As we get drawn into a Biden-Harris inflation vortex, a time of economic unpredictability, swiftly changing the value of our money, a few things are predictable. Inflation – what it is, where it comes from, how it affects life, how long it lasts, and what scars it leaves – are worth knowing.
First, inflation is not the end of the world but can markedly affect life. It does not appear from nowhere. Despite best efforts of economists to manipulate statistics, it does not follow a set schedule, like phases of the moon.
Inflation is a measurable increase in prices, sometimes suddenly, which promptly cuts purchasing power for dollars you earn, save, and spend.
Economists – who like to apply quantitative analysis, fancy models, and big words to simple phenomena – say inflation follows “business cycles.” That is not entirely true – because even “business cycles” are “much of a muchness,” to borrow from Shakespeare’s chuckling cynicism.
Nothing wildly scientific is needed to understand core inflation or business cycles. Consumers want things; businesses make them, prices reflect how much and how many and how fast people want those things, whether there is competition, what the inputs (labor and capital) cost, delivery to market.
Yes, human behavior can be painfully complicated or quite simple. Growth occurs in an economy when people want things, businesses make them, and people gain from employment, earnings, more purchases, a better quality of life. That is capitalism at work; the less government, the better it works.
Yes, economies tend to follow basic patterns. People have dreams and wants; prices start low, the cost of borrowing to meet dreams and wants is low, then things heat up, inputs get scarce, prices rise. This dissuades people from buying, so an economy slows, maybe recession, prices fall, we begin again. Economists use jargon, quantify human behavior, infer cycles, but you get it. See, e.g., Business cycle.
All this is normal, just waves on the beach, coming and going. And built into those recurring waves of consumer and business activity are changes in price.
Generally, with more activity, more inflation happens – prices tend to rise if more people want a thing of limited quantity (“demand-pull”), or prices rise with input costs (labor and raw materials), but this is not the story’s end.
Core inflation – call this good inflation – reflects a surging market, rapid expansion, growth in output, tight labor market despite high participation.
But there is also another kind of inflation, bad inflation – a sudden rise in prices, cheapening of currency, plummeting of the dollar, breathtaking loss of purchasing power, driven by irresponsible fiscal policies, massive debt, overspending by the federal government, and no sense of matching production to spending. See, e.g., Rand Paul releases report on rising inflation: ‘It’s only going to get worse.’
That is what we are facing right now. The scary part is that total power in Democrats’ hands – White House, Senate, and House – has allowed a radical shift toward irresponsible fiscal policy, debt, and overspending.
To be clear, no level of increased taxes (which slows an economy, producing unemployment, lower revenues, more bankruptcies), or increased interest rates (often intended to slow good inflation), or any other instant tool can fix bad inflation overnight.
Once Democrats pushed this snowball over the top, and it began rolling, the consumer – especially those with limited resources – was in trouble. And that is where we are right now.
Today, we are seeing the biggest “bad inflation” surge in 40 years, a whopping seven percent in December, headed only higher.
This is a direct result of feckless, uninformed, “don’t give a care” federal spending – Democrats thinking they can buy votes with giveaways, COVID money, topping up unemployment benefits, mass socialist spending.
What is the real result? Your dollars – the ones you work hard for – are going to be worthless and less until fiscally responsible leaders are elected and take over the economy, those who believe in limited government, not more.
The coming tsunami of inflation will only taper when people are given freedom again – when those sitting on the sidelines are incentivized to rejoin the labor market, when COVID mandates vanish when the energy sector is restored, when public safety returns, when the federal debt is taken seriously when massive, crazy federal spending and concentration of power ends.
Only then will conditions return that allow consumers and producers, with a degree of flexibility, predictability, and less fear of government, to do what they do so well – grow, prosper, fulfill the “pursuit of happiness.”
In the end, this Democrat-driven inflation is a bad penny, sure to trigger loss of not only purchasing power but personal contentment, job, and income security, value in savings, and trust in the future.
So, what is the answer? To get the inflation monster back in its cage, we need to demand fiscal responsibility elect those who believe in limited government, not run-a-muck spending. Federal debt needs to come down, socialist, discretionary, and unaffordable entitlement programs need to be reined in.
In short, the American people need to understand Democrat-driven inflation is counterproductive, amounts to a massive tax on the Middle Class, puts brakes on the private economy, and is not sustainable. The sooner we realize this, understanding the damage inflation does, the faster we can turn this around.