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ECONOMY TOO OOF doomw/ iStock / Getty Images Plus BIDENFLATION RAGES As prices mount, injecting trillions of dollars into a sick economy won't cure it. It cannot be otherwise, since flooding the economy with money created out of thin air will further erode the purchasing power of the dollar, causing prices to rise even more. by William P. Hoar the Consumer Price Index has been altered In other words, if Bidenflation were to minimize the appearance of inflation's computed more truthfully, it would be W hen Joe Biden moved into the influence, making long-term comparisons Jimmy Carter-esque. White House in January 2021, more difficult. The CPI, notes Alfredo the annual inflation rate was Ortiz (president of Jobs Creation Net- Expanding the Money Supply reported at 1.4 percent. In less than a year, work), no longer "directly measures hous- There is no doubt that we have an infla- hat number jumped fivefold - the yearly ing prices, which were part of the index tion problem, yet part of the difficulty in rate of inflation as measured by the Con- until 1983. This omission means that the understanding it lies with a general mis- sumer Price Index (CPI) climbed to seven current CPI doesn't fully account for hous- understanding as to its definition. While percent in December. The rate has not ting prices that have increased by 19.5% increases in the prices of groceries, energy, been that high since June 1982. over the last year. According to economist wages, and other products and services are Inflation can pack a huge wallop. A fel- Peter Schiff, if the CPI still included hous- certainly related to inflation, those are ef- low who was once known to be as phony ing prices, it would be growing at around fects, not the prime driver. as a three-dollar bill is now up to fifteen 11% rather than 6.8%." Here's a clear dictum in the words of dollars. According to a recent analysis by the famed economist Milton Friedman: "In- Even the methodology used to create Penn Wharton Budget Model, low- and flation is always and everywhere a mon- middle-income American households etary phenomenon." William P. Hoar is a longtime writer for THE NEW spent about seven percent more in 2021 Often, however, in common use or in AMERICAN and its predecessor magazines. An author, for the same products they bought in 2020 shorthand fashion, the meaning gets con- e has also served as editor-in-chief and contributor or in 2019. The gloomy experience is be- flated or equated with all sorts of increases for other publications. coming known as "Biden's pay cut." - to include the bumps in the govern- www. TheNewAmerican.com 23ECONOMY ment's Consumer Price Index, rises in gas- termed expansionary monetary poli- 25, purporting to be "Inflation 101: Stark oline prices, jumps in the cost of health- cy. Inflation is a direct cause of cur- Facts and Nuances." The entire piece of care, and so forth. Yet, strictly speaking, rency debasement. nearly 1,700 words did not use the words inflation refers to the drop in the purchas- "money supply" a single time. That's tell- ing power of currency that results when a Treating inflation as if it were a mysterious ing, too - by not telling. central bank expands the money supply. fluke also tends to keep the public in the Last fall, Hanke and Greenwood lik- To be brief, the Fed prints more money. dark. Steve Hanke and John Greenwood, ened the monetary expansion during the Federal Reserve Bank officials know in multiple pieces last year in the Wall early months of the COVID-19 pandemic this, and they used to admit it on occa- Street Journal, shed light on the subject, to opening a gusher from a faucet, saying: - but not very often these days. In- even while pointing out that mainstream deed, last February, Fed Chairman Jerome media's reporting "about U.S. inflation Between December 2019 and August Powell said during testimony to Congress rarely contains the words 'money sup- 2021, the U.S. money supply, mea- that the growth in the money supply (spe- ply.' We are repeatedly told that the most sured by M2, grew by $5.5 trillion, cifically the broad measure known as M2) recent upticks in inflation are anomalous a stunning 35.7% increase in only a "doesn't really have important implica- and 'transitory." That's incorrect, as the year and a half, driven primarily by tions." That's telling pair recognized. (Hanke is a professor of the Fed's purchases of Treasurys and Daniel Lacalle, a professor of global applied economics at Johns Hopkins Uni- mortgage-backed securities. [Author economy at IE Business School in Madrid versity in Baltimore; Greenwood is chief update: As of December 2021, the and a best-selling author, was much more economist at Invesco in London.) Fed had increased the money sup- candid for Mises.org not too long ago: They are also on target in saying that ply more than 40 percent over the "the inflation upticks aren't temporary previous two years.] In light of an- Inflation is not the Consumer Price and were predictable, driven by an