Captain Capitalism, a.k.a. Aaron Clarey, has an excellent article about how government spending in specific areas encourages and fosters inflation in those areas. Here's an excerpt.
We can talk about inflation merely being "the increase in prices." But to really understand inflation you need to know how prices got so inflated in the first place. And that happens when MORE money is flooded into a market than others.
In other words say the government didn't spend/lend $1 trillion annually on education and left it up to people to pay for it privately? What if Obama wasn't taking another $700 billion of working people's money to pay for the health care of the parasitic classes? What if you didn't have every government guarantee backing up the housing industry? That would damn well take away 75-80% of the money flooding these markets and prices would drop by the same. People fret saying, "Well how can we pay for college/healthcare/housing/retirement/etc. without government help!?" but they fail to realize it's government money that is precisely driving these costs up. If you simply took away this money (be it college, the stock market, healthcare, etc. etc.) prices would drop dramatically because there's be TRILLIONS less in money chasing those same fixed amount of degrees, doctors, houses, and stocks.
. . .
But merely having the wisdom to say, "keep the government out of it" would not be enough. We would also have to be willing to say, "I will do without." And that's the real problem driving inflation - entitlement.
In the real world where people are forced to be self-sufficient, affordability is a determinant of demand. And if tuition or children or a McMansion was not affordable, you would simply do without. However, because we've brought up a generation of spoiled, entitled pussies since the baby boomer era, nearly all of our population thinks they're entitled to...well...just look at Bernie Sander's platform:
- Free health care
- Free child care
- Free mental care
- Free education
- Free housing
- Free food
And whereas some of these things are necessities, others are not. But if you still insist on them being "rights," and you invoke the intervention of government to help you pay for them, this then drives prices up to the point you'd DEFINITELY be better off without them.
- Free...well...everything
There's more at the link. Good stuff.
He's not completely correct, of course - he leaves out a number of other inflationary factors - but he's absolutely right that the more you subsidize something, the more of it you're going to get. That lesson's been proved time and time again in all sorts of different fields. It's certainly a contribution to price inflation in the fields Captain Capitalism mentions - and many others besides.
Trouble is, people want their free stuff. The good Captain is quite correct to note that Bernie Sanders' recent political platform was designed to appeal to precisely that self-interest. "The Government will do it all for you!" Trouble is, as Gerald Ford warned us:
A government big enough to give you everything you want is a government big enough to take from you everything you have.
True dat.
Peter
3 comments:
Peter:
A corollary to this is that government intervention not only fosters inflation but dramatically affects availability by driving what the manufacturers will produce.
There is wide discussion about the lack of affordable housing, mostly in the starter house area. But the reason there are no starter houses available is that the market is not demanding them of the builders. Builders will build what people will buy, and they will build what maximizes their profits. McMansions make them twice as much money as single family, 2 & 3 bedroom houses. So why would they build a starter house on the same lot that they can build a McMmansion? The answer is they don't. As long as enough buyers are willing to buy all the McMansions they can build, they will never build single-family affordable housing.
How to fix it? Local government needs to loosen up a little bit on the zoning requirements, which are a major driver in restricting how many homes can be built, which will increase the supply of buildable lots. Next the Fed and .gov need to quit messing in the mortgage markets, and allow the market to charge what real interest should be and not give loans to people that can't afford them. Then people would be looking to buy $120,000-$200,000 houses, and not $300,000-$500,000 houses, and the builders would have a place and an incentive to build them.
By the way? Not gonna happen.
FormerFlyer
Dennis
The problem is there are people that deservedly need government help. The problem is getting rid of the free loaders. We also have to take back work to America in order to have people working. Buying cheap means no work for a America and that is not helping us!
I think the Iron Lady said it best.
“The problem with socialism is that you eventually run out of other people's money.”
― Margaret Thatcher
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