Monetary inflation results in a general rise in prices, often called “price inflation.” But rising prices are not always “inflation.” In any case, more government regs and subsidies won’t help. Original Article: “When Higher Prices Are Not Inflation” Back to 2020, the federal government’s covid-mandated shutdown of meat production plants hobbled the nation’s meat production capabilities, leaving farmers with nowhere to send their beef. This resulted in them having to cull cattle and other livestock. The uncertainty caused farmers to scale back their production at the time, which Arun Sundaram told CNBC “can affect production more than a year, year and a half down the road.” Processing facilities had labor shortages like all other businesses, which reduced
Topics:
Doug French considers the following as important: 6b) Mises.org, Featured, newsletter
This could be interesting, too:
Marc Chandler writes Sterling and Gilts Pressed Lower by Firmer CPI
Ryan McMaken writes A Free-Market Guide to Trump’s Immigration Crackdown
Wanjiru Njoya writes Post-Election Prospects for Ending DEI
Swiss Customs writes Octobre 2024 : la chimie-pharma détermine le record à l’export
Monetary inflation results in a general rise in prices, often called “price inflation.” But rising prices are not always “inflation.” In any case, more government regs and subsidies won’t help.
Original Article: “When Higher Prices Are Not Inflation”
Back to 2020, the federal government’s covid-mandated shutdown of meat production plants hobbled the nation’s meat production capabilities, leaving farmers with nowhere to send their beef. This resulted in them having to cull cattle and other livestock. The uncertainty caused farmers to scale back their production at the time, which Arun Sundaram told CNBC “can affect production more than a year, year and a half down the road.”
Processing facilities had labor shortages like all other businesses, which reduced their capacity to process meat at the same clip as before the pandemic. Meanwhile, consumers regained their appetites for beef, forcing prices higher.
“You have this huge imbalance of supply and demand which is causing the prices to skyrocket,” Sundaram told CNBC Make It. “The demand side got even stronger as the months progressed in 2021, whereas the supply side of things got worse.”
The question is, is this inflation. Austrians would say no. These price increases are the normal process of a market clearing when supply, for whatever reason, isn’t satisfying all of the demand. Consumers who can and most desire the product will pay more for the limited supply.
Unfortunately, this normal market clearing is now being referred to as inflation and politicians are weaponizing the term against business. Jeanna Smialek writes for the New York Times, “As inflation proves stubbornly sticky, administration officials and prominent lawmakers have refined their message to focus more blame on corporations, especially those in concentrated industries with a handful of powerful firms, like meat processing or gas.”
Senator Elizabeth Warren has gone as far as writing the management of large businesses blasting them for “taking advantage of inflation to add greater burdens.”
Ludwig von Mises wrote in Planning For Freedom, “What people today call inflation is not inflation, i.e., the increase in the quantity of money and money substitutes, but the general rise in commodity prices and wage rates which is the inevitable consequence of inflation. This semantic innovation is by no means harmless.”
Government can create money with no backwash and at the same time blame businesses for increasing prices and harming consumers.
For instance, President Joe Biden has targeted large meat-packers for hiking meat prices, saying, “Capitalism without competition isn’t capitalism. It’s exploitation,” he said. “That’s what we’re seeing in meat and poultry.”
So his plan is to hand independent farmers $1 billion in aid. “We’re here to talk about strengthening competition, which will bring down costs,” Biden told a virtual meeting of independent farmers and meat producers.
Mises was decades ahead of the current president. “To prevent this outcome governments often grant subsidies to the farmers operating with the highest costs. These subsidies are financed out of additional credit expansion. Thus they result in increasing the inflationary pressure.”
The best thing Biden could do is nothing and let consumers pay higher prices, which would have no additional inflationary effect. Instead, as Mises quipped, “the allegedly brilliant idea to fight inflation by subsidies in fact brings about more inflation.”
Yet again we will learn Mises’s lesson, “If one wants to correct their manifest unsuitableness and preposterousness by supplementing the first acts of intervention with more and more of such acts, one must go farther and farther until the market economy has been entirely destroyed and socialism has been substituted for it.”
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
You Might Also Like
The Fed Has No Real Plan, and Will Likely Soon Chicken Out On Rate Hikes
2022-01-27
The Fed’s Federal Open Market Committee (FOMC) released a new statement today purporting to outline the FOMC’s plans for the next several months. According to the committee’s press release: With inflation well above 2 percent and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate.
What the Regime Will Do to Fight Private Digital Currencies
2022-01-16
During a confirmation hearing with the US Senate this week, Fed chairman Jerome Powell was asked about whether or not a digital currency issued by a central bank could exist side by side with private cryptocurrencies. Powell responded that there is nothing that would prevent private cryptos from “coexisting” with a “digital dollar.”
Thanks to Central Banks, the Old Investment Rules Don’t Apply Anymore
2021-10-29
Sixty percent equities, 40 percent bonds. What has been considered the golden rule of portfolio theory for decades is of less and less value to investors today. Because central banks have backstopped almost every market, essentially mimicking the market maker of last and first resort, returns have been low, correlations have increased, and valuations are deprived of their meaning.
Jeff Deist: Why Covid is an Opportunity for the Right!
2021-10-25
Our topic is assessing the new post-Covid world. After more than a year of unprecedented state intervention in our private lives, have Americans accepted a grim “new normal”? How bad is the post-Covid economy, from shortages of goods and workers to inflation to rent moratoriums? Will all the monetary and fiscal stimulus really work?
Paul Krugman’s One-Man War on Science
2021-10-23
When David Card was recently awarded the Nobel Memorial Price in Economic Science (along with two other economists), I figured Paul Krugman would weight in, since Card, along with the late Alan Krueger, authored an economic study almost thirty years ago that allegedly debunked standard economic theory on the effects of a binding minimum wage. Krugman did not disappoint.
The Economic Foundations of Freedom
2021-10-07
Animals are driven by instinctive urges. They yield to the impulse that prevails at the moment and peremptorily asks for satisfaction. They are the puppets of their appetites. Man’s eminence is to be seen in the fact that he chooses between alternatives. He regulates his behavior deliberatively.
Currency Debasement and Social Collapse
2021-10-03
Knowledge of the effects of government interference with market prices makes us comprehend the economic causes of a momentous historical event, the decline of ancient civilization.
Too Much Inflation? Just Raise the Inflation Target!
2021-09-26
In late August, Fed chairman Jerome Powell suggested that the Federal Reserve would begin tapering before the end of the year, an admission that price inflation was rising above the 2 percent target. Nonetheless, the Fed took no immediate action in the following month.
Tags: Featured,newsletter