The Source of High Inflation: Government Spending

Economy • September 2012 • Views: 718

Charles Hugh Smith-the Source of High Inflation: Government Spending

If we look at what’s skyrocketed in price (healthcare, college tuition), we find they are government funded and supported. This is not a coincidence.

Inflation is generally viewed as a monetary phenomenon (print money excessively and you get inflation), but let’s use a very simple definition: any loss of purchasing power. If your income buys fewer goods and services, for whatever mix of reasons (geopolitical, weather, monetary, fiscal, etc.), that’s inflation “on the ground.”

Consider this breakdown of the components that together make up the standard measure of inflation, the Consumer Price Index (CPI): (courtesy of dshort.com) What are the obvious major sources of inflation? Energy, medical costs and college tuition.

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4 comments

researchok Sun, Sep 30, 2012 3:25:29pm

'...creates inflation in government-funded sectors by monetizing Treasury bonds that enable massive Federal spending.'

That's an attention getter.

Curt Mon, Oct 1, 2012 3:56:23am

This has always been the case:

If an item is valued by the local currency of record at say 1/1000 of all dollars in circulation, than, over night, the government doubles the number of dollars in circulation, the item retains it's value, yet, automagically, the owner posts a price tag that is "double the price" on the item. Why? because there are twice as many dollars, therefore the price reflects 1/1000 of the dollars in circulation.

It's no more difficult than that.

Now, as we have been trained by our employees (elected 'representatives'), we are told the shop keeper, who just "doubled the price" has been the proximate cause of inflation...and the media trumpets this loudly about the 'greedy corporations' that just jacked your grocery and gas bill up...

Dirty little secret: Only the legally assigned controllers of the money supply can do anything about inflation. If any of the rest of us did anything to impact it, we'd be in prison.

Fact: The bad actors in this are the greedy/power hungry politicians who can't manage to (or anymore, even try to) live within a budget, like the rest of the us.

Fact: Those in the halls of power don't want us to know this, because we might ask them hard questions and then "unhire" them next election cycle.

uncah91 Mon, Oct 1, 2012 4:37:39am

Ummmm, government involvement in the health care market has far lower inflation than the overall health care market in the U.S. elsewhere in the world, complete government control of healthcare results in far lower inflation in their healthcare sectors.

If.you don't address those issues, you really haven't made an argument.

Romantic Heretic Mon, Oct 1, 2012 10:23:31am

Inflation rates by month since 1914.

Federal spending since 1940.

A quick perusal shows that Federal budgets go up, and inflation wobbles up and down. Most telling is the years since Obama took over where inflation has hardly been gigantic.

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