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What doesn't cause inflation June 2, 2022
Back in November, I explained that the way to stop inflation was to raise taxes. Prices go up because people have too much money to spend, so if the federal government takes back some of it, prices will stop increasing. The feds not only have to take it back, but take it out of circulation.
Paying more taxes is tough, but so is inflation. It is like a tax, only it is indiscriminate. It is especially hard on the poor. A tax increase, on the other hand, can be targeted at the more well off.
We, the people, are not at fault for this inflation. The sole cause was the actions of the Federal Reserve. They did this to us. They thought it was a good idea to just print money and put it into the economy. I'm not sure who exactly received this money, but hopefully it was the federal government, which used it to ease the economic stress of the coronavirus pandemic. Something had to be done, but it should have been financed by a tax increase.
The Federal Reserve and the Biden administration didn't think printing money would cause inflation (see U.S. policymakers misjudged inflation threat until it was too late). For years now, leading economists have downplayed the connection between the two. That was a big mistake. If printing money was harmless, we could do away with taxes. So much for the brilliance of the people we allow to make decisions about our economy.
I predicted this inflation back in March of 2020.
Money to buy things normally comes from income from production in the form of wages, profits, interest and rents. When it doesn't come from production, there is no increase in goods and services to spend the extra money on. Demand outstrips supply, causing prices to increase.
What doesn't cause inflation. Inflation can't be blamed on coronavirus shutdowns, disruptions of the supply chain, the microchip shortage or the war in Ukraine. A shortage of one product may cause its price to go up, but the extra paid for that item makes less money available for other items, causing demand for them to go down. Those lower prices offset the higher prices, and the overall cost of living remains the same.
The funny money printed by the Federal Reserve is the only cause of inflation.
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