For 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.
Inflation Is Not Driven by a Shortage of Supply
Mainstream 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.
Graph 1: Real GDP growth
Graph 2: Inflation and industrial production
The invoked shortage of supply is primarily based on anecdotal evidence about unmet demand and rising prices in specific economic sectors, such as semiconductors, cars, furniture, and energy.
But those who claim that supply is insufficient do not bother to analyze whether the squeeze of supply chains is due to chronic shortage of production or to excess demand. Moreover, even if supply were short for certain goods due to production lockdowns, changes in consumer schedules, or environmental greening policies, a surge in the aggregate price level would not take place if the money supply and aggregate demand remained broadly unchanged.
The squeeze on some individual supply chains would be compensated for by lower demand for other goods and services, and only relative prices would change in the economy.
Let us have a closer look at specific cases of widely perceived supply bottlenecks. The shortage of shipping containers and logistic problems at several ports in the US and Asian countries seems central to many other supply chain bottlenecks.
Shipping costs have soared indeed, but shipped volumes have increased as well (graph 3).2 This does not indicate a lack of supply, but rather buoyant demand for international transport. Experts from leading shipping groups report that major US ports, container groups, and logistics companies can barely handle the surge in international trade. This is not surprising given that both US imports and its trade deficit surged by more than 20 percent year on year in the first seven months of 2021, as consumers rushed to spend their stimulus checks.
United Nations Conference on Trade and Development experts claim that the global demand for manufactured consumer goods increased throughout the pandemic, boosting the demand for container shipping and raising transportation costs. The surge in global demand has not only rearranged international trade flows to the advantage of China and other Asian economies, but has also pushed international trade volumes to new highs (graph 4).
Graph 3: Global TEU shipping volume and price index
Graph 4: Global volume of trade
The shortage of semiconductors, which affects car production, is also blamed on the inability of chip manufacturers to deal with an order backlog swollen by covid-19 and shipping disruptions. But the global semiconductor market expanded by 7 percent in 2020 and is projected to grow by another 20 percent this year (graph 5) and almost double in size by 2028.
So, again, the shortage is being caused by a relatively rigid supply which cannot accommodate buoyant demand. The latter has increased not only from the automotive sector, in particular as electric vehicles use more chips, but also from manufacturers of computers and other consumer electronics, the consumption of which has surged during the pandemic.
Graph 5: Global market for semiconductors
The recent rally in energy prices, with coal and European gas hitting record highs and crude oil pushing above $80 a barrel, is also attributed to a constrained supply and perceived as a threat to the economic recovery. But the global supply has not shrunk; on the contrary, the world production of energy has been on a steady upward trend (graph 6).
After growing by about 2.4 percent per year for the past three years, energy production fell by 3.5 percent in 2020 due to the lockdowns, but is expected to rebound by 4.1 percent in 2021.
Graph 6: World energy production
The global energy supply would have been much higher and better balanced among sources and across regions had it not been for government-mandated green policies and carbon emission targets. In Europe, coal plants have been gradually phased out, as have nuclear power plants in Germany. They have been replaced by wind turbines and other renewable energy sources which underperformed recently due to adverse weather conditions.
Together with lower gas deliveries from Russia, this has created a perfect storm in the European energy market. At the same time, China’s strict emissions targets and rising coal prices have also generated a power crunch, disrupting factory activity.
In the same way that green government policies have undermined the production of energy, the lockdowns and stimulus paychecks generously handed out during the pandemic have created an artificial shortage of labor that is likely to exacerbate further inflationary pressures. Due to forced business closures, the US economy lost about 20 million jobs by April of last year.
Despite the economic recovery, some 5 million jobs have not yet been filled, as millions of Americans have been paid to stay home or have left the labor force altogether. In Europe, trade unions are already asking for pay increases while surveys show that inflation expectations are rising.
Excessive Demand Stimulus and Money Creation Are the Real Culprit
The growth stimuli applied during the pandemic have been truly unprecedented in size and outreach. Massive government support and budget deficits monetized by central banks have been poured over economies weakened by recurrent lockdowns. Despite the loss of jobs and market incomes, US household wealth has increased by a staggering $32 trillion since the beginning of the pandemic, fueling consumer spending and aggregate demand.
Together with an increase in the broad money supply by more than a third over the same period (graph 7), this indicates that the inflation is actually driven by too much money rather than too few goods.
Graph 7: Money supply
The rapid rise in inflation is also raising inflation expectations.3 Inflation depends not only on the mechanical outcome of changes in the supplies of money and goods, but also on the demand for money. If the public realizes that its cash holdings are being eaten away by significant price increases, it will move away from cash. In this case, inflation would accelerate beyond the pace of money creation, which is obviously the nightmare of all central bankers.
