The Consumer Price Catalog (CPI) in the US was 9. 1 percent in 06 .
Taking into account that the government lies about pumpiing , it is better to consider Shadow Government Statistics’ CPI (based on the 1980s CPI methodology), which was (as of July 13) regarding 17 percent .
The government claims that this high CPI is due to Russia’s invasion of Ukraine (you actually could argue that, one of the reasons could be the sanctions on Russia’s economic climate, which don’t do much to harm to the Russian government and damages ordinary people both inside and outside Russia ). But this is just a reason for the government to not admit the blame. It is crystal clear the war has an influence on the CPI, as it removes the supply of various goods and services, which ends up increasing prices. However , the CPI has been going up since Feb 2021 .
The 2020 and 2021 lockdowns (and the adopted supply shocks) were also a big factor, but the real reason prices are going upward is the inflation (monetary expansion) created by the US government in 2020 and 2021 .
Yes, supply shocks cause increases in certain prices in the economy, but not a general increase in the costs of goods and services . If there is a supply shock of certain goods (making their prices higher), but the money supply does not modify, there will be a new equilibrium of supply and demand for that various goods and services in the economy (since the money supply is the same and individuals will have to change the allocation of their budget, therefore the prices of the goods which will have a lower demand will certainly decrease).
Once the supply shock of these goods ended, their supply might increase, and their prices would decrease (changing the particular equilibrium of supply plus demand once again). Just an increase in money in blood flow can make ALL (or nearly all) prices in the economy rise simultaneously, as the value of cash decreases and more units associated with currency are needed to pay for services and goods.
Inflation (the expansion of the money supply) and the consequent increase in costs is a disguised tax. The US government increased its spending and its budget deficit . So , it released more debt securities, that have been mostly purchased from the Federal Reserve (Fed) via an increase in the monetary base (M0) . Then, the federal government spent the newly developed money, raising the amount of money in circulation in the economy (M1 and M2) , which tends to make prices increased.
Note that the federal government increased its spending with out raising taxes in the exact same proportion. The cost of the increase in government spending was compensated by the population (nothing in the government is free; not really for the poor, who endure the most from taxes, as their incomes are lower) not by taxes, but by the increase in prices that occurred due to inflation.
Also bear in mind that government funding, by itself, is not inflationary. In the event that debt securities are all soaked up by the market (by investors and financial institutions) no new money is created with the central bank.
However , even in this situation the economy is broken because when the government switches into debt it appropriates resources that could be used for productive investments (which could increase the efficiency of the economy and make prices lower). In addition , government indebtedness also implies attention costs. To pay the interest (which tends to increase as debt grows), governments often raise taxes and/or borrow even more. The interest cost represents a lot more resources that are expropriated in the economy by the government.
Price increases harm everyone, especially the poor as well as the lower middle class (who have fewer resources). Due to rising prices, individuals will inevitably have to make budget cuts, buying fewer goods and services. The standard of living decreases. At best, individuals do not create budget cuts, but conserve less than before.
The poor and the lower center class are also more heavily affected because, due to rising prices, wealthy people and the upper middle class (who have enough income to afford to not make budget cuts) end up saving and investing less (of course, they hardly feel this change them selves, but it is a great cut in the savings and investments in the economy). If there is less purchase in the economy, productivity does not boost (or even decreases) and prices tend to increase in the particular medium and long run.
But even the wealthy people and the upper center class can be heavily impacted by rising prices caused by pumpiing. Imagine, for example , a retail company. If prices rise, individuals (notably the poor as well as the lower middle class, that are the majority) will stop buying certain products (after just about all, their income is not higher enough for them to have the luxury to afford not to do it).
Therefore , despite rising prices, the company’s profit decreases (or the company winds up incurring loss), also considering that, due to inflation, the costs associated with producers and the retail firm increase. This is what happened some time ago with Target , which registered lower profits. The owners of large retail companies and businesses that produce the goods occur to register lower profits (or even incur losses), and investors and financial institutions that buy the stocks of these businesses also lose (since the particular stocks are worth less and the companies tend to pay out less dividends or even postpone it).
Therefore , everyone is worse off due to government-generated inflation. But it may be the poor and the lower center class who take the majority of the bullets.
Government authorities always claim to help the poor and the lower middle class. But these are precisely the types who bear most of the price of governments (taxes, indebtedness, rules, and inflation). After all, the upper middle class and the wealthy can turn to lawyers, accountants, plus tax consulting agencies in order to allocate their assets to be able to pay less in fees (all legally).
And it’s a good thing they do so (if not, there would be even less investment in the economy plus prices would be even higher). They may also buy a lots of gold, invest in assets priced in currencies that are much less inflated, or resort to the other form of wealth safety.
Therefore , the particular poorest are the ones that actually pay for the government. It really is precisely because of governments the fact that poor and the lower middle class, in most cases, don’t get richer. It is the government that perpetuate poverty, precisely to justify their existence by deceiving to help the poorer. In the end, if there were no monetary inflation created by governments, prices would often decrease as the productivity from the economy rose and the quality lifestyle would rise .