The IGNORANCE of people about INFLATION!

the ignorance of people about inflation. This is sort of a rant or a grind by gears about inflation because most people around the world don’t understand what inflation is. They don’t understand what it is. They don’t understand how it works. They don’t understand the cause. So this is the narrative. If you ask a 100 Americans, what is inflation? First of all, they’ll say it’s when prices go up. So they they sort of kind of understand what inflation is as far as like it means the prices of things go up. But the part that they miss that drives me crazy is almost none of them can diagnose the reason behind inflation. Here’s a cl here’s the classic narrative. If you poll people or you do focus groups, what you’re going to hear is that inflation is caused by some sort of supply strain uh uh supply chain constraint, right? So the war with Iran or CO or actually the government’s response to CO but anyway you’re going to find out that something causes prices to go up and then what people think which is wrong is that corporate greed causes the prices to stay high that something you know basically allows companies to uh raise prices. Then they realize that people will keep paying those prices no matter what. And then so they keep the prices high and then you know corporations are like wallowing in profits. Okay. So that there’s a fundamental flaw to that which is the misunderstanding of actually what leads to inflation and then what causes inflation to continue. As Milton Freriedman said and as you will find out if you read u Mises or Hayek or anybody inflation is always and everywhere a monetary phenomenon. What that means is if prices do not come back down or if they don’t sort of normalize at wherever they were before, it is always a monetary phenomenon. Meaning somewhere when you follow the chain back, someone is making more money. Not more money like more profits like somebody is actually generating more US dollars out of nothing and pumping them into the economy. And the way that actually works is the Federal Reserve makes money out of thin air. They loan it to the government and basically the government spends it into the economy and it’s called M2. M as in money, two as in the number two. It’s called the M2 money supply. And the M2 money supply is over time. It goes up and down a little bit on the near-term, but on the long term, the M2 money supply is just climbing, climbing, climbing, climbing, climbing. Okay? So, the the thesis that people have about inflation falls apart if you ask a couple of very simple questions. Sadly, the vast majority of people never ask those very simple questions. One second. So, so let’s take for example grocery prices. Okay? So, the prices of groceries keep going up and up and up and it’s crazy, etc. So, when you ask people, it’s like, why are groceries so high? They would be like, well, corporate agreed. They know we’ll pay it. So, then you ask them a follow-on question. And again, this drives me crazy because people I was taught I was homeschooled all the way through. I went to Bell Haven University. I was taught to think, right? And when you think, you ask questions that challenge your thesis. So, for example, if you think groceries are too expensive, which they are, then the question is, if you think corporate greed is causing those grocery prices to be very high, then the question you would ask is what are the profits of these grocery store companies? Surely they must be like wallowing in profits with all this insane amounts of money they’re making as the price of groceries. And if you ask the average person, they’ll say, “I don’t know. Their profit margins are probably like 30 or 40%. They’re just like making a ton of money.” Okay. Well, obviously a Google search or asking chat GPT, you would find out that grocery store margins for most major chains are about maybe 1 or 2%, maybe as high as 3%. But let’s call it between 1 and 3%. uh right after co and the government’s responses I remember when it was a big deal Kla Harris was you know talking about corporate greed being responsible for grocery prices and at that time the profit margin for Kroger was 1.8%. Which I think is one of the largest including Harris Theater and all the other sort of subbrands that are under Kroger 1.8%. Okay. So so I was chatting with somebody one time and they were talking about corporate greed and you know that why that was the cause of grocery prices. I was like, “Oh, well, you know, grocery stores are only making 1.8% profit. So, how did how does that explain that?” And of course, they had no idea because it had never occurred to them to check the internet to see what the profit margins of grocery stores are. The truth is grocery store profit margins are ridiculously small. And and think about this. So, let’s say, you know, you’re concerned about prices with oil and gas. You know, the price of gas at the pump, you know, groceries, you know, anything, clothing, you name it. everything’s more expensive. Well, if all of these companies were wallowing in profit, you don’t think entrepreneurs would show up and be like, “Ooh, they’re making 30 or 40% profit margins. I’ll start a new grocery store or I’ll start a new gas station or I’ll start a new clothing store.” Of course, they would show up. The reason you don’t see grocery stores coming out of the woodwork is because nobody wants to make 1.8%. It is ridiculously hard to make profits in the grocery business. The profit margins are ridiculously small. So again, corporate greed is not driving that. Also, there are certain industries where efficiency is so great, it drives the price down. So for example, uh large screen TVs, the first, you know, plasma screens were like $2,800 and people paid that. They paid $2,800. So, if you had a little bit of logic in your brain, you might ask yourself, wait, if