Two years of rampant inflation - why?

A tale of two markets - government controlled and free ones

If you listen to Jerome Powell or Tiff Macklem talking about the prospects of continued inflation, the story will be concentrated almost exclusively on interest rates and monetary policy, and you can spend hours at your crystal ball studying the “dot plots” and asking why central banks haven’t followed the Taylor Rule in setting policy. That would make interesting cocktail conversatin and ignore the reality. The reality is that inflation has its roots in only two elements of our society - government intervention in markets and nonsensical energy polcies.

Government intervention is a key differentiator of where inflation happens and where it does not. Here are data fromt the U.S. Department of Labor.

Note the “greedy corporations” to use the term Jagmeet Singh likes to bandy about produce things like cars, furniture, clothing, cellphones and cellphone services, computer software, toys and TV’s. Since 2020 the prices of these consumers goods have either been flat or fallen sharply. This is the result of free and open competition in a capitalist system devoid of excess government involvement. It seems the “greedy corporations” are leaning against inflation, not causing it.

Where the Biden and Trudeau governments do really heavy lifting to “have our backs” is in areas like healthcare, education, childcare, housing and food and beverages. These areas are rife with regulation, government controls, restrictions on market participants, and mandates enacted by our leaders. No one should be surprised that prices in these areas have risen from 80% to over 200% in just a couple of years. This is the “benefit” of government intervention in markets.

In the food and beverage area, fundamental to our everyday lives, the inflation is not only an outgrowth of direct regulation of these vital industries but also over regulation (even an outright attack) on fossil fuels based on the now pervasive pretense that CO2 causes climate change. It doesn’t and can’t.

In 2021, energy comprised about 6.5% of global GDP. In 2022, that rose to about 13%, according to an article published by Bloomberg. Energy consumption didn’t rise much, just energy prices. Those higher prices resulted from shortages created by climate policies but blamed on the Ukraine war. The war made little difference since Russia kept shipping about as much oil & gas during the ongoing war as it was before the war, but politicians in America and Canada needed a scapegoat so the Ukraine war was convenient.

Global GDP is measured in current dollars and reflects price as well as activity. A rise in the energy component by 6.5% simply means 6.5 percentage points of global inflation is a manifestation of higher energy prices. That comprises about 80% of the total inflation world economies have experienced since 2020. Democrats and Liberals can justifiably take the credit for creating this environment and will earn credit for failing to correct the problem they have created by tepid policies that will do little to curb inflation but do a lot to make it more difficult for households to meet their living expenses.

In the famous words of Pogo “I have seen the enemy and it is us”. We elected these nincompoops and many North Americans still think the progressive governments are their salvation. The attraction of a “something for nothing” promise of government handouts of taxpayers’ own money is a legendary grift and Democrats and Liberals have turned it into a science - increase taxes, give some back to taxpayers in “programs” and pretend mankind can alter nature by taxing carbon. Ludicrous really, but widely believed by the left wing electorate who perpetuate the problem by voting for Biden and Trudeau.

The outlook is for more leftist crap, not less. Voters have eschewed critical thinking in favor of getting their pronouns politically correct and turning cities into cess pools of drug addicts, rising crime and random acts of violence. You voted for it so stop bitching about it. Just remember the Irish curse - “may you get your wish”.