Hi everyone, welcome back to Fiscal Friday, this is Bess Byers with A Generation Empowered. We’re reporting from Jackson Hole, Wyoming, where the increased altitude got me thinking about inflation. So today we’re looking at this monetary mirage, and how inflation impacts middle and low-income Americans most.
Inflation is the general upward price movement of goods and services in the economy. It’s caused by an increase in the money supply. I’m looking at you trillion dollar stimulus… Over time, the cost of goods and services increase, but the value of the dollar falls, because you can’t purchase as much with that dollar. Remember when candy was 50 cents? Now it’s $1.29. Inflation!
The best explanation of inflation comes from economist Henry Hazlitt. Divide the community into four groups of producers, A, B, C and D, who get the money income benefits in that order. We’ll call group A “the war contractors, bankers and their employees.” Those whom Group A directly buy their goods and services from are Group B. Group C services Group B, so is able to increase their prices and have more money to spend on Group D. Group D services group C, and so forth.
Here’s why inflation is infuriating… While the money incomes of Group A increased 30 percent, the price of things they purchased has not yet increased. With Group B, their income has increased 20 percent, but prices have increased only ten percent. Group C is in trouble, as their incomes increased only ten percent, but prices have already increased 15 percent. (blow balloon) Group D and beyond is screwed. Their money income has not increased, but on average prices increased 20 percent.
Like a tax, inflation determines the individual businesses and policies we’re forced to follow (war and bankers). It discourages stable economic relationships and encourages waste. It benefits those in charge and hurts middle and low-income Americans most. Inflation eventually ends in disillusion and collapse.
Hazlitt says, “when the process has been completed, nearly everybody will have a higher income measured in terms of money. But the nation will be no richer than it was before.”
The inflated economic balloon, or bubble, will eventually burst.
In summation, it’s important to not confuse money with wealth. While money is the currency you have, real wealth is what we consume or produce: be it food, clothes, cars, etc. Politicians will have us believe money is wealth, for example minimum wage laws, but if prices increase, what good is your pay increase? Ok, ok, I’m getting ahead of myself. We’ll discuss this topic next week. So stay tuned!
For now, we’re shredding the pow and board sliding budget facts. This is Bess Byers, signing off, and remember, it’s your generation and you’re empowered.