Bad Government Brings Bad Inflation

The worst inflation in over 40 years.

Prices for cars are rising by 37% Gas prices are up by 49%

Experts told us to relax during the past few years as politicians have spent more money.

Jerome Powell, chair of the Federal Reserve, said inflation would be “transitory.”

Treasury Secretary Janet Yellen said, “I don’t anticipate inflation is going to be a problem.”

Now she says, “I’m ready to retire the word transitory.”

How did it go wrong?

“Big corporations have taken advantage,” says Rep. Ted Lieu.

Sen. Elizabeth Warren tweeted: “greedy corporations are charging Americans extra.” It’s “price gouging.”

It is absurd.

“Greed is constant,” says economist David Henderson in my Video of the Week. “If it’s greed, how do we explain prices The falling?” When oil prices fall, is it because “oil companies just suddenly decide, ‘I’m gonna be less greedy’?”

Supply and demand affect prices.

Inflation results “from too much money chasing too few goods,” explains Henderson. “If government’s spending more money, that’s more money chasing too few goods.”

The government has borrowed heavily from the Fed and been spending more money in recent years. Trump’s presidency saw the nation’s debt rise to $7.8 Trillion. In just one year, the national debt has grown to $2.2 trillion. Biden is determined to spend $6 trillion more this year, a record.

How will they raise the money? Because the government doesn’t have any money to spend, it will need to borrow money or tax money more. Or, perhaps, just print money.

This is what they have done in the past few years. Untested, the Fed has produced more money than any time in human history.

The economy is losing money because of all the new money being pumped around. While you might notice price rises, inflation can cause damage to savings.

You can put 10,000 under your pillows, and 7% inflation will make it to $2,342 within 20 years.

You can’t count on your retirement savings if you did not save enough. The majority of your savings will disappear.

But today’s politicians are determined to spend more.

Biden claims his spending bills will “reduce inflation.”

“Biden’s wrong,” Henderson responds. “There’s no economic theory that says when the government spends a huge amount more money, prices fall.”

People want the government to set price controls and stop inflation.

That would be “horrible,” says Henderson.

Previous price controls have been attempted. Nixon in 1971 ordered an immediate freeze of all prices.

The sound was reasonable. Too much inflation We know that government can stop inflation by imposing a price freeze. But “that’s where people’s intuition goes wrong,” says Henderson.

False because prices don’t just represent money, they also contain information.

“Prices are signals … that guide people,” explains Henderson. “Mess that up, you’ve really messed up the economy.”

Prices change tell sellers what to make and buyers what they should avoid. Face mask prices rose dramatically after COVID-19. Producers made even more immediately. New Balance moved from manufacturing footwear to mask-making.

Flexible pricing allows suppliers to make the goods that customers really want.

Some products are now in short supply because COVID-19 has disrupted supply chains.

The shortages would be made worse by price controls.

There was a shortage of gasoline soon after Nixon frozen prices. I searched for fuel stations with it, and wasted gasoline, as I drove about looking for them.

“Price controls are like saying it’s really cold and I’m going to solve that by breaking the thermometer,” says Henderson. “It’s actually worse than that because breaking the thermometer doesn’t reduce the temperature, whereas price controls cause actual shortages!”

Venezuelan price controls have led to food shortages. But inflation continued to rise. Inflation at 270%, 700% and eventually at 400,000%!

Inflation is hard to stop once it begins.

Zimbabwean President Robert Mugabe could not collect enough tax revenue to finance his extravagant plans. So he created more money.

Zimbabwe printed its first newspaper in 1994, just a few years after. 100 trillion-dollar bills.

This has not been the case. Because the Fed recently reigned in, it is unlikely that this will happen.

It could be possible here, however, with Republicans and Democrats eager to spend more.

John Stossel is creator of Stossel TV and author of “Give Me a Break: How I Exposed Hucksters, Cheats, and Scam Artists and Became the Scourge of the Liberal Media.”

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