Bloomberg reports that the U.S. producer prices rose almost twice as much as forecast. Food and energy stoked the 1.1 percent gain in wholesale prices in March, the Labor Department reported today in Washington. Yet, we, the consumers, do not need the government statistics to know that we are paying more for gas, for food and from there for almost everything.
Reporters blame the high prices to crude oil, to ethanol as an alternate energy, to the War in Iraq and even to China – all plausible. However, they all missed the point. An overall rise of price levels may only be caused by one reason – too much money chasing after too few goods in the markets. Who is capable of creating the excessive money? The government. Only the government has access to the money printing machines. The Bush government in the past 8 years carried out a reckless fiscal policy which has been the direct cause for inflation. Millions upon millions were spent on “Wars on Terror,” homeland securities. Under the political circumstances, few, if any, politicians came out to question those spending. All those money the government spent without revenue backing became government deficits which drove up the price level. We know the government levy taxes. Most of the taxes we are all familiar with. When we make money, we pay income tax. When we spend money, we pay sales tax. When we die, our children pay inheritance tax if we still have money left. We seldom realize that inflation induced by government deficit is also a form of tax. Yes, you are right, it is known as inflation tax. Compared with other forms of taxes, the inflation tax is vicious because it causes the social wealth to be redistributed at random whips. The results of such wealth redistribution are often undesirable. Additionally, inflation causes uncertainties which makes it difficult for business to engage in transactions, especially long term ones. What follows such uncertainties are slowdown of business activities and the economy. One may argue that in a capitalist system, business cycles are inevitable. True. But an economic downturn resulted from bad government policies are not part of business cycles. They are human mistakes. Someone should be asked to take the responsibility for such an economic turbulence.
Reporters blame the high prices to crude oil, to ethanol as an alternate energy, to the War in Iraq and even to China – all plausible. However, they all missed the point. An overall rise of price levels may only be caused by one reason – too much money chasing after too few goods in the markets. Who is capable of creating the excessive money? The government. Only the government has access to the money printing machines. The Bush government in the past 8 years carried out a reckless fiscal policy which has been the direct cause for inflation. Millions upon millions were spent on “Wars on Terror,” homeland securities. Under the political circumstances, few, if any, politicians came out to question those spending. All those money the government spent without revenue backing became government deficits which drove up the price level. We know the government levy taxes. Most of the taxes we are all familiar with. When we make money, we pay income tax. When we spend money, we pay sales tax. When we die, our children pay inheritance tax if we still have money left. We seldom realize that inflation induced by government deficit is also a form of tax. Yes, you are right, it is known as inflation tax. Compared with other forms of taxes, the inflation tax is vicious because it causes the social wealth to be redistributed at random whips. The results of such wealth redistribution are often undesirable. Additionally, inflation causes uncertainties which makes it difficult for business to engage in transactions, especially long term ones. What follows such uncertainties are slowdown of business activities and the economy. One may argue that in a capitalist system, business cycles are inevitable. True. But an economic downturn resulted from bad government policies are not part of business cycles. They are human mistakes. Someone should be asked to take the responsibility for such an economic turbulence.
No comments:
Post a Comment