The current surge in inflation is neither due to a shortage of supply nor transitory, as central banks want us to believe. It is primarily due to soaring consumer demand fueled by excessive growth stimuli and monetary creation. Government-imposed lockdowns and clean energy policies constraining output have exacerbated price increases. We are witnessing a consumption boom and persistent distortions in the structure of production, all bearing a striking resemblance to the boom that preceded the Great Recession.
- This definition is disputed by Austrian economists because price inflation lumps together monetary and nonmonetary causal factors, which have different consequences for the structure of production, incomes, and individual wealth. Therefore, Austrian economists define inflation as an increase in the supply of money beyond an increase in specie, i.e., commodity money such as gold or silver.
- According to the Financial Times, it costs more than $20,000 to ship a standard container from China to the East Coast of the US today, up from less than $3,000 two years ago.
- In the US, Consumer Price Index inflation advanced by 5.3 percent in August, housing prices grew by almost 20 percent year on year as of July, and the S&P 500 Index was up by almost 29 percent year on year at the end of September.
Author: Mihai Macovei
Dr. Mihai Macovei ([email protected]) is an associated researcher at the Ludwig von Mises Institute Romania and works for an international organization in Brussels, Belgium.
Big Pharma’s Five Major Minions that Everyone, Vaxxed or Unvaxxed, Must Oppose
This is not an “anti-vaxxer” article, per se. It’s a call for everyone to wake up to the nefarious motives behind vaccine mandates, booster shots, and condemnation of freedom.
The worst kept secret in world history SHOULD be that the unquenchable push for universal vaccinations against Covid-19 has little if anything to do with healthcare and everything to do with Big Pharma’s influence over the narrative. Unfortunately, that secret has stayed firmly hidden from the vast majority of people because of the five major minions working on behalf of Big Pharma.
What’s even worse is the fact that Big Pharma’s greed is merely a smokescreen to hide an even darker secret. We’ll tackle that later. First, let’s look at the public-facing ringleaders behind the vaccine push, namely Big Pharma. But before we get into their five major minions, it’s important to understand one thing. This is NOT just an article that speaks to the unvaccinated. Even those who believe in the safety and effectiveness of the vaccines must be made aware of agenda that’s at play.
Let’s start with some facts. The unvaccinated do NOT spread Covid-19 more rampantly than the vaccinated. Even Anthony Fauci acknowledged the viral load present in vaccinated people is just as high as in the unvaccinated. This fact alone should demolish the vaccine mandates as it demonstrates they have absolutely no effect on the spread of the disease. But wait! There’s definitely more.
This unhinged push to vaccinate everyone defies science. Those with natural immunity may actually have their stronger defenses against Covid-19 hampered by the introduction of the injections which fool the body into creating less-effective antibodies. Moreover, the push to vaccinate young people is completely bonkers. The recovery rate for those under the age of 20 is astronomical. Children neither contract, spread, nor succumb to Covid-19 in a statistically meaningful way. What they DO succumb to more often than Covid-19 are the adverse reactions to the vaccines, particularly boys.
All of this is known and accepted by the medical community, yet most Americans are still following the vaccinate-everybody script. It requires pure cognitive dissonance and an overabundant need for confirmation bias to make doctors and scientists willingly go along with the program. Yet, here we are and that should tell you something.
Before I get to the five major minions of of Big Pharma, I must make the plea for help. Between cancel culture, lockdowns, and diminishing ad revenue, we need financial assistance in order to continue to spread the truth. We ask all who have the means, please donate through our GivingFuel page or via PayPal. Your generosity is what keeps these sites running and allows us to expand our reach so the truth can get to the masses. We’ve had great success in growing but we know we can do more with your assistance.
Who does Big Pharma control? It starts with the obvious people, the ones who most Americans believe are actually behind this push. Our governments at all levels as well as governments around the world are not working with Big Pharma. They are working for Big Pharma. Some are proactive as direct recipients of cash. Others may oppose Big Pharma in spirit but would never speak out because they know anyone who does has no future in DC.
This may come as a shock to some, but it’s Big Pharma that drives the narrative and sets the agenda for the “experts” at the CDC, FDA, WHO, NIH, NIAID, and even non-medical government organizations.
Most believe it’s the other way around. They think that Big Pharma is beholden to the FDA for approval, but that’s not exactly the case. They need approval for a majority of their projects, but when it comes to the important ones such as the Covid injections, Big Pharma is calling the shots. They have the right people in the right places to push their machinations forward.
That’s not to say that everyone at the FDA is in on it. Big Pharma only needs a handful of friendlies planted in leadership in order to have their big wishes met. We have seen people quitting the FDA in recent weeks for this very reason. The same can be said about the other three- and five-letter agencies. Too many people in leadership have been bribed, bullied, or blackmailed into becoming occasional shills for the various Big Pharma corporations. Some have even been directly planted by Big Pharma. That’s the politics of healthcare and science that drives such things as Covid-19 “vaccines.”
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JD Rucker – EIC