The Democrat Playbook: How To Look Like You Are Fighting Inflation Without Really Trying thumbnail

The Democrat Playbook: How To Look Like You Are Fighting Inflation Without Really Trying

By Neland Nobel

“Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.”  Professor Milton Friedman

You want to bring down inflation? Let’s make sure the wealthiest corporations pay their fair share.  President Joe Biden

Inflation is the relationship between the quantity of money in circulation and the supply of goods and services.

Government and central banks can create money but they can’t create oil, copper, food, housing, hip surgeries, or Tootsie Rolls.  But government can create conditions that stifle the production of these things through taxation, regulation, import restrictions, and arbitrary credit restrictions.

The basic rule in dealing with inflation, if you are a Democrat, is to blame everyone, and everything, for the price spiral.  Never look at your own insane monetary and fiscal policy.  Then, start tinkering with the economy to show that you care.

Republicans have played the game as well, with wage and price controls by Nixon and WIN buttons (Whip Inflation Now) promoted by President Ford. But Democrats are better at the game.

Being old enough to remember the inflation of the 1960-1980 period, the tried-and-true response is to blame greedy corporations. From that follows the imposition of “windfall profits” taxes. Of course, inflation was only 1 ½% under Donald Trump, so corporations must have undergone tremendous change very quickly, with greedy people taking them over, just to frustrate Biden. That includes, of course, many of the “woke” corporations run by Progressives. They raise their prices as well.

Price controls are also part of the toolbox. Democrats know what the “just” and “honest” price should be, and thus they will attempt to fix prices to what they believe is the correct level.

The problem with price-fixing is well established since attempts go back to the Code of Hammurabi in Mesopotamia.

They were tried by Greeks and Romans, especially under Diocletian.

The Church (allied with the government) tried price fixing based on “the just” price during the Middle Ages.

Almost all Socialist governments do the same, to some degree or another. Things like the Medicare Codes, which fix the price for specific procedures, are a good example. So is rent control in Democrat-controlled cities like New York.

If you establish a price above what the market determines through free exchange, based on real supply and demand data, it will create surpluses.

If you fix prices below the real cost of production, based on free exchange and real supply and demand, you will create shortages.  This is the most common outcome.

A spinoff of shortages is long wait periods (waiting in the queue) or rationing, which is simply an attempt to equalize the misery of shortages.

An interesting book written during the last great inflation period was Forty Centuries of Wage and Price Controls by Robert Schuettinger and Eamonn Butler. The conclusion of the book, after exhaustive historical examples, is wage and price controls have never worked anywhere, at any time in history.

The reason they never work is that they never address the underlying causes of inflation, which is excessive government spending funded by monetary creation.

Price fixing inevitably leads to expansive and usually authoritarian government. For example, let’s suppose the government decides a particular item, let’s say milk, is vitally important to the population. So, they fix the price to stop public outrage.

To be even partially effective, you then must proceed to fix the price of dairy cattle, milking machines, barns, hay, farmland, farm labor, processing, transportation, and dozens of other price inputs that create what you see as the “price” of milk.

The price of anything is simply the sum of hundreds of prices of the applicable inputs. You can’t control one, without trying to control the others. Hence, attempts to control inflation through price control creates a gigantic and intrusive government that destroys the free market and its wealth-producing capacity. That is why Venezuela can sit on the largest reserve of oil per capita in the world, and be impoverished with oil over $100 a barrel.

The softer version of price controls is jawboning or attacking corporations for what the government has caused.

So, blaming corporations, taxing them heavily, and excoriating them in public (jawboning) should be expected.

Windfall profit taxes are likely as are price controls.

We may also see rationing.

Jawboning is an attempt to deflect blame onto someone else, typically business owners. Sometimes this gets very ugly when particular religious or ethnic groups are cited as exploiting inflation. Sometimes it has been Jews, sometimes ethnic Chinese,  Koreans in some neighborhoods, and sometimes kulaks.

Then, there is usually an attack on “hoarders”.

Hoarding is a rational response to expected shortages. Governments are against hoarding and prefer rationing. If you try to get supplies that you need, you are to be condemned as a hoarder. If your costs go up, you will be accused of exploitation and price gouging if you pass those costs along. If you correctly anticipate inflation and profit from it, you will be called a speculator. In all these cases, the government simply blames individuals and corporations for responding to something the government itself caused.

Finally, there is what could be called ‘the switch”.

This is a variation on the old theme of passing out public money to buy votes. Here is how it works: Take money from the public through taxation. Take money from the public secretly through currency debasement. Then hand money back to the public to help them deal with the excessive price inflation the money printing caused.

It is almost a perfect circle. Give the money back to the public that you took from them, to acculturate the public to taking government money and make them politically dependent on politicians.

A good example has actually been proposed. Drive up the cost of fuel by harassing and regulating oil producers, forcing the Green agenda, and printing excessive money. Then ride to the rescue by sending the public a check so they can deal with the high fuel costs. Since the government is running huge deficits anyway, simply print the money you will pass out to the public. The belief is the public will be too stupid to understand the game.

A variation of this scheme was the stimulus checks. Shut the economy down using Covid restrictions, causing great pain. Relieve some of that pain by sending checks to those harmed, hopefully, to make them grateful and dependent.

Thus, the way not to fight inflation is to harass and harangue businesses and housewives, print excessive money to pass out to the public to help with inflation, impose wage and price controls, blame corporations, and impose “windfall” profit taxes.

As to what to do to really fight inflation, the following steps are necessary. If inflation is too much money chasing too few goods, one needs to decrease the amount of money and increase the supply of goods.

Slow dramatically the growth of government spending and the growth of the money supply.

Increase the supply of goods by deregulating and rewarding production. Avoid at all cost wage and price controls, rationing, and windfall profit taxes. Foster vigorous competition, knocking down legal and regulatory barriers that block new producers from entering the market.

In short, do the opposite of what Democrats propose.

If the program is both credible and consistent, consumer hoarding will stop as the public learns there is no rational reason for doing it. When supplies of goods and services are reliable, and if prices moderate, there is no reason to buy before prices climb even further. It takes time to break the back of inflationary psychology. However, if the underlying cause, too much money and too few goods is addressed, the inflation will subside.

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