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Biden’s Peculiar Theory On Inflation

The President Biden administration is taking a hit in the polls for a number of reasons – inflation is one of them.  The inflation rate of 6.8 percent is higher than any time since June of 1982.   Even worse, the calculated rate on what are called “essentials” – the rate that impacts on the poor and the middle-class the most — is passing the 10 percent mark.

No amount of political jawboning can change what the public feels in their pocketbook, but Biden & Co. are going to try anyway.  They have their own unique theories of inflation.

To sell their ass-covering theory, Democrats are saying that the inflation is CAUSED by businesses raising prices – the fuel industry, retailers, car dealers and your local mom and pop bakery.  In fact, the increase in prices is the RESULT of inflation.  What CAUSES inflation, is too much money chasing too few goods – too much government spending and too much money given out to stimulate an overly stimulated economy.

Senator Elizabeth Warren claimed that inflation is caused by grocery stores raising their prices.  She should know better – and probably does.  White House Press Secretary Jen Psaki said that the inflation is being caused by the “meat conglomerates” “jacking up prices.”  She should know better, and probably does.

In a totally unique economic theory – one not embraced by ANY economist I can find – Biden argues that the inflation is being caused by the entire world of commerce and professional services suddenly raising the prices of everything.  Warren, Psaki and the Democrats in general seem to be ignorant that having more dollars to purchase fewer items automatically increases the cost of goods across the board.  That is inflation.

Since Democrats already reject the FACT that printing more and more money – and pushing it into the economy – causes inflation, it is a small step to claim that giving the people more money fights inflation.  

According to Biden, the trillions of dollars he wants to give people will help them cover the cost of inflationary price increases.  That may sound like a good idea – but if you like it, you are being flimflammed by Biden.  If the problem is too much money chasing too few goods, more money poured into the economy will only accelerate the inflation.  It is a bit like the proverbial squirrel chasing its own tail.

Biden also claims that his Build Back Better program would actually reduce inflation. Since it is impossible to rationally understand that claim, it is probably just a big political whopper.

It can be argued that IF all the goodies in the BBB program were totally offset by new revenues, it might be inflation neutral.  But if it results in deficit spending and more piled onto the National Debt, it will accelerate inflation.  

Biden emphatically claims that the $1.9 trillion in new spending was to be paid for with new revenues, Biden is telling another whopper.  The Congressional Budget Office had scored the BBB legislation as producing a $380 billion shortfall – and that is if you believe the $1.9 trillion price tag.

The most promising news in the battle against inflation is the probability that BBB is now dead.  It will not pass the Senate.  At least that is the likely outcome since West Virginia Senator Joe Manchin has declared himself a “no” on the BBB bill.

So, there ‘tis.

Written by Larry Horist

9 Comments

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  1. In any free market economic system supply and demand usually determines price we all, at least those with an IQ above single digits, know that to be fact. When government does a number of things it drives up prices of all goods. First when government pays people to stay home the workforce is reduced effecting production by reducing the amount of goods produced. Second when government decreases the production of energy it drives up prices by increasing the cost to produce and transport everything. It is the consumer who bears the brunt of all increases including taxes. Taxation is a topic for another day. These socialist marxist democrats have yet to learn corporations do not pay taxes consumers do. In order for any corporation to stay in business it must make a profit on the goods it produces. Consequently when costs to produce that product increase that increase must be passed on to the consumer in order for that manufacturer or producer to remain in business.

    In any free market system competition tends to drive prices down. Consequently when energy cost is low prices go down. When the work force is plentiful wages stabilize and prices do not increase much. President Trump demonstrated this during his administrations four year term. However, when government(s) are considered the driving force behind economic conditions free markets do not and can not flourish. Consequently, supplies diminish and costs go up. Like Ronald Reagan once said government does not solve problems because government IS the problem!

    In the final analysis it is usually government controls that cause inflation not free market enterprise. Furthermore, these facts seem to demonstrate socialism never produces prosperity. But it does demand government control over everything and that is the secret to socialism’s failure!

  2. Larry:
    Once we came off the gold standard, the value of a dollar became, and is, the number of dollars divided by the Gross Domestic Product. Period.
    Print more dollars without a corresponding increase in the GDP and the dollar is worth less. Lower the GDP without a corresponding decrease in the money supply and your dollar is worth less.
    But, print more dollars WITH a decrease in GDP due to covid and you are screwed.

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