Wait, how much is it again? Charles Mudede
People have been talking about inflation lately, and for an obvious reason. This month’s inflation report by the Bureau of Labor Statistics determined that consumer prices rose “4.2% from April of last year and 0.8% from compared to the previous month ”. Responses to this report from the dominant left and the right as a whole (as there is no moderate right in the matter) have been predictable.
The main or most visible left-wing economist, Paul Krugman, sees it essentially as a “blip” which is similar to the 3.8% rise that occurred in 2011 when the United States began to emerge from the US. ‘a recession that had the serious crash of 2008.. He attributes the current blip to a similar circumstance, but this time the conventional economy (as opposed to the economy of assets – houses, bonds, stocks) is pulling out of the 2020 crash. The result is the rise of very specific ( or COVID -sensitive) and products that were suppressed during the pandemic. (Krugman mentions used cars; Popular policy project includes hotels and airfare).
The Right, of course, describes rising consumer prices as evidence that the economy is overheating because of too much stimulus, which is free money. By being “free”, stimulus money is even worse than another inflation fuel: cheap money in the form of low interest rates.
Fox news don’t waste time beating that very old drum:
“ There is so much money in the economy that the demand is high, it exceeds supply and it starts to drive up prices, ” Sen. John Thune, RS told Bloomberg on Wednesday. .D. “We have to be a little more careful and restrained.”
Thune warms up the quantitative theory of money (QTM). If you don’t like reheated coffee, you also won’t like reheated economic theories like this. QTM, which was formalized 100 years ago by the Fisher equation, basically says this: “The price changes relative to the money supply in an economy.” This is, of course, pure nonsense, because it assumes a system of values independent of the background. This means that he describes inflation as a technical problem (“M × V = P × T”) and not as a political problem. And politics is always part of a cultural context that structures our class relations.
This means you shouldn’t be asking, “Is this inflation really happening?” Instead, you should ask, “Who Said Inflation Really Happens?” Here’s why.
The rarity value is good for antiques and rare stamps. It is horrible for necessities like houses. We need to increase the supply of housing. https://t.co/4uftJomxgK
– Todd Gloria (@ToddGloria) May 18, 2021
This is San Diego Mayor Todd Gloria. Although he is a Democrat, “the proud son of a maid and a gardener” and a “Native American-Filipino-Latino-Dutch-LGBTQ”, his economic thinking is predominantly neoliberal. There is really no difference between his theory of scarcity value and the monetarist doctrine of “too many dollars for too few goods”. Both identify inflation as a technical issue independent of the context. Inflation indicates an imbalance that requires correction. In the case of San Diego, the fix is an “increase [of] provision.”
But what should make us think in the context of San Diego, which is by no means isolated, but experienced by all the big cities and the galleys of the United States, is this: the inflation of the value of the housing is not something that economists, most of whom are educated in neoclassical schools, are really worried about. The political right, the market, or the business press also never howls about rising house values. But it is really a form of inflation. The rise in the price of a plane ticket is inflation; the increase in the value of a home is inflation.
Indeed, the entire stock market was swiftly inflated during Trump’s tenure, but this “overheating” had mostly positive policy implications. Trump bragged about it, as did the Democrats when the rapid inflation in asset values occurred under Obama. But why are these other forms of inflation considered to be good when that concerning commodity prices is not?
Bruce Bartlett from The soap box:
As might be expected, the Conservatives are once again warning against inflation. This happens every time a Democrat takes office – even if he is simply continuing the identical policies of his Republican predecessor. Unfortunately, these concerns, which still receive wide media attention, are costly, politically and economically. Bill Clinton was forced to pass a deficit reduction plan in 1993 that led to the defeat of many Democrats in 1994 and the installation of Newt Gingrich as Speaker of the House. Barack Obama was forced to cut his stimulus package in 2009 and was intimidated by deficit reduction in 2011.
As with Krugman, the problem with this analysis is that it maintains the importance of keeping commodity prices stable. This is just a given. You don’t even have to bother to question it. The sun is still rising. Inflation is always bad. But clearly, someone or a group has decided which inflation is positive and which is negative. Active, yes; apples, no. When choices are involved, then culture is involved, and the defining form of capitalist culture is a hierarchical structure that repeatedly collapses in class struggle.
The reason there is so much noise about commodity prices is that they are directly locked into class politics. And in a major way, we can blame the moderate left economists for it. It was they who, by a theory called the Philips curve, pointed out a generally harmful link between the price of labor and the price of commodities.
The idea was that inflation was fine as long as the economy was growing (more and more jobs). It was the compromise. The Philips curve, however, hit a wall in the mid-1970s, because inflation rose with slow or no growth. This sorry episode received the name of stagflation. It cost moderate left-wing political power and paved the way for the right’s monetarist agenda (inflation as money supply). The right-wing solution, which began under Jimmy Carter, was a sharp hike in interest rates, which effectively killed corporate investment, the source of job growth in a capitalist economy. The decline in jobs has matched deflation and the eventual stabilization of commodity prices.
This all happened in the early 1980s. It has a name: the Volcker Shock. He gutted union power even before the end of the decade. And that has made targeting inflation (not full employment) the Federal Reserve’s main economic concern. Indeed, one thing that is noticeable in this wave of inflationary fever is the absence of much talk about the job, which has been confined to the talk of supposedly lazy fast food workers refusing to take open, risky jobs. and low wages. Union power is not the issue here. Everything now revolves around this free government cheese.