Skyrocketing gasoline prices. Explosion of house prices and rents. Increase in food costs. Inflationary trends have dominated most people’s thoughts for the past two years.
Sometimes citizens cry out for the government to do something, anything, to relieve the suffering. However, it is ironic to ask the government to manage prices out of control when government interference is the cause of the problem.
The price of a product is a function of supply and demand. Consumers have a desire to acquire a product and producers manufacture an offer to meet the demand. The market clearing price of a product is the price at which the quantity supplied equals the quantity demanded.
What happens when this balance is broken? What are the causes of the disturbance?
The national debt of the United States is approaching $31 trillion. The United States does not have enough money to pay its bills. Unlike private citizens, the government can print money. These newly minted dollars are added to the economy as fiat money – the face value of printed money far exceeds its market value.
Writing for the Foundation for Economic Education, Dan Sanchez noted that the extra printed money allows customers to increase the prices charged by their suppliers, who in turn use the extra money to increase the prices charged by their suppliers. . This is how new money raises prices in all areas, albeit unequally, as it circulates through the economy.
Some in the Biden administration accused producers of taking advantage of product shortages and supply chain constraints by excessively raising prices. As Sanchez said, “Blaming rising prices on the pursuit of profit is like blaming a plane crash on gravity.”
Companies cannot stay in business without making a profit, a well-established fact. Why are corporate profits considered excessive? The actions taken by the federal government have set the stage to disrupt the free market and directly affect prices.
Stifle the oil and natural gas industry with punitive ideological policies and transform the United States from a net exporter to a major importer.
Forcing businesses to close during the COVID-19 pandemic, in turn disrupting supply chains.
Destroy cargo due to a lack of truckers available to transport cargo.
Paying workers more to stay home, creating a labor shortage across the economy.
Print money to offset extraordinary loss expenses.
The Consumer Price Index released on June 10 reflects an 8.6% increase over the past year in the price of a basket of consumer goods that a typical household purchases.
Brad Polumbo, policy correspondent for the Foundation for Economic Education, noted that producer prices rose 10.8%. Producers do not deceive consumers.
Government spokespersons never acknowledge the facts or honestly answer the question, “Who created this problem?” The financial health of the United States and its citizens is at stake. Free markets strangled by government interference equates to rising prices.