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Joe Armendariz
Yesterday I was reminded by a British joke that was told in England’s Black Country. It is a parody of the dry humor of Brits. And it is the joke behind the meaning of the Led Zeppelin song D’er Mak’er. The joke goes like this: A chap is walking down the street on his way to the local pub for a pint when he bumps into an old mate who says, “Hi Bob, how’s the wife?” Bob says great she’s just taken off on holiday to the Caribbean. “Jamaica?” and Bob says no, she went on her own accord.
This joke is not about what reminds me of it. It is far from my ability to comprehend what it takes for the brain to link thoughts to one another. Speaking of led, perhaps what led me to the joke is listening to people, on the left and the right, meaning Fox News and CNN, blame every increase in the price of everything, whether it be a carton of milk, a gallon of gas, a new Tesla, or a round trip ticket to the next insurrection — if the price is higher than it was last year, the reason must be inflation. Today, in America, inflation is the latest hobgoblin. It has taken over Dr. Fauci and Donald Trump’s place as the most prominent. Joe Rogan has managed to unify the nation, something that no other person has done. Everyone blames inflation for everything.
Despite Joe Biden’s best efforts, and that of his White House communications department which is outsourced to CNN, the strategy to make Vladimir Putin public enemy #1, by blaming him for inflation, has failed. The American people aren’t buying it. Half of the stuff they buy is not theirs. They buy the inflation part, but they aren’t buying the Putin caused it part. They blame Putin for invading Ukraine but Joe is responsible for making them pay more.
I thought I overheard a lady in front of me at the grocery store the other day say, “I remember when it used to only be $1 to help feed the hungry. Now it’s $5 — it’s obviously inflation.” I smiled at her and said, “I remember when it was only a penny for your thoughts, now it’s 5 cents.”
Allow me to do my Joe Biden impression: Look, folks, this is no joke, inflation isn’t the only reason prices rise. And rising prices aren’t only caused by inflation. There are many reasons why prices rise and the reason inflation is not a factor. Let me first state the obvious. There is inflation. This can be understood by simply looking at the price of gold and comparing it to the dollar. If you want to really earn some extra credit, track the price of gold against the value of the dollar, and the global price of oil and you’ll understand how the dollar’s value is linked to both gold and oil.
If the dollar has strength or, to put it another way: when it is weak the value of gold and oil will rise. If the dollar is weak, then gold and oil both rise. These are just two measures that can be used to prove America’s inflationary monetary policy. A picture says a thousand words. See the full chart. The Treasury is trying desperately to protect the dollar by lowering the value of gold relative to it.
Inflation is real, but it isn’t when Netflix increases the price for your service. Inflation is real, but it isn’t the real explanation for the rise in the price of bacon… Inflation is the devaluation of the currency. What we experienced in the 1970s, when Nixon took the country off the “Gold Standard” by abandoning the Bretton Woods Agreement, when the dollar essentially became a fiat currency, with its value no longer being fixed to an ounce of gold, or any other fixed store of value — that was inflation. So the dollar began to fluctuate against other currencies and commodities, such as oil but especially gold, started to increase against it. This was inflation, people. This is also true today. You can see the difference for yourself.
Americans live with a problem because of rising oil prices. This leads to increased gas prices. Higher fuel costs lead to increased costs across the economy, which leads to an overall increase in prices measured using the Consumer Price Index (CPI).
It is true that the CPI does not accurately reflect the increase in prices within the wider economy, but it should be noted.
To be clear, I’m not blaming higher prices for most of the consumer goods we buy on inflation. I’m blaming it on higher transportation costs, although that is only a part of it, and as I’ll get to in a minute, a relatively small part. Today’s higher transportation costs, relative to 18 months ago, without question, are a result of higher fuel costs, and sure, today’s higher fuel costs are due to the recent spike in the global price of oil. But that isn’t a new phenomenon. Since President Clinton’s departure, global oil prices have been rising. The inflation adjusted oil price chart is available. You will notice that only Reagan, Clinton and others enjoyed low global oil prices. Their dollars were also strong.
John Tamny (the editor at RealClearPolitics and the only economist who has written about it) likes to say that blaming inflation is equivalent to a meteorologist calling for rain by blaming wet sidewalks.
Wet sidewalks don’t cause rain any more than inflation causes prices at your local grocery store to spike. Because of the currency devaluation, things such as a house, car, clothes and bread are now more costly than they were thirty years ago.
However, inflation isn’t why those things are more expensive than they were a month ago, a year ago, or 18 months ago. The reason why prices are higher for so many of the items we buy today is that in March of 2020, politicians panicked, to borrow another one of Tamny’s words. Tamny wrote a book called “When Politicians Panicked.” And he writes about — and at the time I, too, was talking about — the fact that politicians including at the local level, were only listening to public health bureaucrats instead of economists and made the spectacularly stupid decision to shut down the economy.
You can’t shut down an economy that relies on the invisible hand of the market that involves billions of individuals making billions of decisions every minute of every hour of every day across millions of miles simultaneously across hundreds of industries and sectors. And then a year later turn it back on like it’s a light switch and expect it to return to its same level of flawless efficiency and expect it to produce at the same level of efficiency and with the same low prices. It’s staggeringly naïve to even contemplate such a remarkably ignorant belief or assumption. People who tend to be conservative or have predisposed views against politicians and bureaucrats are especially vulnerable.
To be very clear: Virginia’s prices have risen more than necessary due to the constant devaluation over time of the dollar. This happened over fifty years ago. But not when Biden was elected.
Joe Armendariz, Director of Government Affairs, Armendariz Partners, LLC. He serves as the Chairman of the California Center for Public Policy, an institute for public policy focusing on issues relating to economic and educational development in Santa Barbara County. Contact him by phone at 805.990.2494. Or email at: [email protected]
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