Finance - How Much? For How Long?

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Money Matters

August 19, 2021 by Scott Crosby - Views: 64

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Finance - How Much? For How Long?

Inflation keeps finding its way into the news.  Nobody denies it is happening.

The Democratic President and Congress insist that the inflation we are  experiencing is just a part of the recovery from the COVID pandemic, and is temporary.  

S142-1.jpgRepublican opponents point to the huge Federal debt and Biden’s 2.3 trillion-dollar “infrastructure” deficit spending package as the causes of inflation.  Both will be with us for a long time, which means the same will be true for inflation.

History sides with the Republicans.  Federal overspending that began during Lyndon Johnson’s Presidency continued throughout the 1970s Presidencies of Nixon and Carter.  Ongoing, unstoppable inflation was the result.  President Carter’s “malaise” speech laid bare the Democrats’ clueless inability to understand that the Democrats’ own spending was the cause.  

The “Law of Supply and Demand” taught in Economics courses is not a vague generality.  It is true of anything:  if there is too much of something available, each seller must reduce his selling price to be successful at selling his merchandise.  Or if there is not enough of something, people will pay more for it; prices go up.

Throughout history governments have refused to understand that the Law of Supply and Demand is not within their power to change;  attempts to ignore it or to set fixed prices for goods and services have always had disastrous consequence, both for the general population and for the country as a whole – whether in the U.S. or in Soviet Russia or anywhere else.  

There are no exceptions.  When the Federal government spends more money that it receives in taxes it increases the amount of money in circulation.

When the amount of dollars available goes up, the value of a single dollar goes down.  People will want more dollars in exchange for what they offer for sale.  That is the nuts and bolts description of inflation in action.

In the 1970s, inflation got so bad that companies found they needed to give employees unscheduled raises just to help them maintain their lifestyle.  Inflation was so bad that people’s level of economic standing was declining. 

In the 1930s, Germany was printing increasing amounts of money.  Employees would be paid in the morning, and then allowed to go make the purchases they needed before prices rose further.  Later in the day, they would get paid again, and allowed to go make further needed purchases at prices already greater than what had been charged that morning.

No amount of denial or naivety can point the blame towards anyone but the government, be it Democrat, like Jimmy Carter or Joe Biden, or Republican, like Richard Nixon.

If a shipment of goods is delayed, local prices may temporarily rise as those goods consequently become scarce – a localized, temporary “inflation”.  

But when the government arbitrarily increases the amount of money in circulation, as called for by President Biden, inflation throughout that country’s economy becomes pandemic.  

Only the government has that power, and only that government is responsible for the resulting economic decline that follows.  Call it “The Government Against the Economy”. 

Scott Crosby

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