wait for it!

WAIT FOR IT!

Yes, we have inflation.  We’ve had it for a hundred years ever since the Federal Reserve Bank took over the country.  Inflation is money growth.  Money growth is debt growth.  And debt growth is income growth.  Whether for a bank profiting off interest, as with that debt  or a government profiting off income growth from money growth.  The US Revolution was largely paid for by hyperinflating the currency ( the Continental, giving rise to the phrase “not worth a Continental” ).  The Confederate States fought a war with hyperinflation at the time Lincoln was introducing Greenbacks ( which weren’t worth spit but surprisingly were redeemed after the war.  When I use the term, I imply all the worthlessness of its predecessor without any of the same hopes for a happy ending ).  Inflation is so normal that we accept it pretty much unquestionably.  So, yes, we are seeing an increase in inflation today.  But not all inflation is the same and you can’t confuse them.  There is currency printing, credit creation and shortages.  There might be more, and I’m sure the terms differ, but it has been a few decades since I gloried in the minutiae of economics and I prefer the layman’s simplified version anymore.  It keeps the discussion from bogging down.  Currency creation is diluting the supply of the money.  You take two Monopoly games and combine the money from them ( keeping everything else the same as one game’s supply ).  You now have twice the money for the same supplies.  Prices will get bid upwards.

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Credit creation is the banks offering more debt.  Typically in our system, the banks use fractional reserve banking where they are required to hold X number of currency units for every Y number of loans.  As time went on, X shrunk allowing more loans to be created.  Shortage induced price inflation is when an item is scarce and the price is bid up as a form of rationing.  Today, there is currency creation in the form of “quantitative easing”.  The official rate is around eight percent or so but you have to be leery of that admitted number plus whatever fiction they are using as GDP.  Credit creation pretty much saw a freeze after the 2008 meltdown, and most credit in whatever form is staying in the banking system to keep the derivatives market from implosion.  These two inflation forms don’t explain a lot of our price increases.  But shortage pricing does.  Take away houses, with the artificial shortage caused by houses being taken off the market as emptied, and shortages can explain a lot of prices.  Colleges keep enrollments up through a propaganda campaign and through catering to the status conscience ( status DOES pay off in increased future income, but for a shrinking minority ).  Too many students in a fixed seat environment, with an artificially scarce status allotment, prices go up.

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Health care costs are in large part a casualty of the insurance industry.  Both because some doctors are scared away after malpractice costs and its insurance make profit impossible and because there are no longer all that many corporations offering medical insurance and hence no longer fighting to lower costs ( this was pre-ObammyCare.  Too soon to tell the new effects ).  And food cost increases are easy.  All the available acreage is now pretty much under cultivation ( any new land, say in the former jungles in South America, is pretty much consumed by Chinese growth demand ) and combined with that, the Green Revolution rise in per acre output are NOT increasing any longer.  Rising population is seeing lack of output growth, shrinking water tables and glacier shrinking, input cost increases and widespread infertility due to past overproduction.  Not to mention the cost of petroleum ( artificial fertilizer might be in large part using “nearly free waste byproduct” natural gas near oil production, but the cost of transporting the finished product has risen ) impacting everything everywhere.  Those small but persistent price increases are largely the work of shortages.  You ain’t seen nothing yet for inflation.  Wait for it!

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