Why are we seeing record inflation? Just look at the quantity of money the government has injected into the economy.
No, it's not Putin's price hike as oil prices did not spike until the invasion and the inflation we are seeing is before the invasion.
Milton Friedman said: “Inflation is always and everywhere a monetary phenomenon, in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.”
Has their been a rapid increase of money in proportion to the economy?
Yes! A dramatic increase. A portion can be explained and justified as a reasonable reaction to the initial shut-down of the economy due to the pandemic. Think of it as an insurance policy where the government pays for what was lost if a very large, very rare event happens.
However, if the government pays significantly more than was lost, you end up with too much money chasing too few goods and inflation results. This is what is happening. While the last amounts that were injected by Trump may have been arguably needed, it is clear that the significant amounts injected by Biden so far, not to mention what more he has proposed, are in excess of what is needed and as a result we are seeing increased prices.
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