, 27 to 42, who postponed home buying, car buying, for about 7 years later than many generations. But in the past 2 yrs, they’ve all entered the party together, ” he said.

Smead actually gets closer to the reason for inflation than most. This individual at least recognizes that more dollars chasing the same amount of products and services causes costs to rise. But he simply leaves the key question unanswered – where are these people getting all of these extra dollars?

If the number of dollars along with the number of goods and services in the system remained stable, rising spending by one era would necessarily correlate along with declining spending in other people. As millennials consumed more stuff, there would be less stuff for other people in the some other generations to purchase. Prices might remain stable.

More realistically, the larger generation would produce more things, adding to the inventory of products and services. In a stable monetary environment, prices might generally fall as the bigger generation produced additional wealth.

But since Smead explains it, the millennials apparently aren’t making more. But somehow they have got more dollars. Meanwhile, almost every other generation still has the same number of dollars and they continue to spend at the same pace. For that reason we have all of these extra millennial dollars chasing the same amount of stuff.

Viola — inflation!

But it seems like maybe Smead is leaving out a key player in this scenario.

He is — the Federal Reserve.

The only way millennials can have more dollars without taking dollars from other generations is if somebody is creating new dollars. That somebody, of course , may be the Fed.

The Root of the Problem

Somehow, the Fed manages to escape overview in any mainstream discussion of inflation. But the central bank is the root of the problem.

The Fed developing trillions of dollars away from thin air over the last couple of years plus injecting them into the economic climate is the primary reason we all see consumer prices spiking through the roof today. Indeed, oil price shocks, supply chain issues and other elements drive up prices in certain sectors, but the Fed monetary policy lies behind the more general rise in prices.

The federal government also performed a role. In the first place, the US government required the Fed to monetize its pandemic borrowing plus spending spree. Meanwhile, both Trump and Biden administrations took a lot of the newly produced money and showered it on consumers with incitement checks. That put money in people’s pockets even as they were sitting at home producing nothing.

So , exactly how did millennials spend a bunch of money while they weren’t working? The Fed “ printed” it and the government gave it to them.

The Fed is the engine that drives it all. The particular central bank creates the dollars. Without all of those additional dollars, people couldn’t have “ too much money” to chase too few goods, as Smead explains it.

One question remains — how does the Fed manage to get off scot-free in each inflation discussion when its policies drive inflation?

Because the politicians, bureaucrats, central bankers and mainstream media pundits have successfully redefined inflation.

Getting the Definition Correct

When people use the term “ inflation” today, they mean increasing consumer prices as measured by the Consumer Price Index (CPI). You’ll often hear CPI referred to as “ an inflation measure. ”

But rising costs aren’t inflation. They are a  symptom   of inflation.

Look at this definition of inflation from the 1971 dictionary.

Observe that the definition mentions rising prices, but only as a regarding inflation. Inflation itself is described as “ an increase in the amount of cash and credit. ”

Over the years, the government, along with its apologists in the business media and academia, changed the definition to suit government reasons. The standard definition of inflation bandied about today is simply government propaganda.

Why does the government want to establish inflation as rising costs?

Because the modern definition allows policymakers in order to shift the blame. Whenever we use the original definition of pumpiing as an “ expansion from the supply of money, ” at fault becomes clear. Who grows the supply of money? It is the Fed and the government. Therefore , if you accurately define pumpiing, you know exactly who’s accountable. But if the government can fool people into believing that an effect of inflation  is   inflation, they can blame it on whoever, or whatever, is increasing the prices – Putin, pandemics and apparently millennials.

The original definition of inflation is the key to understanding pumpiing. When you misdefine inflation since rising prices, bad monetary policy and bad fiscal policy go on unchallenged.

The inflation blame game is great for the forces that be. It’s not so excellent for you or me.

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