people are readily paying $2,800 for a flat screen TV 20 years ago, then why can I buy a flat screen TV for $280 today? Like onetenth the price, why are the prices of flat screen TVs that that that much down? And the answer is competition. is lots of companies decided there was profits in big screen TVs and lots of brands started cranking out big screen TVs and they drove those profit margins down. So if corporate greed was the reason for high prices then it would draw competition. you know, all sorts of companies that are not in the grocery business or the big screen TV business or, you know, whatever business, clothing, uh, you know, oil and gas, whatever, petroleum, if if corporate greed was holding those prices high, entrepreneurs would be showing up in droves or companies that were not in those industries would be opening businesses in those industries. But again, people don’t THINK ABOUT THIS BECAUSE THEY DON’T ASK the follow-up question, which is, “Hey, I’m paying high grocery prices. It must be corporate greed. Maybe I should check the internet to see what the profit margins of grocery stores are. And maybe if I find out that they’re 1% or 2%, maybe my brain should calculate that maybe corporate greed is not the problem. Maybe there’s a deeper systemic problem. Because again, if profit margins were as high as people think they are, it would draw competition from all over the world jumping in groceries and clothing and gasoline and you know, every m every industry would have competitors coming out of your ears to get those huge profits. They don’t. The average profit margins at one point in the S&P 500, which is the 500 largest uh most, you know, generally most profitable companies in America, I think the average profit margin at one point was 5%. Something like that. So even high margin businesses that are not commodities, you know, major brand names, Coca-Cola, where people are willing to pay a lot more for Coke with the brand name on it than something similar from RC Cola, even those are not making ridiculous profits like people think they are. Uh even if it’s higher than sort of traditional grocery stores at, you know, one or two or 3%. So anyway, uh all you got to do is you have to ask those follow-up questions is if prices start going high due to supply tra uh supply chain constraints, which can happen, why don’t they come back down? Why does competition not come in and push those prices down? And the answer is because behind the scenes, the Federal Reserve is cranking out new money. That new money means more money is chasing the same amount of stuff which is driving the prices higher. So that is the constant the constant behind all of these things that results in the prices getting higher for gasoline, the prices getting higher for groceries, the price is getting higher for clothing, the price is getting higher for everything. Is behind the scenes the government is undermining the value of the dollar. Actively undermining the value of the dollar somewhere between 4% and 9% per year. Even though the official inflation rate is like 3 or 4%. That’s basically they gain the system by constantly changing what they measure. so that they’re not measuring the same things over time. If you measure the same things over time, it’s more like somewhere between 4% and 9% per year. One second. Another follow-on question. So, if you’ll remember, the price of eggs went really high recently. Uh there was like some sort of bird flu and a gazillion birds died off and the price of a dozen eggs went up to like $8 or something like that. It was just some like really large number. Anyway, well, the price of eggs has radically crashed way back down now. So, think about this. People need eggs. People don’t just stop eating eggs. So, if corporate greed was able to keep the prices high for everything, then why didn’t the prices stay high for eggs? Well, the answer is the price went really high for eggs and then they bred a bunch of new chickens and they killed all the chickens that had the bird flu or whatever it was and then the prices came back down significantly. But if corporations and corporate greed was the cause for high prices, they would have kept the price of eggs up at $8. They didn’t because there’s competition. Competition pushes the prices back down. Now, because the Federal Reserve is always printing money, the price of eggs didn’t go all the way back to where they were before. But competition, just like it does with everything, push the prices of eggs back down to where they’re not $8 for a dozen like they were. Uh, one additional thing is the price of everything is going up. the price of stocks, the price of your home is going up. Even though construction workers can build new homes basically as fast as you can buy them building materials, the prices of homes keep coming up going up and the price of homes keep going up, let’s call it in the same ballpark of the same of prices for, you know, lots of things. So people like it when their house goes up in value, you know, 3%, 4%, 5% per year. So think about this. If corporate greed is what’s making the price of groceries higher, then what’s making the price of your house go up? Is it corporate greed? No. Because if you own your own home, even if it’s with a loan from the bank or something like that, then what? Are you corporate greed? Are you the reason your house’s prices is going up because you’re like greedy and demanding more for your house every day every every year? No. The price of your house is going up because the price of everything’s going up because the value of the dollar is going down. We see here’s the thing. If I take a if I take a ruler and every year I lop a quarter of an inch off of that ruler and I is 11, you know, 11 and 3/4 and next year a foot is, you know, 11 12 in. And the year after it’s, you know, 11.25 in, then by that