ex- ticipated Federal Reserve tapering, Index (CPI). Inflation is the loss of traordinary explosion in the money sup- we estimate that by the end of 2024 purchasing power of the currency ply." The economists are similarly spot on the money supply will grow another that leads to a persistent rise in most in observing how the media ignores the $5.1 trillion. prices regardless of their sector, de- immediate instigator of inflation. For an mand, supply, or nature, and is a example, we offer a New York Times ar- Persistent, not transitory, inflation "will be direct consequence of the wrongly ticle that appeared (in print) on December with us for the next two to three years," as the two economists put it. And that is as- suming that the Fed counters its previous actions immediately. Scapegoats, Summers, and Pseudo-stimuli Washington, of course, affects supply and demand in multiple ways - usually to our detriment. (State governments often do likewise.) As a result, prices change. For example, the Biden administration's inter- ference affects transportation and energy production, lockdowns harm production, and unemployment rates are exacerbated by paying people excessively to not work. Rather than doing the right thing, or even stopping its harmful practices, the Biden administration and its allies (no- tably including Massachusetts Senator Elizabeth Warren) have been looking for diversions and others to blame for the in- flationary damage. Warren, for instance, has blasted major oil and gas producers, as well as grocery chains, for dastardly "profiteering." While she gets positive AP In left-wing publicity for trying to scalp the Not a real solution: The Fed and Biden administration have flooded the U.S. economy with food-distribution chiefs, Warren ignores money - driving up the cost of living at a pace not seen in four decades. Real wages, on the the facts to do so. "Big Grocery," as has other hand, have not kept pace with inflation. been explained by National Review writ- 24 THE NEW AMERICAN . FEBRUARY 14, 2022er David Harsanyi, \"is one of the least protable major businesses in the United States, with average margins coming in at a little over 2 percent.\" (Emphasis in original.) Looking everywhere but in the mir- ror, the president has sicced the Federal Trade Commission on oil and gas compa- nies, alleging that their \"anti-consumer\" behavior was responsible for inated gasoline costs. The Federal Maritime Commission was directed to look for \"price gouging\" by shipping companies said to be implicated with the troubled supply chain. In addition, Biden employed executive authority against alleged unfair practices in the agribusiness industry, directing the Department of Agriculture to investigate large meatpacking companies, and call- ing for new rules under the Packers and Stockyards Act. This came, as it happens, after passage of the massive $1.9 trillion stimulus package known as the American Rescue Plan which included awarding around $600 million in new subsidies to the meat industry. Then in January 2022, the president threw more money at the situation, pledging $1 billion to small- er meat and poultry companies (Little Meat?) as part of his blame game against Big Meat for higher prices. All of this is more than a distraction, it's also counterproductive. The Wall Street Journal quoted a spokeswoman from the North American Meat Institute, who explained that labor remains the biggest challenge for the industry and that meat compa- nies can't operate plants at full capac- ity because they struggle to employ a long-term stable workforce. \"New capacity and expanded capacity cre- ated by the government will have the same problem,\" she said. The U.S. Chamber of Commerce said the Biden administration's plan could further constrain supply and push prices higher. \"It is pretty clear that the admin- istration is attempting to use higher prices to justify their pre-existing agenda to overturn decades of bi- partisan consensus around antitrust and competition policy in favor of a ' government-knowsbest' regulatory Cali 1800 72 7VTFiUE to subscribe today! KoonsiriBoonnakStcck/GettyimagesPlus Whose fault is it? Consumers are feeling the pain at the pump as gas prices rise. Despite claims that OPEC is to blame, the Biden administration's stifling energy policy and excessive money printing are the real culprits. approach," said Neil Bradley, the group's executive vice president and chief policy officer. Administration efforts were doomed to fall at from the start 7 a point obvious to one prominent \"liberal\" economist in particular. A veteran of the Obama and Clinton administrations, former Treasury Secretary Larry Summers has publicly taken Biden to task for his \"antitrust\" actions supposedly against ina- tion pointing out that such efforts are more likely to cut supplies and reduce innovation. (By contrast, the establish- ment leftist New York Times applauded. A front-page piece on December 26 was headlined \"As Prices Rise, Biden De- ploys Antitrust Team,\" with the subhead celebrating the search for \"Gouging by Big Business\") In February 2021, Summers wrote in a Washington Post op-ed that the massive spending package could help overheat the economy. He warned that a \"macroeco- nomic stimulus on a scale closer to World War II levels than normal recession levels will set o inationary pressures of a kind we have not seen in a generation, with consequences for the value of the dollar and nancial stability.