The Mainstream Has the Inflation Story Backwards
The mainstream blames inflation on “supply chain bottlenecks.” But they have it completely backward. In reality, Federal Reserve-created inflation is causing the supply chain mess.
According to Biden administration talking points, the economy is booming. Americans are flush with cash. And they are demanding lots of goods. The supply chain simply can’t keep up. That’s why we’re seeing empty shelves and rising prices. Transportation Secretary Pete Buttigieg summed up the mainstream mantra.
Demand is up … because income is up, because the president has successfully guided this economy out of the teeth of a terrifying recession.”
White House spokeswoman Jen Psaki told a similar tale. She said we have supply chain problems because “people have more money … their wages are up … we’ve seen an economic recovery that is underway.”
This sounds like a lot of spin. But in one sense, the mainstream is right. As Mises Institute Senior Editor Ryan McMaken pointed out in a recent article on the Mises Wire, they are correct when it comes to consumer demand and spending, even if they got it right for the wrong reason.
As Mihai Macovei showed earlier this month, the global volume of trade and shipping volume in 2021 have actually exceeded prepandemic numbers. For example, in the port of Los Angeles, ‘loaded imports’ and ‘total imports’ for the 2020–21 fiscal year (ending June 30, 2021) were both up when compared to the same period of the 2018–19 fiscal year. In other words, it’s not as if little is moving through these ports. In fact, more is moving through them than ever before. That suggests demand is indeed higher.”
But why is demand so much higher? As Psaki said, Americans have more money in their pockets. Wages are up nominally. But it’s not because the economy is booming. As McMaken points out, it’s due to inflation.
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