Proving that many people have no idea what causes inflation, the majority of Americans in a latest poll said they want the us government to hand out stimulus investigations to combat inflation.
In the poll commissioned by Newsweek , 63% of the respondents stated they agreed that the feds should issue new stimulation checks to tackle inflation. Forty-two percent said these people “ strongly agree” whilst only 18% disagreed. 15 percent said they neither agreed nor disagreed.
The results of this poll reveal the effects of redefining “ inflation. ”
Properly defined, inflation is definitely an increase in the money supply. Rising consumer prices are one symptom of inflation. But the government has effectively redefined pumpiing as “ rising prices. ” In effect, most people believe a symptom of inflation is inflation. As a result, most people have no clue exactly where inflation comes from.
This was on purpose.
Of course , when you accurately define inflation , it becomes crystal clear who is at fault — the Federal Arrange and the US government.
Economist Ludwig vonseiten Mises explained exactly why this particular redefinition of inflation is really pernicious.
“ People today use the term `inflation’ to refer to the particular phenomenon that is an unavoidable consequence of inflation, that is the tendency of all prices plus wage rates to rise. The consequence of this deplorable confusion is the fact that there is no term left in order to signify the cause of this within prices and wages. There is no longer any word open to signify the phenomenon that has been, up to now, called inflation…. While you cannot talk about something that has no name, you cannot fight this. Those who pretend to fight inflation are in fact only fighting what is the inevitable consequence of inflation, rising prices. Their own ventures are doomed to failure because they do not assault the root of the evil. They will try to keep prices low while firmly committed to an insurance policy of increasing the quantity of money that must necessarily make them soar. As long as this terminological confusion is not entirely wiped out, right now there cannot be any question of stopping inflation. ”
Today, individuals aren’t even asking the federal government to fight inflation. They will just want Uncle Sam handy them money in order in order to mitigate the pain of rising prices.
Actually, stimulus during the pandemic is among the factors causing the high prices today.
The particular Federal Reserve pumped more than $3 trillion into the economy after the 2008 financial crisis through quantitative easing . It also stimulated credit development with 0% interest rates that lasted more than a decade. During the outbreak, the Fed doubled down, pumping nearly $5 trillion more into the economy plus dropping rates to absolutely no again.
The us government exacerbated the situation during the outbreak by handing out three models of stimulus money, along with trillions in other aid. This particular enabled consumers to keep spending even though they were sitting in your own home playing Xbox and not generating anything. With more dollars chasing fewer goods and services, a massive spike in consumer prices was entirely predictable.
And that’s exactly what we got. And it hasn’t abated. Oct CPI came in at 8. 2% on an annual basis .
Meanwhile, wages aren’t keeping up with rising prices . Real typical hourly earnings decreased simply by 3. 0% from Sept 2021 to September 2022.
It’s no wonder people are clamoring for more stimulus. But it will only make the circumstance worse. In the first place, it will place more dollars in customers’ hands without any corresponding increase in the supply of goods and services. This is a recipe for even more price increases.
Moreover, the US government doesn’t have any money to hand out. This just ran a $1. 3 trillion budget debt . In order to give everyone stimmy checks, the government would have to borrow more money. The Treasury market is already reeling due to rising interest rates. Ultimately, the Federal Reserve would almost certainly have to monetize that brand new debt with more quantitative reducing. The only other alternative would be to let interest rates soar, making the interest payment on the debt even higher.
Stimulus checks might provide a little temporary relief, but they would ultimately make inflation worse and prices might rise even higher later on. But most Americans don’t understand that. They don’t understand inflation. They just know they’re battling and they want government to “ make it better. ”
The problem is the government never makes it better. It always makes things worse. And it’s important to remember you never have more government for free. You generally pay.
That you simply paying for your COVID stimmy checks today through the inflation tax . If you get another stimmy check tomorrow, that will indicate an even bigger inflation taxes increase down the road.