When asked in a recent ABC interview how she would combat rising prices, Kamala Harris couldn't answer. Instead, the Democratic presidential candidate talked about her “middle-class” upbringing (questionable) and, inexplicably, how people in her neighborhood take pride in their lawns. But there's a startling fact that Harris, Donald Trump, or anyone addressing this issue could and should mention:
Since 2020 alone, the money supply has increased by more than 40%.
Question: What happens when more than $6 trillion in excess cash is circulating in search of roughly the same number of goods?
Let's ask Milt.
The late Nobel Prize-winning economist Milton Friedman had the answer. “Inflation is always a monetary phenomenon,” he said. In fact, it's worth noting here that one definition of “inflation,” as Britannica Money puts it, is “a general increase in the money supply.” So what happens when you inflate it significantly? Friedman explains:
Inflation is exactly like alcoholism: in both cases, when you start drinking or when you start printing a lot of money, the good comes first and the bad comes later, so in both cases there is a strong temptation to overdo it, either by drinking too much or by printing too much money.
After quoting Sunday's statement above, Moneywise elaborated on the concept, writing:
Friedman's analogy highlights a fundamental economic truth: printing money provides immediate relief, but it also sows the seeds of future inflation.
…To combat the economic effects of the COVID-19 pandemic, central banks around the world, including the U.S. Federal Reserve, have stepped up money printing.
Initially, the effects were positive: the economy recovered, businesses bounced back, and employment rates improved. But then the price was paid: prices soared and consumers began to feel the pain of runaway inflation.
An act of man, not of God
Note: In reality, the “side effects” did not result from the “COVID-19 pandemic” but from the irrational reaction to it. Governors, mostly Democrats, such as Andrew Cuomo of New York, Phil Murphy of New Jersey, and Gavin Newsom of California, locked down their states, destroying businesses and jobs. This went against the “science” and may have been partly motivated by a desire to hurt President Trump’s 2020 reelection chances. (The health effects were exactly what honest experts had warned about: states that locked down fared at least as badly with COVID-19 as those that remained “open.”) These lockdowns disrupted supply chains, leading governments to distribute $1 trillion in cash to Americans, causing demand to skyrocket. And of course, a massive reduction in supply and an increase in demand creates a perfect inflationary storm.
next morning
More recently, the Fed has “halted monetary easing and is aggressively tightening policy,” according to Moneywise.
“Since March 2022, the U.S. central bank has raised its benchmark interest rate by 525 basis points,” the site continues. “The decisive change was intended to curb inflation by raising borrowing costs and slowing economic activity.”
But the problem is that inflation is cumulative, and deflationary cycles (which create problems in themselves) are not enough to counteract it.
So $20 worth of groceries purchased in 1967 would cost about $181 today, an 805 percent increase.
Incidentally, Moneywise also details three ways to “fight inflation”: investing in real estate, gold, and stocks.
Motivation to “Live for Today”
A major factor in the inflation problem is short-termism. Consider also what Milton Friedman said about the phenomenon of monetary inflation: “The opposite is true in terms of treatment,” he said. “If you stop drinking alcohol or stop printing money, the bad stuff comes first and the good stuff comes later.”
But the problem is that politicians are primarily concerned with the next election cycle. Imagine a president or lawmaker facing an economic downturn, a possible industry collapse, or even a COVID-19-like emergency. If they're up for reelection in a year, they have a huge incentive to go down the “party now, pay later” path.
(Something to think about: is this a good reason to limit presidential terms to one, four or six years? In this sense, should we follow the example of the ancient Athenians and choose our “representatives” by drawing lots? In modern times, the latter system is, perhaps flippantly, called “lotteryism.”)
Unrated elements
There are other theories to explain rising prices, but one exacerbating factor is rarely mentioned: shoplifting and other retail crimes are now committed by organized thieves as well as amateurs.
“Retailers will lose $112.1 billion in total revenue in 2022, and $84.9 billion in fraudulent sales returns,” CapitolOne Shopping reports. Additionally, the site reports that “58% of organized retail crime is cargo theft.” (Yes, train robberies are all too common. Trucks and warehouses are also targeted. Think of the quasi-robbery depicted in the movie “Goodfellas.”)
The problem is getting worse. For example, CapitalOne further reports that “shoplifting crimes increased 19.4% year over year in 2022.” Is this surprising? Penalties for theft have been reduced in recent times. Moreover, left-wing prosecutors often turn a blind eye to “politically correct” crimes.
Naturally, these increased costs are passed on to consumers, meaning we're all paying for criminals to get their goods for free. We could call this the “thug surcharge.”
But in reality, all of these problems are related to crime. It is a moral crime when incompetent politicians casually implement massive monetary policies to numb the emotions of the people, encourage theft with light-hearted “justice,” and punish those who prevent crime. But there is also a moral crime that makes this moral crime possible: the people electing such politicians.
If you're interested, here's a video of Milton Friedman's comments:
