John Stossel weighs in on the current inflation issue, and hits right to the heart of the matter. Excerpt:
“Greed is constant,” says economist David Henderson in my new video. “If it’s greed, how do we explain prices falling?” When oil prices fall, is it because “oil companies just suddenly decide, ‘I’m gonna be less greedy’?”
Prices change because of supply and demand.
Inflation results “from too much money chasing too few goods,” explains Henderson. “If government’s spending more money, that’s more money chasing too few goods.”
Lately, government borrowed from the Fed, and spent much more money. Under President Donald Trump, the national debt rose $7.8 trillion. Under President Joe Biden, it’s grown $2.2 trillion in just one year. Biden wants to spend even more — a record $6 trillion this year.
Where will they get the money? Government has no money of its own, so increased spending means politicians must borrow more, tax more, or, easiest of all, create money out of thin air by just printing it.
In the last few years, that’s what they did. In an untested experiment, the Fed printed more money than ever in history.
All this new money sloshing around the economy makes money we have less valuable. You notice the price increases, but you may not notice the damage inflation does to your savings.
If you put $10,000 under your pillow, 7% inflation will reduce that to $2,342 in just 20 years.
If you were counting on those savings for retirement, too bad. Most of your savings will be gone.
Yet today’s politicians want to spend even more.
Biden claims his spending bills will “reduce inflation.”
“Biden’s wrong,” Henderson responds. “There’s no economic theory that says when the government spends a huge amount more money, prices fall.”
Honestly, if you want to wreck an economy and bring a nation to its knees, runaway inflation/poor monetary policy is a good way to do it. See the Wiemar Republic, or Zimbabwe, or Venezuela for examples.
And as much as pols like to shed big fat crocodile tears about “the poor hit hardest,” inflation is a de facto tax that does precisely this; wages never rise as fast as prices, and the folks who have the hardest time adjusting to higher prices are always the ones who suffer most. I’m inclined to believe this is caused by incompetence, especially in the Biden(‘s handlers) administration, although the Trump Administration dumped plenty of fiat currency into the market as well. Both parties share some of the blame.
Stossel concludes:
Once inflation starts, it’s hard to stop.
In Zimbabwe, President Robert Mugabe couldn’t collect enough in taxes to pay for his grand plans, so he printed more money.
A few years later, Zimbabwe was printing 100 trillion-dollar bills.
Such drastic inflation hasn’t happened here. It probably won’t because recently the Fed reigned itself in.
But with Democrats and Republicans eager to spend more, it could happen here.
It’s already happening here, John.
