The Inflation Lie: ‘Shortages’ Aren’t Causing It. Money Creation Is.
by Mihai Macovei October 7, 2021 in OpinionsFor central bankers and mainstream analysts the recent inflation outburst is only a transitory phenomenon which has nothing or very little to do with the massive monetary and fiscal stimuli unleashed during the pandemic. Although the Fed has recently conceded that price pressures are persisting longer than expected, the surge of inflation is allegedly due to supply bottlenecks caused by the pandemic.
This superficial diagnosis serves as a convenient excuse for politicians to keep in place damaging growth stimuli and draconian public health measures.
Inflation Is Not Driven by a Shortage of SupplyMainstream economists define inflation as an increase in consumer prices which occurs when the growth of money supply outpaces economic growth.1 In other words, too much money is chasing too few goods. If the recent surge in inflation were driven by a shortage of goods rather than an increase in the money supply, then aggregate output would be shrinking.
But this is not the case, because global economic output is projected by the Organisation for Economic Co-operation and Development to grow by 5.7 percent in 2021 after having dropped by 3.4 percent in 2020. This year, the output lost during the pandemic is expected to be recovered in both advanced and emerging economies, including in the US (graph 1).
As a matter of fact, inflation was accelerating this year at the same time that industrial production was recovering to prepandemic levels in both the US and the EU (graph 2). The alleged shortage of supply at an aggregate level appears to be a myth.
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https://noqreport.com/2021/10/07/the-inflation-lie-shortages-arent-causing-it-money-creation-is/
