Defining inflation as "rising prices" creates all kinds of confusion.
As I explained in-depth, historically, inflation meant an increase in the amount of money and credit in the economy, or more succinctly, an expansion in the money supply. Rising consumer prices - price inflation - is one symptom of this monetary inflation.
By redefining “inflation” as “rising prices” government people can muddy the water and shift the blame.
I found the perfect example of this in a recent email from Seeking Alpha. It highlighted shipping disruptions in the Middle East and speculated that rising shipping costs could be "inflationary."
In effect, they are speculating that rising prices might cause rising prices.
It's fair to worry that higher shipping costs could be passed on to consumers, causing prices of many things to rise. But even if higher shipping costs eventually do get passed along to consumers, that isn't "inflation" in the true sense of the word.
An increase in the money supply - inflation - causes all prices to rise more than they otherwise would. Price shocks such as higher shipping rates can certainly reverberate broadly through the economy causing a lot of prices to go up. But they won't cause all prices to rise. Some will actually fall.
Tom Woods did a good job of explaining the impact of price shocks in contrast to inflationary price increases in his email newsletter. He uses rising energy prices as an example, but the same would apply to elevated shipping costs.
Some sectors of the economy can see their prices rise because of changes in taste, or sudden disruptions (caused by war, natural disaster, etc.), or other such factors.
But the only explanation (barring a sudden fall in money demand, which would itself require an explanation) for rising prices across the board is an increase in the amount of money in the system.
And this is why some of the MAGA people are also getting it wrong. Rising energy prices cannot cause price inflation across the board. Rising energy prices leave less money to spend on other things, so prices are a wash. Only more money overall can raise prices everywhere.
The regime would like you to think that you are suffering because of every reason in the world EXCEPT the central bank it created and endowed with a monopoly. It's evil companies, it's 'greed,' it's 'cost-push,' whatever. It's all b.s.
As Woods points out, the political class wants you to believe higher shipping costs, or rising oil prices, or greedy corporations, or "Putin's price hikes" or perhaps Vodoo is causing price inflation. That lets them off the hook. Economist Ludwig von Mises summed it up this way.
The result of this deplorable confusion is that there is no term left to signify the cause of this rise in prices and wages. There is no longer any word available to signify the phenomenon that has been, up to now, called inflation… As you cannot talk about something that has no name, you cannot fight it.
Of course, the government and the central bankers at the Fed don't really want to fight inflation. They want inflation. Increasing the money supply allows politicians to continue borrowing and spending. They just don't want you to notice the inflation they are creating as a matter of policy. If they can convince you it's because of shipping costs, all the better.
Don't be fooled.
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