definition, the the size of everything in the world is going up. I’m getting taller. Your house is getting bigger. Every car on the road is getting bigger. The lanes on the road are getting wider every single year. Now, if that was happening, do you think you would question is everything in the world getting bigger or is the ruler? So, if everything in the world is getting bigger, that’s not realistic. What’s actually happening is the is the the measuring stick is getting smaller. Same if everything in the world is getting more expensive, the reason is because the measuring stick, which is money, government money, the US dollar for example, is getting smaller. And as the value of the US dollar shrinks, it makes it look like everything’s getting more expensive, which makes it harder for you to live because you are probably not one of the people, unless you’re in Wall Street, you know, in the finance industry in, you know, or near Washington DC or you work for the government. If you’re not in something that’s, you know, in the Northeast right where close to where the money is being printed, then you’re not benefiting from those new dollars. You’re not getting the new money from the Federal Reserve before the prices go up, which means you’re on the receiving end of the inflation rather than the causing end of the inflation. If you’re on the causing end of the inflation, then you don’t care because, you know, you get new money before the prices go up and everything’s fine for you. But the rest of us which is the vast majority of Americans in the world are on the receiving end of the inflation. So uh that is how that works. The price of everything is going up including your house including a significant portion of the increase in the price of the stock market is not actually the companies uh on the stock market becoming more valuable. It’s actually the measuring stick of the US dollar going down. All right. There was one more point I was going to make and I am forgetting it but I’m going to try to remember it. What was the last point? um related to inflation was oh it’s think about this corporate greed is like gravity okay it’s always there okay so corporate greed is is a known thing corporate greed is humans are all greedy at some level we’re all fallen human beings we’re all sinful greed is an issue that everybody deals with just the same as pride just the same as everything else okay now if an airplane falls out of the sky and kills people. The question is how many times on the news would they blame it on gravity? And so, you know, you hear the news headline, right? You know, there’s a plane crash in Washington DC and 200 people died. Nobody shakes their heads and says, “Uh, gravity got it again.” You know, there’s that evil gravity. It’s always trying to pull things back down to the ground. If gravity was not there, these planes would fly and people wouldn’t die. THAT’S A REALLY STUPID explanation because everybody knows that gravity’s always there. So yeah, if something if a plane falls out of the ground the sky, the problem the cause of death for the individuals on the plane was not an engine malfunction. It was not a mid-air collision that you know clipped off one of the wings. No, THE PROBLEM WAS GRAVITY. THE GRAVITY pulled the people and the plane down to the earth and they died. So if somebody blames inflation on corporate greed, that is literally just as dumb as somebody blaming a plane crash on gravity. Of course the plane crashed. And of course there is corporate greed, but that’s not the reason the plane crashed. The plane crashed because it ran into something up there in the sky or because there was an engine malfunction or because birds flew into the engine, something like that. Something made it crash. You don’t blame a plane crash on gravity because that’s a stupid simplistic zero brain cell explanation for what happened. And it’s also obvious. So if somebody cla claims that inflation is caused by corporate greed, that’s like saying, you know, you know, there was a murder on Elm Street and uh you know, sin in the world. Sin in the world. Well, of course it’s sin in the world, but what else? Like sin is a thing, but typically there was some other precipitating factor other than just sin in the world. Like people do stuff for a reason. They don’t just like randomly kill people just because the world is sinful and we’re all fallen people. Like there’s typically something else going on there that makes somebody kill somebody. If a plane falls from the sky, it wasn’t gravity. Of course it was gravity. There was something else to it. Something went wrong up there that made the plane crash. So again, the next time somebody says inflation is caused by corporate greed, very simplistic, low IQ thinking up here. If you think inflation is caused by corporate greed, you’re the sort of person that might think plane crashes are caused by gravity. No, something else is going on. The Federal Reserve is printing mountains of money out of thin air, devaluing the currency, meaning the the value of the US dollar is going down. And as the value of the dollar goes down, the price of everything goes up up up and up, which makes your life harder to live. And it makes the price of everything inflate. Cause cause inflation. It’s called inflation. The prices are going up. But that is caused by a fundamental flaw in the money that is not caused by the greed of humans other than maybe the greed of people in Washington DC and the Federal Reserve. So sure, if you want to if you want to blame greed, blame the right greed that actually causes the problem, which is the people in the Federal Reserve and the people in the Treasury Department and the politicians in Washington. Those are the people that are devaluing your money, not corporations making 1% interest selling you groceries. So think about it, people. It’s not that hard.