\" Summers kept up his efforts. This was recapitulated well by Issues & Insights (though the publication acknowledged not being a long-term fan of the economist): In March, after Biden had signed his $1.9 trillion monstrosity into law, Summers called it \"the least respon- sible macroeconomic policy we've had in the last 40 years.\" in May, he said that \"Whatever was the case a few months ago, it should now be clear that overheating not excess slack is the domi- nant economic risk facing the U.S. over the next year or two.\" It's important to point out that Summers' predictions came before the (unexpected) return of COVID and before the supply chain bottle- necks and shortages gripped the na- tion 7 both of which are now getting blamed for the ination surge. It's also important to point out that, despite what Biden kept saying, the economy didn't need rescuing. The nation's GDP had almost completely 25 ECONOMY on the inflationary fire - figuratively, The wizards in Washington have already approved of of course, since such fossil fuel is re- putedly an enemy of the People and spending that projects a stunning $112 trillion in additional Mother Climate. More deficit spending baseline deficits over the next three decades. That would is planned. Much more. This follows the post-pandemic package (about 15 push the national debt beyond 200 percent of GDP. percent of GDP, beyond the New Deal's response to the Great Depression), the $1.9 trillion stimulus bill, and a $550 billion infrastructure bill. Sadly, subsequent generations will learn the value of the dollar when they have to pay the resultant debt. Manhattan Institute senior fellow Brian Riedl lays out the encapsulated pain that is still in the works. The proposed (albeit struggling) program called Build Back Better ($3 trillion in deficits assuming Congress repeals the fake expiration dates), and new discretionary spending ($1 trillion over the decade) would add up to $6.5 trillion in additional ten-year debt from one year of legislation. DIVE This is quadruple the cost of the 2017 tax cuts, and it exceeds 20 years of domestic and international costs related to the war on terrorism. Nor are Democrats finished yet, as President Biden still has campaign pledges related to health care, Social AP Images Security, education, and other areas that would add an additional $3 tril- Where's the beef? Many Americans are growing frustrated with rising food prices and empty lion in debt. store shelves. Supply-chain issues and loose monetary policy are taking their toll on the This deficit spending would take availability of certain food items, particularly meat. place on top of growing baseline deficits and push the national debt less than $17 trillion before the recovered from the COVID lock- in corporate concentration as U.S. infla- pandemic - past $44 trillion a dec- downs by March, and unemploy- tion soared this year to the highest level ade from now. ment was tumbling. What's more, since the early 1980s.' ast amounts of money for the previ- Inflation, as it happens, doesn't affect As it is, as computed by the Congres- ous two COVID stimulus bills under everything: After all, we still have two- sional Budget Office, the wizards in President Donald Trump still hadn't bit politicians. Reading the notes given Washington have already approved of been spent. to him, Biden has continued to claim that spending that projects a stunning $112 even more deficit-financed spending will trillion in additional baseline deficits A recent tweet by Harvard economist somehow - cut prices. over the next three decades. That would Summers is likewise blunt: "The emerg- Still, according to the International push the national debt beyond 200 per- ing claim that antitrust can combat infla- Monetary Fund, we are tops - after a cent of GDP. ion reflects 'science denial." There are, fashion: Among the top 35 developed na- It would be comforting to think this he maintained, "many areas like transitory tions, the United States has the highest couldn't happen here. And wrong. Infla- inflation where serious economists differ. level of inflation. tion, you see, also means that the buck Antitrust as an anti-inflation strategy is doesn't stop anywhere. Disaster, however, not one of them." As reported by Market- Even More Deficits, Debt is not inevitable. What is vital is to stanch Watch in late December, Summers also Facing all that, the Biden administra- the bleeding: End Washington's excessive, explained that "there's been little change tion still wants to throw more gasoline largely unconstitutional spendathon. 26 THE NEW AMERICAN . FEBRUARY 14, 2022