“House Speaker Nancy Pelosi, D-Calif., argued Friday that global inflation “starts with [Russian President Vladimir] Putin,” but that increased U.S. government spending on domestic social programs would help decrease the national debt and bring down inflation at home.” (from Yahoo News)
The following is from Wikipedia (under Inflation – History)
“Historically, large infusions of gold or silver into an economy had led to inflation. For instance, when silver was used as currency, the government could collect silver coins, melt them down, mix them with other metals such as copper or lead and reissue them at the same nominal value, a process known as debasement.
“At the ascent of Nero as Roman emperor in AD 54, the denarius contained more than 90% silver, but by the 270s hardly any silver was left. By diluting the silver with other metals, the government could issue more coins without increasing the amount of silver used to make them. When the cost of each coin is lowered in this way, the government profits from an increase in seigniorage. This practice would increase the money supply but at the same time the relative value of each coin would be lowered. As the relative value of the coins becomes lower, consumers would need to give more coins in exchange for the same goods and services as before. These goods and services would experience a price increase as the value of each coin is reduced.
“The adoption of fiat currency by many countries, from the 18th century onwards, made much larger variations in the supply of money possible. Rapid increases in the money supply have taken place a number of times in countries experiencing political crises, producing hyperinflations—episodes of extreme inflation rates much higher than those observed in earlier periods of commodity money. The hyperinflation in the Weimar Republic of Germany is a notable example. Currently, the hyperinflation in Venezuela is the highest in the world, with an annual inflation rate of 833,997% as of October 2018.”
In short, Nancy is refuting what classical dictionaries as well as Austrian economics such as Ludwig Von Mises have taught for millennia.
Government’s deficit spending is the only cause of inflation.
What Nancy is doing by arguing this point is what many have for decades.
“Don’t argue facts. Just rewrite the dictionary.”
Can prices go up and down? Absolutely. These things happen in a free market when supply and demand is unencumbered by government interference. Manipulation of these markets by price controls or regulating in-demand goods out of business (such as coal) are a couple of examples of interference.
But price increases due to a strain on supply or an increase in demand is not inflation. It’s simply the free market at work.
But the free market also finds alternatives when left to itself. For example, when Sony determined to dominate the video tape market with its BetaMax players, the industry embraced VHS.
When the Swiss dominated the world watch market with high-quality, high-price mechanical time pieces, others introduced the quartz watch.
As a result, in a free market, robber barons are minimized. Referring back to my examples, the robber barons at Sony decided to create a monopoly with BetaMax. Other manufacturers in the same industry said “Not on my watch” and introduced VHS machines.
You see, robber barons can only hold onto their market and their high profits for a small window of time before their competitors respond with variations which serve the market just as well.
That’s why the robber barons met in secret on Jekyll Island – in order to keep their position in America’s economy forever. Rather than continue competing with railroad or oil or other services and products, they determined to become the National Bank of the United States, thereby making money every time money exchanged hands.
You know this national bank as the Federal Reserve System.
And now you know the rest of the story. Good Day.
