E. Eugene Webb PhD
In Search of Robin
What Is Causing Inflation?
You are hearing a lot of talk about inflation lately, but if you're like me, you really don't need all the talk you've already noticed that prices for almost everything are going up.
Everybody is asking the same question, what is all this inflation caused from?
The bankers, economists, and financial people stick to the classical definition of inflation as detailed below from Investopedia.
“What Is Inflation?
Inflation is the decline of purchasing power of a given currency over time. A quantitative estimate of the rate at which the decline in purchasing power occurs can be reflected in the increase of an average price level of a basket of selected goods and services in an economy over some period of time. The rise in the general level of prices, often expressed as a percentage, means that a unit of currency effectively buys less than it did in prior periods.
Causes of Inflation
An increase in the supply of money is the root of inflation, though this can play out through different mechanisms in the economy. Money supply can be increased by the monetary authorities either by printing and giving away more money to the individuals, by legally devaluing (reducing the value of) the legal tender currency, more (most commonly) by loaning new money into existence as reserve account credits through the banking system by purchasing government bonds from banks on the secondary market.”
Not too surprisingly, I have a different view. As you read through the definition above you may have noted that the classical definition of inflation is when the government pumps more and more money into the economy somehow causing the prices of goods and services to rise. It's difficult to get a definition of that somehow.
I think the real root cause of inflation is greed.
It is difficult to come to grips with the fact that current inflation is the result of the amount of money that government is putting into the economy. If you look around in whatever news document, blog post, or newspaper you're looking at you'll probably find another article regarding how little of the money that's been obligated by the government to be dispersed to the public has actually found its way into the hands of the purchaser.
Traditionally, inflation has always been low when the Republican Party is in control of the federal government and frequently grows when the Democratic Party and their new deal, big deals, socialist policies are in control of the government.
Here's a new theory.
I think the reason why prices are going up right now is quite simple. It's because they can.
During the previous administration businesses at all levels super large, large, and small we're somewhat reluctant to go on a price increasing binge not knowing exactly what the federal government might do to curtail the inflationary spiral should it begin.
It is, I think, true, for the most part, that Republican politicians and policy makers pay more attention to and are more concerned with the inflation rate than are their democratic counterparts.
Republicans and their supporters worry greatly about inflation while the Democrats and their supporters simply think the solution to rising prices is for the government to give away even more money.
What we have now are businesses, large and small, taking advantage of the fact that the Democrats don't have their eye on the inflation ball they have their eye on social welfare.
The people running large businesses today are not dummies.
They know that they can get away with gradually increasing prices, and they are not going to incur the wrath of the federal government. And, as those large businesses increase their prices, the price increasing fever trickles down all the way to your local Barber shop.
So, the actual answer to why are prices going up is simply because they can.
Now, sooner or later, if the Democrats continue to pump massive amounts of money into the economy, it’s certainly going to have an inflationary impact.
But the guy who's responsible for inflation right now is the guy running the big company that has seen fit to Jack up prices regardless of what his costs are. Using as excuses, he must pay more people more money. He can't hire people. His goods and services have gone up, and most of that is a fabrication.
The only way we're going to get inflation back under control is for the Republican Party to win back at least one of the houses of Congress, if not both, and put the brakes on government handouts and put the spotlight on those who are really causing the inflationary upward spiral.
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